FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period from __________ to __________
Commission file number 33-75594
MERIDIAN FINANCIAL CORPORATION
(Name of small business issuer in its charter)
INDIANA 35-1894846
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8250 HAVERSTICK ROAD, SUITE 110
INDIANAPOLIS, INDIANA 46240-2401
(Address of principal executive offices)
(317) 722-2000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past twelve 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 [ ]
Number of common shares, without par value, outstanding at May 12, 1997: 1,000
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
MERIDIAN FINANCIAL CORPORATION
FORM 10-QSB
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheets at March 31, 1997 and
September 30, 1996 3
Condensed Statements of Earnings (Loss) for the three months and the
six months ended March 31, 1997 and 1996 4
Condensed Statements of Cash Flows for the six months
ended March 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
Index to Exhibits 15
2
<PAGE>
Part I. Financial Information
Item 1. Condensed Financial Statements
<TABLE>
<CAPTION>
MERIDIAN FINANCIAL CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
ASSETS
<S> <C> <C>
Finance receivables, net of unearned finance charges:
Net investment in direct financing leases $ 6,190,918 $ 5,425,285
Loans receivable - 781,940
Total finance receivables 6,190,918 6,207,225
Cash 1,856,247 115,744
Cash held in origination account 3,658 4,252
Debt service reserve funds 124,301 156,789
Receivable for preferred stock
and subordinated debt 942,308 -
Debt issue costs, net 497,090 610,321
Other assets 448,534 268,483
Total assets $ 10,063,056 $ 7,362,814
LIABILITIES AND
SHAREHOLDERS' EQUITY
Bonds payable $ 6,032,275 $ 6,382,117
Warehouse line of credit 982,878 -
Subordinated debt 500,000 -
Accounts payable and accrued expenses 447,466 59,900
Total liabilities 7,962,619 6,442,017
SHAREHOLDERS' EQUITY:
Preferred stock 3,203,060 1,789,560
Common stock 68,533 68,533
Additional paid-in capital - 37,500
Accumulated deficit (1,171,156) (974,796)
Total shareholders' equity 2,100,437 920,797
Total liabilities and shareholders' equity $ 10,063,056 $ 7,362,814
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
<TABLE>
MERIDIAN FINANCIAL CORPORATION
CONDENSED STATEMENTS OF EARNINGS (LOSS)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE:
Interest income from leases and
mortgage loan $ 286,854 $ 257,630 $ 573,131 $ 509,127
Gains from brokerage activities - - 5,194 -
Gains on early termination of leases 49,142 9,691 49,142 43,344
Investment income and other 6,460 31,266 12,329 58,328
Total revenue 342,456 298,587 639,796 610,799
EXPENSES:
Interest expense 237,967 235,429 456,037 451,127
Legal and professional 16,000 27,000 29,090 29,050
Other general and administrative 137,993 125,802 272,029 218,165
Total expenses 391,960 388,231 757,156 698,342
NET EARNINGS (49,504) (89,644) (117,360) (87,543)
Less - Preferred stock dividends (39,000) (40,000) (79,000) (80,000)
EARNINGS (LOSS) TO COMMON
SHAREHOLDERS $ (88,504) $ (129,644) $ (196,360) $ (167,543)
EARNINGS (LOSS) PER COMMON
SHARE $ (88.50) $ (129.64) $ (196.36) $ (167.54)
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
MERIDIAN FINANCIAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION> Six Months Ended
MARCH 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (117,360) $ (87,543)
Adjustments to reconcile net earnings (loss)
to net cash from operating activities-
Depreciation and amortization 157,562 162,740
Increase in other assets (92,735) (83,320)
Increase (decrease) in accounts payable
and accrued expenses 68,383 (74,781)
Net cash provided by (used in) operating activities 15,850 (82,904)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to direct financing leases (1,671,717) (1,518,638)
Principal payments received on direct financing leases
and loans receivable 1,751,560 1,208,408
Other - (33,493)
Net cash provided by (used in) investing activities 79,843 (343,723)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series C Preferred Stock 2,192,308 -
Proceeds from issuance of Subordinated Debt 365,384 -
Redemption of Series B Preferred Stock (1,500,000) -
Proceeds from issuance of bonds payable - 1,375,000
Principal payments on bonds payable (349,842) (413,716)
Proceeds from bank borrowings 1,102,884 -
Principal payments on bank borrowings (120,006) -
(Increase) decrease in cash held in debt service
reserves and origination accounts 33,082 (425,866)
Debt issue costs paid - (129,375)
Preferred stock dividends (79,000) (80,000)
Other - (48,383)
Net cash provided by financing activities 1,644,810 277,660
NET CHANGE IN CASH 1,740,503 (148,967)
CASH, at beginning of period 115,744 311,701
CASH, at end of period $ 1,856,247 $ 162,734
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
1. GENERAL:
The financial information included herein was prepared in conformity with
generally accepted accounting principles, and such principles were applied on a
basis consistent with those reflected in the Annual Report on Form 10-KSB for
the year ended September 30, 1996.
The information furnished includes all adjustments and accruals which are, in
the opinion of management, necessary for a fair presentation of results for the
interim periods. Results for any interim period may not be indicative of the
results for the entire year.
The disclosures in the notes presume that the users of the interim financial
information have read or have access to the audited financial statements
included in the Annual Report on Form 10-KSB for the year ended September 30,
1996.
2. FINANCE RECEIVABLES:
The components of the Company's net investment in direct financing leases are
as follows:
MARCH 31, SEPTEMBER 30,
1997 1996
MINIMUM LEASE PAYMENTS TO BE RECEIVED $ 8,339,303 $ 7,524,065
LESS- UNEARNED INCOME (2,148,385) (2,098,780)
NET INVESTMENT IN DIRECT FINANCING LEASES $ 6,190,918 $ 5,425,285
THE COMPANY HAD A LEASE AND MORTGAGE LOAN OUTSTANDING TO OLD INDIANA LIMITED
LIABILITY COMPANY, IN THE TOTAL AMOUNT OF APPROXIMATELY $1.1 MILLION AS OF
DECEMBER 31, 1996, AND BOTH THE LEASE AND MORTGAGE LOAN WERE IN DEFAULT AS OF
THAT DATE. DURING THE QUARTER ENDED MARCH 31, 1997, THE COMPANY RECEIVED
FUNDS TO PAY OFF BOTH THE LEASE AND MORTGAGE LOAN. THE COMPANY NO LONGER
HAS ANY AMOUNTS OUTSTANDING WITH OLD INDIANA LIMITED LIABILITY COMPANY.
THE COMPANY HAS ADDITIONAL LEASES WITH A NET INVESTMENT BALANCE OF
APPROXIMATELY $1.2 MILLION WHICH WERE NOT PERFORMING IN ACCORDANCE WITH THEIR
CONTRACTUAL TERMS AT MARCH 31, 1997. MANAGEMENT OF THE COMPANY HAS REVIEWED
ITS COLLATERAL POSITION ON THESE TRANSACTIONS AND HAS CONSULTED WITH LEGAL
COUNSEL. BASED ON THIS REVIEW AND CONSULTATION, MANAGEMENT BELIEVES THAT
THE COMPANY IS ADEQUATELY SECURED AND WILL RECOVER ALL AMOUNTS PRESENTLY OWED.
MANAGEMENT OF THE COMPANY CONTINUES TO ACTIVELY PURSUE THE RESOLUTION OF THESE
FINANCE RECEIVABLES, AND EXPECTS THAT ALL OF THE NONPERFORMING LEASES WILL
EITHER BE REPAID OR BROUGHT CURRENT IN ACCORDANCE WITH THEIR CONTRACTUAL
PROVISIONS.
6
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
3. BONDS PAYABLE:
At March 31, 1997, bonds payable consist of two series of bonds, bearing
interest at rates of either 9% or 10% ($2,765,515 at 9% and $3,266,760 at 10%)
collateralized by equipment purchased and leases originated from proceeds of
the offerings, cash held in the origination account, and by debt service
reserve funds held by a trustee. The two series are not cross-collateralized,
but are cross-defaulted. Quarterly principal payments are required from the
principal portions of the related lease payments received by the
Company. Based on the leases in place as of March 31, 1997, quarterly
principal payments for the next twelve months are expected to total
approximately $1,102,000.
4. WAREHOUSE LINE OF CREDIT:
At March 31, 1997, the Company has borrowed approximately $983,000 on its
$1 million warehouse line. The interest rate on this warehouse line is 2% over
prime, and it is secured by all assets of the Company, excluding those
securing bonds payable. On April 18, 1997, the warehouse line was repaid in
full and replaced with a new credit facility as described in footnote 6.
5. PREFERRED STOCK AND SUBORDINATED DEBT INFUSION:
On March 28, 1997, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") with Inroads Capital Partners, L.P. ("Inroads"),
Mesirow Capital Partners VII, an Illinois Limited Partnership ("Mesirow"),
Edgewater Private Equity Fund II, L.P. (the latter three parties being the
"Purchasers"), Michael F. McCoy ("McCoy") and William L. Wildman ("Wildman")
pursuant to which the Purchasers have purchased from the Company a total of
3,000 shares of the Company's Series C Convertible Preferred
Stock (the "Preferred Shares") and $500,000 aggregate principal amount of
10% Subordinated Notes due March 31, 2002 (the "Notes"). The aggregate
purchase price for the Preferred Shares was $3,000,000 and the aggregate
purchase price for the Notes was $500,000. Subject to certain conditions,
the Purchasers are obligated under the Purchase Agreement to purchase an
additional $3,000,000 aggregate principal amount of Notes. Of the aggregate
purchase price of $3,500,000, $2,557,692 was received from two of the
purchasers on March 28, 1997, and the remaining amount of $942,308 was received
from the third purchaser on April 7, 1997. This remaining amount of $942,308 is
recorded as a receivable and disclosed separately in the March 31, 1997
balance sheet.
The Subordinated Debt is subject to a Subordination and Intercreditor Agreement
between the Company, the Purchasers and LaSalle National Bank, the Company's
lender as described in footnote #6. The Subordinated Debt is subordinate to
the LaSalle Bank Credit Facility.
The Preferred Shares are convertible into Common Shares of the Company at any
time. The conversion ratio initially is one-for-one, but is subject to
adjustment under certain circumstances. In general, the Preferred Shares
have full voting rights (voting together with the Common Shares) on all
actions submitted to a vote of the Company's shareholders. Each Preferred
Share initially entitles the holder thereof to one vote on each matter
submitted, but the number of votes is subject to adjustment on the same basis
as the conversion ratio. The convertible Preferred Shares are considered to be
common stock equivalents for purposes of the earnings per share calculation,
however they are presently excluded from the calculation of loss per share
because their effects are antidilutive.
7
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
THE COMPANY'S OUTSTANDING CAPITAL STOCK CONSISTS OF 1,000 COMMON SHARES (WITH
FULL VOTING RIGHTS), 525 OF WHICH ARE OWNED BY MR. MCCOY, 1,000 SHARES OF
SERIES A PREFERRED STOCK (WITHOUT VOTING RIGHTS), AND THE PREFERRED SHARES.
$1,500,000 OF THE PROCEEDS OF THE SALE OF THE PREFERRED SHARES WAS USED TO
REDEEM ALL OF THE COMPANY'S OUTSTANDING SERIES B PREFERRED STOCK AND WARRANTS
TO PURCHASE COMMON SHARES (WHICH WERE OWNED BY THE HOLDERS OF THE SERIES B
PREFERRED STOCK). THE HOLDERS OF THE SERIES B PREFERRED STOCK HAD
LIMITED VOTING RIGHTS, INCLUDING THE RIGHT TO ELECT ONE DIRECTOR.
AS A RESULT OF THE ISSUANCE OF THE PREFERRED SHARES AND THE REDEMPTION OF THE
SERIES B PREFERRED STOCK, THE PURCHASERS COLLECTIVELY ARE ENTITLED TO EXERCISE
75% OF THE VOTING POWER OF THE COMPANY UNDER ORDINARY CIRCUMSTANCES.
PRIOR TO THE ISSUANCE OF THE PREFERRED SHARES, MR. MCCOY WAS ENTITLED TO
EXERCISE A MAJORITY OF THE VOTING POWER OF THE COMPANY UNDER ORDINARY
CIRCUMSTANCES.
IN CONNECTION WITH THE ISSUANCE OF THE PREFERRED SHARES, THE COMPANY ALSO
ENTERED INTO A VOTING AGREEMENT WITH THE PURCHASERS, MR. MCCOY AND MR. WILDMAN
UNDER WHICH THE PARTIES AGREED TO COOPERATE TO CAUSE THE COMPANY'S BOARD OF
DIRECTORS TO CONSIST OF FIVE MEMBERS, ONE OF WHOM WOULD BE DESIGNATED BY
INROADS, ONE OF WHOM WOULD BE DESIGNATED BY MESIROW, ONE OF WHOM WOULD BE
DESIGNATED BY THE HOLDERS OF TWO-THIRDS OF THE VOTING POWER OF THE COMPANY
EXERCISABLE BY THE PURCHASERS, AND TWO OF WHOM WOULD BE DESIGNATED BY MR.
MCCOY. THE RIGHTS OF THE PARTIES TO DESIGNATE DIRECTORS TERMINATE UNDER
CERTAIN CIRCUMSTANCES.
THE COMPANY AND THE PURCHASERS ALSO ENTERED INTO A REGISTRATION RIGHTS AGREEMENT
ENTITLING THE PURCHASERS, UNDER CERTAIN CIRCUMSTANCES, TO DEMAND OR OTHERWISE
PARTICIPATE IN A PUBLIC OFFERING OF THE COMPANY'S EQUITY SECURITIES.
THE COMPANY, THE PURCHASERS AND MR. MCCOY ALSO ENTERED INTO AN EXECUTIVE
SHARE AGREEMENT PURSUANT TO WHICH THE PURCHASERS ARE OBLIGATED, SUBJECT TO
CERTAIN CONDITIONS, TO TRANSFER, FOR NO CONSIDERATION OTHER THAN THE
FULFILLMENT OF SUCH CONDITIONS, TO MR. MCCOY AND/OR SUCH OTHER OFFICERS,
DIRECTORS EMPLOYEES OR CONSULTANTS OF THE COMPANY AS HE DESIGNATES, UP TO 8%
OF THE PREFERRED SHARES PURCHASED BY EACH PURCHASER.
6. SUBSEQUENT EVENT - BANK CREDIT FACILITY:
On April 18, 1997, the Company finalized a Credit Agreement (the "Agreement")
with LaSalle National Bank. The Agreement consists of a $5 million warehouse
line, which will convert to a term loan six months after the effective date.
This facility replaces the $1 million facility described in footnote #4.
The interest rate on the warehouse line is either prime plus 1%, or LIBOR
plus 300 basis points, at the option of the Company. Upon conversion to a
term loan, the interest rate will be either (1) prime plus 1.25%, (2) LIBOR
plus 325 basis points, or (3) the treasury rate for similar maturities plus 325
basis points, each at the option of the Company. The term loan will be for a
three year period.
8
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
THE WAREHOUSE LINE REQUIRES MONTHLY PAYMENTS OF INTEREST ONLY. THE TERM LOAN
REQUIRES MONTHLY PAYMENTS OF PRINCIPAL AND INTEREST, WITH THE PRINCIPAL
PORTION EQUALING THE PRINCIPAL AMOUNTS SCHEDULED TO BE RECEIVED ON THE
UNDERLYING LEASES.
THE CREDIT FACILITY IS SECURED BY A PERFECTED FIRST SECURITY INTEREST IN ALL
EXISTING ASSETS WITH THE EXCEPTION OF THE EXISTING LEASES FINANCED BY THE
SERIES I AND II BOND ISSUES. EACH NEW DRAW WILL BE SECURED BY AN ASSIGNMENT
OF THE LEASE CONTRACT AND A PERFECTED FIRST SECURITY INTEREST IN THE
UNDERLYING EQUIPMENT.
THE AGREEMENT REQUIRES THE COMPANY TO MAINTAIN A DEFINED LEVEL OF TANGIBLE NET
WORTH, ALLOWS A MAXIMUM RATIO OF RECOURSE DEBT TO TANGIBLE NET WORTH OF 5.00:1,
DEFINES MINIMUM INTEREST COVERAGE RATIOS, AND LIMITS DIVIDENDS TO THOSE
REQUIRED ON THE SERIES A PREFERRED STOCK.
SUBJECT TO THE PURCHASERS ACQUIRING THE ADDITIONAL $3 MILLION IN SUBORDINATED
NOTES AS DESCRIBED IN FOOTNOTE #5, AND CERTAIN OTHER CONDITIONS, LASALLE
NATIONAL BANK HAS COMMITTED TO RAISE THE CREDIT FACILITY TO A TOTAL OF $10
MILLION.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW:
The Company's cash in-flows consist primarily of lease payments from lessees.
The Company's cash out-flows consist primarily of investments in leases, debt
service obligations, dividend payments on the Company's preferred stock, and
general and administrative expenses. The profitability of the Company depends
largely on the Company's ability to enter into suitable leases, to realize an
adequate spread between the interest rate paid by the Company on its borrowings
and the implicit interest rate charged on the leases, and to avoid defaults by
the lessees.
LIQUIDITY AND CAPITAL RESOURCES:
With the expiration of the Company's public offering of bonds on December 31,
1995, the Company began to explore various other sources of funding, with the
intention to ultimately reduce the Company's borrowing costs, and to provide
the Company with an adequate source of funding to grow the lease portfolio. On
March 28, 1997, the Company entered into a transaction with three venture
capital funds which initially raised $3.5 million in capital, and which is
expected, subject to certain conditions, to result in a total of $6.5 million
of new capital. This capital is in the form of a new Series C Convertible
Preferred Stock ($3 million) and Subordinated Debt (currently $0.5 million; but
expected to be increased to $3.5 million). The Company utilized $1.5 million
of the proceeds to redeem its Series B Preferred Stock and related warrants.
In conjunction with the above transaction, on April 18, 1997, the Company
entered into a Credit Agreement (the "Agreement") with LaSalle National Bank
for a total of $5 million, which will be raised to $10 million when the
additional $3 million of subordinated debt is infused, and subject to
compliance with existing convenants. The Agreement consists
of a $5 million warehouse line, which will convert to a term loan six months
after the effective date. This credit facility replaces the Company's $1
million warehouse line with a different bank. The Company is in discussions
with other banks and financial enterprises interested in participating in the
LaSalle credit facility, with the goal being a $25 million facility.
With the closing of the capital financing transaction and senior credit
facility, the Company has access to significant amounts of capital which
previously had not been available. The Company expects to be able to grow the
Company's portfolio at a much faster rate than in the past, while maintaining a
debt-to-equity ratio that is below industry average.
Management believes that its overall sources of liquidity will continue to be
sufficient to satisfy the foreseeable financial obligations of the Company.
Management of the Company knows of no material requirements for capital
expenditures other than to enter into leases.
ANALYSIS OF CASH FLOWS:
Net cash flows from operating activities result primarily from net earnings or
losses, adjusted for non-cash items such as depreciation and amortization of
assets and from changes in working capital. The Company experienced net cash
inflows from operations of $15,850 for the three months ended March 31, 1997,
compared to a net cash outflow of $82,904 for the three months ended March 31,
1996. The improvement in cash flows from operations from period to period is
due primarily to paydowns in accounts payable during the 1996 period and
increases in accounts payable in the 1997 period.
10
<PAGE>
Net cash flows used in investing activities consist primarily of investments in
leases, which is the Company's primary requirement for cash, and principal
payments received from lessees, which is one of the Company's principal
sources of cash. During the six months ended March 31, 1997, the Company
invested $1,671,717 in seventeen leases, compared to $1,518,638 in eleven
leases for the same period in 1996. Principal payments received on leases and
loans receivable totaled $1,751,560 for the six months ended March 31, 1997
compared to $1,208,408 for the same period in 1996. Principal payments
received in the 1997 period include approximately $145,000 from brokerage
activity and approximately $1,132,000 from early terminations and the
prepayment of the mortgage loan receivable. The 1996 period includes
approximately $754,000 from the early terminations of leases. Investments in
leases and principal payments received on leases are expected to grow in
future periods.
Cash inflows from financing activities have consisted of bank borrowings and
proceeds from the sale of equity and debt securities. Cash outflows consist of
costs incurred in the sale of the securities, principal payments on borrowings
and debt securities, preferred stock dividends, and amounts deposited in the
debt service reserve and origination accounts. As previously described, on
March 28, 1997, the Company raised $3,500,000 in the form of $3,000,000 of
Series C Preferred Stock and $500,000 of subordinated debt. At the closing
date, the Company received $2,557,692 from two of the purchasers, and the
remaining amount of $942,308 was received from the third purchaser on April 7,
1997. In conjunction with the preferred stock and subordinated debt infusion,
the Company utilized $1,500,000 of the proceeds to redeem all of the Company's
outstanding Series B Preferred Stock and warrants to purchased Common Shares
(which were owned by the holders of the Series B Preferred Stock). As a result
of the redemption of the Series B Preferred Stock, future preferred stock
dividends requirements will be reduced to $10,000 per quarter. Also during the
six months ended March 31, 1997, the Company borrowed $1,102,884 and repaid
$120,006 in connection with its warehouse line of credit. Subsequent to March
31, 1997, the Company entered into a $5 million credit facility with LaSalle
National Bank and paid off the previous $1 million warehouse line. In the 1996
period, the Company sold $1,375,000 of bonds prior to the expiration of the
offering on December 31, 1995. Management anticipates that the Company's
primary cash inflows from financing activities in the future will be from the
new senior credit facility, and that the amount of borrowings will continue to
grow as the Company's growth in leasing transactions continues.
RESULTS OF OPERATIONS:
For the six months ended March 31, 1997, the Company reflected an operating
loss, before preferred dividend requirements, of $117,360 compared to a loss
for the same period in 1996 of $87,543. Preferred dividend requirements
totaled $39,000 and $40,000 in the 1997 and 1996 period, respectively.
Dividends were reduced in the 1997 period due to a pro-rata dividend paid in
conjunction with the redemption of the Series B Preferred Stock.
Interest income from leases, loans receivable and invested funds for the six
months ended March 31, 1997 was $585,460 and interest expense was $456,037 in
the same period, or a net interest spread of $129,423, compared to $567,455 of
interest income, $451,127 of interest expense, and a net interest spread of
$116,328 in the comparable period in 1996. In future periods, management
expects the interest spread to increase as the Company continues to invest in
new leases and initiates the new senior credit facility and realizes the
effects of the Series C Preferred Stock and Subordinated Debt infusions, both
of which should lower the Company's overall cost of funds.
11
<PAGE>
Other general and administrative expenses increased approximately $54,000
during the six months ended March 31, 1997 compared to the same period in 1996.
Approximately $35,000 of this increase reflects the increased travel and
marketing efforts to generate new business, in anticipation of the capital
infusion and senior credit facility as described in Liquidity and Capital
Resources. The Company anticipates a significant increase in the amount of
lease transactions in the future. However, with its management team and
systems in place, general and administrative costs going forward should be
relatively fixed, with the exception of a limited number of personnel additions
required by anticipated growth in the Company's lease portfolio. Therefore,
interest earned on leases is expected to grow at a much faster pace than the
related general and administrative expenses.
IMPACT OF INTEREST RATE CHANGES AND THE RESTAURANT INDUSTRY:
The overall strength of the U.S. economy and the general interest rate
environment have remained relatively stable during the past few years. To date
the Company has funded its fixed rate leases with fixed rate debt, with similar
duration, thereby avoiding any interest rate risk. While a dramatic rise in
future interest rates would not have a direct impact on leases booked to date,
it may have an impact on the restaurant industry's growth rate. A rising
interest rate environment may also impact the Company's future gains on
brokerage activities. The new credit facility with LaSalle National Bank
allows for various interest rate options, including fixed rates, and the
Company will utilize interest rate caps when necessary to limit its exposure to
interest rate risk.
The Company's primary focus involves the leasing of complete packages of
restaurant equipment for restaurant franchises. The franchise restaurant
industry has experienced rapid growth as the number of franchise concepts and
units continues to grow. As large metropolitan areas in some geographic areas
begin to reach saturation points from the standpoint of restaurant locations,
the Company is seeing an increasing number of leasing opportunities in more
rural locations, which would tend to be the smaller type franchisee that the
Company targets. In addition, the Company is seeing some consolidation in the
marketplace as franchisees purchase other franchisees' operations. While these
types of transactions are generally larger in size than the Company's typical
lease deal, the Company expects this consolidation to present opportunities to
utilize the Company's third party brokerage source.
Inflation has not had a material effect on the Company's operations.
CREDIT RISK:
During the quarter ended December 31, 1996, the Company declared a lease and
mortgage loan with Old Indiana Limited Liability Company, in the total amount
of approximately $1.1 million, to be in default. During the quarter ended
March 31, 1997, the Company held an auction for the equipment portion of the
collateral. The proceeds from this auction repaid the amounts owed on the
lease and reduced the amount owed on the mortgage loan. The Company's position
in the mortgage loan was then purchased by a third party and as a
result, the Company no longer has any amounts outstanding with Old Indiana
Limited Liability Company.
The Company has additional leases with a net investment balance of
approximately $1.2 million which are not performing in accordance with their
contractual terms at March 31, 1997. Management of the Company has reviewed
its collateral position on these transactions and has consulted with legal
counsel. Based on this review and consultation, management believes that the
Company is adequately secured and will recover all amounts presently owed.
12
<PAGE>
Management of the Company is actively pursuing the resolution of these finance
receivables, and expects that all of the non-performing leases will either be
repaid or brought current in accordance with their contractual provisions.
FORWARD-LOOKING STATEMENTS:
The statements contained in this filing on Form 10-QSB that are not historical
facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. Actual results may differ materially from
those included in the forward-looking statements. These forward-looking
statements involve risks and uncertainties including, but not limited to, the
following: changes in general economic conditions, including changes in
interest rates and spending on food prepared outside the home; competitive or
regulatory changes that affect the cost of or demand for the Company's lease
product; and the availability of funds or third-party financing sources to
allow the Company to purchase equipment and enter into new leases. The
Company's future results also could be adversely affected if it is unable to
resolve the current non-performing leases in its portfolio without
significant loss.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 1997, the Company issued a new
Series C Preferred Stock and redeemed its Series B Preferred Stock
and related warrants as described in Management's Disucssion and
Analysis-Liquidity and Capital Resources and footnote 5 to the
financial statements. The Series C Preferred Stock were sold to
three venture capital firms and not registered under the Securities
Act, but issued on reliance of Section 4(2)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed on the Index to Exhibits appearing on
page 15 are filed herewith.
(b) On April 14, 1997, the Company filed a Current Report on
Form 8-K dated March 28, 1997, describing the Series C
Preferred Stock and Subordinated Debt transaction,
and its impact on the voting power of the Company.
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MERIDIAN FINANCIAL CORPORATION
By: /S/ MICHAEL F. MCCOY
Michael F. McCoy
President
By: /S/ GERALD W. GERICHS
Gerald W. Gerichs
Vice President, Secretary
and Treasurer
(Principal Financial Officer)
Date: May 14, 1997
14
<PAGE>
Index To Exhibits
Page No.
In This
Exhibit No. Description Filing
3-A (1) Articles of Incorporation of Registrant, as amended to date
3-B (1) By-Laws of Registrant, as amended to date
10-U (1) Credit Agreement dated April 18, 1997 with LaSale National Bank
10-V (1) Security Agreement and Master Assignment of Leases dated
April 18, 1997 with LaSalle National Bank
10-W (1) Subordination and Intercreditor Agreement between the Company,
the Purchasers and LaSalle National Bank
10-x (1) Initial Credit Line Note in connection with the LaSalle National
Bank Credit Agreement
10-y (1) Agreement dated September 18, 1996 with AT & T Commercial Finance
Corporation
27 (1) Financial Data Schedule
<F1>
(1) Filed with this report on Form 10-QSB
ARTICLES OF INCORPORATION
OF
LEASE ACQUISITION CORPORATION
The undersigned incorporator, desiring to form a corporation
(hereinafter
referred to as the "Corporation") pursuant to the provisions of the Indiana
Business
Corporation Law, as amended (hereinafter referred to as the "Corporation
Law"), executes
the
following Articles of Incorporation.
ARTICLE I
Name
The name of the Corporation is Lease Acquisition Corporation.
ARTICLE II
Purposes and Powers
Section 2.1. Purposes of the Corporation. The purpose for which
the
Corporation is formed is to engage in the transaction of any or all lawful
business for which
corporations may now or hereafter be incorporated under the Corporation
Law.
Section 2.2. Powers of the Corporation. The Corporation shall
have (a) all
powers now or hereafter authorized by or vested in corporations pursuant to
the provisions
of
the Corporation Law, (b) all powers now or hereafter vested in corporations
by common law
or any other statute or act, and (c) all powers authorized by or vested in
the Corporation by
the provisions of these Articles of Incorporation or by the provisions of
its By-Laws as from
time to time in effect.
ARTICLE III
Term of Existence
The period during which the Corporation shall continue is
perpetual.
ARTICLE IV
Registered Office and Agent
The street address of the Corporation's registered office is 300
North Meridian
Street, Suite 2700, Indianapolis, Indiana 46204 and the name of its
registered agent at
such
office is Daniel L. Boeglin.
ARTICLE V
Shares
Section 5.1. Authorized Classes and Number of Shares. The total
number of
shares which the Corporation has authority to issue shall be 20,000 shares,
consisting of
10,000 common shares (the "Common Shares") and 10,000 special shares (the
"Special
Shares"). The Corporation's shares do not have any par or stated value.
Section 5.2. General Terms of All Shares. The Corporation shall
have the
power to acquire (by purchase, redemption or otherwise), hold, own, pledge,
sell, transfer,
assign, reissue, cancel or otherwise dispose of the shares of the
Corporation in the manner
and
to the extent now or hereafter permitted by the laws of the State of
Indiana (but such
power
shall not imply an obligation on the part of the owner or holder of any
share to sell or
otherwise transfer such share to the Corporation), including the power to
purchase, redeem
or
otherwise acquire the Corporation's own shares, directly or indirectly, and
without pro rata
treatment of the owners or holders of any class or series of shares,
unless, after giving effect
thereto, the Corporation would not be able to pay its debts as they become
due in the usual
course of business or the Corporation's total assets would be less than its
total liabilities
(calculated without regard to any amounts that would be needed, if the
Corporation were to
be
dissolved at the time of the purchase, redemption or other acquisition, to
satisfy the
preferential rights upon dissolution of shareholders whose preferential
rights are superior
to
those of the holders of the shares of the Corporation being purchased,
redeemed or
otherwise
acquired, unless otherwise expressly provided with respect to a series of
Special Shares in
the
provisions of these Articles of Incorporation adopted by the Board of
Directors pursuant to
Section 5.5 hereof describing the terms of such series). Shares of the
Corporation
purchased,
redeemed or otherwise acquired by it shall constitute authorized but
unissued shares
unless the
Board of Directors adopts a resolution providing that such shares
constitute authorized and
issued but not outstanding shares.
The Board of Directors of the Corporation may dispose of, issue
and sell shares
in accordance with, and in such amounts as may be permitted by, the laws of
the State of
Indiana and the provisions of these Articles of Incorporation and for such
consideration, at
such price or prices, at such time or times and upon such terms and
conditions (including
the
privilege of selectively repurchasing the same) as the Board of Directors
of the Corporation
shall determine, without the authorization or approval by any shareholders
of the
Corporation.
Shares may be disposed of, issued and sold to such persons, firms or
corporations as the
Board of Directors may determine, without any preemptive or other right on
the part of the
owners or holders of other shares of the Corporation of any class or kind
to acquire such
shares by reason of their ownership of such other shares.
When the Corporation receives the consideration specified in a
subscription
agreement entered into before incorporation, or for which the Board of
Directors authorized
the issuance of shares, as the case may be, the shares issued therefor
shall be fully paid
and
nonassessable.
The Corporation shall have the power to declare and pay dividends
or other
distributions upon the issued and outstanding shares of the Corporation,
subject to the
limitation that a dividend or other distribution may not be made if, after
giving it effect, the
Corporation would not be able to pay its debts as they become due in the
usual course of
business or the Corporation's total assets would be less than its total
liabilities (calculated
without regard to any amounts that would be needed, if the Corporation were
to be
dissolved
at the time of the dividend or other distribution, to satisfy the
preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
of the holders of
shares receiving the dividend or other distribution, unless otherwise
expressly provided
with
respect to a series of Special Shares in the provisions of these Articles
of Incorporation
adopted by the Board of Directors pursuant to Section 5.5 hereof describing
the terms of
such
series). The Corporation shall have the power to issue shares of one class
or series as a
share
dividend or other distribution in respect of that class or series or one or
more other classes
or
series.
Section 5.3. Voting Rights of Shares.
(a) Common Shares. Except as otherwise provided by the
Corporation Law and subject to such shareholder disclosure and
recognition
procedures (which may include voting prohibition sanctions) as the
Corporation
may by action of its Board of Directors establish, the Common Shares
have
unlimited voting rights and each outstanding Common Share shall, when
validly issued by the Corporation, entitle the record holder thereof to
one vote
at all shareholders' meetings on all matters submitted to a vote of the
shareholders of the Corporation.
(b) Special Shares. Except as required by the Corporation Law or
by
the provisions of these Articles of Incorporation adopted by the Board
of
Directors pursuant to Section 5.5 hereof describing the terms of
Special Shares
or a series thereof, the holders of Special Shares shall have no voting
rights or
powers. Special Shares shall, when validly issued by the Corporation,
entitle
the record holder thereof to vote as and on such matters, but only as
and on
such matters, as the holders thereof are entitled to vote under the
Corporation
Law or under the provisions of these Articles of Incorporation adopted
by the
Board of Directors pursuant to Section 5.5 hereof describing the terms
of
Special Shares or a series thereof (which provisions may provide for
special,
conditional, limited or unlimited voting rights, including multiple or
fractional
votes per share, or for no right to vote, except to the extent required
by the
Corporation Law) and subject to such shareholder disclosure and
recognition
procedures (which may include voting prohibition sanctions) as the
Corporation
may by action of the Board of Directors establish.
Section 5.4. Other Terms of Common Shares. The Common Shares
shall be
equal in every respect insofar as their relationship to the Corporation is
concerned, but
such
equality of rights shall not imply equality of treatment as to redemption
or other
acquisition of
shares by the Corporation. Subject to the rights of the holders of any
outstanding Special
Shares issued under Section 5.5 hereof, the holders of Common Shares shall
be entitled to
share ratably in such dividends or other distributions (other than
purchases, redemptions
or
other acquisitions of shares by the Corporation), if any, as are declared
and paid from time
to
time on the Common Shares at the discretion of the Board of Directors. In
the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary
or involuntary,
after
payment shall have been made to the holders of the Special Shares of the
full amount to
which they shall be entitled under this Article V, the holders of Common
Shares shall be
entitled, to the exclusion of the holders of the Special Shares of any and
all series, to share,
ratably according to the number of shares of Common Shares held by them, in
all
remaining
assets of the Corporation available for distribution to its shareholders.
Section 5.5. Other Terms of Special Shares.
(a) Special Shares may be issued from time to time in one or more
series, each such series to have such distinctive designation and such
preferences, limitations and relative voting and other rights as shall
be set forth
in these Articles of Incorporation. Subject to the requirements of the
Corporation Law and subject to all other provisions of these Articles
of
Incorporation, the Board of Directors of the Corporation may create one
or
more series of Special Shares and may determine the preferences,
limitations
and relative voting and other rights of one or more series of Special
Shares
before the issuance of any shares of that series by the adoption of an
amendment to these Articles of Incorporation that specifies the terms
of the
series of Special Shares. All shares of a series of Special Shares
must have
preferences, limitations and relative voting and other rights identical
with those
of other shares of the same series and, if the description of the
series set forth
in these Articles of Incorporation so provides, no series of Special
Shares need
have preferences, limitations or relative voting or other rights
identical with
those of any other series of Special Shares.
Before issuing any shares of a series of Special Shares, the Board
of
Directors shall adopt an amendment to these Articles of Incorporation,
which
shall be effective without any shareholder approval or other action,
that sets
forth the preferences, limitations and relative voting and other rights
of the
series, and authority is hereby expressly vested in the Board of
Directors, by
such amendment:
(i) To fix the distinctive designation of such series and
the
number of shares which shall constitute such series, which number
may
be increased or decreased (but not below the number of shares
thereof
then outstanding) from time to time by action of the Board of
Directors;
(ii) To fix the voting rights of such series, which may
consist of
special, conditional, limited or unlimited voting rights,
including
multiple or fractional votes per share, or no right to vote
(except to the
extent required by the Corporation Law);
(iii) To fix the dividend or distribution rights of such
series and
the manner of calculating the amount and time for payment of
dividends
or distributions, including, but not limited to:
(1) the dividend rate, if any, of such series;
(2) any limitations, restrictions or conditions on
the payment of dividends or other distributions, including
whether dividends or other distributions shall be
noncumulative or cumulative or partially cumulative and,
if so, from which date or dates;
(3) the relative rights of priority, if any, of
payment of dividends or other distributions on shares of
that series in relation to Common Shares and shares of
any other series of Special shares; and
(4) the form of dividends or other distributions,
which may be payable at the option of the Corporation,
the shareholder, or another person (and in such case to
prescribe the terms and conditions of exercising such
option), or upon the occurrence of a designated event in
cash, indebtedness, stock or other securities or other
property, or in any combination thereof,
and to make provisions, in the case of dividends or other
distributions
payable in stock or other securities, for adjustment of the
dividend or
distribution rate in such events as the Board of Directors shall
determine;
(iv) To fix the price or prices at which, and the terms and
conditions on which, the shares of such series may be redeemed or
converted, which may be
(1) at the option of the Corporation, the
shareholder or another person or upon the occurrence of a
designated event;
(2) for cash, indebtedness, securities, or other
property or any combination thereof; and
(3) in a designated amount or in an amount
determined in accordance with a designated formula or by
reference to extrinsic data or events;
(v) To fix the amount or amounts payable upon the shares of
such series in the event of any liquidation, dissolution or
winding up of
the Corporation and the relative rights of priority, if any, of
payment
upon shares of such series in relation to Common Shares and shares
of
any other series of special shares; and to determine whether or
not any
such preferential rights upon dissolution need be considered in
determining whether or not the Corporation may make dividends,
repurchases or other distributions;
(vi) To determine whether or not the shares of such series
shall
be entitled to the benefit of a sinking fund to be applied to the
purchase
or redemption of such series and, if so entitled, the amount of
such fund
and the manner of its application;
(vii) To determine whether or not the issue of any
additional
shares of such series or of any other series in addition to such
series
shall be subject to restrictions in addition to restrictions, if
any, on the
issue of additional shares imposed in the provisions of these
Articles of
Incorporation fixing the terms of any outstanding series of
Special
Shares theretofore issued pursuant to this Section 5.5 and, if
subject to
additional restrictions, the extent of such additional
restrictions; and
(viii) Generally to fix the other preferences or rights, and
any
qualifications, limitations or restrictions of such preferences or
rights, of
such series to the full extent permitted by the Corporation Law;
provided, however, that no such preferences, rights,
qualifications,
limitations or restrictions shall be in conflict with these
Articles of
Incorporation or any amendment hereof.
(b) Special Shares of any series that have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by
the
Corporation, or which, if convertible, have been converted into shares
of the
Corporation of any other class or series, may be reissued as a part of
such
series or of any other series of Special Shares, subject to such
limitations (if
any) as may be fixed by the Board of Directors with respect to such
series of
Special Shares in accordance with subsection (a) of this Section 5.5.
ARTICLE VI
Directors
Section 6.1. Number. The initial Board of Directors shall be
comprised of two
(2) members, which number may be changed by amendment to the By-Laws.
Section 6.2. Qualifications. Directors need not be shareholders
of the
Corporation or residents of this or any other state in the United States.
Section 6.3. Vacancies. Vacancies occurring in the Board of
Directors shall be
filled in the manner provided in the By-Laws or, if the By-Laws do not
provide for the
filling
of vacancies, in the manner provided by the Corporation Law. The By-Laws
may also
provide that in certain circumstances specified therein, vacancies
occurring in the Board of
Directors may be filled by vote of the shareholders at a special meeting
called for that
purpose or at the next annual meeting of shareholders.
Section 6.4. Liability of Directors. A Director's responsibility
to the
Corporation shall be limited to discharging his or her duties as a
Director, including his
duties
as a member of any committee of the Board of Directors upon which he or she
may serve, in
good faith, with the care an ordinarily prudent person in a like position
would exercise
under
similar circumstances, and in a manner the Director reasonably believes to
be in the best
interests of the Corporation, all based on the facts then known to the
Director.
In discharging his or her duties, a Director is entitled to rely
on information,
opinions, reports, or statements, including financial statements and other
financial data, if
prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom
the Director reasonably believes to be reliable and competent in the
matters
presented;
(b) Legal counsel, public accountants, or other persons as to
matters
the Director reasonably believes are within such person's professional
or expert
competence; or
(c) A committee of the Board of which the Director is not a
member
if the Director reasonably believes the Committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the
matter
in question that makes reliance otherwise permitted by this Section 6.4
unwarranted. A
Director may, in considering the best interests of the Corporation,
consider the effects of
any
action on shareholders, employees, suppliers and customers of the
Corporation, and
communities in which offices or other facilities of the Corporation are
located, and any other
factors the Director considers pertinent.
A Director shall not be liable for any action taken as a Director,
or any failure
to take any action, unless (a) the Director has breached or failed to
perform the duties of
the
Director's office in compliance with this Section 6.4, and (b) the breach
or failure to perform
constitutes willful misconduct or recklessness.
Section 6.5. Removal of Directors. Any one or more of the
members of the
Board of Directors may be removed, with or without cause, only at a meeting
of the
shareholders called expressly for that purpose, by the affirmative vote of
the holders of
outstanding shares representing at least a majority of all the votes then
entitled to be cast
at an
election of Directors. No Director may be removed except as provided in
this Section 6.5.
Section 6.6. Election of Directors by Holders of Special Shares.
The holders
of one (1) or more series of Special Shares may be entitled to elect all or
a specified number
of Directors, but only to the extent and subject to limitations as may be
set forth in the
provisions of these Articles of Incorporation adopted by the Board of
Directors pursuant to
Section 5.5 hereof describing the terms of the series of Special Shares.
ARTICLE VII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
Section 7.1. Meetings of Shareholders. Meetings of the
shareholders of the
Corporation shall be held at such time and at such place, either within or
without the State
of
Indiana, as may be stated in or fixed in accordance with the By-Laws of the
Corporation
and
specified in the respective notices or waivers of notice of any such
meetings.
Section 7.2. Special Meetings of Shareholders. Special meetings
of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
the Corporation
Law, may be called at any time by the Board of Directors or the person or
persons
authorized
to do so by the By-Laws and shall be called by the Board of Directors if
the Secretary of the
Corporation receives one (1) or more written, dated and signed demands for
a special
meeting, describing in reasonable detail the purpose or purposes for which
it is to be held,
from the holders of shares representing at least twenty-five percent (25%)
of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting.
If
the Secretary receives one (1) or more proper written demands for a special
meeting of
shareholders, the Board of Directors may set a record date for determining
shareholders
entitled to make such demand.
Section 7.3. Meetings of Directors. Meetings of the Board of
Directors of the
Corporation shall be held at such place, either within or without the State
of Indiana, as
may
be authorized by the By-Laws and specified in the respective notices or
waivers of notice of
any such meetings or otherwise specified by the Board of Directors. Unless
the By-Laws
provide otherwise (a) regular meetings of the Board of Directors may be
held without notice
of the date, time, place, or purpose of the meeting and (b) the notice for
a special meeting
need not describe the purpose or purposes of the special meeting.
Section 7.4. Action Without Meeting. Any action required or
permitted to be
taken at any meeting of the Board of Directors or shareholders, or of any
committee of such
Board, may be taken without a meeting, if the action is taken by all
members of the Board
or
all shareholders entitled to vote on the action, or by all members of such
committee, as the
case may be. The action must be evidenced by one (1) or more written
consents describing
the action taken, signed by each Director, or all the shareholders entitled
to vote on the
action,
or by each member of such committee, as the case may be, and, in the case
of action by the
Board of Directors or a committee thereof, included in the minutes or filed
with the
corporate
records reflecting the action taken or, in the case of action by the
shareholders, delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records. Action
taken
under this Section 7.4 is effective when the last director, shareholder or
committee member,
as the case may be, signs the consent, unless the consent specifies a
different prior or
subsequent effective date, in which case the action is effective on or as
of the specified date.
Such consent shall have the same effect as a unanimous vote of all members
of the Board,
or
all shareholders, or all members of the committee, as the case may be, and
may be
described
as such in any document.
Section 7.5. By-Laws. The Board of Directors shall have the
exclusive power
to make, alter, amend or repeal, or to waive provisions of, the By-Laws of
the Corporation
by
the affirmative vote of a majority of the entire number of Directors at the
time, except as
expressly provided by the Corporation Law. Any provisions for the
regulation of the
business
and management of the affairs of the Corporation not stated in these
Articles of
Incorporation
may be stated in the By-Laws. The Board of Directors may adopt Emergency
By-Laws of
the Corporation and shall have the exclusive power (except as may otherwise
be provided
therein) to make, alter, amend or repeal, or to waive provisions of, the
Emergency By-Laws
by the affirmative vote of a majority of the entire number of Directors at
such time.
Section 7.6. Interest of Directors.
(a) A conflict of interest transaction is a transaction with the
Corporation in which a Director of the Corporation has a direct or
indirect
interest. A conflict of interest transaction is not voidable by the
Corporation
solely because of the Director's interest in the transaction if any one
(1) of the
following is true:
(1) The material facts of the transaction and the Director's
interest were disclosed or known to the Board of Directors or a
committee of the Board of Directors and the Board of Directors or
committee authorized, approved, or ratified the transaction.
(2) The material facts of the transaction and the Director's
interest were disclosed or known to the shareholders entitled to
vote and
they authorized, approved, or ratified the transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 7.6, a Director of the
Corporation
has an indirect interest in a transaction if:
(1) Another entity in which the Director has a material
financial interest or in which the Director is a general partner
is a party
to the transaction; or
(2) Another entity of which the Director is a director,
officer,
or trustee is a party to the transaction and the transaction is,
or is
required to be, considered by the Board of Directors of the
Corporation.
(c) For purposes of Section 7.6(a)(1), a conflict of interest
transaction is authorized, approved, or ratified if it receives the
affirmative vote
of a majority of the Directors on the Board of Directors (or on the
committee)
who have no direct or indirect interest in the transaction, but a
transaction may
not be authorized, approved, or ratified under this section by a single
Director.
If a majority of the Directors who have no direct or indirect interest
in the
transaction vote to authorize, approve, or ratify the transaction, a
quorum shall
be deemed present for the purpose of taking action under this Section
7.6. The
presence of, or a vote cast by, a Director with a direct or indirect
interest in the
transaction does not affect the validity of any action taken under
Section 7.6(a)(1), if the transaction is otherwise authorized,
approved, or
ratified as provided in such subsection.
(d) For purposes of Section 7.6(a)(2), shares owned by or voted
under the control of a Director who has a direct or indirect interest
in the
transaction, and shares owned by or voted under the control of an
entity
described in Section 7.6(b), may be counted in such a vote of
shareholders to
determine whether to authorize, approve or ratify a conflict of
interest
transaction.
Section 7.7. Nonliability of Shareholders. Shareholders of the
Corporation are
not personally liable for the acts or debts of the Corporation, nor is
private property of
shareholders subject to the payment of corporate debts.
Section 7.8. Indemnification of Officers, Directors and Other
Eligible Persons.
(a) To the extent not inconsistent with applicable law, every
Eligible
Person shall be indemnified by the Corporation against all Liability
and
reasonable Expense that may be incurred by him or her in connection
with or
resulting from any Claim, (i) if such Eligible Person is Wholly
Successful with
respect to the Claim, or (ii) if not Wholly Successful, then if such
Eligible
Person is determined, as provided in either Section 7.8(f) or 7.8(g),
to have
acted in good faith, in what he or she reasonably believed to be the
best
interests of the Corporation or at least not opposed to its best
interests and, in
addition, with respect to any criminal claim is determined to have had
reasonable cause to believe that his or her conduct was lawful or had
no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any Claim, by judgment, order, settlement (whether with
or
without court approval), or conviction or upon a plea of guilty or of
nolo contendere, or its equivalent, shall not create a presumption that
an
Eligible Person did not meet the standards of conduct set forth in
clause (ii) of
this subsection (a). The actions of an Eligible Person with respect to
an
employee benefit plan subject to the Employee Retirement Income
Security Act
of 1974 shall be deemed to have been taken in what the Eligible Person
reasonably believed to be the best interests of the Corporation or at
least not
opposed to its best interests if the Eligible Person reasonably
believed he or she
was acting in conformity with the requirements of such Act or he or she
reasonably believed his or her actions to be in the interests of the
participants
in or beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.8 shall include
every
pending, threatened or completed claim, action, suit or proceeding and
all
appeals thereof (whether brought by or in the right of this Corporation
or any
other corporation or otherwise), civil, criminal, administrative or
investigative,
formal or informal, in which an Eligible Person may become involved, as
a
party or otherwise:
(i) by reason of his or her being or having been an Eligible
Person, or
(ii) by reason of any action taken or not taken by him or her
in his
or her capacity as an Eligible Person, whether or not he or she
continued in such capacity at the time such Liability or Expense
shall
have been incurred.
(c) The term "Eligible Person" as used in this Section 7.8 shall
mean
every person (and the estate, heirs and personal representatives of
such person)
who is or was a Director, officer, employee or agent of the Corporation
or is or
was serving at the request of the Corporation as a director, officer,
employee,
agent or fiduciary of another foreign or domestic corporation,
partnership, joint
venture, trust, employee benefit plan or other organization or entity,
whether
for profit or not. An Eligible Person shall also be considered to have
been
serving an employee benefit plan at the request of the Corporation if
his or her
duties to the Corporation also imposed duties on, or otherwise involved
services
by, him or her to the plan or to participants in or beneficiaries of
the plan.
(d) The terms "Liability" and "Expense" as used in this Section
7.8
shall include, but shall not be limited to, counsel fees and
disbursements and
amounts of judgments, fines or penalties against (including excise
taxes
assessed with respect to an employee benefit plan), and amounts paid in
settlement by or on behalf of, an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 7.8
shall
mean (i) termination of any Claim against the Eligible Person in
question
without any finding of liability or guilt against him, (ii) approval by
a court or
agency, with knowledge of the indemnity herein provided, of a
settlement of
any Claim, or (iii) the expiration of a reasonable period of time after
the
threatened making of any Claim without commencement of an action, suit
or
proceeding and without any payment or promise made to induce a
settlement.
(f) Every Eligible Person claiming indemnification hereunder
(other
than one who has been Wholly Successful with respect to any Claim)
shall be
entitled to indemnification (i) if special independent legal counsel,
which may
be regular counsel of the Corporation or other disinterested person or
persons,
in either case selected by the Board of Directors, whether or not a
disinterested
quorum exists (such counsel or person or persons being hereinafter
called the
"Referee"), shall deliver to the Corporation a written finding that
such Eligible
Person has met the standards of conduct set forth in Section
7.8(a)(ii), and
(ii) if the Board of Directors, acting upon such written finding, so
determines.
The Board of Directors shall, if an Eligible Person is found to be
entitled to
indemnification pursuant to the preceding sentence, also determine the
reasonableness of the Eligible Person's Expenses. The Eligible Person
claiming
indemnification shall, if requested, appear before the Referee, answer
questions
that the Referee deems relevant and shall be given ample opportunity to
present
to the Referee evidence upon which he or she relies for
indemnification. The
Corporation shall, at the request of the Referee, make available facts,
opinions
or other evidence in any way relevant to the Referee's finding that are
within
the possession or control of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to
Section 7.8(f) is found not to be entitled thereto, or if the Board of
Directors
fails to select a Referee under Section 7.8(f) within a reasonable
amount of
time following a written request of an Eligible Person for the
selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.8(f) within a reasonable amount of time
following the selection of a Referee, the Eligible Person may apply for
indemnification with respect to a Claim to a court of competent
jurisdiction,
including a court in which the Claim is pending against the Eligible
Person.
On receipt of an application, the court, after giving notice to the
Corporation
and giving the Corporation ample opportunity to present to the court
any
information or evidence relating to the claim for indemnification that
the
Corporation deems appropriate, may order indemnification if it
determines that
the Eligible Person is entitled to indemnification with respect to the
Claim
because such Eligible Person met the standards of conduct set forth in
Section 7.8(a)(ii). If the court determines that the Eligible Person
is entitled to
indemnification, the court shall also determine the reasonableness of
the
Eligible Person's Expenses.
(h) The rights of indemnification provided in this Section 7.8
shall
be in addition to any rights to which any Eligible Person may otherwise
be
entitled. Irrespective of the provisions of this Section 7.8, the
Board of
Directors may, at any time and from time to time, (i) approve
indemnification
of any Eligible Person to the full extent permitted by the provisions
of
applicable law at the time in effect, whether on account of past or
future
transactions, and (ii) authorize the Corporation to purchase and
maintain
insurance on behalf of any Eligible Person against any Liability
asserted against
him or any Liability or Expense incurred by him or her in any such
capacity,
or arising out of his or her status as such, whether or not the
Corporation
would have the power to indemnify him against such Liability or
Expense.
(i) Expenses incurred by an Eligible Person with respect to any
Claim, may be advanced by the Corporation (by action of the Board of
Directors, whether or not a disinterested quorum exists) prior to the
final
disposition thereof upon receipt of an undertaking by or on behalf of
the
Eligible Person to repay such amount if he or she is determined not to
be
entitled to indemnification.
(j) The provisions of this Section 7.8 shall be deemed to be a
contract between the Corporation and each Eligible Person, and an
Eligible
Person's rights hereunder shall not be diminished or otherwise
adversely
affected by any repeal, amendment or modification of this Section 7.8
that
occurs subsequent to such person becoming an Eligible Person.
(k) The provisions of this Section 7.8 shall be applicable to
Claims
made or commenced after the adoption hereof, whether arising from acts
or
omissions to act occurring before or after the adoption hereof.
ARTICLE VIII
Incorporator
The name and post office address of the incorporator of the
Corporation are as
follows:
Number and Street City, State
Name or Building Zip Code
Daniel L. Boeglin 300 N. Meridian St., Indianapolis, IN
Suite 2700 46204
ARTICLE IX
Miscellaneous Provisions
Section 9.1. Amendment or Repeal. Except as otherwise expressly
provided
for in these Articles of Incorporation, the Corporation shall be deemed,
for all purposes, to
have reserved the right to amend, alter, change or repeal any provision
contained in these
Articles of Incorporation to the extent and in the manner now or hereafter
permitted or
prescribed by statute, and all rights herein conferred upon shareholders
are granted subject
to
such reservation.
Section 9.2. Headings. The headings of the Articles and Sections
of these
Articles of Incorporation have been inserted for convenience of reference
only and do not in
any way define, limit, construe or describe the scope or intent of any
Article or Section
hereof
IN WITNESS WHEREOF, the undersigned, being the incorporator
designated
in Article IX, executes these Articles of Incorporation this 3rd day of
August, 1993.
by: /s/ Daniel L. Boeglin
This instrument was prepared by Daniel L. Boeglin, Attorney at Law, Baker &
Daniels,
Suite 2700, 300 North Meridian Street, Indianapolis, Indiana 46204-1782.
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
LEASE ACQUISITION CORPORATION
Lease Acquisition Corporation (the "Corporation"), existing
pursuant to the Indiana Business Corporation Law and desiring to give
notice
of corporate action effectuating an amendment to its Articles of
Incorporation, sets forth the following facts:
Article I
Amendment to the
Articles of Incorporation
Section 1. The name of the Corporation prior to this amendment is
Lease Acquisition Corporation.
Section 2. Article I of the Corporation's Articles of
Incorporation hereby is amended to read in its entirety as follows:
ARTICLE I
Name
The name of the Corporation is Meridian Financial Corporation.
Section 3. The amendment was approved by the Board of Directors
and the shareholders of the Corporation on November 8, 1993. The effective
date of the amendment shall be the date of filing of these Articles of
Amendment with the office of the Secretary of State of the State of
Indiana.
Article II
Manner of Adoption and Vote
Section 1. The Corporation has only one class of capital stock
issued and outstanding. The amendment to the Articles of Incorporation was
adopted by the unanimous joint written consent of all of the Directors and
all
of the shareholders of the Corporation on November 8, 1993.
Section 2. The manner of the adoption of the amendment to the
Articles of Incorporation constitutes full legal compliance with the
provisions of the Indiana Business Corporation Law and the Corporation's
Articles of Incorporation and By-Laws.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed these Articles of Amendment on November 8, 1993.
/s/Michael F. McCoy
President
oard of Directors constitutes full legal compliance with the provisions of
the Indiana
Business Corporation Law and the Corporation's Articles of Incorporation
and By-Laws.
IN WITNESS WHEREOF, the undersigned officer of Meridian
Financial
Corporation has executed these Articles of Amendment this 24th day of
November, 1993.
by:\s\ Michael F. McCoy, President
EXHIBIT A
Section 5.6. Terms of Series A Preferred Stock. The
designation,
preferences, limitations and relative voting and other rights of the shares
of the first series
of the authorized Special Shares of the Corporation (such series being
hereinafter called the
"Series A Preferred Stock"), in addition to those set forth in these
Articles of Incorporation
which are applicable to Special Shares of all series, are hereby fixed as
follows:
(a) Designation and Amount. The shares of such series
shall be
designated "Series A Preferred Stock", and the number of authorized shares
constituting
such series shall be 1,000 shares.
(b) Dividends. The holders of shares of the Series A
Preferred Stock shall
be entitled to receive, out of the assets of the Corporation legally
available therefor and as
and when declared by the Board of Directors in its sole discretion, cash
dividends at the
rate of $40.00 per share per annum, payable quarterly in arrears on the
last day of the
months of March, June, September and December in each year, commencing
December, 1993. Such dividends shall be cumulative from the date of
original issue of the
Series A Preferred Stock and will be payable to the holders of record as
they appear on the
stock books of the Corporation on such record dates, not more than 50 days
nor less than 10
days preceding the payment dates, as shall be fixed by the Board of
Directors of the
Corporation.
Dividends payable for any partial dividend period shall be
computed on the
basis of a 360-day year of twelve 30-day months.
If dividends are not paid in full upon the Series A
Preferred Stock and any
other Special Shares ranking on a parity as to dividends with the Series A
Preferred Stock,
all dividends declared upon shares of Series A Preferred Stock and such
other Special
Shares shall be declared pro rata so that in all cases the amount of
dividends declared per
share on the Series A Preferred Stock and such other Special Shares bear to
each other the
same ratio that accumulated dividends per share on the shares of Series A
Preferred Stock
and such other Special Shares bear to each other.
Unless full cumulative dividends on the Series A Preferred
Stock have been
paid, no Common Shares of the Corporation or any other shares of the
Corporation ranking
junior to the Series A Preferred Stock as to dividends may be redeemed,
purchased or
otherwise acquired for any consideration (or any payment made to or
available for a
sinking fund for the redemption of any such shares) by the Corporation
(except by
conversion into or exchange for, or out of the net cash proceeds from the
concurrent sale of,
shares of the Corporation ranking junior to the Series A Preferred Stock as
to dividends)
and no dividends (other than in Common Shares or any other shares ranking
junior to the
Series A Preferred Stock as to dividends) may be paid or declared and set
aside for payment
or other distribution made upon the Common Shares or on any other shares of
the
Corporation ranking junior to the Series A Preferred Stock as to dividends.
(c) Liquidation Rights. In the event of any
liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of Series A
Preferred Stock shall be entitled to receive, out of the assets of the
Corporation available for
distribution to shareholders, before any distribution or payment is made
upon any Common
Shares or other Special Shares ranking junior in right of payment upon
liquidation to the
Series A Preferred Stock, the sum of $400 per share plus accumulated and
unpaid
dividends. If upon any liquidation, dissolution or winding up of the
Corporation, the
amounts payable with respect to the Series A Preferred Stock and any other
Special Shares
ranking as to any such distribution on a parity with the Series A Preferred
Stock are not
paid in full, the holders of the Series A Preferred Stock and of such other
Special Shares
will share ratably in any such distribution of assets in proportion to the
full respective
preferential amounts to which they are entitled. After payment of the full
amount of the
liquidating distribution to which they are entitled, the holders of shares
of Series A
Preferred Stock will not be entitled to any further participation in any
distribution of assets
by the Corporation.
(d) Voting Rights. Except as required by applicable
law, the holders of
shares of the Series A Preferred Stock have no voting rights.
(e) Optional Redemption. The Series A Preferred Stock may
be redeemed on
at least 10 and not more than 60 days' notice at the option of the
Corporation, as a whole or
in part, at any time or from time to time, at a redemption price of $400
per share plus
accumulated and unpaid dividends. On and after the redemption date, the
dividends cease
to accumulate on shares of the Series A Preferred Stock called for
redemption. In case of
the redemption of less than all the outstanding shares of Series A
Preferred Stock, the
shares to be redeemed shall be determined by the Board of Directors of the
Corporation, in
its sole discretion. Notice of redemption shall be given by mail, postage
prepaid, to the
holders of record of the Series A Preferred Stock to be redeemed, to be
addressed to each
such stockholder at his post office address as shown by the records of the
Corporation. If
such notice of redemption shall have been duly given, and if on or before
the redemption
date specified in such notice the funds necessary for such redemption shall
have been set
aside so as to be and continue to be available therefor, then,
notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for
cancellation, from and after such redemption date, the shares so called for
redemption shall
no longer be deemed outstanding, the dividends thereon shall cease to
accrue, and all rights
with respect to shares so called for redemption, including the rights, if
any, to receive
notices and to vote, shall forthwith on such redemption date cease and
terminate, except
only the right of the holders thereof to receive the amount payable upon
redemption
thereof, without interest. Subject to the provisions hereof, the Board of
Directors shall
have authority to prescribe the manner in which the Series A Preferred
Stock shall be
redeemed from time to time.
(f) No Sinking Fund. The Series A Preferred Stock shall
not be entitled to
the benefits of any retirement or sinking fund.
Board of Directors constitutes full legal compliance with the provisions of
the Indiana
Business Corporation Law and the Corporation's Articles of Incorporation
and By-Laws.
IN WITNESS WHEREOF, the undersigned officer of Meridian
Financial
Corporation has executed these Articles of Amendment this 29th day of
September, 1994.
by:\s\ Michael F. McCoy, President
EXHIBIT A
Section 5.7. Terms of Series B Preferred Stock. The
designation,
preferences, limitations and relative voting and other rights of the shares
of the
second series of the authorized Special Shares of the Corporation (such
series being
hereinafter called the "Series B Preferred Stock"), in addition to those
set forth in
these Articles of Incorporation which are applicable to Special Shares of
all series,
are hereby fixed as follows:
(a) Designation and Amount. The shares of such series
shall be
designated "Series B Preferred Stock", and the number of authorized shares
constituting such series shall be 1,500 shares.
(b) Dividends. The holders of shares of the Series B
Preferred
Stock shall be entitled to receive, out of the assets of the Corporation
legally
available therefor and as and when declared by the Board of Directors in
its sole
discretion, cash dividends at the rate of $80.00 per share per annum,
payable
quarterly in arrears on the last day of the months of March, June,
September and
December in each year, commencing December, 1994. Such dividends shall be
cumulative from the date of original issue of the Series B Preferred Stock
and will be
payable to the holders of record as they appear on the stock books of the
Corporation
on such record dates, not more than 50 days nor less than 10 days preceding
the
payment dates, as shall be fixed by the Board of Directors of the
Corporation.
Dividends payable for any partial dividend period shall be
computed
on the basis of a 360-day year of twelve 30-day months.
The Series B Preferred Stock shall rank on a parity as to
dividends
with the Series A Preferred Stock. If dividends are not paid in full upon
the Series B
Preferred Stock and any other Special Shares ranking on a parity as to
dividends
with the Series B Preferred Stock (including the Series A Preferred Stock),
all
dividends declared upon shares of Series B Preferred Stock and such other
Special
Shares shall be declared pro rata so that in all cases the amount of
dividends
declared per share on the Series B Preferred Stock and such other Special
Shares
bear to each other the same ratio that accumulated dividends per share on
the
shares of Series B Preferred Stock and such other Special Shares bear to
each other.
Unless full cumulative dividends on the Series B Preferred
Stock have
been paid, no Common Shares of the Corporation or any other shares of the
Corporation ranking junior to the Series B Preferred Stock as to dividends
may be
redeemed, purchased or otherwise acquired for any consideration (or any
payment
made to or available for a sinking fund for the redemption of any such
shares) by the
Corporation (except by conversion into or exchange for, or out of the net
cash
proceeds from the concurrent sale of, shares of the Corporation ranking
junior to the
Series B Preferred Stock as to dividends) and no dividends (other than in
Common
Shares or any other shares ranking junior to the Series B Preferred Stock
as to
dividends) may be paid or declared and set aside for payment or other
distribution
made upon the Common Shares or on any other shares of the Corporation
ranking
junior to the Series B Preferred Stock as to dividends.
(c) Liquidation Rights. In the event of any
liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the
holders of
Series B Preferred Stock shall be entitled to receive, out of the assets of
the
Corporation available for distribution to shareholders, before any
distribution or
payment is made upon any Common Shares or other Special Shares ranking
junior
in right of payment upon liquidation to the Series B Preferred Stock, the
sum of
$1,000 per share plus accumulated and unpaid dividends.
The Series B Preferred Stock shall rank on a parity as to
distributions
on liquidation, dissolution or winding up with the Series A Preferred
Stock. If upon
any liquidation, dissolution or winding up of the Corporation, the amounts
payable
with respect to the Series B Preferred Stock and any other Special Shares
ranking
as to any such distribution on a parity with the Series B Preferred Stock
(including
the Series A Preferred Stock) are not paid in full, the holders of the
Series B
Preferred Stock and of such other Special Shares will share ratably in any
such
distribution of assets in proportion to the full respective preferential
amounts to
which they are entitled. After payment of the full amount of the
liquidating
distribution to which they are entitled, the holders of shares of Series B
Preferred
Stock will not be entitled to any further participation in any distribution
of assets by
the Corporation.
(d) Voting Rights. Except as provided in this Section
5.7(d) or as
required by applicable law, the holders of shares of the Series B Preferred
Stock
have no voting rights.
The holders of Series B Preferred Stock, voting as a class,
shall be
entitled to elect one Director at each meeting of the shareholders of the
Corporation
at which Directors are elected, but (except as provided below) shall not be
entitled to
vote upon the election of the remaining Directors.
Unless otherwise specified in this Section 5.7(d), in any
case in which
the holders of the Series B Preferred Stock have voting rights, each
outstanding
share of Series B Preferred Stock shall, when validly issued by the
Corporation,
entitle the record holder thereof to one vote.
If the Corporation fails to declare and pay two consecutive
quarterly
dividends on the Series B Preferred Stock, then beginning on the day after
the
second of such dividends should have been but was not paid and continuing
until the
day on which all accumulated but unpaid dividends have been paid, the
holders of
the Series B Preferred Stock shall be entitled to vote, together with the
holders of
Common Shares as a single voting group, on all matters on which the holders
of
Common Shares are entitled to vote. The aggregate number of votes to be
cast by
the holders of the Series B Preferred Stock shall be equal to forty percent
(40%) of
the total number of votes entitled to be cast by such single voting group;
and each
share of Series B Preferred Stock shall entitle the record holder thereof
to cast one-
fifteen hundredth (1/1500) of such aggregate number of votes.
(e) No Sinking Fund. The Series B Preferred Stock shall
not be
entitled to the benefits of any retirement or sinking fund.
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
OF MERIDIAN FINANCIAL CORPORATION
Meridian Financial Corporation (hereinafter referred to as the
"Corporation"),
existing pursuant to the Indiana Business Corporation Law and desiring to
give
notice of
corporate action effectuating an amendment of its Articles of
Incorporation, sets
forth the
following facts:
Article I
Amendment
Section 1. The name of the Corporation following this amendment
continues to
be Meridian Financial Corporation.
Section 2. Upon effectiveness of these Articles of Amendment, the
Corporation's Articles of Incorporation shall be amended by adding a new
Section
5.8 thereto,
the exact text of which is attached as Exhibit A.
Section 3. The foregoing amendment was duly adopted by the
Corporation's
Board of Directors on March 24, 1997. The effective date of such amendment
shall
be the
date of filing of these Articles of Amendment with the office of the
Secretary of State
of the
State of Indiana.
Article II
Manner of Adoption and Vote
Section 1. The amendment was adopted by the Corporation's Board
of
Directors without shareholder action, and shareholder action was not
required.
Section 2. The manner of adoption of the amendment by the
Corporation's
Board of Directors constitutes full legal compliance with the provisions of
the
Indiana
Business Corporation Law and the Corporation's Articles of Incorporation
and By-
Laws.
IN WITNESS WHEREOF, the undersigned officer of Meridian Financial
Corporation has executed these Articles of Amendment this 27th day of
March,
1997.
by:\s\ Gerald W. Gerichs, Vice President, Secretary and Treasurer
EXHIBIT A
Section 5.8. Terms of Series C Convertible Preferred Stock. The
designation,
preferences, limitations and relative voting and other rights of the shares
of the
third series of the
authorized Special Shares of the Corporation (such series being hereinafter
called
the "Series C
Convertible Preferred Stock"), in addition to those set forth in these
Articles of
Incorporation which are
applicable to Special Shares of all series, are hereby fixed as follows:
1. Number of Shares. The series of Special Shares designated and
known as
"Series C
Convertible Preferred Stock" shall consist of 3,000 shares.
2. Voting.
2.1 General. Except as may be otherwise provided in these terms
of the Series
C
Convertible Preferred Stock or by the Corporation Law, the Series C
Convertible
Preferred Stock shall
vote together with the Common Shares (which are referred to hereinafter as
the
"Common Stock") as a
single class on all actions to be taken by the shareholders of the
Corporation. Each
share of Series C
Convertible Preferred Stock shall entitle the holder thereof to such number
of votes
per share on each such
action as shall equal the number of shares of Common Stock (including
fractions of a
share) into which
each share of Series C Convertible Preferred Stock is then convertible.
2.2 Board Size. The Corporation shall not, without the
affirmative vote of the
holders
of at least two-thirds of the then outstanding shares of Series C
Convertible
Preferred Stock, voting
separately as a series, increase the maximum number of directors
constituting the
Board of Directors to
a number in excess of five.
3. Dividends. The holders of the Series C Convertible Preferred
Stock shall be
entitled to
receive, out of funds legally available therefor, dividends at the same
rate as
dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect
to the
Common Stock
(treating each share of Series C Convertible Preferred Stock as being equal
to the
number of shares of
Common Stock (including fractions of a share) into which each share of
Series C
Convertible Preferred
Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of
the
Corporation, whether
voluntary or involuntary, the holders of the shares of Series C Convertible
Preferred
Stock shall be
entitled, before any distribution or payment is made upon any stock ranking
on
liquidation junior to the
Series C Convertible Preferred Stock, to be paid an amount equal to the
greater of (i)
$1,000 per share
plus, in the case of each share, an amount equal to all dividends declared
but unpaid
thereon, computed
to the date payment thereof is made, or (ii) such amount per share as would
have
been payable had each
such share been converted to Common Stock pursuant to paragraph 6
immediately
prior to such
liquidation, dissolution or winding up, and the holders of Series C
Convertible
Preferred Stock shall not
be entitled to any further payment, such amount payable with respect to one
share
of Series C Convertible
Preferred Stock being sometimes referred to as the "Liquidation Payment"
and with
respect to all shares
of Series C Convertible Preferred Stock being sometimes referred to as the
"Liquidation Payments". If
upon such liquidation, dissolution or winding up of the Corporation,
whether
voluntary or involuntary,
the assets to be distributed among the holders of Series C Convertible
Preferred
Stock shall be insufficient
to permit payment to the holders of Series C Convertible Preferred Stock of
the
amount distributable as
aforesaid, then the entire assets of the Corporation to be so distributed
shall be
distributed ratably among
the holders of Series C Convertible Preferred Stock and any shares of stock
of the
Corporation ranking
on parity with such shares of Series C Convertible Preferred Stock as to
payments
upon any liquidation,
dissolution or winding up of the Corporation. Upon any such liquidation,
dissolution
or winding up of
the Corporation, after the holders of Series C Convertible Preferred Stock
shall have
been paid in full the
amounts to which they shall be entitled, the remaining net assets of the
Corporation
may be distributed
to the holders of stock ranking on liquidation junior to the Series C
Convertible
Preferred Stock. Written
notice of such liquidation, dissolution or winding up, stating a payment
date, the
amount of the
Liquidation Payments and the place where said Liquidation Payments shall be
payable, shall be delivered
in person, mailed by certified or registered mail, return receipt
requested, or sent by
telecopier, not less
than 20 days prior to the payment date stated therein, to the holders of
record of
Series C Convertible
Preferred Stock, such notice to be addressed to each such holder at its
address as
shown by the records
of the Corporation. For purposes hereof, shares of Common Stock shall rank
on
liquidation junior to the
Series C Convertible Preferred Stock, unless the Liquidation Payments are
calculated pursuant to clause
(ii) above, in which case shares of Common Stock shall rank on liquidation
on parity
with the Series C
Convertible Preferred Stock. The Series A Preferred Stock and the Series B
Preferred Stock shall rank
on liquidation junior to the Series C Convertible Preferred Stock.
5. Restrictions. At any time when shares of Series C Convertible
Preferred Stock
are
outstanding, except where the vote of the holders of a greater number of
shares of
the Corporation is
required by law or by the Articles of Incorporation of the Corporation, and
in
addition to any other vote
required by law or the Articles of Incorporation of the Corporation,
without the
approval of the holders
of at least two-thirds of the then outstanding shares of Series C
Convertible
Preferred Stock, voting
separately as a series, the Corporation will not:
(i) create, authorize the creation of or issue any
additional shares of any
class
or series of shares of stock unless the same ranks junior to the
Series C
Convertible
Preferred Stock as to the distribution of assets on the
liquidation, dissolution
or winding
up of the Corporation, or increase the authorized amount of the
Series C
Convertible
Preferred Stock or increase the authorized amount of any class or
series of
shares of stock
unless the same ranks junior to the Series C Convertible Preferred
Stock as to
the
distribution of assets on the liquidation, dissolution or winding
up of the
Corporation, or
create or authorize any obligation or security convertible into
shares of Series
C
Convertible Preferred Stock or into shares of any other class or
series of stock
unless the
same ranks junior to the Series C Convertible Preferred Stock as
to the
distribution of
assets on the liquidation, dissolution or winding up of the
Corporation,
whether any such
creation, authorization, issuance or increase shall be by means of
amendment
to the
Articles of Incorporation of the Corporation or by merger,
consolidation or
otherwise;
(ii) consent to any liquidation, dissolution or winding up of
the Corporation
or consolidate or merge into or with any other entity or entities
or sell, lease,
abandon,
transfer or otherwise dispose of all or substantially all of its
assets;
(iii) amend, alter or repeal its Articles of
Incorporation;
(iv) purchase or set aside any sums for the purchase of, or
pay any
dividends
or make any distribution on, any shares of stock other than the
Series C
Convertible
Preferred Stock, except for (x) dividends or other distributions
payable on the
Common
Stock solely in the form of additional shares of Common Stock, (y)
regular
quarterly
dividends on shares of Series A Preferred Stock outstanding as of
the date
these terms of
Series C Convertible Preferred Stock are filed with the Indiana
Secretary of
State, in
accordance with the terms of such Series A Preferred Stock, and
(z) redemption
of the
Series B Preferred Stock substantially contemporaneously with the
issuance
and sale of
the Series C Convertible Preferred Stock; or
(v) redeem or otherwise acquire any shares of Series C
Convertible
Preferred
Stock except as expressly authorized in paragraph 7 hereof or
pursuant to a
purchase offer
made pro rata to all holders of the shares of Series C Convertible
Preferred
Stock on the
basis of the aggregate number of outstanding shares of Series C
Convertible
Preferred
Stock then held by each such holder.
6. Conversion. The holders of shares of Series C Convertible
Preferred Stock
shall have the
following conversion rights:
6.1 Right to Convert. Subject to the terms and conditions of
this paragraph 6,
the
holder of any share or shares of Series C Convertible Preferred Stock shall
have the
right, at its option
at any time, to convert any such shares of Series C Convertible Preferred
Stock
(except that upon any
liquidation of the Corporation the right of conversion shall terminate at
the close of
business on the
business day fixed for payment of the amount distributable on the Series C
Convertible Preferred Stock)
into such number of fully paid and nonassessable shares of Common Stock as
is
obtained by (i)
multiplying the number of shares of Series C Convertible Preferred Stock so
to be
converted by $1,000
and (ii) dividing the result by the conversion price of $1,000 per share
or, in case an
adjustment of such
price has taken place pursuant to the further provisions of this paragraph
6, then by
the conversion price
as last adjusted and in effect at the date any share or shares of Series C
Convertible
Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted,
being referred
to as the "Conversion
Price"). Such rights of conversion shall be exercised by the holder
thereof by giving
written notice that
the holder elects to convert a stated number of shares of Series C
Convertible
Preferred Stock into shares
of Common Stock and by surrender of a certificate or certificates for the
shares so to
be converted to the
Corporation at its principal office (or such other office or agency of the
Corporation
as the Corporation
may designate by notice in writing to the holders of the Series C
Convertible
Preferred Stock) at any time
during its usual business hours, together with a statement of the name or
names
(with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
6.2 Issuance of Certificates; Time Conversion Effected. Promptly
after the
receipt of
the written notice referred to in subparagraph 6.1 and surrender of the
certificate or
certificates for the
share or shares of Series C Convertible Preferred Stock to be converted,
the
Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in
such name or
names as such holder
may direct, a certificate or certificates for the number of whole shares of
Common
Stock issuable upon
the conversion of such share or shares of Series C Convertible Preferred
Stock. To
the extent permitted
by law, such conversion shall be deemed to have been effected and the
Conversion
Price shall be
determined as of the close of business on the date on which such written
notice shall
have been received
by the Corporation and the certificate or certificates for such share or
shares shall
have been surrendered
as aforesaid, and at such time the rights of the holder of such share or
shares of
Series C Convertible
Preferred Stock shall cease, and the person or persons in whose name or
names any
certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall
be deemed to have
become the holder or holders of record of the shares represented thereby.
6.3 Fractional Shares; Partial Conversion. No fractional shares
shall be
issued upon
conversion of Series C Convertible Preferred Stock into shares of Common
Stock. At
the time of each
conversion, the Corporation shall pay in cash an amount equal to all
dividends,
accrued and unpaid on
the shares of Series C Convertible Preferred Stock surrendered for
conversion to the
date upon which such
conversion is deemed to take place as provided in subparagraph 6.2. In
case the
number of shares of
Series C Convertible Preferred Stock represented by the certificate or
certificates
surrendered pursuant to
subparagraph 6.1 exceeds the number of shares converted, the Corporation
shall,
upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for
the number of shares of Series C Convertible Preferred Stock represented by
the
certificate or certificates
surrendered which are not to be converted. If any fractional share of
Common Stock
would, except for
the provisions of the first sentence of this subparagraph 6.3, be delivered
upon such
conversion, the
Corporation, in lieu of delivering such fractional share, shall pay to the
holder
surrendering the Series C
Convertible Preferred Stock for conversion an amount in cash equal to the
current
market price of such
fractional share as determined in good faith by the Board of Directors of
the
Corporation.
6.4 Adjustment of the Conversion Price. Except as provided in
subparagraph
6.5, if
and whenever the Corporation shall issue or sell, or is deemed to have
issued or sold,
at any time, whether
in a public or private offering or sale or otherwise, any shares of Common
Stock for a
consideration per
share less than the lesser of (i) the Conversion Price in effect
immediately prior to
such issue or sale and
(ii) the Fair Market Value (as herein defined) of a share of Common Stock
immediately prior to such issue
or sale, then, forthwith upon such issue or sale, the Conversion Price
shall be
reduced by an amount equal
to: (x) the difference between (1) the greater of (A) the Conversion Price
in effect
immediately prior to
such issue or sale or (B) the Fair Market Value of a share of Common Stock
immediately prior to such
issue or sale and (2) the price at which the Corporation issued or sold, or
is deemed
to have issued or
sold, such share of Common Stock; multiplied by (y) the number of shares of
Common Stock issued
(including the maximum number of shares issuable upon the exercise of
Options (as
defined herein) or
conversion of Convertible Securities (as defined herein)) at such price;
and divided
by the number of
shares of Common Stock (determined on a fully-diluted basis) outstanding
immediately prior to such
issuance or sale. Such adjustment shall be made successively each time any
event
described in this
subparagraph 6.4 shall occur. For purposes of applying the foregoing
provisions of
this subparagraph 6.4,
the following subparagraphs shall be applicable:
(i) In case at any time the Corporation shall in any manner
grant (whether
directly or by assumption in a merger or otherwise) any warrants
or other
rights to
subscribe for or to purchase, or any options for the purchase of,
shares of
Common Stock
or any stock or security convertible into or exchangeable for
shares of Common
Stock
(such warrants, rights or options being called "Options" and such
convertible or
exchangeable stock or securities being called "Convertible
Securities"), whether
or not
such Options or the right to convert or exchange any such
Convertible
Securities are
immediately exercisable, and the price per share for which shares
of Common
Stock are
issuable upon the exercise of such Options or upon the conversion
or exchange
of such
Convertible Securities (determined by dividing (A) (x) in the case
of an Option
not
relating to Convertible Securities, the total amount, if any,
received or
receivable by the
Corporation as consideration for the granting of all such Options,
plus the
minimum
aggregate amount of additional consideration payable to the
Corporation upon
the exercise
of all such Options or (y) in the case of an Option relating to
Convertible
Securities, the
total amount, if any, received or receivable by the Corporation as
consideration
for the
granting of such Options, plus the minimum aggregate amount of
additional
consideration
payable to the Corporation upon the exercise of all such Options,
plus the
minimum
aggregate amount of additional consideration, if any, payable to
the
Corporation upon the
issue or sale of all such Convertible Securities and upon
conversion or
exchange of all
such Convertible Securities by (B) the total maximum number of
shares of
Common
Stock issuable upon the exercise of such Options or upon the
conversion or
exchange of
all such Convertible Securities issuable upon the exercise of such
Options)
shall be less
than the lesser of (1) the Conversion Price in effect immediately
prior to the
granting of
such Options and (2) the Fair Market Value of a share of Common
Stock in
effect
immediately prior to the time of the granting of such Options,
then the total
maximum
number of shares of Common Stock issuable upon the exercise of
such Options
or upon
conversion or exchange of the total maximum amount of such
Convertible
Securities
issuable upon the exercise of such Options shall be deemed to have
been issued
for such
price per share as of the date of granting of such Options and
thereafter shall
be deemed
to be outstanding. Except as otherwise provided in subparagraph
(iii) below,
no further
adjustment of the Conversion Price shall be made upon the actual
issue of such
Common
Stock or of such Convertible Securities upon exercise of such
Options or upon
the actual
issue of such shares of Common Stock upon conversion or exchange
of such
Convertible
Securities.
(ii) In case at any time the Corporation shall in any manner
issue (whether
directly or by assumption in a merger or otherwise) or sell any
Convertible
Securities,
whether or not the rights to exchange or convert any such
Convertible
Securities are
immediately exercisable, and the price per share for which shares
of Common
Stock are
issuable upon such conversion or exchange (determined by dividing
(A) the
total amount
received or receivable by the Corporation as consideration for the
issue or sale
of all such
Convertible Securities, plus the minimum aggregate amount of
additional
consideration,
if any, payable to the Corporation upon the conversion or exchange
thereof by
(B) the
total maximum number of shares of Common Stock issuable upon the
conversion or
exchange of all such Convertible Securities) shall be less than
the lesser of (1)
the
Conversion Price in effect immediately prior to such issue or sale
and (2) the
Fair Market
Value of a share of Common Stock in effect immediately prior to
the time of
such issue
or sale, then the total maximum number of shares of Common Stock
issuable
upon
conversion or exchange of all such Convertible Securities shall be
deemed to
have been
issued for such price per share as of the date of the issue or
sale of such
Convertible
Securities and thereafter shall be deemed to be outstanding,
provided that (x)
except as
otherwise provided in subparagraph (iii) below, no further
adjustment of the
Conversion
Price shall be made upon the actual issue of such shares of Common
Stock
upon
conversion or exchange of such Convertible Securities and (y) if
any such issue
or sale
of such Convertible Securities is made upon exercise of any
Options to
purchase any such
Convertible Securities for which adjustments of the Conversion
Price have
been or are to
be made pursuant to any other provisions of this subparagraph 6.4,
no further
adjustment
of the Conversion Price shall be made by reason of such issue or
sale.
(iii) Upon the happening of any of the following events,
namely, if the
purchase price provided for in any Option referred to in
subparagraph (i)
above, the
number of shares of Common Stock or number or amount of
Convertible
Securities
subject to such Option, the additional consideration, if any,
payable upon the
exercise of
any Option referred to in subparagraph (i) above which relates to
Convertible
Securities,
the additional consideration, if any, payable upon the conversion
or exchange
of any
Convertible Securities referred to in subparagraph (i) or (ii)
above, or the rate
at which
Convertible Securities referred to in subparagraph (i) or (ii)
above are
convertible into or
exchangeable for shares of Common Stock, shall change at any time
(including,
but not
limited to, changes under or by reason of provisions designed to
protect against
dilution),
the Conversion Price in effect at the time of such event shall
forthwith be
readjusted to
the Conversion Price which would have been in effect at such time
(subject to
any other
adjustments under the other provisions of this subparagraph 6.4
subsequent to
the time of
such initial grant, issue or sale) had such Options or Convertible
Securities
still
outstanding provided for such changed purchase price, additional
consideration
or
conversion rate, as the case may be, at the time initially
granted, issued or
sold, but only
if as a result of such adjustment the Conversion Price then in
effect hereunder
is thereby
reduced; and on the expiration of any Option or the termination of
any right to
convert
or exchange Convertible Securities, the Conversion Price then in
effect
hereunder shall
forthwith be adjusted to the Conversion Price which would have
been in effect
at the time
of such expiration or termination had such Option or Convertible
Securities, to
the extent
outstanding immediately prior to such expiration or termination,
never been
issued and
thereafter the shares of Common Stock theretofore issuable upon
the exercise
of such
Option or the conversion or exchange of such Convertible
Securities shall no
longer be
deemed to be outstanding.
(iv) In case the Corporation shall declare a dividend or make
any other
distribution upon any stock of the Corporation payable in Options
or
Convertible
Securities (except for (A) dividends or other distributions upon
the Series C
Convertible
Preferred Stock to the exclusion of any other class or series or,
if other classes
or series
participate in such dividend or distribution, then dividends or
distributions
declared ratably
(as determined in good faith by the Board of Directors of the
Corporation)
among the
Series C Convertible Preferred Stock and such other classes or
series, and (B)
the issuance
of stock dividends or distributions upon the outstanding shares of
Common
Stock for
which adjustment is made pursuant to any other paragraph or
subsection
hereof), the
provisions of this subparagraph 6.4 shall be applicable, except
that any
Options or
Convertible Securities, as the case may be, issuable in payment of
such
dividend or
distribution shall be deemed to have been issued or sold without
consideration
for
purposes of calculating the consideration in subparagraphs (i)
through (iii)
above.
(v) In case any shares of Common Stock, Options or
Convertible Securities
shall be issued or sold for cash, the consideration received
therefor shall be
deemed to be
the amount received by the Corporation therefor, without deduction
therefrom
of any
expenses incurred or any underwriting commissions or concessions
paid or
allowed by the
Corporation in connection therewith. In case any shares of Common
Stock,
Options or
Convertible Securities shall be issued or sold for a consideration
other than
cash, the
amount of the consideration other than cash received by the
Corporation, for
purposes of
calculating the consideration in subparagraphs (i) through (iii)
above, shall be
deemed to
be the fair value of such consideration as determined reasonably
and in good
faith by the
Board of Directors of the Corporation, without deduction of any
expenses
incurred or any
underwriting commissions or concessions paid or allowed by the
Corporation in
connection therewith. In case any Options or Convertible
Securities shall be
issued in
connection with the issue and sale of other securities of the
Corporation,
together
comprising one integral transaction in which no specific
consideration is
allocated to such
Options or Convertible Securities by the parties thereto, such
Options and
Convertible
Securities shall be deemed to have been issued for such
consideration as
determined
reasonably and in good faith by the Board of Directors of the
Corporation.
(vi) In case the Corporation shall take a record of the
holders of shares of
Common Stock or any other class of stock or series thereof of the
Corporation
for the
purpose of entitling them (A) to receive a dividend or other
distribution
payable in shares
of Common Stock, Options or Convertible Securities or (B) to
subscribe for or
purchase
shares of Common Stock, Options or Convertible Securities, then
such record
date shall
be deemed to be the date of the issue or sale of the shares of
Common Stock to
be issued
or sold upon the declaration of such dividend or the making of
such other
distribution or
the date of the granting of such right of subscription or
purchase, as the case
may be.
(vii) The number of shares of Common Stock outstanding at
any time
shall not
include shares of Common Stock owned or held by or for the account
of the
Corporation,
and the disposition of any such shares of Common Stock shall be
considered an
issue or
sale of shares of Common Stock for the purpose of this
subparagraph 6.4
6.5 Certain Issues of Common Stock Excepted. Anything herein to
the
contrary
notwithstanding, the Corporation shall not be required to make any
adjustment of
the Conversion Price
in the case of any issuances, from and after the date of filing of these
terms of the
Series C Convertible
Preferred Stock, of (i) shares of Common Stock or Options to directors,
officers,
employees or consultants
of the Corporation pursuant to a stock option or incentive plan approved by
the
affirmative vote of at least
a majority of the outstanding shares of Series C Convertible Preferred
Stock or (ii)
shares of Common
Stock upon the exercise of any such Options.
6.6 Subdivision or Combination of Common Stock. In case the
Corporation
shall at
any time subdivide (by any stock split, stock dividend or otherwise) its
outstanding
shares of Common
Stock into a greater number of shares, the Conversion Price in effect
immediately
prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of
Common Stock shall
be combined into a smaller number of shares, the Conversion Price in effect
immediately prior to such
combination shall be proportionately increased. In the case of any such
subdivision,
no further adjustment
shall be made pursuant to subparagraph 6.4(iv) by reason thereof.
6.7 Fundamental Changes. In case of any reclassification or
change of the
outstanding
shares of Common Stock, sale or conveyance of substantially all the assets
of the
Corporation, or
consolidation or merger of the Corporation with another corporation (each,
a
"Fundamental Change"), a
holder of a share of Series C Convertible Preferred Stock then outstanding
shall
thereafter have the right
to receive upon conversion the kind and amount of shares of stock and other
securities and property
receivable upon such Fundamental Change by a holder of the number of shares
of
Common Stock which
the holder of such share of Series C Convertible Preferred Stock would have
had the
right to receive upon
conversion immediately prior to such Fundamental Change, at a price equal
to the
Conversion Price then
in effect pertaining to such share of Series C Convertible Preferred Stock,
provided,
however, that the
Corporation shall not permit, or enter into an agreement which will result
in a
Fundamental Change unless
such Fundamental Change has been approved by the vote of the holders of at
least
two-thirds of the then
outstanding shares of Series C Convertible Preferred Stock, voting
separately as a
single class.
6.8 Fair Market Value. For purposes of this paragraph 6, the
"Fair Market
Value" of
a share of Common Stock shall be the fair market value of such a share as
determined by the Board of
Directors of the Corporation in the good faith exercise of its informed,
business
judgment for the purposes
of the then applicable issuance or sale; provided, however, that the
Corporation
shall, within five days of
such determination give to the holders of Series C Convertible Preferred
Stock
written notice of such
determination and the basis therefor; provided, further, that such Fair
Market
Value shall be the fair
market value of such share of the Corporation determined by an appraisal
if, within
15 days of receipt of
such notice, the holders of a majority of the shares of Series C
Convertible Preferred
Stock then
outstanding shall so elect by service of written notice on the Corporation
to such
effect. In the event that
the Fair Market Value of a share of Common Stock is, in accordance with the
immediately preceding
proviso, to be determined by an appraisal, such appraisal shall be
conducted by a
regionally or nationally
recognized independent appraiser with experience in the appraisal of
businesses
similar to those of the
Corporation and mutually acceptable to the Corporation and the holders of a
majority of the shares of
Series C Convertible Preferred Stock then outstanding. All fees and
expenses
associated with the appraisal
shall be paid by the Corporation. The valuation made in an appraisal
pursuant to
this subparagraph 6.8
shall be made in conformity with standard appraisal techniques in use at
the time of
such appraisal,
including, without limitation, discounted cash flow analysis and shall
apply the
market and economic facts
then relevant. The Corporation shall cause any appraiser appointed
pursuant to
this subparagraph 6.8 to
report in writing to the Corporation and the holders of Series C
Convertible
Preferred Stock the results
of the appraisal, including the Fair Market Value of a share of Common
Stock as of
the time such
determination is to be made in accordance with this subparagraph 6.8.
Within five
days after any
appraiser appointed pursuant to this subparagraph 6.8 delivers its report
to the
Corporation as to the Fair
Market Value of a share of Common Stock, the Corporation shall give to the
holders
of Series C
Convertible Preferred Stock a copy of such appraisal report. Such report
shall be
binding on the
Corporation and the holders of the Series C Convertible Preferred Stock.
6.9 Notice of Adjustment. Upon any adjustment of the Conversion
Price, then
and
in each such case the Corporation shall give written notice thereof, by
delivery in
person, certified or
registered mail, return receipt requested, or telecopier, addressed to each
holder of
shares of Series C
Convertible Preferred Stock at the address of such holder as shown by the
records of
the Corporation,
which notice shall state the Conversion Price resulting from such
adjustment,
setting forth in reasonable
detail the method upon which such calculation is based.
6.10 Other Notices. In case at any time: (i) the Corporation
shall declare any
dividend
upon its Common Stock payable in cash or stock or make any other
distribution to
the holders of its
Common Stock; (ii) the Corporation shall offer for subscription pro rata to
the
holders of its Common
Stock any additional shares of stock of any class or other rights; (iii)
there shall be
any capital
reorganization or reclassification of the capital stock of the Corporation,
or a
consolidation or merger of
the Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other
disposition of all or substantially all its assets; or (iv) there shall be
a voluntary or
involuntary dissolution,
liquidation or winding up of the Corporation; then, in any one or more of
said cases,
the Corporation shall
give, by delivery in person, certified or registered mail, return receipt
requested, or
telecopier, addressed
to each holder of any shares of Series C Convertible Preferred Stock at the
address
of such holder as
shown by the records of the Corporation, (x) at least 20 days' prior
written notice of
the date on which
the books of the Corporation shall close or a record shall be taken for
such dividend,
distribution or
subscription rights or for determining rights to vote in respect of any
such
reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up
and (y) in
the case of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution,
liquidation or winding up,
at least 20 days' prior written notice of the date when the same shall take
place.
Such notice in
accordance with the foregoing clause (x) shall also specify, in the case of
any such
dividend, distribution
or subscription rights, the date on which the holders of shares of Common
Stock
shall be entitled thereto
and such notice in accordance with the foregoing clause (y) shall also
specify the date
on which the
holders of shares of Common Stock shall be entitled to exchange their
shares of
Common Stock for
securities or other property deliverable upon such reorganization,
reclassification,
consolidation, merger,
disposition, dissolution, liquidation or winding up, as the case may be.
6.11 Reservation of Shares. The Corporation shall at all times
reserve from its
authorized Common Stock a sufficient number of shares to provide for
conversion of
all Series C
Convertible Preferred Stock from time to time outstanding. As a condition
precedent
to the taking of any
action which would cause an adjustment reducing the Conversion Price, the
Corporation will take such
corporate action as may be necessary in order that it may validly and
legally issue to
holders of Series C
Convertible Preferred Stock upon conversion fully paid and non-assessable
shares of
Common Stock at
such adjusted Conversion Price. If the Common Stock issuable upon
conversion of
the Series C
Convertible Preferred Stock is listed on any national securities exchange
or
automated quotation system
of NASD, the Corporation will cause, within 60 days of any such listing,
and within
60 days of any
adjustment reducing the Conversion Price, all shares reserved for such
conversion to
be listed on such
exchange or automated quotation system, subject to official notice of
issuance upon
such conversion.
6.12 Taxes. The issuance of certificates for shares of Common
Stock upon
conversion
of Series C Convertible Preferred Stock shall be made without charge to the
holders
thereof for any
issuance tax in respect thereof, provided that the Corporation shall not be
required
to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of
any certificate in a
name other than that of the holder of the Series C Convertible Preferred
Stock
which is being converted.
6.13 Closing of Books. The Corporation will at no time close its
transfer books
against
the transfer of any Series C Convertible Preferred Stock or of any shares
of Common
Stock issued or
issuable upon the conversion of any shares of Series C Convertible
Preferred Stock
in any manner which
interferes with the timely conversion of such Series C Convertible
Preferred Stock,
except as may
otherwise be required to comply with applicable securities laws.
6.14 Definition of Common Stock. As used in this paragraph 6, the
term
"Common
Stock" shall mean and include the Corporation's authorized Common Shares,
without par value, as
constituted on the date of filing of these terms of the Series C
Convertible Preferred
Stock, and shall also
include any capital stock of any class of the Corporation thereafter
authorized (other
than the Series C
Convertible Preferred Stock) which shall not be limited to a fixed sum or
percentage
in respect of the
rights of the holders thereof to participate in dividends or in the
distribution of
assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the Corporation;
provided
that the shares of
Common Stock receivable upon conversion of shares of Series C Convertible
Preferred Stock shall include
only shares designated as shares of Common Stock of the Corporation on the
date of
filing of this
instrument, or in case of any reorganization or reclassification of the
outstanding
shares thereof, the stock,
securities or assets provided for in subparagraph 6.7.
6.15 Mandatory Conversion. If at any time the Corporation shall
effect a firm
commitment underwritten public offering of shares of Common Stock in which
(i) the
aggregate price paid
for such shares by the public (net of underwriting discounts and other
expenses)
shall be at least
$25,000,000, (ii) the public offering price for such shares shall be at
least three times
the Conversion Price
in effect immediately prior to such public offering and (iii) the holders
of at least
two-thirds of the then
outstanding shares of Series C Convertible Preferred Stock have approved
the
selection of the managing
underwriter of such public offering, then effective upon the closing of the
sale of such
shares by the
Corporation pursuant to such public offering, all outstanding shares of
Series C
Convertible Preferred
Stock shall automatically convert to shares of Common Stock on the basis
set forth
in this paragraph 6.
Holders of shares of Series C Convertible Preferred Stock so converted may
deliver
to the Corporation
at its principal office (or such other office or agency of the Corporation
as the
Corporation may designate
by notice in writing to such holders) during its usual business hours, the
certificate
or certificates for the
shares so converted. As promptly as practicable thereafter, the
Corporation shall
issue and deliver to such
holder a certificate or certificates for the number of whole shares of
Common Stock
to which such holder
is entitled, together with any cash dividends and payment in lieu of
fractional
shares to which such holder
may be entitled pursuant to subparagraph 6.3. Until such time as a holder
of shares
of Series C
Convertible Preferred Stock shall surrender his, her or its certificates
therefor as
provided above, such
certificates shall be deemed to represent the shares of Common Stock to
which such
holder shall be
entitled upon the surrender thereof.
7. Redemption. The shares of Series C Convertible Preferred Stock
shall be
redeemed as
follows:
7.1 Mandatory Redemption. Each holder of shares of Series C
Convertible
Preferred
Stock shall have the right by written notice delivered to the Company (a
"Redemption Notice") to request
the Company to redeem all or any portion of the shares of Series C
Convertible
Preferred Stock held by
such holder at any time following the earlier of (i) the sixth anniversary
of the date
of first issuance of
any shares of Series C Convertible Preferred Stock or (ii) unless waived by
the
holders of at least 75%
of the outstanding shares of Series C Convertible Preferred Stock, the
occurrence of
any of the following
events:
(a) The Corporation shall default in the payment of any
installment of
principal or interest under any subordinated note of the
Corporation issued
pursuant to the
Securities Purchase Agreement among the Corporation, Inroads
Capital
Partners, L.P.,
Mesirow Capital Partners VII, L.P., Edgewater Private Equity Fund
II, L.P.,
Michael F.
McCoy and William L. Wildman (the "Purchase Agreement") when the
same
shall
become due and payable, and such default shall continue unremedied
for a
period of five
business days after the date payment is due;
(b) The Corporation shall default in the performance of any
covenant,
condition or agreement on its part to be performed or observed
pursuant to the
terms of
the Purchase Agreement, unless waived pursuant to the Purchase
Agreement,
and such
default shall continue unremedied for a period of ten business
days after the
delivery to
the Corporation of written notice thereof;
(c) Any representation or warranty made by the Corporation
in the
Purchase
Agreement shall fail to be true and correct in any material
respect when made
or deemed
to have been made pursuant to the Purchase Agreement, unless
waived
pursuant to the
Purchase Agreement;
(d) The Corporation shall: (i) file a petition commencing a
voluntary case
under any chapter of Title 11 of the United States Code; (ii) make
a general
assignment
for the benefit of creditors; (iii) admit in writing its inability
to pay its debts as
they
mature; (iv) file an application for, or consent to the
appointment of, any
receiver or a
permanent or interim trustee of the Corporation, including,
without limitation,
the
appointment or authorization of a trustee, receiver or agent under
applicable
law or under
a contract to take charge of its property for the purpose of
enforcing a lien
against such
property or for the purpose of general administration of such
property for the
benefit of
its creditors; (v) file a petition seeking a reorganization of its
financial affairs
or to take
advantage of any bankruptcy, reorganization, insolvency,
readjustment of
debt, dissolution
or liquidation law or statute, or an answer admitting the material
allegations
of a petition
filed against it in any proceeding under such law or statute; or
(vi) take any
corporate
action for the purpose of effecting any of the foregoing;
(e) An involuntary case is commenced against the Corporation
by the filing
of a petition under chapter 7 or chapter 11 of Title 11 of the
United States
Code and
within 60 days after the filing thereof either the petition is not
dismissed or an
order for
relief is entered therein; or an order, judgment or decree is
entered against the
Corporation
or against all or any portion of its property, including, without
limitation, the
entry of an
order, judgment or decree appointing or authorizing a trustee,
receiver or
agent to take
charge of the property of the Corporation for the purpose of
general
administration of
such property or for the benefit of creditors of the Corporation
and such order,
judgment
or decree shall continue unstayed and in effect for a period of 60
days; or an
order,
judgment or decree is entered, without the approval or consent of
the
Corporation,
approving or authorizing the reorganization, insolvency,
readjustment of debt,
dissolution
or liquidation of the Corporation under any law or statute, and
such order,
judgment or
decree shall continue unstayed and in effect for a period of 60
days; and
(f) The Corporation shall sell, lease, abandon, transfer or
otherwise dispose
of all or substantially all of its assets, except in connection
with any such
transaction
effected in the form of a securitization.
7.2 Redemption Price and Payment. Shares of Series C Convertible
Preferred
Stock
for which redemption is requested pursuant to subparagraph 7.1 shall be
redeemed
on the tenth business
day following delivery to the Corporation of the Redemption Notice (the
"Redemption
Date") by paying
on the Redemption Date an amount in cash equal to $1,000 per share plus (i)
an
amount equal to all
dividends declared but unpaid thereon, computed to the date of redemption,
(such
amount being referred
to as the "Redemption Price") and (ii) in the case of any failure by the
Corporation to
redeem such share
on the Redemption Date, interest at a rate of 13.5%, compounded annually,
on the
Redemption Price from
the Redemption Date through the actual date of redemption. The Redemption
Price
shall be paid only
upon surrender of the certificate or certificates representing the shares
to be
redeemed. If fewer than all
of the shares represented by a certificate are to be redeemed, then the
Corporation
shall issue a
replacement certificate for the unredeemed shares.
7.3 Redemption Mechanics. From and after the close of business
on the
Redemption
Date, unless there shall have been a default in the payment of the
Redemption
Price, all rights of holders
of shares of Series C Convertible Preferred Stock (except the right to
receive the
Redemption Price) for
which redemption has been requested shall cease with respect to such
shares, and
such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to
be
outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for
redemption of
shares of Series C
Convertible Preferred Stock on the Redemption Date are insufficient to
redeem the
number of outstanding
shares of Series C Convertible Preferred Stock for which redemption has
been
requested, the holders of
shares of Series C Convertible Preferred Stock for which redemption has
been
requested shall share ratably
in any funds legally available for redemption of such shares according to
the
respective amounts which
would be payable with respect to the full number of shares owned by them
for which
redemption has been
requested. The shares of Series C Convertible Preferred Stock not redeemed
shall
remain outstanding and
entitled to all rights and preferences provided herein. At any time
thereafter when
additional funds of the
Corporation are legally available for the redemption of such shares of
Series C
Convertible Preferred
Stock, such funds will be used to redeem the balance of such shares for
which
redemption has been
requested, or such portion thereof for which funds are then legally
available, on the
basis set forth above.
7.4 Redeemed or Otherwise Acquired Shares to be Retired. Any
shares of
Series C
Convertible Preferred Stock redeemed pursuant to this paragraph 7 or
otherwise
acquired by the
Corporation in any manner whatsoever shall be canceled and shall not under
any
circumstances be
reissued; and the Corporation may from time to time take such appropriate
corporate action as may be
necessary to reduce accordingly the number of authorized shares of Series C
Convertible Preferred Stock.
8. Record Holders. The Corporation and its transfer agent, if any,
for the Series
C
Convertible Preferred Stock may deem and treat the record holder of any
shares of
Series C Convertible
Preferred Stock as the sole true and lawful owner thereof for all purposes,
and
neither the Corporation nor
any such transfer agent shall be affected by any notice to the contrary.
9. Amendments. No provision of these terms of the Series C
Convertible
Preferred Stock
may be amended, modified or waived without the affirmative vote of the
holders of
at least two-thirds of
the then outstanding shares of Series C Convertible Preferred Stock.
-16-
-2-
BY-LAWS
OF
MERIDIAN FINANCIAL CORPORATION
(As last amended March 24, 1997)
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETINGS. Annual meetings of the
shareholders of the Corporation shall be held on the second Wednesday of
April of each year, beginning in the year 1994, at such hour and at such
place within or without the State of Indiana as shall be designated by the
Board of Directors. In the absence of designation, the meeting shall be
held on the date established hereby at the principal office of the
Corporation at 11:00 a.m., local time. The Board of Directors may, by
resolution, change the date or time of such annual meeting. If the day
fixed for any annual meeting of shareholders shall fall on a legal holiday,
then such annual meeting shall be held on the first following day that is
not a legal holiday.
SECTION 1.2. SPECIAL MEETINGS. Special meetings of the
shareholders of the Corporation may be called at any time by the Board of
Directors or by any two members thereof, by the Chairman of the Board or by
the President and shall be called by the Board of Directors if the
Secretary receives written, dated and signed demands for a special meeting,
describing in reasonable detail the purpose or purposes for which it is to
be held, from the holders of shares representing at least twenty-five
percent (25%) of (i) all votes entitled to be cast on any issue proposed to
be considered at the proposed special meeting, or (ii) the outstanding
Series C Convertible Preferred Stock. If the Secretary receives one (1) or
more proper written demands for a special meeting of shareholders, the
Board of Directors may set a record date for determining shareholders
entitled to make such demand. The Board of Directors, the Chairman of the
Board or the President, as the case may be, calling a special meeting of
shareholders shall set the date, time and place of such meeting, which may
be held within or without the State of Indiana.
SECTION 1.3. NOTICES. A written notice, stating the date, time
and place of any meeting of the shareholders, and in the case of a special
meeting the purpose or purposes for which such meeting is called, shall be
delivered or mailed by the Secretary of the Corporation, to each
shareholder of record of the Corporation entitled to notice of or to vote
at such meeting not less than ten (10) nor more than sixty (60) days before
the date of the meeting. In the event of a special meeting of shareholders
required to be called as the result of a demand therefor made by
shareholders, such notice shall be given no later than the sixtieth (60th)
day after the Corporation's receipt of the demand requiring the meeting to
be called. Notice of shareholders' meetings, if mailed, shall be mailed,
postage prepaid, to each shareholder at his or her address shown in the
Corporation's current record of shareholders.
Notice of a meeting of shareholders shall be given to
shareholders not entitled to vote, but only if a purpose for the meeting is
to vote on any amendment to the Corporation's Articles of Incorporation,
merger or share exchange to which the Corporation would be a party, sale of
the Corporation's assets, dissolution of the Corporation, or consideration
of voting rights to be accorded to shares acquired or to be acquired in a
"control share acquisition" (as such term is defined in the Indiana
Business Corporation Law). Except as required by the foregoing sentence or
as otherwise required by the Indiana Business Corporation Law or the
Corporation's Articles of Incorporation, notice of a meeting of
shareholders is required to be given only to shareholders entitled to vote
at the meeting.
A shareholder or his or her proxy may at any time waive notice of
a meeting if the waiver is in writing and is delivered to the Corporation
for inclusion in the minutes or filing with the Corporation's records. A
shareholder's attendance at a meeting, whether in person or by proxy,
(a) waives objection to lack of notice or defective notice of the meeting,
unless the shareholder or his or her proxy at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting, and
(b) waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder or his or her proxy objects to considering the
matter when it is presented. Each shareholder who has in the manner above
provided waived notice or objection to notice of a shareholders' meeting
shall be conclusively presumed to have been given due notice of such
meeting, including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a
different date, time or place, notice need not be given of the new date,
time or place if the new date, time or place is announced at the meeting
before adjournment, unless a new record date is or must be established for
the adjourned meeting.
SECTION 1.4. VOTING. Except as otherwise provided by the
Indiana Business Corporation Law or the Corporation's Articles of
Incorporation, each share of the capital stock of any class of the
Corporation that is outstanding at the record date established for any
annual or special meeting of shareholders and is outstanding at the time of
and represented in person or by proxy at the annual or special meeting,
shall entitle the record holder thereof, or his or her proxy, to one (1)
vote on each matter voted on at the meeting.
SECTION 1.5. QUORUM. Unless the Corporation's Articles of
Incorporation or the Indiana Business Corporation Law provide otherwise, at
all meetings of shareholders a majority of the votes entitled to be cast on
a matter, represented in person or by proxy, constitutes a quorum for
action on the matter. Action may be taken at a shareholders' meeting only
on matters with respect to which a quorum exists; provided, however, that
any meeting of shareholders, including annual and special meetings and any
adjournments thereof, may be adjourned to a later date although less than a
quorum is present. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is
or must be set for that adjourned meeting.
SECTION 1.6. VOTE REQUIRED TO TAKE ACTION. If a quorum exists
as to a matter to be considered at a meeting of shareholders, action on
such matter (other than the election of Directors) is approved if the votes
properly cast favoring the action exceed the votes properly cast opposing
the action, except as the Corporation's Articles of Incorporation or the
Indiana Business Corporation Law require a greater number of affirmative
votes. Directors shall be elected by a plurality of the votes properly
cast.
SECTION 1.7. RECORD DATE. Only those persons shall be entitled
to notice of or to vote, in person or by proxy, at any shareholders'
meeting who appear as shareholders upon the books of the Corporation as of
the record date for such meeting set by the Board of Directors, which date
may not be earlier than the date seventy (70) days immediately preceding
the meeting. In the absence of such determination, the record date shall
be the thirtieth (30th) day immediately preceding the date of such meeting.
Unless otherwise provided by the Board of Directors, shareholders shall be
determined as of the close of business on the record date.
SECTION 1.8. PROXIES. A shareholder may vote his or her shares
either in person or by proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder (including authorizing the proxy to
receive, or to waive, notice of any shareholders' meetings within the
effective period of such proxy) by signing an appointment form, either
personally or by the shareholder's attorney-in-fact. An appointment of a
proxy is effective when received by the Secretary or other officer or agent
authorized to tabulate votes and is effective for eleven (11) months unless
a shorter or longer period is expressly provided in the appointment form.
The proxy's authority may be limited to a particular meeting or may be
general and authorize the proxy to represent the shareholder at any meeting
of shareholders held within the time provided in the appointment form.
Subject to the Indiana Business Corporation Law and to any express
limitation on the proxy's authority appearing on the face of the
appointment form, the Corporation is entitled to accept the proxy's vote or
other action as that of the shareholder making the appointment.
SECTION 1.9. REMOVAL OF DIRECTORS. Any one or more of the
members of the Board of Directors may be removed, with or without cause,
only at a meeting of the shareholders called expressly for that purpose, by
a vote of the holders of shares representing a majority of the votes then
entitled to be cast at an election of Directors.
SECTION 1.10. WRITTEN CONSENTS. Any action required or
permitted to be taken at a shareholders' meeting may be taken without a
meeting if the action is taken by all the shareholders entitled to vote on
the action. The action must be evidenced by one (1) or more written
consents describing the action taken, signed by all the shareholders
entitled to vote on the action, and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Action
taken under this Section 1.10 is effective when the last shareholder signs
the consent, unless the consent specifies a different prior or subsequent
effective date, in which case the action is effective on or as of the
specified date. Such consent shall have the same effect as a unanimous
vote of all shareholders and may be described as such in any document.
If the Indiana Business Corporation Law or the Corporation's
Articles of Incorporation or these By-Laws require that notice of proposed
action be given to nonvoting shareholders and the action is to be taken by
unanimous consent of voting shareholders, the Corporation shall give its
nonvoting shareholders written notice of the proposed action at least ten
(10) days before the action is taken.
SECTION 1.11. PARTICIPATION BY CONFERENCE TELEPHONE. The
Chairman of the Board or the President may authorize any or all
shareholders to participate in any shareholders' meeting by, or through the
use of, any means of communication, such as conference telephone, by which
all shareholders participating may simultaneously hear each other during
the meeting. Any shareholder participating in a meeting by such means is
deemed to be present in person for all purposes at the meeting.
ARTICLE II
DIRECTORS
SECTION 2.1. NUMBER AND TERM. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors.
The number of Directors comprising the Board of Directors is five (5).
Each Director shall be elected for a term of office to expire at
the annual meeting of shareholders next following his or her election.
Despite the expiration of a Director's term, the Director shall continue to
serve until his or her successor is elected and qualified, or until the
earlier of his or her death, resignation, disqualification or removal, or
until there is a decrease in the number of Directors by action of the Board
of Directors. Any vacancy occurring in the Board of Directors, from
whatever cause arising, shall be filled by selection of a successor by a
majority vote of the remaining members of the Board of Directors (although
less than a quorum); provided, however, that if such vacancy or vacancies
leave the Board of Directors with no members or if the remaining members of
the Board are unable to agree upon a successor or determine not to select a
successor, such vacancy may be filled by a vote of the shareholders at a
special meeting called for that purpose or at the next annual meeting of
shareholders. The term of a Director elected or selected to fill a vacancy
shall expire at the end of the term for which such Director's predecessor
was elected.
The Directors and each of them shall have no authority to bind
the Corporation except when acting as a Board.
SECTION 2.2. QUORUM AND VOTE REQUIRED TO TAKE ACTION. A majority
of the whole Board of Directors shall be necessary to constitute a quorum
for the transaction of any business, except the filling of vacancies. If a
quorum is present when a vote is taken, the affirmative vote of a majority
of the Directors present shall be the act of the Board of Directors, unless
the act of a greater number is required by the Indiana Business Corporation
Law, the Corporation's Articles of Incorporation or these By-Laws.
SECTION 2.3. ANNUAL AND REGULAR MEETINGS. The Board of
Directors shall meet annually, without notice, immediately following the
annual meeting of the shareholders, for the purpose of transacting such
business as properly may come before the meeting. Other regular meetings
of the Board of Directors, in addition to said annual meeting, shall be
held on such dates, at such times and at such places as shall be fixed by
resolution adopted by the Board of Directors and specified in a notice of
each such regular meeting, or otherwise communicated to the Directors. The
Board of Directors may at any time alter the date for the next regular
meeting of the Board of Directors.
SECTION 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by any member of the Board of Directors upon not
less than twenty-four (24) hours' notice given to each Director of the
date, time and place of the meeting, which notice need not specify the
purpose or purposes of the special meeting. Such notice may be
communicated in person (either in writing or orally), by telephone,
telegraph, teletype or other form of wire or wireless communication, or by
mail, and shall be effective at the earlier of the time of its receipt or,
if mailed, five (5) days after its mailing. Notice of any meeting of the
Board may be waived in writing at any time if the waiver is signed by the
Director entitled to the notice and is filed with the minutes or corporate
records. A Director's attendance at or participation in a meeting waives
any required notice to the Director of the meeting, unless the Director at
the beginning of the meeting (or promptly upon the Director's arrival)
objects to holding the meeting or transacting business at the meeting and
does not thereafter vote for or assent to action taken at the meeting.
SECTION 2.5. WRITTEN CONSENTS. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if the action is taken by all members of the Board. The action
must be evidenced by one (1) or more written consents describing the action
taken, signed by each Director, and included in the minutes or filed with
the corporate records reflecting the action taken. Action taken under this
Section 2.5 is effective when the last Director signs the consent, unless
the consent specifies a different prior or subsequent effective date, in
which cases the action is effective on or as of the specified date. A
consent signed under this Section 2.5 shall have the same effect as a
unanimous vote of all members of the Board and may be described as such in
any document.
SECTION 2.6. PARTICIPATION BY CONFERENCE TELEPHONE. The Board of
Directors may permit any or all Directors to participate in a regular or
special meeting by, or through the use of, any means of communication, such
as conference telephone, by which all Directors participating may
simultaneously hear each other during the meeting. A Director
participating in a meeting by such means shall be deemed to be present in
person at the meeting.
SECTION 2.7. COMMITTEES. (a) The Board of Directors may create
one (1) or more committees and appoint members of the Board of Directors to
serve on them, by resolution of the Board of Directors adopted by a
majority of all the Directors in office when the resolution is adopted.
Each committee may have one (1) or more members, and all the members of a
committee shall serve at the pleasure of the Board of Directors.
(b) To the extent specified by the Board of Directors in the
resolution creating a committee, each committee may exercise all of the
authority of the Board of Directors; provided, however, that a committee
may not:
(1)authorize dividends or other distributions, except a committee (or an
executive officer of the Corporation designated by the Board of Directors)
may authorize or approve a reacquisition of shares or other distribution if
done according to a formula or method, or within a range, prescribed by the
Board of Directors;
(2)approve or propose to shareholders action that is required to be
approved by shareholders;
(3)fill vacancies on the Board of Directors or on any of its committees;
(4)except to the extent permitted by subdivision (7), amend the
Corporation's Articles of Incorporation under IC 23-1-38-2;
(5)adopt, amend, repeal or waive provisions of these By-Laws;
(6)approve a plan of merger not requiring shareholder approval; or
(7)authorize or approve the issuance or sale or a contract for sale of
shares, or determine the designation and relative rights, preferences and
limitations of a class or series of shares, except the Board of Directors
may authorize a committee (or an executive officer of the Corporation
designated by the Board of Directors) to take action described in this
subdivision within limits prescribed by the Board of Directors.
(c) Except to the extent inconsistent with the resolutions
creating a committee, Sections 2.1 through 2.6 of these By-Laws, which
govern meetings, action without meetings, notice and waiver of notice,
quorum and voting requirements and telephone participation in meetings of
the Board of Directors, apply to each committee and its members as well.
SECTION 2.8. COMPENSATION. The Board of Directors may fix the
compensation of Directors.
ARTICLE III
OFFICERS
SECTION 3.1. DESIGNATION, SELECTION AND TERMS. The officers of
the Corporation shall consist of the Chairman of the Board, the President,
one or more Vice Presidents, the Secretary and the Treasurer. The Board of
Directors may also elect such Assistant Secretaries, Assistant Treasurers,
and other officers or assistant officers as it may from time to time
determine by resolution creating the office and defining the duties
thereof. In addition, the Chairman of the Board or the President may, by a
certificate of appointment creating the office and defining the duties
thereof delivered to the Secretary for inclusion with the corporate
records, from time to time create and appoint such assistant officers as
they deem desirable. The officers of the Corporation shall be elected by
the Board of Directors (or, in the case of assistant officers, appointed by
the Chairman of the Board or the President as provided above) and need not
be selected from among the members of the Board of Directors, except for
the Chairman of the Board, who shall be a member of the Board of Directors.
Any two (2) or more offices may be held by the same person. All officers
shall serve at the pleasure of the Board of Directors and, with respect to
the assistant officers appointed by the Chairman of the Board or the
President, also at the pleasure of such officers. The election or
appointment of an officer does not itself create contract rights.
SECTION 3.2. REMOVAL. The Board of Directors may remove any
officer at any time with or without cause. An assistant officer appointed
by the Chairman of the Board or the President may also be removed at any
time, with or without cause, by either of such officers. Vacancies in such
offices, however occurring, may be filled by the Board of Directors at any
meeting of the Board of Directors (or by appointment by the Chairman of the
Board or the President, to the extent provided in Section 3.1 of these
By-Laws).
SECTION 3.3. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall be the chief executive and principal policy-making officer of the
Corporation. Subject to the authority of the Board of Directors, he shall
formulate the major policies to be pursued in the administration of the
Corporation's affairs. He shall study and make reports and recommendations
to the Board of Directors with respect to major problems and activities of
the Corporation and shall see that the established policies are placed into
effect and carried out under the direction of the President. The Chairman
of the Board shall, if present, preside at all meetings of the shareholders
and of the Board of Directors.
SECTION 3.4. PRESIDENT. Subject to the provisions of
Section 3.3, the President shall be the chief operating officer of the
Corporation, shall exercise the powers and perform the duties which
ordinarily appertain to that office, and shall manage and operate the
business and affairs of the Corporation in conformity with the policies
established by the Board of Directors and by the Chairman of the Board, or
as may be provided for in these By-Laws. In connection with the
performance of his duties, he shall keep the Chairman of the Board fully
informed as to all phases of the Corporation's activities. In the absence
of the Chairman of the Board, the President shall preside at meetings of
the shareholders and of the Board of Directors.
SECTION 3.5. VICE PRESIDENTS. Each Vice President shall have
such powers and perform such duties as the Board of Directors may, from
time to time, prescribe and as the Chairman of the Board or the President
may, from time to time, delegate to him or her.
SECTION 3.6. TREASURER. The Treasurer shall perform all of the
duties customary to that office, including the duty of supervising the
keeping of the records of the receipts and disbursements of the
Corporation. The Treasurer shall submit to the Board of Directors at such
times as the Board may require full statements showing in detail the
financial condition and affairs of the Corporation.
SECTION 3.7. ASSISTANT TREASURER. In the absence or inability
of the Treasurer, the Assistant Treasurer, if any, shall perform only such
duties as are specifically assigned to him or her, in writing, by the Board
of Directors, the Chairman of the Board, the President or the Treasurer.
SECTION 3.8. SECRETARY. The Secretary shall be the custodian of
the books, papers and records of the Corporation and of its corporate seal,
if any, and shall be responsible for seeing that the Corporation maintains
the records required by the Indiana Business Corporation Law (other than
accounting records) and that the Corporation files with the Indiana
Secretary of State the annual report required by the Indiana Business
Corporation Law. The Secretary shall be responsible for preparing minutes
of the meetings of the shareholders and of the Board of Directors and for
authenticating records of the Corporation, and shall perform all of the
other duties usual in the office of Secretary of a corporation.
SECTION 3.9. ASSISTANT SECRETARY. In the absence or inability
of the Secretary, the Assistant Secretary, if any, shall perform only such
duties as are provided herein or specifically assigned to him or her, in
writing, by the Board of Directors, the Chairman of the Board, the
President or the Secretary.
SECTION 3.10. SALARY. The Board of Directors may, at its
discretion, from time to time, fix the salary of any officer by resolution
included in the minute book of the Corporation.
ARTICLE IV
CHECKS
All checks, drafts or other orders for payment of money shall be
signed in the name of the Corporation by such officers or persons as shall
be designated from time to time by resolution adopted by the Board of
Directors and included in the minute book of the Corporation; and in the
absence of such designation, such checks, drafts or other orders for
payment shall be signed by either the Chairman of the Board, the President
or the Treasurer.
ARTICLE V
LOANS
Such of the officers of the Corporation as shall be designated
from time to time by any resolution adopted by the Board of Directors and
included in the minute book, and in the absence of any such designation,
the Chairman of the Board or the President of the Corporation shall have
the power, with such limitations thereon as may be fixed by the Board of
Directors, to borrow money in the Corporation's behalf, to establish
credit, to discount bills and papers, to pledge collateral and to execute
such notes, bonds, debentures or other evidences of indebtedness, and such
mortgages, trust indentures and other instruments in connection therewith,
as may be authorized from time to time by such Board of Directors.
ARTICLE VI
EXECUTION OF DOCUMENTS
The Chairman of the Board or the President may, in the
Corporation's name, sign all deeds, leases, contracts or similar documents
that may be authorized by the Board of Directors unless otherwise directed
by the Board of Directors or otherwise provided herein or in the
Corporation's Articles of Incorporation, or as otherwise required by law.
ARTICLE VII
STOCK
SECTION 7.1. EXECUTION. Certificates for shares of the capital
stock of the Corporation shall be signed by the Chairman of the Board or
the President and by the Secretary and the seal of the Corporation (or a
facsimile thereof), if any, may be thereto affixed. Where any such
certificate is also signed by a transfer agent or a registrar, or both, the
signatures of the officers of the Corporation may be facsimiles. The
Corporation may issue and deliver any such certificate notwithstanding that
any such officer who shall have signed, or whose facsimile signature shall
have been imprinted on, such certificate shall have ceased to be such
officer.
SECTION 7.2. CONTENTS. Each certificate shall state on its face
the name of the Corporation and that the Corporation is organized under the
laws of the State of Indiana, the name of the person to whom it is issued,
and the number and class of shares and the designation of the series, if
any, that the certificate represents, and shall state conspicuously on its
front or back that the Corporation will furnish the shareholder, upon his
written request and without charge, a summary of the designations, relative
rights, preferences and limitations applicable to each class and the
variations in rights, preferences and limitations determined for each
series (and the authority of the Board of Directors to determine variations
for future series).
SECTION 7.3. TRANSFERS. Except as otherwise provided by law or
by resolution of the Board of Directors, transfers of shares of the capital
stock of the Corporation shall be made only on the books of the Corporation
by the holder thereof in person or by duly authorized attorney, on payment
of all taxes thereon and surrender for cancellation of the certificate or
certificates for such shares (except as hereinafter provided in the case of
loss, destruction or mutilation of certificates) properly endorsed by the
holder thereof or accompanied by the proper evidence of succession,
assignment or authority to transfer, and delivered to the Secretary or an
Assistant Secretary, if any.
SECTION 7.4. STOCK TRANSFER RECORDS. There shall be entered
upon the stock records of the Corporation the number of each certificate
issued, the name and address of the registered holder of such certificate,
the number, kind and class of shares represented by such certificate, the
date of issue, whether the shares are originally issued or transferred, the
registered holder from whom transferred and such other information as is
commonly required to be shown by such records. The stock records of the
Corporation shall be kept at its principal office, unless the Corporation
appoints a transfer agent or registrar, in which case the Corporation shall
keep at its principal office a complete and accurate shareholders' list
giving the names and addresses of all shareholders and the number and class
of shares held by each. If a transfer agent is appointed by the
Corporation, shareholders shall give written notice of any changes in their
addresses from time to time to the transfer agent.
SECTION 7.5. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may appoint one or more transfer agents and one or more
registrars and may require each stock certificate to bear the signature of
either or both.
SECTION 7.6. LOSS, DESTRUCTION OR MUTILATION OF CERTIFICATES.
The holder of any of the capital stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of the
certificate therefor, and the Board of Directors may, in its discretion,
cause to be issued to the holder a new certificate or certificates of
stock, upon the surrender of the mutilated certificate, or, in the case of
loss or destruction, upon satisfactory proof of such loss or destruction.
The Board of Directors may, in its discretion, require the holder of the
lost or destroyed certificate or his or her legal representative to give
the Corporation a bond in such sum and in such form, and with such surety
or sureties as it may direct, to indemnify the Corporation, its transfer
agents and registrars, if any, against any claim that may be made against
them or any of them with respect to the capital stock represented by the
certificate or certificates alleged to have been lost or destroyed, but the
Board of Directors may, in its discretion, refuse to issue a new
certificate or certificates, save upon the order of a court having
jurisdiction in such matters.
SECTION 7.7. FORM OF CERTIFICATES. The form of the certificates
for shares of the capital stock of the Corporation shall conform to the
requirements of Section 7.2 of these By-Laws and be in such printed form as
shall from time to time be approved by resolution of the Board of
Directors.
ARTICLE VIII
SEAL
The corporate seal of the Corporation shall, if the Corporation
elects to have one, be in the form of a disc, with the name of the
Corporation and "INDIANA" on the periphery thereof and the word "SEAL" in
the center.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. INDIANA BUSINESS CORPORATION LAW. The provisions
of the Indiana Business Corporation Law, as amended, applicable to all
matters relevant to, but not specifically covered by, these By-Laws are
hereby, by reference, incorporated in and made a part of these By-Laws.
SECTION 9.2. FISCAL YEAR. The fiscal year of the Corporation
shall end on the 30th of September of each year.
SECTION 9.3. AMENDMENTS. These By-Laws may be rescinded,
changed or amended, and provisions hereof may be waived, at any meeting of
the Board of Directors by the affirmative vote of a majority of the entire
number of Directors at the time, except as otherwise required by the
Corporation's Articles of Incorporation or by the Indiana Business
Corporation Law.
SECTION 9.4. DEFINITION OF ARTICLES OF INCORPORATION. The term
"Articles of Incorporation" as used in these By-Laws means the Articles of
Incorporation of the Corporation as from time to time are in effect.
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("AGREEMENT" or "THIS AGREEMENT") is made and
entered into effective as of the day of April, 1997, by and among
MERIDIAN FINANCIAL CORPORATION, an Indiana corporation with its principal
place of business located at 8250 Haverstick Road, Suite 110, Indianapolis,
Indiana 46240 ("BORROWER"), and LASALLE NATIONAL BANK, a national banking
association with banking offices at 1600 One American Square, Indianapolis,
Indiana 46282 ("BANK").
RECITALS
WHEREAS, the Borrower's primary business is the origination of
equipment leases for the food service industry;
WHEREAS, the Borrower desires to obtain a credit facility in the
maximum principal amount of Five Million Dollars ($5,000,000.00) in favor
of the Borrower, and
WHEREAS, the Borrower desires to have the right to obtain a second
line of credit in the maximum principal sum of Five Million Dollars
($5,000,000.00);
WHEREAS, the Bank is willing, subject to the terms and conditions of
this Agreement, to make available to Borrower each of the requested credit
facilities;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
1 DEFINITIONS. In addition to the definitions in the opening
paragraph of this Credit Agreement, the following terms shall have the
meanings set forth below (such meanings to be equally applicable to both
the singular and plural form of the terms defined):
(a) "ADVANCE" shall mean any disbursement of any of the Loans
requested by the Borrower under this Agreement.
(b) "ADVANCE PAYMENT" shall mean any payments, whether one or
more, received by the Borrower from any Lessee which is designated in
any schedule to any Lease as an 'Advance Payment', typically the first
and/or last monthly rental payments under a Lease.
(c) "ADVANCE RENTAL" shall mean, with respect to any Lease, the
amount of Advance Payment LESS the amount of the Security Deposit,
each of which shall be stated in dollars. Any Advance Rental on a
Lease shall be deemed to be due on or before the date on which a
Request for Advance with respect to such Lease is submitted to Bank.
(d) "APPLICABLE BORROWING BASE" shall mean the Initial Credit
Line Borrowing Base, the Initial Term Loan Borrowing Base, the Second
Credit Line Borrowing Base or the Second Term Loan Borrowing Base, as
the context requires.
(e) "APPLICABLE MARGIN" shall mean with respect to: (i) Loans
under either of the Credit Lines taken as or converted to a Prime Rate
Loan, one percent (1.0%) per annum; (ii) Loans under either of the
Credit Lines taken as or converted to a LIBOR Rate Loan, three hundred
(300) basis points; (iii) Loans under either of the Term Loans taken
as or converted to Prime Rate Loans, one and one-quarter percent
(1.25%) per annum; (iv) Loans under either of the Term Loans taken as
or converted to LIBOR Rate Loans, three hundred twenty-five (325)
basis points; and (v) Loans under either of the Term Loans taken as
Fixed Rate Loans, three hundred fifty (350) basis points.
(f) "ASSIGNMENT OF LIFE INSURANCE POLICY" shall mean the
Assignment Of Life Insurance Policy As Collateral executed and
delivered to Bank by Borrower, all other owners and all beneficiaries
of such policy or policies, assigning to Bank not less than Three
Million Two Hundred Twenty-Five Thousand Dollars ($3,250,000.00) of
life insurance on certain officers of Borrowers as additional
collateral for the Loans, as required pursuant to Section 8.10 of this
Agreement.
(g) "BANK'S COUNSEL" shall mean the law firm of DANN PECAR
NEWMAN & KLEIMAN, Professional Corporation, One American Square, Suite
2300, Box 82008, Indianapolis, Indiana 46282-0008, or such other
counsel as Bank may hereafter designate in writing to Borrower.
(h) "BORROWER'S COUNSEL" shall mean the law firm of BAKER &
DANIELS, Suite 2700, 300 North Meridian Street, Indianapolis, Indiana
46204.
(i) "BORROWING BASE" shall mean an amount which is eighty
percent (80%) of the Net Book Value of a Borrowing Base Lease.
(j) "BORROWING BASE CERTIFICATE" means a certificate
substantially in the form of the Borrowing Base Certificate example
attached hereto as EXHIBIT 1.1(J).
(k) "BORROWING BASE LEASE" shall mean a Qualified Lease which is
assigned to Bank.
(l) "BORROWING DATE" shall mean the date upon which Borrower
requests a Loan to be advanced by Bank or, if the actual date of such
Advance is different from the date requested, the actual date on which
such Loan was advanced by Bank.
(m) "BUSINESS DAY" shall mean for all purposes, any day
excluding Saturday, Sunday and any day which is a legal holiday under
the laws of the United States of America, the State of Indiana or the
State of Illinois or is a day on which banking institutions located in
the State of Illinois and/or the State of Indiana are authorized or
required by law or other governmental action to close or is a day on
which the United States Federal Reserve is closed and, in connection,
with a LIBOR Rate Loan shall mean any day excluding Saturday, Sunday
and any day which is a legal holiday under the laws of Great Britain
or is a day on which banking institutions doing business in the London
Interbank market are closed.
(n) "CASH COLLATERAL ACCOUNT" shall mean an account established
at Bank pursuant to the requirements of Section 6.1 of this Agreement.
(o) "CHICAGO TIME" shall mean, as applicable, Central Standard
Time or Central Daylight Time.
(p) "COLLATERAL" shall mean all personal property which has been
assigned to Bank, or in which Bank has been granted a Security
Interest, as collateral security for the Secured Obligations.
(q) "COLLECTIONS" shall mean all payments, funds, or money paid
by or on behalf of any Lessee with respect to any Lease.
(r) "COST" shall mean the amount actually paid by Borrower for
Leased Equipment, including freight, sales taxes and installation
expenses, stated in dollars.
(s) "COST RECOVERY" shall mean, with respect to any Lease, that
portion of a Rental which represents the recovery of Cost after giving
effect to the amortization of the Service Charge.
(t) "CREDIT FACILITY" shall mean the Initial Credit Line, the
Initial Term Loan, the Second Credit Line or the Second Term Loan, as
the context requires.
(u) "CREDIT LINE" shall mean the Initial Credit Line or the
Second Line, as the context requires, or, if used in the plural, the
Initial Credit Line and the Second Credit Line.
(v) "CREDIT LINE LOAN" shall mean a Loan advanced by Bank to
Borrower for the purchase of Qualified Leased Equipment or for the
payment of indebtedness owed by Borrower to Star Financial Bank
incurred for the purchase of Qualified Leased Equipment, which payment
satisfies the lien of Star Financial Bank with respect thereto, under
the Initial Credit Line or the Second Credit Line and, if used in the
plural, any two or more such Loans.
(w) "DEFAULT" shall mean any event which, after the expiration
of any applicable grace period, or with notice to the Borrower, or
both, would constitute an Event of Default.
(x) "EFFECTIVE DATE" shall mean with respect to: (i) the Initial
Credit Line and this Agreement, the date of the execution of this
Agreement by all parties; (ii) the Initial Term Note, the date upon
which Borrower timely executes and delivers to Bank the Initial Term
Loan Note; (iii) the Second Credit Line, the date upon which all of
the conditions precedent set forth in Sections 6.1, 6.2, 6.3 and 6.5
hereof have been fully satisfied and Borrower has executed and
delivered to delivered to Bank the Second Credit Line Note required
pursuant to Section 2.3(c); and (iv) the Second Term Note, the date
upon which Borrower timely executes and delivers to Bank the Second
Term Loan Note.
(y) "EVENT OF DEFAULT" shall mean any of the events set forth in
Section 10.1 hereof.
(z) "FIXED RATE LOAN" shall mean any Loan under either of the
Term Loans for which Borrower has received an Advance which, at the
time requested Borrower designated Treasury Rate Option as the Rate
Option or which was subsequently converted to bear interest at the
Treasury Rate Option.
(27) "GAAP" shall mean generally acceptable accounting
principles as promulgated by the American Institute of Certified
Public Accountants and/or the Financial Accounting Standards Board.
(28) "GUARANTOR(S)" shall mean, collectively, each Guarantor of
any Lease.
(29) "INITIAL CREDIT LINE" shall mean the Five Million Dollar
($5,000,000.00) revolving credit facility made available to Borrower
pursuant to Section 2.1 of this Agreement.
(30) "INITIAL CREDIT LINE BORROWING BASE" shall mean the
Borrowing Base applicable to the Initial Credit Line itself or any
Request for Advance under the Initial Credit Line, which is expressly
limited to Qualified Leased Equipment funded or to be funded from an
Advance under the Initial Credit Line, as the context requires.
(31) "INITIAL CREDIT LINE LEASE" shall mean a Lease the
Borrowing Base of which was originally advanced to Borrower under the
Initial Credit Line and any Qualified Lease assigned to Bank pursuant
to Section 2.5 hereof in connection with the release of a Lease any
portion of the Net Book Value of which was at any time included in the
computation of the Initial Credit Line Borrowing Base.
(32) "INITIAL CREDIT LINE MATURITY DATE" shall mean that date
which is the first to occur of: (i) the Termination Date of the
Initial Credit Line; or (ii) that date six (6) months after the
Effective Date of this Agreement.
(33) "INITIAL CREDIT LINE NOTE" shall mean the promissory note
in favor of and executed and delivered to Bank by Borrower in
accordance with the provisions of Section 2.1(c) of this Agreement.
(34) "INITIAL TERM LOAN" shall mean the Loan made to Borrower by
Bank to repay the outstanding principal balance of the Initial Credit
Line pursuant to the provisions of Section 2.2 of this Agreement.
(35) "INITIAL TERM LOAN BORROWING BASE" shall mean, at the time
of determination, the aggregate Borrowing Base of Initial Term Loan
Leases.
(36) "INITIAL TERM LOAN LEASES" shall mean, at the time of
determination, any Initial Credit Line Lease: (i) not released by Bank
pursuant to the provisions of Section 2.5 prior to the Effective Date
of the Initial Term Loan Note; and (ii) not yet released by Bank.
(37) "INITIAL TERM LOAN MATURITY DATE" shall mean that date
which is the first to occur of: (i) the Termination Date of the
Initial Term Loan; (ii) the end of the term of the average of
maturities, rounded to the next lower whole month, of all Borrowing
Base Leases funded by Advances under the Initial Credit Line; (iii)
that date which is thirty (30) months after the Effective Date of the
Initial Term Loan Note; or (iv) that date which is three (3) years
after the Effective Date of this Agreement.
(38) "INITIAL TERM LOAN NOTE" shall mean the promissory note in
favor of and executed and delivered to Bank by Borrower in accordance
with the provisions of Section 2.2(c) of this Agreement.
(39) "INTEREST PERIOD" shall mean the period of time designated
by Borrower for which a LIBOR Rate Loan is to be outstanding, which
shall be thirty (30), sixty (60), ninety (90) or one hundred eighty
(180) days, if deposits for such period are available from financial
institutions acceptable to Bank in the London Interbank market.
(40) "LEASE" shall mean every written agreement for the transfer
of the right to possession and use of equipment, fixtures and other
goods for a finite term in return for consideration, including, with
particularly and without limitation, a lease intended as, or treated
at law as, a sale.
(41)(AO) "LEASE ASSIGNMENT" shall mean an Lease Assignment in
the form of EXHIBIT 5.3 to this Agreement executed and delivered to
Bank with respect to a Lease.
(42) "LEASE DOCUMENTS" shall mean, collectively, the Lease
(including the master lease and all schedules created in relation
thereto), the certificate of acceptance, the disbursement
authorization, any resolutions of the Lessee authorizing the Lease,
each Guaranty, each resolution of each Guarantor authorizing any
Guaranty, each invoice and bill of sale for Leased Equipment, each
certificate of insurance, each waiver of each landlord or mortgagee
and all other instruments and other papers creating, evidencing, or
representing the collateral or the security interests therein.
(43) "LEASE PORTFOLIO SUMMARY REPORT" shall mean a monthly
report of the Borrower as of the last Business Day of each month, as
soon as available and in any event within fifteen (15) calendar days
after the end of such month, listing all Leases (other than the
Trustee Leases), separately, containing all information reasonably
required by Bank, in such form and detail as the Bank shall reasonably
request, including, but not limited to, with respect to each Lease:
(i) the name and address of the Lessee; (ii) the street address at
which the Leased Equipment is located; (iii) the franchisor or
franchise concept; (iv) all other Leases with the same Lessee,
including all information required by this Subsection with respect
thereto; (v) the date of the Advance; (vi) the amount of Advance made
by Bank; (vii) the Cost of the Leased Equipment; (viii) the Net Book
Value of such Lease; (ix) the date and amount of last payment on the
Lease; (x) the total amount of lease payments remaining due on the
Lease (reflected in columnar format and aged, based on the last due
date of the lease payment remaining unpaid, and categorized as 30 days
or less, 31 to 60 days, 61-90 days and over 90 days past due); (xi)
the existence of an Event of Default, if any; and (xii) the unpaid
balance of any Loans from Bank with respect to such Lease.
(44) "LEASED EQUIPMENT" shall mean all equipment, fixtures and
other goods leased to any Lessee under any Lease.
(45) "LESSEE" shall mean any person or entity possessing Leased
Equipment pursuant to a Lease.
(46) "LIBOR" means, for each Interest Period, the offered rate
per annum for deposits of Dollars for a period approximately equal to
the Interest Period and for an amount equal or comparable to the
principal amount of the LIBOR Rate Loan as of 11:00 A.M. (London,
England time) two (2) Business Days prior to the first day in such
Interest Period. If no such offered rate exists, such rate will be
the rate of interest per annum, as determined by Bank (rounded
upwards, if necessary, to the nearest 1/16 of 1%) at which deposits of
Dollars in immediately available funds are offered at 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in
such Interest Period by major financial institutions reasonably
satisfactory to the Bank in the London interbank market for a period
approximately equal to the Interest Period and for an amount equal or
comparable to the principal amount of the LIBOR Rate Loan on such date
of determination. If no such deposits are offered by such
institutions, such rate will be the rate in effect for the prior
Interest Period.
(47) "LIBOR RATE LOAN" shall mean any Loan for which Borrower
has received an Advance which, at the time requested Borrower
designated the LIBOR Rate Option as the Rate Option or which was
subsequently converted to the LIBOR Rate Option.
(48) "LIBOR RATE OPTION" shall mean the interest rate option
available to Borrower pursuant to Section 4.3(b) or Section 4.3(c)(ii)
of this Agreement.
(49) "LOCATION" shall mean the street address and legal
description, in metes and bounds or as platted, of such street
address.
(50) "LOCKBOX ACCOUNT" a depository account maintained with Bank
into which Borrower shall deposit, and require its Lessees to deposit,
Collections on Leases, as required by Section 6.1 of this Agreement.
(51) "LOAN" shall mean any Advance made to Borrower,r whether as
a Prime Rate Loan, LIBOR Rate Loan or Fixed Rate Loan and, if used in
the plural, any or all Advances made to Borrower without regard to the
Rate Option.
(52) "LOAN DOCUMENTS" shall mean, collectively, this Agreement,
the Security Agreement, the Assignment of Life Insurance Policy, ,
each Lease Assignment, each UCC Filing and all other documents
executed or delivered in conjunction with the execution of this
Agreement.
(53) "LOAN RATE" shall mean, as the context requires: (i) Prime
Rate plus the Applicable Margin; (ii) LIBOR plus the Applicable
Margin; or (iii) Treasury Rate plus the Applicable Margin.
(54) "MATURITY DATE" shall mean the Initial Credit Line Maturity
Date, the Initial Term Loan Maturity Date, the Second Credit Line
Maturity Date or the Second Term Loan Maturity Date, as the context
requires.
(55) "MAXIMUM AMOUNT" shall mean, with respect to each of the
Credit Lines, Five Million Dollars ($5,000,000.00).
(56) "NET BOOK VALUE" shall mean, at the time of determination
and with respect to any Lease: (i) the Cost; LESS (ii) the aggregate
Cost Recovery for all Rentals due under such Lease on or before such
date.
(57) "NOTE" shall mean the Initial Credit Line Note, the Initial
Term Loan Note, the Second Credit Line Note or the Second Term Loan
Note, as the context requires, or, if used in the plural, so many of
them as may at such time be outstanding.
(58) "NOTICE OF CONTINUATION\CONVERSION" shall mean a written
request to Bank, in the form of EXHIBIT 4.2 attached, to continue a
LIBOR Rate Loan or convert a Prime Rate Loan or LIBOR Rate Loan to a
different Loan Rate
(59) "PRIME RATE" shall mean, at any time, the rate established
by LaSalle National Bank, Chicago, Illinois, from time to time based
on its consideration of economic, money market, business and
competitive factors, and it is not necessarily the Bank's most favored
rate.
(60) "PRIME RATE LOAN" shall mean any Loan for which Borrower
has received an Advance which, at the time requested Borrower
designated the Prime Rate Option as the Rate Option or which was
subsequently converted to Prime Rate Option.
(61) "PRIME RATE OPTION" shall mean the interest rate option
available to Borrower under Section 4.3(a) or Section 4.3(c)(i).
(62) "QUALIFIED LEASE" shall mean a Lease of Qualified Leased
Equipment other than: (i) a Trustee Lease; (ii) a Lease with respect
to which all or any portion of a Rental is more than thirty (30) days
past due; (iii) a Lease the maturity of which exceeds sixty (60)
months, excluding any purchase option or payment solely in
consideration of the purchase of the Leased Equipment thereunder; (iv)
a Lease with respect to which any portion of the Rentals have been
assigned to any person or entity other than Bank; and (v) a Lease with
respect to which any person or entity other than Bank has been granted
or acquired a security interest in or lien upon the Lease or the
Leased Equipment subject thereto which will remain after payment of
all invoices or indebtedness with respect thereto by Borrower. If the
context so requires, "Qualified Lease" shall also mean any and all
instruments and documents which evidence or relate to any such Lease.
(63) "QUALIFIED LEASED EQUIPMENT" shall mean any equipment,
fixtures or other goods used solely in the food service industry the
possession or use of which is permitted by a Lessee pursuant to a
Lease.
(64) "RATE OPTION" shall mean an interest rate option available
to Borrower pursuant to Section 4.3 of this Agreement.
(65) "RENTAL" shall mean a single installment or payment to paid
with respect to a Lease, including Cost Recovery and Service Charge.
(66) "REQUEST FOR ADVANCE" shall mean a written request for an
Advance by the Borrower in substantially the form of EXHIBIT 1.1(BN)
to this Agreement, completed in a manner acceptable to the Bank.
(67) "SECOND CREDIT LINE" shall mean the Five Million Dollar
($5,000,000.00) revolving credit facility made available to Borrower
pursuant to Section 2.3 of this Agreement.
(68) "SECOND CREDIT LINE BORROWING BASE" shall mean the
Borrowing Base applicable to the Second Credit Line itself or any
Request for Advance under the Second Credit Line, which is expressly
limited to Qualified Lease Equipment funded or to be funded by
Advances under the Second Credit Line, as the context may require.
(69) "SECOND CREDIT LINE LEASE" shall mean a Lease the Net Book
Value of which was originally advanced to Borrower under the Second
Credit Line and any Qualified Lease assigned to Bank pursuant to
Section 2.5 hereof in connection with the release of a Lease the Net
Book Value of which was at any time included in the computation of the
Second Credit Line Borrowing Base.
(70) "SECOND CREDIT LINE MATURITY DATE" shall mean that date
which is the first to occur of: (i) the Termination Date of the
Second Credit Line; or (ii) that date six (6) months after the
Effective Date of the Second Credit Line.
(71) "SECOND CREDIT LINE NOTE" shall mean the promissory note in
favor of and executed and delivered to Bank by Borrower in accordance
with the provisions of Section 2.3(c) of this Agreement.
(72) "SECOND TERM LOAN" shall mean the Loan made to Borrower by
Bank to repay the outstanding principal balance of the Second Credit
Line pursuant to Section 2.4 of this Agreement.
(73) "SECOND TERM LOAN BORROWING BASE" shall mean, at the time
of determination, the aggregate Borrowing Base of Second Term Loan
Leases.
(74) "SECOND TERM LOAN LEASES" shall mean, at the time of
determination any Second Credit Line Lease: (i) not released by Bank
pursuant to the provisions of Section 2.5 prior to the Effective Date
of the Second Term Loan Note; and (ii) not yet released by Bank.
(75) "SECOND TERM LOAN NOTE" shall mean the promissory note in
favor of and executed and delivered to Bank by Borrower in accordance
with the provisions of Section 2.4(c) of this Agreement.
(76) "SECOND TERM LOAN MATURITY DATE" shall mean that date which
is the first to occur of: (i) the Termination Date of the Second Term
Loan; (ii) the end of the term of the average of maturities, rounded
to the next lower whole month but not to exceed in any event sixty
(60) months, of all Borrowing Base Leases funded by Advances under the
Second Credit Line; (iii) that date which is thirty (30) months after
the Effective Date of the Second Term Loan Note; or (iv) that date
which is three (3) years after the Effective Date of the Second Credit
Line.
(77) "SECURED OBLIGATIONS" shall mean the entire unpaid
principal balance of and all interest now accrued or hereafter to
accrue on the Notes, the performance of all the respective covenants,
agreements and obligations of the Borrower under this Agreement, the
Notes, the Security Agreement, the Assignment Of Life Insurance
Policies and the other Loan Documents, whether direct or indirect,
liquidated or unliquidated, fixed or contingent, matured or unmatured,
and all other liabilities, obligations, covenants and duties owing to
the Bank from the Borrower of any kind or nature, present or future,
whether or not evidenced by any note, guaranty, security agreement,
assignment of life insurance policy, lease assignment, depository
agreement, any other Loan Document or other instrument, including,
without limitation, any obligations, liabilities or indebtedness of
Borrower acquired by Bank, together with all amendments, renewals or
extensions of any of the liabilities, obligations and indebtedness
referred to herein. The term "Secured Obligations" includes, without
limitation, all interest, charges, expenses, reasonable attorneys'
fees and any other sum chargeable to the Borrower under this Credit
Agreement and/or any other Loan Document.
(78) "SECURITY AGREEMENT" shall mean the Security Agreement And
Master Assignment Of Leases in the form of EXHIBIT 5.1 attached hereto
executed and delivered to Bank by the Borrower.
(79) "SECURITY DEPOSIT" shall mean any Advance Payments received
by Borrower which are for Lease payments due at the end of the Lease
term; provided such Advance Payments are received by Borrower prior to
the date upon which Bank makes an Advance with respect to such Lease
and which, at the time of determination, would constitute a prepayment
if applied to such Lease.
(80) "SECURITY INTEREST" shall mean every security interest,
pledge, lien, hypothecation, and other encumbrance on or in any of the
assets of the Borrower now or hereafter granted by the Borrower to the
Bank, whether pursuant to this Agreement, the Security Agreement, the
Assignment Of Life Insurance Policy, any other Loan Documents, the
Lease Documents or otherwise.
(81) "SERVICE CHARGE" shall mean, with respect to any Lease: (i)
the aggregate dollar amount of all Rentals due under such Lease; LESS
(ii) the sum of: (A) the Cost; and (B) any broker fee or other
expenses in connection with Leased Equipment which is not treated as
Cost under this Agreement.
(82) "SUBORDINATED DEBT" means any indebtedness of Borrower with
respect to which Borrower and the holder of the debt have entered into
a subordination agreement in a form acceptable to Banks prohibiting
repayment until the payment in full of the Loans (except as may be
provided for herein), including, without limitation, the Subordinated
Debt owed or to be owed by Borrower to Inroads Capital Partners, L.P.,
Mesirow Capital Partners VII, L.P. and Edgewater Private Equity Fund
II, L.P. in the amount Three Million Five Hundred Thousand Dollars
($3,500,000), which is subordinated to the Secured Obligations
pursuant to the Subordination And Intercreditor Agreement dated April
, 1997.
(83) "TANGIBLE NET WORTH" shall mean the sum of the amounts set
forth on the balance sheet of Borrower, prepared in accordance with
GAAP as (i) the sum of Borrower's: (A) par or stated value of all
outstanding capital stock; (B) paid-in capital; and (C) retained
earnings; LESS the sum of (ii)(A) goodwill, including any amounts
representing the cost of acquisitions or subsidiaries in excess of the
underlying tangible assets; (B) patents, copyrights or trademarks,
leasehold improvements not recoverable at the expiration of a lease
and deferred charges (including, but not limited to, unamortized debt
discount and expense and organizational expenses); (C) loans to, or
investments in, affiliates, officers and employees; (D) treasury
stock; and (E) all other intangible assets of Borrower; PLUS (iii) the
amount of the deferred fee due those persons or entities who have
contributed or will contribute, by way of equity or subordinated debt,
those amounts required pursuant to Section 6.1(a) and 6.5; and PLUS
(iv) Subordinated Debt.
(84) "TERMINATION DATE" shall mean the earlier of: (i) the
Maturity Date of a Credit Line or a Term Loan; or (ii) the date the
Bank declares this Agreement or any Loan hereunder to be terminated,
pursuant to Section 10.3 below.
(85) "TOTAL INDEBTEDNESS" shall mean, as of the date of any
determination, all indebtedness of the Borrower, including, without
limitation, all unpaid Secured Obligations, all amounts due under all
capital leases, all accounts and trade payables, and all other
liabilities and obligations of the Borrower.
(86) "TREASURY RATE" shall mean the shall mean the United States
Treasury Constant Maturities Rate for obligations of a similar
maturity as published in the weekly Federal Reserve Statistical
Release Form H.15 (519) in effect on the date of a Fixed Rate Loan.
In the event the United States Treasury Constant Maturities Rate is
no longer published on a weekly basis in the weekly Federal Reserve
Statistical Release Form H.15 (519) or no reasonably comparable
maturities, in the judgment of Bank, are then listed, Bank shall have
the right to ascertain said rate from any other reasonable and
comparable source as shall be available, and upon selection of such
source, Bank shall give notice thereof to Borrower.
(87) "TREASURY RATE OPTION" shall mean the interest rate option
available to Borrower under Section 4.3(c)(iii).
(88) "TRUST" shall mean that certain Indenture of Trust dated
December 15, 1993, as amended or supplemented, by and between Borrower
and Trustee.
(89) "TRUSTEE" shall mean Texas Commerce Bank National
Association, as Trustee under the Trust.
(90) "TRUSTEE LEASES" shall mean any and all Leases which have
been pledged to Trustee or in, to or upon which Trustee held a
security interest, prior to the date of this Agreement or which is
hereafter funded from proceeds exclusively derived from a Lease so
pledged prior to the date of this Agreement.
(91) "UCC FILING" means a financing statement filing made by:
(i) the Borrower pursuant to the Uniform Commercial Code of any state
in which Leased Equipment is located for informational purposes or to
perfect the rights of Borrower as a lessor or secured party under a
Lease; or (ii) Bank pursuant to the Uniform Commercial Code of any
state in which Leased Equipment or other assets of Borrower are
situated to perfect the rights of Bank as a secured party under this
Agreement, the Security Agreement or any other Loan Document.
2 ACCOUNTING TERMS. All accounting terms, except as their meanings
have been modified by this Agreement, shall have the meanings given them in
accordance with generally accepted accounting principles, as such
principles are in effect on the date hereof and as same may be amended from
time to time and at any time.
3 COMMERCIAL TERMS. Terms not otherwise defined in this Agreement
shall, to the extent applicable, have the meanings given such terms in the
Indiana Uniform Commercial Code, IND. CODE (section) (section) 26-1-1-101 ET
SEQ..
4 TREATMENT OF RENTALS. Any classification of Rentals, or any
portion thereof, as Service Charge or Cost Recovery contained in this
Agreement are for the convenience of the Bank and the Borrower and are
intended for the purposes of determining eligibility for Advances and
monitoring covenant performance standards, such as the Borrowing Base. The
uses of such terms in this Agreement are not determinative of the
accounting or tax treatment of any Lease or Rentals due thereunder.
ARTICLE 2.
CREDIT FACILITIES
1 INITIAL CREDIT LINE.
(a) ADVANCES. Bank agrees to lend to Borrower, and Borrower
agree to borrow from Bank, on the terms and subject to the conditions
of this Agreement, an aggregate principal sum not to exceed the lesser
of: (i) Five Million Dollars ($5,000,000,00); or (ii) the Initial
Credit Line Borrowing Base. Subject to the terms and conditions
herein, Borrower may obtain Advances of this Initial Credit Line until
six (6) months after the Effective Date of this Agreement unless
sooner terminated as provided in this Agreement.
(b) LIMITATIONS ON ADVANCES. Notwithstanding any provision of
this Agreement or the Initial Credit Line Note to the contrary, Bank
shall not be obligated to make any Advance which, (i) when added to
the sum of the aggregate outstanding principal balance of the Initial
Credit Line would cause or result in a violation of any of the
covenants set forth in ARTICLE 8 of this Agreement; (ii) when added to
the sum of the aggregate outstanding principal balance of the Initial
Credit Line would cause the aggregate outstanding balance of the
Initial Credit Line to exceed the Initial Credit Line Borrowing Base;
or (iii) if the Advance would cause the aggregate outstanding
principal balance of the Initial Credit Line to exceed Five Million
Dollars ($5,000,000.00). Bank shall not be obligated to honor any
request for an Advance under the Initial Credit Line if the
disbursement of funds thereunder would occur more than six (6) months
after the Effective Date of the Initial Credit Line. In addition,
Bank shall have no obligation to honor any request for Advance if an
Event of Default has occurred and has not been cured within the
applicable grace period, if any, or which would cause or result in an
Event of Default or Default.
(c) INITIAL CREDIT LINE NOTE. To further evidence Borrower's
obligations under the Initial Credit Line, Borrower shall execute and
deliver to Bank the Initial Credit Line Note in the form of EXHIBIT
2.1(C) to this Agreement on the Effective Date of the Initial Credit
Line.
(d) USE OF PROCEEDS. Proceeds of any Advance under the Initial
Credit Line shall be used solely for the purpose of purchasing
Qualified Leased Equipment and for the purpose of paying indebtedness
owing on one or more existing Qualified Leases originally financed by
Star Financial Bank; PROVIDED, however, that Borrower shall deliver to
Bank and Bank's counsel copies of the Lease Documents for such Leases
for review and Bank shall, within one (1) week of the delivery of such
Lease Documents, approve such Lease Documents and authorize Borrower,
in writing, to obtain an Advance with respect to such Lease. No
provision of this Section 2.1(d) shall modify any condition precedent
to an Advance with respect to any Qualified Lease originally financed
by Star Financial Bank.
2 INITIAL TERM LOAN.
(a) ADVANCE. Bank agrees to lend to Borrower, and Borrower
agrees to borrow from Bank, on the terms and subject to the conditions
of this Agreement, the Initial Term Loan in the sum of the lesser of:
(i) the aggregate principal sum of the outstanding balance of the
Initial Credit Line at the Effective Date of the Initial Term Loan
Note; or (ii) the Initial Credit Line Borrowing Base on the Effective
Date of the Initial Term Loan Note.
(b) LIMITATIONS ON ADVANCE. Notwithstanding any provision of
this Agreement to the contrary. Bank shall have no obligation to
Advance the Initial Term Loan if: (i) Borrower fails to execute and
deliver the Initial Term Loan Note within the LATER of: (A) ten (10)
days after the Initial Credit Line Maturity Date; and (B) three (3)
Business Days after receipt of written notice from Bank that the
Initial Term Loan Note is ready for execution by Borrower; or (ii) a
Default or an Event of Default has occurred and has not been cured
within the applicable grace period.
(c) INITIAL TERM LOAN NOTE. To further evidence Borrower's
obligations with respect to the Initial Term Loan, Borrower shall
execute and deliver to Bank the Initial Term Loan Note in the form of
EXHIBIT 2.2(C) to this Agreement. The principal amount of the Term
Loan Note shall be equal to the lesser of: (i) the outstanding
principal balance of the Initial Credit Line at the Effective Date of
the Initial Term Loan Note; or (ii) the Initial Credit Line Borrowing
Base on the Effective Date of the Initial Term Loan Note. The
Effective Date of the Initial Term Loan Note shall be the date upon
which the Initial Term Loan Note is executed and delivered to Bank.
(d) USE OF PROCEEDS. Proceeds of the Initial Term Loan Note
shall be used solely for the purpose of repayment to Bank of the
outstanding balance of the Initial Credit Line. Borrower hereby
authorizes and directs Bank to pay to itself as a credit against
Borrower's obligations to Bank with respect to the Initial Credit Line
all proceeds of the Initial Term Loan on the Effective Date of the
Initial Term Loan Note.
3 SECOND CREDIT LINE.
(a) ADVANCES. Bank agrees to lend to Borrower, and Borrower
agrees to Borrow from Bank, on the terms and subject to the conditions
of this Agreement, an aggregate principal sum not to exceed the lesser
of: (i) Five Million Dollars ($5,000,000.00); or (ii) the Second
Credit Line Borrowing Base. Subject to the terms and conditions
herein, Borrower may obtain Advances of this Second Credit Line until
six (6) months after the Effective Date of the Second Credit Line Note
unless sooner terminated as provided in this Agreement. Provided,
however, that notwithstanding any provision of this Agreement to the
contrary, Borrower shall not be entitled to receive any Advance under
the Second Credit Line if Borrower has not satisfied the requirements
of Section 6.5 and executed and delivered to Bank the Second Credit
Line Note on or before January 1, 1998.
(b) LIMITATIONS ON ADVANCES. Notwithstanding any provision of
this Agreement or the Second Credit Line Note to the contrary, Bank
shall have no obligation to make any Advance which: (i) when added to
the sum of the aggregate outstanding balance of the Second Credit Line
will cause the aggregate outstanding balance of the Second Credit Line
to exceed the Borrowing Base for the Second Credit Line at such time;
(ii) when added to the sum of the aggregate outstanding balance of the
Second Credit Line would cause or result in a violation of any of the
Covenants set forth in ARTICLE 8 of this Agreement; or (iii) would
cause the sum of the aggregate outstanding balance of the Second
Credit Line to exceed Five Million Dollars ($5,000,000.00). Bank will
not be obligated to honor any request for an Advance under the Second
Credit Line if the disbursement of funds thereunder would occur more
than six (6) months after the Effective Date of the Second Line of
Credit. In addition, Bank shall have no obligation to honor any
request for Advance if an Event of Default has occurred and has not
been cured within the applicable grace period, if any, or which would
cause or result in an Event of Default or Default.
(c) SECOND CREDIT LINE NOTE. To further evidence Borrower's
obligations under the Second Credit Line, Borrower shall execute and
deliver to Bank the Second Credit Line Note in the form of EXHIBIT
2.3(C) to this Agreement on the Effective Date of the Second Credit
Line.
(d) USE OF PROCEEDS. Proceeds of any Advance under the Second
Credit Line shall be used solely for the purpose of purchasing
Qualified Leased Equipment.
4 SECOND TERM LOAN.
(a) ADVANCE. Bank agrees to lend to Borrower, and Borrower
agrees to borrow from Bank, on the terms and subject to the conditions
of this Agreement, the Second Term Loan in the sum of the lesser of:
(i) the aggregate principal sum of the outstanding balance of the
Second Credit Line at the Effective Date of the Second Term Loan Note;
or (ii) the Second Credit Line Borrowing Base on the Effective Date of
the Second Term Loan Note.
(b) LIMITATIONS ON ADVANCE. Notwithstanding any provision of
this Agreement to the contrary. Bank shall have no obligation to
Advance the Second Term Loan if: (i) Borrower fails to execute and
deliver the Second Term Loan Note within the LATER of: (A) ten (10)
days after the Second Credit Line Maturity Date; and (B) three (3)
Business Days after receipt of written notice from Bank that the
Second Term Loan Note is ready for execution by Borrower; or (ii) a
Default or an Event of Default has occurred and has not been cured
within the applicable grace period.
(c) SECOND TERM LOAN NOTE. To further evidence Borrower's
obligations with respect to the Second Term Loan, Borrower shall
execute and deliver to Bank the Second Term Loan Note in the form of
EXHIBIT 2.2(C) to this Agreement. The principal amount of the Term
Loan Note shall be equal to the lesser of: (i) the outstanding
principal balance of the Initial Credit Line at the Effective Date of
the Second Term Loan Note; or (ii) the Second Credit Line Borrowing
Base on the Effective Date of the Second Term Loan Note. The
Effective Date of the Second Term Loan Note shall be the date upon
which the Second Term Loan Note is executed and delivered to Bank.
(d) USE OF PROCEEDS. Proceeds of the Second Term Loan Note
shall be used solely for the purpose of repayment to Bank of the
outstanding balance of the Second Credit Line. Borrower hereby
authorizes and directs Bank to pay to itself as a credit against
Borrower's obligations to Bank with respect to the Second Credit Line
all proceeds of the Second Term Loan on the Effective Date of the
Second Term Loan Note.
5 RELEASE AND REPLACEMENT OF BORROWING BASE LEASES. If AT&T
Commercial Finance Corporation or a similar investor purchases any Lease,
Borrower may obtain the release of such Lease and the related Leased
Equipment; PROVIDED THAT, after giving effect to such release: (a) the
aggregate amount of the Applicable Borrowing Base EXCEEDS the principal
balance of the Secured Obligations; or (b) Borrower (i) pays to Bank the
amount by which the aggregate principal balance of the Credit Facilities IS
LESS THAN the aggregate amount of all Applicable Borrowing Bases at the
time of such release (the "BORROWING BASE DEFICIENCY"); or (ii) Borrower
assigns to Bank Qualified Leases which are not then already assigned to
Bank having a Borrowing Base not less than the amount of the Borrowing Base
Deficiency. Any payment by Borrower to Bank in connection with this
Section 2.5 shall be applied in reduction of the principal balance of the
Credit Facility with respect to which the Borrowing Base Deficiency existed
prior to such payment and any Qualified Leases assigned to Bank pursuant to
this Section 2.5 shall be designated to the Credit Facility the Borrowing
Base Deficiency of which is cured by such assignment. Notwithstanding any
provision of this Agreement, the Security Agreement or any Lease Assignment
to the contrary, Borrower may not obtain the release of any Initial Term
Loan Lease or Second Term Loan Lease unless such Lease: (x)(1) is prepaid
in full by the Lessee; or (2) sold to AT&T Commercial Finance Corporation
or a similar investor; and (y) the Net Book Value of such Lease is paid to
Bank as a prepayment of the respective Term Loan.
ARTICLE 3.
ADVANCE PROCEDURES
1 REQUESTS FOR ADVANCES - GENERALLY Each Request for Advance
submitted to Bank shall, at a minimum, provide the following information:
(i) the date of the Request for Advance; (ii) the date of the Qualified
Lease; (iii) the name and address of the Lessee, including, without
limitation, the form of entity (general partnership, limited partnership,
limited liability partnership, corporation, limited liability company or
other), the state or province under whose law such entity was formed; (iv)
the Cost of the Qualified Leased Equipment, including, where multiple
Locations are involved, the Cost at each Location; (v) the Lease number;
(vi) the Locations of the Qualified Leased Equipment; (vii) the names,
addresses, telephone numbers and telephone facsimile numbers, if any, of
the Lessees and any guarantors of the Qualified Lease; (viii) the
certification of an authorized officer of Borrower, acceptable to Bank,
setting forth: (A) the amount which is the lesser of the aggregate
Borrowing Base of the applicable Credit Line (Initial or Second) and the
Maximum Amount of the applicable Credit Line; (B) the outstanding balance
of said applicable Credit Line as at the time of the Request for Advance,
adjusted, where required, for the effect of other amounts sought to be
Advanced for other Qualified Leased Equipment submitted as a part of the
applicable or other Requests for Advances submitted to Bank but for which
disbursement is not reflected in the outstanding balance of the applicable
Credit Line; (C) the Cost of the Qualified Leased Equipment; (D) the
Borrowing Base with respect to the Qualified Lease for which the Advance is
sought; and (E) the amount of the requested Advance; (ix) the amount of
such Requested Advance which is to advanced as a Prime Rate Loan, a LIBOR
Rate Loan or, if applicable, a Fixed Rate Loan; (x) the date upon which
such Advance is requested to be disbursed; (xi) Net Book Value with respect
to all Borrowing Base Leases; and (xii) such other information as Bank may
reasonably request.
2 REQUESTS FOR ADVANCES - CREDIT LINE(S). The Credit Lines shall
be available to the Borrower as Advances, subject to the terms and
conditions hereof, at such times prior to the respective Credit Line
Termination Dates, and in such sums, as the Borrower may request. Each
request for a disbursement of any Loan under this Agreement shall be
accompanied by a written Request for Advance and shall, at a minimum,
provide the information required by Section 3.1 of this Agreement.
3 ADVANCES ON INITIAL TERM LOAN. Subject to the terms and
conditions of this Agreement, upon execution and delivery to Bank of the
Initial Term Loan Note and a Request for Advance, in form and substance
acceptable to Bank, the Bank shall advance the proceeds of the Initial Term
Loan to Borrower by disbursing to Bank such proceeds in payment of the
Borrower's obligations under the Initial Credit Line Note and with respect
to the Initial Credit Line, as further provided in this Agreement.
4 ADVANCES ON SECOND TERM LOAN. Subject to the terms and
conditions of this Agreement, upon execution and delivery to Bank of the
Second Term Loan Note and a Request for Advance, in form and substance
acceptable to Bank, the Bank shall advance the proceeds of the Second Term
Loan to Borrower by disbursing to Bank such proceeds in payment of the
Borrower's obligations with respect to the Second Credit Line Note and with
respect to the Second Credit Line, as further provided in this Agreement.
5 TIMING AND EFFECT OF REQUEST FOR ADVANCE. Each Request for
Advance shall constitute Borrower's irrevocable notice and must be received
by Bank prior to 9:00 o'clock, A.M., Chicago Time, on the Borrowing Date in
the case of a Prime Rate Loan, the second Business Day prior to the date
upon which the Advance is sought to be disbursed in the case of a Fixed
Rate Loan, or the third Business Day prior to the date upon which Advance
is sought to be disbursed, in the case of a LIBOR Rate Loan. In the event
that a Request for Advance requests more than one Loan Rate, the Request
shall irrevocable specify the amount of Advances to be received under each
Rate Option. Notwithstanding any provision of this Agreement or any of the
Notes to the contrary, no LIBOR Rate Loan shall be for a sum less than Five
Hundred Thousand Dollars ($500,000.00) nor for a period less than thirty
(30) days or one (1) month, as the case may be.
6 LIBOR INTEREST PERIODS. Each LIBOR Rate Loan must be for a
period of thirty (30), sixty (60), ninety (90) or one hundred eighty (180)
days. The applicable Interest Period must be designated at the time of the
Request for Advance or Notice of Continuation\Conversion.
ARTICLE 4.
INTEREST RATES
1 CREDIT LINES - RATE OPTIONS.
(a) INITIAL BORROWINGS. Each Advance under a Credit Line shall
be made upon the Borrower's irrevocable written notice delivered to
Bank in the form of the Request for Advance, which notice must be
received by the Bank in conformity with the prior notice requirements
of Section 3.5. Such Request for Advance shall specify:
(i) the amount of the Advance, which, in the case of an
Advance of LIBOR Rate Loans, shall be in aggregate minimum
principal amount of Five Hundred Thousand Dollars ($500,000.00)
or any amount in excess thereof;
(ii) the requested Borrowing Date, which shall be a Business
Day;
(iii) whether the Advance is to be comprised of LIBOR Rate
Loans or Prime Rate Loans;
(iv) if the Advance is to be LIBOR Rate Loans, the Interest
Period applicable to such Loans;
PROVIDED, HOWEVER, that with respect to the Borrowing to be made on
the Effective Date of this Agreement, the Request For Advance shall be
delivered to Bank not later than 9:00 o'clock, A.M., Chicago Time one
Business Day before such Effective Date and such Advance will consist
of Prime Rate Loans only.
(b) CONVERSION TO LIBOR DURING DEFAULT. During the existence of
a Default or an Event of Default, the Borrower may not elect to have a
Loan converted into or continued as a LIBOR Rate Loan.
2 CONVERSION AND CONTINUATION ELECTIONS.
(a) CONVERSION. The Borrower may, upon irrevocable written
notice to the Bank in the form of a Notice of Continuation\Conversion
in the form of EXHIBIT 4.2 to this Agreement and in accordance with
the advance notification provisions set forth in Section 3.5:
(i) elect to convert on any Business Day, any Prime Rate
Loans (or any part thereof in an amount not less than Five
Hundred Thousand Dollars ($500,000.00) into LIBOR Rate Loans or,
in the case of a Term Loan, into a Fixed Rate Loan; or
(ii) elect to convert on the last day of the applicable
Interest Period any LIBOR Rate Loans having Interest Periods
maturing on such day to a Prime Rate Loan or, in the case of Term
Loan, into a Fixed Rate Loan; provided, however, no remaining
LIBOR Rate Loan shall be for an amount less than Five Hundred
Thousand Dollars ($500,000.00).
(b) Borrower may, upon irrevocable written notice to the Bank, in
a Notice of Continuation\Conversion and in accordance with the advance
notification provisions of Section 3.5, elect to renew on the last day
of the applicable Interest Period any LIBOR Rate Loans having Interest
Periods maturing on such day (or any part thereof in an amount not
less than Five Hundred Thousand Dollars ($500,000.00);
PROVIDED, that if the aggregate amount of LIBOR Rate Loans in
respect of any Advance shall have been reduced, by payment,
prepayment, or conversion of part thereof to be less than Five
Hundred Thousand ($500,000.00), such LIBOR Rate Loan shall
automatically convert into a Prime Rate Loan, and on and after
such date the right of the Borrower to continue such Loans as,
and convert such Loans into, LIBOR Rate Loans, as the case may
be, shall terminate.
(c) NOTICE OF CONTINUATION. The Borrower shall deliver a Notice
of Continuation\Conversion to Bank not later than 9:00 o'clock, A.M.,
Chicago Time, at least three (3) Business Days in advance of the
requested date upon which a Loan is to be converted from one Rate
Option to another Rate Option (the "CONVERSION DATE") or the date upon
which a new Interest Period is to commence (the "CONTINUATION DATE"),
if the Loans are to be converted into or continued as LIBOR Rate
Loans, and, on the requested Conversion Date, if the Loans are to be
converted into Prime Rate Loans, specifying:
(i) the proposed Conversion Date or Continuation Date;
(ii) the aggregate amount of Loans to be converted or
renewed;
(iii) the nature of the proposed conversion or continuation;
and
(iv) the duration of the requested Interest Period with
respect to any Loans to be converted or continued as LIBOR Rate
Loans.
(d) FAILURE TO DESIGNATE. If upon the expiration of any Interest
Period applicable to LIBOR Rate Loans, the Borrower has failed to
select timely a new Interest Period to be applicable to such LIBOR
Rate Loans, as the case may be, or if, upon any such expiration, any
Default or Event of Default shall then exist, the Borrower shall be
deemed to have elected to convert such LIBOR Rate Loans into Prime
Rate Loans effective as of the expiration date of such current
Interest Period.
3 INTEREST.
(a) CREDIT LINES - PRIME RATE LOANS The aggregate sum of all
Prime Rate Loans advanced under the Credit Line shall bear interest on
the outstanding principal amount thereof from the date when each
Credit Line Loan was made at a rate per annum equal to the sum of the
Prime Rate plus the Applicable Margin.
(b) CREDIT LINES - LIBOR RATE LOAN. Each LIBOR Rate Loan shall
bear interest on the outstanding principal amount thereof from the
date LIBOR Rate Loan was made at a rate per annum equal to LIBOR plus
the Applicable Margin.
(c) TERM LOANS. The Term Loans shall bear interest on the
unpaid principal balance thereof at a rate per annum equal, at
Borrower's option to: (i) a variable rate equal to the Prime Rate
plus the Applicable Margin, with respect to the aggregate of the Prime
Rate Loans; (ii) a variable rate equal to the then effective LIBOR
plus the Applicable Margin with respect to any LIBOR Rate Loans; or
(iii) a fixed rate equal to the Treasury Rate for Loans of comparable
maturities plus the Applicable Margin. Any selection of a fixed rate
under this Section 4.3(c)(iii) shall be irrevocable and no right of
conversion to any other Rate Option shall thereafter exist.
(d) DEFAULT RATES. While any Event of Default exists and is
continuing and/or after maturity of the Loans (whether by acceleration
or otherwise), the Borrower shall pay interest (after as well as
before entry of judgment thereon to the extent permitted by law) on
the principal amount of all Secured Obligations due and unpaid, at a
rate per annum which is determined by adding three percent (3%) per
annum to the Applicable Margin then in effect for such Loans and, in
the case of Secured Obligations not subject to an Applicable Margin,
at a rate per annum equal to the Prime Rate plus three percent (3%);
PROVIDED, HOWEVER, that, on and after the expiration of any Interest
Period applicable to any LIBOR Rate Loan outstanding on the date of
occurrence of such Event of Default or maturity, the principal amount
of such Loan shall, during the continuation of such Event of Default
and/or after acceleration, bear interest at a rate per annum equal to
the Prime Rate plus three percent (3%).
(e) INTEREST IN EXCESS OF LEGALLY PERMISSIBLE RATES. Anything
herein to the contrary notwithstanding, the obligations of the
Borrower hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is
computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by Bank would be contrary to
the provisions of any law applicable to Bank limiting the highest rate
of interest which may be lawfully contracted for, charged or received
by Bank, and in such event the Borrower shall pay Bank interest at the
highest rate permitted by applicable law. Borrower acknowledges that
it is a corporation organized under the laws of the State of Indiana
and that no portion of the proceeds have been used by any individual
for personal, family or household purposes and that none of the Loans
hereunder are, or will be, subject to the Indiana Uniform Consumer
Credit Code or the Federal Consumer Credit Protection Act of 1968, as
amended.
4 FEES.
(a) COMMITMENT FEES. Borrower shall pay to Bank for the account
of Bank a commitment fee ("COMMITMENT FEE") on the Initial Credit Line
in the sum of Fifty Thousand Dollars ($50,000.00) on the Effective
Date of the Initial Credit Line. Borrower shall pay to Bank an
additional commitment fee in the sum of Fifty Thousand Dollars
($50,000.00) with respect to the Second Credit Line on the Effective
Date of the Second Credit Line. Each such commitment fee shall be
fully earned when paid.
(b) NON-USE FEES. Borrower shall pay to Bank for the account of
Bank a fee ("NON-USE FEE") on the average daily unused portion of the
Initial Credit Line and, if all conditions precedent thereto have been
satisfied, the Second Credit Line, computed and paid on a quarterly
basis in arrears on the last Business Day of each calendar quarter
based upon the daily utilization for that quarter as calculated by
Bank, multiplied by one-fourth of one percent (.25%) per annum. The
Non-use Fees shall accrue from the Effective Date to the Termination
Date of the respective Credit Lines and shall be due and payable
quarterly in arrears on the last Business Day of each calendar
quarter, commencing on June 30, 1997 except that the final payment
shall be made on the Termination Date.
5 COMPUTATION OF FEES AND INTEREST.
(a) 360 DAY YEAR. All computations of fees and interest payable
under this Agreement shall be made on the basis of a 360-day year and
actual days elapsed. Interest and fees shall accrue during each
period during which interest or such fees are computed from the first
day thereof to the last day thereof.
(b) NOTIFICATION OF LIBOR RATE. Bank will, with reasonable
promptness, notify the Borrower of each determination of a LIBOR Rate;
PROVIDED that any failure to do so shall not relieve the Borrower of
any liability hereunder or provide the basis for any claim against
Bank.
(c) CHANGE IN RATE. Any change in the applicable interest rate
on a Loan resulting from a change in the applicable rate shall become
effective as of the opening of business on the day on which such
change in the applicable rate becomes effective. Bank will with
reasonable promptness notify the Borrower of the effective date and
the amount of each such change, PROVIDED that any failure to do so
shall not relieve the Borrower of any liability hereunder or provide
the basis for any claim against Bank.
(d) PRESUMPTIVELY CONCLUSIVE. Each determination of an interest
rate by Bank shall be presumptively conclusive and binding on the
Borrower in the absence of manifest error.
6 REPAYMENT OF PRINCIPAL AND INTEREST.
(a) INTEREST. Interest on the Loans will be due and payable
monthly on the first day of the month following the month during which
such interest accrues. Interest will be payable at the then
applicable rate with respect to each of the Loans.
(b) PRINCIPAL. The principal of the Loans shall be payable as
follows:
(i) the principal balance and any accrued but unpaid
interest, costs and expenses with respect to the Initial Credit
Line shall be due and payable in full on the Initial Credit Line
Maturity Date;
(ii) unless sooner terminated, the principal amount of the
Initial Term Loan shall be due and payable in monthly
installments of principal equal to the aggregate Cost Recovery
due monthly on the Borrowing Base Leases for which Borrower
received Advances under the Initial Credit Line which remain
outstanding at the Effective Date of the Initial Term Loan Note;
PROVIDED, that notwithstanding any provision of this Agreement to
the contrary, all principal of and interest, costs and expenses
in connection with the Initial Term Loan shall be due and payable
in full, without further notice, on the third anniversary date of
the Effective Date of this Agreement;
(iii) the principal balance and any accrued but unpaid
interest, costs and expenses of the Second Credit Line shall be
due and payable in full on the Second Credit Line Maturity Date;
and
(iv) unless sooner terminated, the principal amount of the
Second Term Loan shall be due and payable in monthly installments
of principal equal to the aggregate Cost Recovery due monthly on
the Borrowing Base Leases for which Borrower received Advances
under the Second Credit Line which remain outstanding at the
Effective Date of the Second Term Loan Note; PROVIDED, that
notwithstanding any provision of this Agreement to the contrary,
all principal of and interest, costs and expenses in connection
with the Second Term Loan shall be due and payable in full,
without further notice, on the third anniversary date of the
Effective Date of the Second Credit Line.
(c) PRINCIPAL PAYMENTS - BORROWING BASE VIOLATIONS.
Notwithstanding any provision of this Agreement to the contrary, in
the event that the principal balance of any Credit Facility shall
exceed the Applicable Borrowing Base, Borrower shall: (i) pay to Bank
on demand any principal amount required to reduce the principal
balance of such Credit Facility to the Applicable Borrowing Base; or
(ii) assign to Bank additional Qualified Leases having a Borrowing
Base equal to or in excess of the amount by which the principal
balance of such Credit Facility exceeds the Applicable Borrowing Base.
(d) PRINCIPAL PAYMENTS - PREPAYMENT OR SALE OF TERM LOAN LEASE.
Notwithstanding any provision of this Agreement or any of the other
Loan Documents to the contrary, Borrower shall pay to Bank the Net
Book Value, together with any applicable Prepayment Penalty
(hereinafter defined), of any Initial Term Loan Lease or Second Term
Loan Lease prepaid in full by the Lessee or sold by Borrower pursuant
to Section 2.5 as a mandatory prepayment of the respective Term Loan.
(e) PREPAYMENT PENALTY - FIXED RATE LOANS. Any prepayment, in
whole or in part, of any Fixed Rate Loan shall be accompanied by an
amount (the "PREPAYMENT PENALTY") equal to the principal sum of such
prepayment mutliplied by: (i) three percent (3%) in the case of any
prepayment made after the Effective Date or Conversion Date, as the
case may be, of such Fixed Rate Loan and prior to the first
anniversary thereof; (ii) two percent (2%) in the case of any
prepayment made after the first anniversary of such Effective Date or
Conversion Date and prior to the second anniversary thereof; or (iii)
one percent (1%) in the case of any prepayment after the second
anniversary of such Effective Date or Conversion Date and prior to the
Maturity Date.
(f) COSTS AND EXPENSES. Costs and expenses due Bank form
Borrower as provided in this Agreement shall be due and payable upon
demand and shall bear interest at the Default Rate from the date of
demand.
ARTICLE 5.
COLLATERAL
1 SECURITY INTEREST. To secure the payment of the Notes and all
other Secured Obligations, the Borrower shall execute and deliver to Bank
the Security Agreement And Master Assignment Of Leases in the form of
EXHIBIT 5.1 to this Agreement and thereby grant to the Bank security
interests in all of its Leases, Lease Documents, Leased Equipment,
equipment, inventory, contract rights, chattel paper, goodwill, general
intangibles, accounts, accounts receivable, instruments, rents, monies,
payments, and all other rights arising out of the sale, lease or other
disposition of any property described herein, all records and data relating
to any of the property described herein, whether in the form of microfiche,
microfilm, or electronic media, together with all of grantor's interest in
and to all computer software required to utilize, create, maintain, and
process any such records or data on electronic media, insurance proceeds
and fixtures, all attachments, accessions, accessories, tools parts
supplies, increases, and additions to and replacements of and substitutions
for any property described herein and other assets as may be required under
the terms of this Agreement and the Loan Documents. Notwithstanding
anything contained herein to the contrary, the grant of the Security
Interest shall not include a security interest in any of the Leases, Leased
Equipment or the Borrower's security interest in any of the Leases or
Leased Equipment which have been assigned by Borrower to the Trustee under
the Trust, the proceeds of any of the Trustee Lease, the debt service
reserve fund or any other deposit account established by the Trustee in
connection with the Trustee Leases, so long as such Leases and Leased
Equipment remain subject to such assignment the debt service reserve fund
created by the Trust.
2 NEGATIVE PLEDGE OF TRUSTEE LESSEES AND LEASED EQUIPMENT.
Borrower hereby warrants, covenants and pledges that Borrower shall not
grant any lien, security interest or chattel mortgage in, to or upon, and
shall not pledge or assign, any of the Trustee Leases or any Leased
Equipment leased to Lessees under the Trustee Leases nor the debt service
reserve fund or any other fund associated with the Trust to any person or
entity, except Trustee. Borrower shall defend the title to the Trustee
Leases and any related Leased Equipment and such funds against any and all
persons, except the Trustee, claiming an adverse interest therein.
Notwithstanding any provision of this Agreement to the contrary, any
violation of this Section 5.2 shall constitute an Event of Default
entitling Bank to pursue any and/or all of its remedies hereunder, under
the Loan Documents, in equity or at law.
3 ASSIGNMENT OF LEASES. To further secure its obligations to Bank,
Borrower shall execute and deliver to Bank a Lease Assignment in the form
of EXHIBIT 5.3 in connection with each Lease (other than a Trustee Lease):
(a) on the Effective Date of this Agreement in connection with any such
Lease then existing; (b) at the time of a Request for Advance in
connection with such Lease; or (c) within ten (10) days after receipt by
Borrower of the Lessee's written acceptance of the Leased Equipment
thereunder.
4 POSSESSION OF LEASES. On the Effective Date of this Agreement,
Borrower shall deliver to Bank the originals of all Lease Documents, other
than the Trustee Leases, then owned by Borrower or, if such Leases are not
then within the possession of Borrower, Borrower shall obtain such
possession and deliver the originals of all such Lease Documents to Bank
within ten (10) days after the Effective Date of this Agreement.
Notwithstanding any provision of this Agreement to the contrary, failure to
timely deliver the original Lease Documents as required by this Section 5.4
shall constitute an Event of Default under this Agreement and Bank may
immediate cease funding any Loans and refuse to honor any Request for
Advance, all Loans shall immediately become due and payable, without
further action by Bank, and Bank may exercise any one or all of its
remedies as provided herein or in any other Loan Document.
5 CROSS-COLLATERAL. All of the Secured Obligations and any other
obligation of Borrower to Bank, whether payment or performance, shall
constitute one and the same indebtedness, secured by the Security Interests
granted Bank pursuant to the Security Agreement, Assignment Of Life
Insurance Policy, Lease Assignment or any other Loan Documents.
Notwithstanding any provision of this Agreement, the Notes or any other
Loan Document to the contrary, a Default or Event of Default with respect
to any of the Secured Obligations shall constitute a Default or Event of
Default, as the case may be, with respect to all of the Secured Obligations
and any other obligation of Borrower to Bank.
6 UCC FILINGS. In addition to the UCC Filings required to be
assigned to Bank pursuant to Section 6.3 of this Agreement, Borrower shall
execute and deliver to Bank such financing statements as Bank may
reasonably request to perfect Bank's Security Interest. Without in any way
limiting the foregoing, Borrower shall execute and deliver to Bank
financing statements with respect to the State of Indiana, the County of
Marion, Indiana and with respect to each state (and where necessary or
advisable, each county) in which Borrower does business or in which Leased
Equipment, other than Leased Equipment subject to a Trustee Lease, is
situated. In addition, Borrower agrees to obtain, execute, deliver, file
and record all financing statements and other instruments as shall in the
judgment of Bank be necessary or desirable to evidence, validate and
perfect the Borrower's security interest in the Leased Equipment. At the
request of Bank, Borrower shall join with Bank in executing one or more
financing statements in a form satisfactory to Bank and shall pay the cost
of filing the same in all public offices wherever filing is deemed by Bank
to be necessary or desirable to perfect Bank's Security Interest. Borrower
hereby authorizes Bank to file such financing statements without the
signature of any officer or authorized representative of Borrower or to
execute such financing statement on behalf of Borrower. Borrower
acknowledges that a carbon, photographic or other reproduction of the
Security Agreement or of a financing statement shall be sufficient as a
financing statement.
ARTICLE 6.
CONDITIONS PRECEDENT
1 CONDITIONS PRECEDENT TO ALL OBLIGATIONS OF BANK. All obligations
of the Bank under this Agreement are expressly conditioned upon the full
performance, acceptable to Bank, of each of the following conditions:
(a) ADDITIONAL EQUITY AND SUBORDINATED DEBT. Not more than
sixty (60) days prior to the Effective Date of this Agreement,
Borrower shall have received from Mesirow Capital Partners VII, L.P.,
Inroads Capital Partners, L.P. and Edgewater Private Equity Fund II,
L.P. contributed equity capital in an amount not less than Three
Million Dollars ($3,000,000.00) and debt in an amount not less Five
Hundred Thousand Dollars ($500,000.00), which debt has been
subordinated by written agreement to the obligations of Borrower to
Bank, and evidence of the receipt of the aggregate sum of Three
Million Five Hundred Thousand Dollars ($3,500,000.00), acceptable to
Bank and Bank's counsel, has been delivered to Bank.
(b) SATISFACTION OF THE INDEBTEDNESS TO STAR FINANCIAL BANK AND
RELEASE OF LEASES. Bank shall have received, reviewed and found
acceptable evidence that Borrower has fully satisfied its obligations,
liabilities and indebtedness to Star Financial Bank, that all Leases
assigned to Star Financial Bank and Leased Equipment related thereto
have been released and that there are no liens or security interests
with respect to Borrower's assets except those of the Trustee or as
set forth in EXHIBIT 6.1(B) and to which Bank has separately consented
in writing.
(c) ESTABLISHMENT OF LOCKBOX AND CASH COLLATERAL ACCOUNTS.
Borrower shall have entered into agreements for the establishment with
Bank of one or more lockbox accounts and cash collateral accounts and
shall have provided to Bank satisfactory evidence of Borrower's
ability to implement cash management systems acceptable to Bank.
(d) RECEIPT OF WRITTEN ASSURANCES REGARDING BORROWER'S
PROCEDURES. Bank shall have received from Borrower a written
undertaking setting forth procedures pertaining to Borrower's lease
and loan administration functions which provides Bank with assurances,
acceptable to Bank, that Borrower duly and properly perfects
Borrower's rights as an owner or secured party with respect to its
Leased Equipment and its Leases.
(e) OPINION OF COUNSEL. Bank shall have received, reviewed and
found acceptable an opinion of Borrower's counsel substantially to the
effect set forth in EXHIBIT 6.1(E) attached hereto.
2 CONDITIONS TO EACH ADVANCE. The Borrower shall deliver to the
Bank and its designated counsel, in conformity with the prior notice
requirements of Section 3.5 of this Agreement, an original (or a facsimile
copy) executed Request for Advance specifying the information required
thereby or required pursuant to Section 3.1 of this Agreement. The amount
of an Advance shall not exceed the aggregate Borrowing Base of the Leases
which are to become Borrowing Base Leases supporting such Advance. On the
date which the Borrower specifies the Advance is to be made, if:
(a) no Event of Default has occurred and is then existing;
(b) the making of the Advance shall not cause or result in
either a violation of any of the terms of this Agreement,
the Lease Assignment or the Security Agreement or shall not
cause or result in a Default or an Event of Default,
(c) Borrower has executed and delivered to Bank an Assignment of
each Lease associated with such Request for Advance and has
delivered to Bank all of the original documents required by
Section 6.3 of this Agreement,
the Bank shall make the proceeds of each Advance requested by the Borrower
available to the Borrower by causing an amount of same day funds equal to
such Advance to be credited to the Borrower's account maintained at Bank.
3 ORIGINALS OF LEASE DOCUMENTS TO BE DELIVERED TO BANK AND ITS
DESIGNATED COUNSEL WITH REQUEST FOR ADVANCE. In conjunction with the
delivery of any Request for Advance to Bank, the Borrower shall also
deliver to Bank an executed original `Lease Assignment' in the form
attached hereto as EXHIBIT 5.3 for each Lease for which Borrower seeks an
Advance together with the originals (except as to Bank's counsel, to whom a
copy will be simultaneously delivered) of each of the following documents
pertaining to each Lease:
(a) Each Lease and each Schedule executed with respect to such
Lease, fully executed by Borrower and Lessee,
(b) A file-marked, executed copy of each UCC-1 Financing
Statement necessary to perfect the Borrower's interest in
each Lease and the Leased Equipment naming the Borrower as
`Secured Party', the Lessee as `Debtor' and the Bank as
`Assignee'.
(c) A file marked copy of each UCC-2 Real Estate Financing
Statement necessary to perfect the Borrower's interest in
each Lease and the Leased Equipment naming the Borrower as
`Secured Party, the Lessee as `Debtor' and the Bank as
`Assignee' to the extent that the Leased Equipment
constitutes fixtures.
(d) The Certificate of Acceptance.
(e) The Disbursement Authorization.
(f) The Lessee's resolution authorizing the lease transaction,
if the Lessee is other than an individual.
(g) The Guaranty, if any, of the Lease.
(h) Each resolution of each Guarantor authorizing the Guaranty,
if the Guarantor is other than an individual.
(i) Each bill of sale for the Leased Equipment or the invoices
with respect thereto with Borrower's check number(s) in
payment thereof, noted thereon.
(j) A certificate of insurance with an endorsement declaring the
Borrower and Bank as a lender loss payee for an amount at
least equal to the full insurable value of the Leased
Equipment.
(k) Any landlord or mortgagee waiver of lien rights with respect
to the Leased Equipment, to the extent that the Leased
Equipment constitutes fixtures.
(l) A UCC search certified by the office of each record
custodian in which a UCC filing was made showing that the
Borrower's UCC Filing has, to the extent same would
constitute a security interest rather than a precautionary
lease filing, priority over all other lien filings that
might attach to the Leased Equipment.
In those jurisdictions which do not return to the secured party/lessor,
within a reasonable period of time, a file-stamped copy of the financing
statement or other written evidence of recording of a financing statement,
Borrower may submit to Bank an affidavit or certificate from an authorized
representative of an independent document service such as Lexis Document
Services or CT Corporation System; PROVIDED, however, that Bank shall not
be required to make Advances with respect to Leased Equipment located in
such jurisdictions if, in the sole judgment of Bank, the aggregate dollar
value of Leased Equipment located in such jurisdictions is unreasonably
large in relation to the aggregate dollar value of all Qualified Leased
Equipment unless Borrower has delivered to Bank the results of an
information and copy request under the Uniform Commercial Code (Uniform
Commercial Code Form UCC-11 or similar form), certified by the appropriate
public office, showing Borrower's security interest, and the assignment to
Bank thereof, to be recorded in such office.
4 BANK'S COUNSEL TO REVIEW DOCUMENTS. The Bank's Counsel shall
review the documents submitted by Borrower with each Request for Advance
until such time as Bank is reasonably assured that Borrower's policies,
procedures and documentation are adequate to obtain and perfect a security
interest in the Leased Equipment and to enforce Lessee's obligations to pay
all Rentals due under a Lease. Bank agrees that it will make reasonable
efforts to obtain adequate assurance in a reasonable period of time but in
no event shall Bank continue its review of documents submitted by Borrower
for longer than three (3) months after the Effective Date of this
Agreement, unless Borrower shall modify the contractual terms of any
document used in connection with a Lease, in which case, Bank shall be
entitled to review each variation of such document submitted with a Request
for Advance. Any documentation deficiencies shall be reported to Borrower
within two Business Days of receipt of the documentation, however, if any
Lease pertains to Leased Equipment located in a state not previously
reviewed by Bank's Counsel, then Bank's Counsel may notify Borrower that
additional time is necessary to complete such review. Subject to the
foregoing provisions of this Section 6.4, the reasonable costs of document
review by Bank's Counsel shall be paid by Borrower.
5 CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK - SECOND CREDIT LINE
Notwithstanding any provision of this Agreement to the contrary, all
obligations of the Bank to make any Advance under or with respect to the
Second Credit Line are expressly conditioned upon receipt by Bank of
evidence acceptable to Bank that the Borrower has obtained, in addition to
the equity capital and subordinated debt required by Section 6.1(a),
subordinated debt or contributed equity capital in an amount not less than
Three Million Dollars ($3,000,000.00), such that Borrower shall have
received from a date not more than sixty (60) days prior to the Effective
Date of this Agreement, contributed equity capital of not less than Three
Million Dollars ($3,000,000.00) and debt in an amount not less Three
Million Five Hundred Thousand Dollars ($3,500,000.00), which debt has been
subordinated by written agreement to the obligations of Borrower to Bank.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make Advances
pursuant to this Agreement, the Borrower represents and warrants that:
1 CORPORATE ORGANIZATION AND GOOD STANDING. The Borrower is a
corporation duly organized and validly existing under the laws of the State
of Indiana and is duly licensed or qualified to transact business as a
foreign corporation in each jurisdiction in which the nature of the
business transacted by it or the character of properties owned or leased by
it requires such licensing or qualification, except where the failure to be
so licensed or qualified would not have a material adverse effect on the
Borrower.
2 CORPORATE POWER AND AUTHORITY. The Borrower has the requisite
power and authority, corporate and otherwise, to enter into this Agreement,
to make the borrowings herein contemplated, to execute and deliver the Note
and the Loan Documents to which it is a party, and to perform its
obligations hereunder and thereunder, all of which have been duly
authorized by all proper and necessary corporate action and do not and will
not:
(a) violate or conflict with any provision of the articles of
incorporation or bylaws of the Borrower;
(b) violate or conflict with the provisions of any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award to which the Borrower is a party or
by which it or its property is bound;
(D) conflict with, result in a breach of, or constitute a
default under, any indenture, Lease, or any other agreement
or instrument to which the Borrower is a party or by which
it or its property is bound.
3 FINANCIAL CONDITION. The Borrower's audited financial statements
(which have been prepared in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding fiscal
year) included in Borrower's Annual Report on Form 10-KSB for the year
ended September 30, 1996, and its unaudited financial statements included
in Borrower's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1996, copies of which have been furnished to the Bank, present
fairly the financial condition of the Borrower as at such date and the
results of their operations for the period then ended, and there has been
no material adverse change in said financial condition since December 31,
1996. The Borrower does not have any contingent obligations, liabilities,
taxes, or other outstanding financial obligations which are material in the
aggregate.
4 PROPERTIES. The Borrower has good and marketable title to all of
its properties and assets, and none of its assets are subject to any
mortgage, pledge, title retention lien, security interest, or encumbrance,
except for those set forth on Schedule 7.4 attached hereto, which must in
all respects be acceptable to Bank on the Effective Date of this Agreement.
5 LITIGATION. No litigation, tax claim, proceeding, dispute, or
governmental proceeding is pending or, to its knowledge, threatened against
the Borrower, which either (a) involves an uninsured claim of over Twenty-
Five Thousand Dollars ($25,000.00) against the Borrower, or (b) in the
opinion of the Borrower, may have a material adverse effect on the business
or condition (financial or other), affairs, or operations of the Borrower.
6 ERISA. No fact or circumstance, including but not limited to any
reportable event within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), exists in connection with any
Plan of the Borrower ("PLAN" shall mean an employee pension benefit plan or
pension covered by ERISA which is guaranteed by the Pension Benefit
Guaranty Corporation or any successor thereto) which might constitute
grounds for the termination of any such Plan by the Pension Benefit
Guaranty Corporation or for the appointment of a trustee to administer any
such Plan. For purposes of this representation and warranty, the Borrower
shall be deemed to have knowledge of all facts attributable to any
administrator of any such Plan.
7 BORROWER INFORMATION. Any written information provided by
Borrower to Bank prior to, in conjunction with or pursuant to execution of
this Agreement is true, accurate and complete in all material respects.
ARTICLE 8.
FINANCIAL COVENANTS
So long as any portion of the Advances made under this Agreement
remains unpaid or this Agreement continues in effect, unless the Bank
otherwise consents in writing, the Borrower shall abide by each of the
following covenants:
1 BORROWING BASE. The aggregate outstanding balance of any Credit
Facility shall not exceed the Applicable Borrowing Base.
2 TANGIBLE NET WORTH. The Minimum Tangible Net Worth of the
Borrower, tested quarterly, shall be:
(a) AT CLOSING AND THROUGH SEPTEMBER 29, 1997. Not less than One
Million Five Hundred Thousand Dollars ($1,500,000.00) on the Effective
Date of this Agreement;
(b) AT SEPTEMBER 30, 1997 AND THROUGH SEPTEMBER 29, 1998. Not
less than Three Million Dollars ($3,000,000.00) as of September 30,
1997;
(c) AT SEPTEMBER 30, 1998 AND THROUGH SEPTEMBER 29, 1999. Not
less than Five Million Five Hundred Thousand Dollars ($5,500,000.00)
as of September 30, 1998;
(d) AT SEPTEMBER 30, 1999 AND THROUGH SEPTEMBER 29, 2000. Not
less than Seven Million Five Hundred Thousand Dollars ($7,500,000.00)
as of September 30, 1999; and
(e) AT SEPTEMBER 30, 2000 AND THEREAFTER. Not less than Ten
Million Dollars ($10,000,000.00) from and after September 30, 2000.
3 MAXIMUM DEBT TO TANGIBLE NET WORTH. The ratio of Borrower's
recourse indebtedness to Borrower's Tangible Net Worth shall not exceed
5.0:1.0 at the end of any calendar quarter.
4 MINIMUM INTEREST COVERAGE. Minimum interest coverage shall not
be less than 1.00:1 at any time during fiscal year 1997 nor less than
1.40:1 at any time thereafter. Interest coverage shall be defined as the
ratio of (i) earnings before interest expense and taxes to (ii) interest
expense less accrued interest on subordinated debt. Minimum interest
coverage shall be tested on a rolling four (4) quarter basis; PROVIDED;
however, that prior to March 31, 1998, minimum interest coverage will be
tested as follows: (x) at June 30, 1997, for the quarter then ending; (y)
at September 30, 1997, the six months then ended; and (z) at December 31,
1997, for the nine months then ended.
5 NO ADDITIONAL RECOURSE DEBT. Borrower shall not incur additional
recourse indebtedness without the prior written consent of Bank, which
consent may be withheld for any or no reason whatsoever.
6 DIVIDEND/DISTRIBUTION LIMITATION. Borrower shall not pay any
dividends or otherwise make any distributions with respect to its equity in
excess of One Hundred Thousand Dollars ($100,000.00) for Fiscal Year 1997
nor more than Forty Thousand Dollars ($40,000.00) during any fiscal year
after Fiscal Year 1997.
7 PAYMENTS ON SUBORDINATED DEBT. Borrower shall not pay any
accrued interest on Subordinated Debt prior to January 1, 1998 and
thereafter such interest may be paid only if and for so long as, Borrower
is in full compliance with the requirements of, and not in violation of the
provisions of, Sections 8.1 through 8.6, inclusive, or of any other
provision of this Agreement. Borrower shall not repay any principal of, or
any amounts other than interest with respect to, any Subordinated Debt
prior to January 1, 2001 and thereafter such principal and other amounts
may be paid only if and for so long as, Borrower is in full compliance with
the requirements of, and not in violation of the provisions of, Sections
8.1 through 8.6, inclusive, or of any other provision of this Agreement.
Borrower shall not acquire any Subordinated Debt prior to January 1, 2001
and thereafter such Subordinated Debt may be acquired by Borrower only if
and for so long as, Borrower is in full compliance with the requirements
of, and not in violation of the provisions of, Sections 8.1 through 8.6,
inclusive, or of any other provision of this Agreement.
8 DELINQUENCY LIMITATION. No more than five percent (5.0%) of the
aggregate U.S. Dollar value of the Borrower's Leases shall be more than
thirty (30) days delinquent, on a contractual basis, at any one time. For
the purposes of this Section 8.8, the entire unpaid balance of rentals due
with respect to a Lease shall be deemed to be more than thirty (30) days
past due if any Rental is more than thirty (30) days past due, in whole or
in part.
9 LESSEE CONCENTRATION. In no event shall any Lessee, or group of
Lessees which would be "affiliates" for the purposes of any proceeding
under the United States Bankruptcy Code, be liable to Borrower with respect
to Leases or any other obligations which, in the aggregate, at any time,
exceed ten percent (10%) of the aggregate of all of Borrower's Leases.
10 ASSIGNMENT OF KEY MAN LIFE INSURANCE. Within sixty (60) days
after the Effective Date of this Agreement, Borrower and any other owners
and beneficiaries shall delivered to Bank originals of life insurance
policies, issued or underwritten by insurers acceptable to Bank, and
executed and delivered to Bank an Assignment Of Life Insurance Policy with
respect to life insurance policies upon the lives of Michael F. McCoy and
William Wildman in the aggregate face amount not less than Three Million
Two Hundred Fifty Thousand Dollars ($3,250,000.00); provided, however, that
after review of such life insurance policies, Bank may require Six Million
Five Hundred Thousand Dollars ($6,500,000.00) in face amount of life
insurance to be assigned to Bank subject to Bank's agreement to retain no
more than Three Million Two Hundred Fifty Thousand Dollars ($3,250,000.00)
in any event. Notwithstanding any provision of this Section 8.10 to the
contrary, not less than Million Five Hundred Thousand Dollars
($4,500,000.00) of the face amount of such life insurance, including that
portion assigned to or to be retained by Bank, shall insure the life of
Michael F. McCoy. Notwithstanding any provision of this Agreement to the
contrary, the failure to timely deliver the original life insurance
policies and/or execute and deliver the Assignment Of Life Insurance Policy
with respect to either officer of the Borrower shall constitute an Event of
Default under this Agreement.
ARTICLE 9.
ADDITIONAL COVENANTS
1 GENERAL AFFIRMATIVE COVENANTS. So long as any portion of the
Secured Obligations under this Agreement, including the Notes, remains
unpaid or this Agreement continues in effect, unless the Bank otherwise
consent in writing, the Borrower shall abide by each of the following
covenants and agreements:
(a) PAYMENT AND PERFORMANCE OF OBLIGATIONS. The Borrower will
pay all principal, interest, fees, and other charges with respect to
the Notes and any other obligations to Bank when and as the same
become due and payable, will strictly observe and perform all
covenants, agreements, terms, conditions, and limitations contained in
this Agreement and the Loan Documents.
(b) NOTICE OF DEFAULT. The Borrower shall promptly notify the
Bank in writing of the occurrence of any Event of Default or Default,
specifying in connection with such notification all actions proposed
to be taken to remedy such circumstance.
(c) NOTICE OF NON-PAYMENT. The Borrower shall notify the Bank in
writing of the occurrence of any failure or refusal by the Borrower to
pay any amount in excess of Ten Thousand Dollars ($10,000) payable
under any agreement to which it is a party (other than trade payables
less than sixty (60) calendar days past due), within ten (10) calendar
days of such failure or refusal, unless the Borrower is diligently and
in good faith contesting its obligations to make such payment by
appropriate action.
(d) NOTICE OF LEGAL PROCEEDINGS. The Borrower shall, promptly
upon becoming aware of the existence thereof, notify the Bank in
writing of the institution of any litigation, legal proceeding, or
formal dispute with any person or tribunal, that might materially and
adversely affect the condition, financial or otherwise, or the
earnings, affairs, business prospects, or properties of the Borrower.
(e) CONTINUATION OF PRIMARY BUSINESS. The Borrower shall
continue to maintain the character of its restaurant equipment leasing
business as currently conducted.
(f) MAINTENANCE OF CORPORATE EXISTENCE. Qualification and
Assets. The Borrower shall at all times maintain (I) its legal
existence; (ii) its qualification to transact business and good
standing as a foreign corporation in all jurisdictions where the
failure to so qualify would materially and adversely affect the nature
of its properties or the conduct of its businesses; and (iii) all
franchises, licenses, rights, and privileges necessary for the proper
conduct of its businesses.
(g) MAINTENANCE OF SECURITY. The Borrower shall execute, file
and deliver to the Bank all security agreements, UCC Filings,
assignments, and such other documents and instruments, and all
supplements thereto, and continuation statements thereof, and take
such other actions as the Bank deems reasonably necessary in order to
maintain as valid, enforceable, and first priority liens, the Security
Interest granted and assigned to the Bank.
(h)PAYMENT OF TAXES AND CLAIMS. The Borrower shall pay all taxes
imposed upon it or upon any of its properties or with respect to its
franchises, business, income, or profits before any material penalty
or interest accrues thereon. The Borrower shall also pay all material
claims (including without limitation claims for labor, services,
materials, and supplies) for sums which have or shall become due and
payable and which by law have or might become a vendors lien or a
mechanics, laborers', materialmen's, statutory, or other lien
affecting any of the Collateral; provided, however, that the Borrower
shall not be required to pay any such taxes or claims if (i) the
amount, applicability, or validity thereof is being contested in good
faith by appropriate legal proceedings promptly initiated and
diligently conducted; and (ii) the Borrower shall have set aside on
its books reserves (segregated to the extent required by generally
accepted accounting principles) adequate with respect thereto.
(i) MAINTENANCE OF INSURANCE. The Borrower shall at all times
maintain, or cause to be maintained, insurance covering such risks as
is customarily carried by prudent businesses similarly situated,
including, without limitation, hazard, fidelity, errors and omissions.
All such insurance shall be written by such insurers and in such form,
amount, and coverage as may be reasonably satisfactory to the Bank,
naming the Bank, as additional insured or loss payee, as applicable.
The Borrower shall provide the Bank with a certificate from such
insurance companies setting forth the amount or amounts of coverage
and containing an agreement from each such insurance company that no
termination, expiration, cancellation, or lapse of any such insurance
policy shall occur without at least thirty (30) calendar days advance
written notice to the Bank.
(j)COMPLIANCE WITH LAWS AND AGREEMENTS. The Borrower shall comply
with the provisions of any laws and the provisions of any agreements
material to its businesses and operations and shall maintain its
ability to perform its obligations under all agreements material to
its businesses and operations.
(k) INSPECTIONS. The Borrower shall, at any reasonable time and
from time to time upon prior notice permit any agents or
representatives of the Bank to inspect, examine, and make copies of
and abstracts from Borrower's records and books of account, and
(1) discuss its affairs, finances, and accounts, and (2) make
available to Bank any of Borrower's officers, management employees, or
independent public accountants (and by this provision the Borrower
hereby authorizes said accountants to discuss with the Bank and its
agents or representatives the Borrower's affairs, finances, and
accounts).
(l) RECORDS. The Borrower shall keep accurate records and books
of account reflecting all of its financial transactions, in which
complete entries shall be made in accordance with generally accepted
accounting principles consistently applied.
(m) ERISA. With respect to any Plan maintained or adopted by the
Borrower, the Borrower shall (I) at all times make prompt payments of
contributions required to be made to meet the minimum funding
standards of ERISA; (ii) promptly, after the filing thereof, furnish
to the Bank copies of all reports of prohibited transactions and
accumulated funding deficiencies required to be made pursuant to the
provisions of ERISA; and (iii) notify the Bank promptly of the
occurrence of any Reportable Event (as such term is defined in ERISA).
(n) FURTHER ASSURANCES. The Borrower shall execute and deliver
such other and further instruments, documents, or assurances as in the
judgment of the Bank may be reasonably required to more effectively
create or perfect the Security Interest(s) or to confirm or evidence
the obligations imposed by the terms and provisions of this Agreement
and the Loan Documents.
(o) CHANGE IN NAME OR LOCATION. The Borrower shall notify the
Bank in writing at least thirty (30) calendar days in advance of any
change in location of its principal place of business, chief executive
office, or place where records are kept, or of any proposed change of
corporate name. To the extent not in the physical possession of the
Bank, the Collateral and all books and records pertaining thereto
shall be maintained and stored at the Borrower's principal place of
business, and the Borrower shall not remove any part of the Collateral
from such location, other than temporarily in the ordinary course of
business, unless the Borrower shall have provided the Bank with prior
written notification of such change in location in accordance with the
terms of this section and shall have assisted the Bank in filing such
security agreements, financing statements, or other notices deemed
necessary by the Bank to preserve and maintain the continued validity,
enforceability, and priority of the Bank's lien on and Security
Interest in the Collateral.
(p) SENIOR MANAGEMENT. The Borrower shall notify the Bank in
writing within fifteen (15) calendar days of any change in the
Borrower's senior management.
(q) CHANGE IN OWNERSHIP. Except as required in connection with
the Three Million Dollar ($3,000,000.00) equity capital contribution
required by this Agreement, the Borrower shall not make any
substantial change of control in the ownership of the capital stock of
the Borrower without the consent of Bank, which consent may be
withheld for any or no reason.
2 COVENANTS AS TO LEASES. With respect to the Leased Equipment and
the Leases (other than the Trustee Leases and any related Leased Equipment
or security interest therein), the Borrower covenants as follows:
(a) each Lease assigned to Bank shall constitute a valid and
enforceable lease of and/or a lien on and security interest in the Leased
Equipment which is the subject thereof and such assignment and the Security
Interest will be duly perfected and, except as otherwise provided herein,
will be prior to all other liens upon, security interests in, and
collateral assignments of such Leased Equipment and Leases.
(b) As of the date of acquisition and granting of a Security Interest,
the Borrower will be the owner of such Leases free of Liens, encumbrances,
and rights of others, except for (i) the Security Interest created pursuant
to this Agreement; (ii) any subordinated liens on Leased Equipment; (iii)
landlord liens under state law; and (iv) rights of Lessees under Leases.
(c) As of the date of the execution of a Lease, there will be no right
of rescission, offset, defense, or counterclaim to the obligation of the
Lessee thereunder to pay the unpaid payments due under such Lease, except
with respect to Advance Payments paid by such Lessee; the operation of the
terms of such Lease or the exercise of any right thereunder will not render
such Lease unenforceable in whole or in part or be subject to any right of
rescission, offset, defense, or counterclaim and no such right of recision,
offset, defense, or counterclaim shall have been asserted.
(d) As of the date of acquisition of any Leased Equipment, there will
not be any liens or claims affecting the Leased Equipment which are or may
become a lien prior to or equal with the Security Interest granted to Bank
in such Leased Equipment except the lien of the Trustee and except for
landlord liens under state laws, which liens may have priority over the
Security Interest.
(e) As of the date of its execution, each Lease will be a legal, valid
and binding obligation of the obligor thereunder and will be enforceable in
accordance with its terms, except only as such enforcement may limited by
bankruptcy, insolvency, or similar laws affecting the enforcement of
creditor's rights generally or by general equity principles, and all
parties to such Lease will have full legal capacity to execute such Lease
and all other documents related thereto, and the terms of such Lease will
not have been waived or modified in any respect.
(f) Each Lease shall contain customary and enforceable provision such
as to render the rights and remedies of the Borrower adequate for the
realization against the Leased Equipment which is the subject of each Lease
of the benefits of the Security Interest; notwithstanding the foregoing
Bank acknowledges the sufficiency of the form of the Lease currently
employed by the Borrower.
(g) The Borrower shall require each Lessee to furnish promptly to the
Borrower the annual financial statements of the Lessee (and of any
Guarantors) which, in some cases, may be certified by independent Certified
Public Accountants, and such interim financial statements of the Lessee as
the Borrower may require during the term of the Lease. If the annual
financial statements of a Lessee are not certified by independent certified
public accountants, such Lessee shall be required to also furnish to the
Borrower copies of its federal income tax returns. The Borrower shall upon
request make copies of all such financial statements and income tax returns
available for inspection by the Bank at any reasonable time during normal
business hours. In addition, the Borrower will cause Lessees to grant it,
or its representatives the right to enter the premises of each location of
the Leased Equipment for the purpose of inspection, and the right to
inspect any and all books and records relating to the Leased Equipment, at
any reasonable time during normal business hours.
(h) The company will notify the Bank in writing within fifteen days of
any default by a Lessee under the terms of a Lease and will specify the
actions taken and being taken to remedy any such default; provided that if
the event of default is the failure to pay rent when due, then the Borrower
may, in its discretion, provide in its notice to Bank that such notice
shall serve as a continuing notice of default by that Lessee in which case
no further notice to the Bank relative to the failure of such Lessee to
timely pay rent under its lease need be given by the Borrower unless the
Borrower deems itself to be insecure.
(i) The Borrower shall deposit, and shall take all reasonable steps to
require Borrower's Lessees to deposit, all Collection into the lockbox
account with Bank required pursuant to Section 6.1(c) of this Agreement
and, in the event, any Collections are received by Borrower, Borrower shall
receive all Collections with respect to any Lease in trust for the benefit
of Bank. All such Collections shall be deposited into the Collateral
Proceeds Account in accordance with the terms of the Security Agreement.
(j) With respect to each Lease, the Borrower hereby supplements and
adds to its covenants set forth above by making the following covenants:
(i) Prior to entering into a Lease, the Borrower will take such
steps as it deems reasonable and prudent to determine the
creditworthiness of the Lessee, including in appropriate
circumstances, but not limited to, undertaking a review of the credit
reports from commercial credit bureaus, investigating and verifying
the potential Lessee's credit record and bank accounts, and
establishing certain minimum levels of historical debt service
coverage and pro forma debt service coverage.
(ii) Each Lease will contain provisions substantially similar to
the following which provisions Bank acknowledges are reflected in the
form of Lease currently employed by Borrower.:
(A) The Lessee will repair and maintain the Leased
Equipment, pay all taxes relating to the Lease and Lessee's use
of the Leased Equipment (other than taxes measured by the net
income or net capital of the Borrower) and bear the entire risk
of the Leased Equipment being lost, damaged, destroyed or
rendered unfit or available for use.
(B) The Lessee will obtain and maintain during the term of
the Lease, at Lessee's sole expense, general liability and
casualty policies of insurance covering the Leased Equipment in
an amount equal at all times to not less than 100% of the full
replacement value of the Leased Equipment and naming the Borrower
or its nominee as an additional insured or loss payee,
respectively.
(C) The following occurrences, among others, will constitute
events of default under the Lease; (1) Lessee's failure to make
the rental payments called for under the Lease or Lessee's
failure to perform or observe any other covenant, condition or
agreement to be performed or observed by it under the Lease,
which failure, in either event, remains unremedied for 30
consecutive days or such other period as shall be provided for in
the Lease; (2) Lessee becomes insolvent or bankrupt or makes an
assignment for the benefit of creditors; (3) Lessee shall, or
shall attempt, without the Borrower's consent, to remove, sell,
transfer or encumber any of the Leased Equipment; (4) Lessee
shall cease doing business as a going concern; or (5) Lessee
shall suffer a material adverse change in its financial
condition, and as a result thereof the Borrower deems itself to
be insecure.
(D) Upon the occurrence of an event of default under the
Lease, the Borrower shall have the right to take all or any of
the following actions: (1) declare all other Leases between the
Borrower and the defaulting Lessee to be in default; (2)
terminate the Lease; (3) declare all sums due and payable under
the Lease for the full term of the Lease immediately due and
payable; (4) demand the return of the Leased Equipment or take
appropriate steps to obtain possession of the Leased Equipment;
and (5) sell the Leased Equipment at public or private sale or
otherwise dispose of or deal with the Leased Equipment.
3 NEGATIVE COVENANTS. So long as any portion of the Secured
Obligations under this Agreement including the Note, remain unpaid or this
Agreement continues in effect, the Borrower shall not violate any of the
following covenants:
(a) LIMITATION ON INDEBTEDNESS. The Borrower shall not incur, create,
assume, have outstanding, guaranty, or otherwise be or become directly or
indirectly liable with respect to any indebtedness if, as a result thereof,
the Borrower is in violation of any of the covenants set forth in this
Agreement.
(b) AMENDMENT OF CORPORATE DOCUMENTS. The Borrower shall not cause or
permit any amendment of its Articles of Incorporation or any material
change in its Bylaws as in effect on the date hereof; provided, however,
Borrower may amend it Articles of Incorporation and Bylaws with respect to
indemnification and make such other changes as do not materially affect
Bank.
(c) MERGERS, SALES, TRANSFERS OR OTHER DISPOSITION OF ASSETS. The
Borrower shall not: (i) dissolve or otherwise dispose of all or
substantially all of its assets; (ii) sell, lease, or otherwise transfer or
dispose of any assets for less than the fair market value (except assets no
longer usable in Borrower's business); (iii) consolidate with or merge into
another corporation or other legal entity; (iv) effect any change in its
capitalization; or (v) sell, lease, transfer, lend, or convey any of its
assets to an affiliate; PROVIDED, however, that Borrower may make such
changes in its capitalization as are required: (x) in connection with the
conversion of any of Borrower's outstanding preferred stock into Borrower's
common stock ; and (y) to issue stock or stock options pursuant to
incentive plans applicable to officers, directors, other management
personnel and consultants; PROVIDED, FURTHER, that all such transactions
under this clause (y) shall not cause or result in more than a five percent
(5%) dilution of the stock ownership interests of Michael F. McCoy and
William Wildman.
(d) LIENS. The Borrower shall not create or permit to exist any
mortgage, pledge, title retention lien, lease purchase, or other
encumbrance or security interest, with respect to any assets now owned or
hereafter acquired by the Borrower except: (i) the Security Interest; (ii)
materialmen's, mechanics', suppliers', tax, or warehousemen's liens,
statutory liens of landlords and other like liens arising in the ordinary
course of business which are not yet due or which are being contested in
good faith by appropriate proceedings; (iii) liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment compensation, and other types of social
security, or to secure the performance of other statutory obligations; (iv)
encumbrances consisting of zoning regulations, easements, rights of way,
survey exceptions, and other similar restrictions on the use of real
property, and minor irregularities in titles thereto which do not
materially impair their use in the operation of its business; (v) existing
liens and security interests disclosed in writing to the Bank prior to
execution of this Agreement, to which Bank has consented in a separate
writing; (vi) the security interests of the Trustee with respect to the
Trustee Leases and the Trust.
(e) GUARANTIES. The Borrower shall not guaranty, endorse, assume,
become surety for, indemnify, or otherwise become or be responsible for the
obligations of any third party, except: (i) endorsements of negotiable
instruments for deposit or collection in the ordinary course of business;
and (ii) obligations incurred in connection with the assignment or sale of
Leases (or any part thereof) owned by the Borrower in the ordinary course
of business of the Borrower.
(f) USE OF PROCEEDS. The Borrower shall not use the proceeds of this
Agreement, nor of any Advance, for any purpose other than working capital,
payment for or recoupment of the costs of Leased Equipment acquired by the
Borrower or payment of indebtedness to Star Financial Bank in connection
with Qualified Leases assigned to Bank in connection with such payment.
4 REPORTING REQUIREMENTS. So long as any portion of the Borrower's
liabilities under this Agreement, including the Note, remains unpaid or
this Agreement remains in effect, unless the Bank otherwise consents in
writing, the Borrower shall furnish to the Bank the following reports:
(a) ANNUAL REPORTS. As soon as available, and in any event within
ninety (90) calendar days after the end of the each fiscal year of the
Borrower, the Borrower shall furnish to the Bank (i) a complete annual
audited financial statement of the Borrower, with all notes thereto,
prepared in reasonable detail in accordance with generally accepted
accounting principles consistently applied, and in detail reasonably
satisfactory to the Bank, which shall contain at least a balance sheet, a
statement of profit and loss and stockholder's equity, and a statement of
cash flows, set forth in each case in comparative form with corresponding
figures from the preceding fiscal year, and (ii) if prepared, the
management letter to the Borrower prepared by the firm of independent
certified public accountants in connection with the certification of the
annual audited financial statements of the Borrower. Each annual audited
financial statement of the Borrower shall be duly certified by a firm of
independent certified public accountants of recognized national standing or
otherwise acceptable to the Bank. The certified report of such firm shall
include a statement to the effect that the examination made in preparing
and certifying such annual audited financial statement has not disclosed
the existence of a condition or event at the end of the fiscal year which
constitutes an Event of Default or Default hereunder, or a statement
specifying the nature and period of existence of any such condition or
event disclosed by such examination.
(b) ANNUAL FINANCIAL STATEMENTS OF FRANCHISORS. Provided such
franchisor obtains audited financial statements, within ten (10) days of
receipt thereof, the audited financial statements of each franchisor for or
in connection with which Borrower leases Qualified Leased Equipment.
(c) FIELD AUDIT REPORTS. At the option of Bank, provide to Bank
audit reports with respect to the Bank's collateral and Borrower's business
operations, in form acceptable to Bank, or permit Bank to engage auditors
and to grant access to Borrower's premises, Lessees and Borrower's books
and records, for such purposes, no less frequently than twice each year.
Borrower agrees that Borrower shall be liable for all costs and expenses in
connection with such field audits and the resulting reports.
(d) QUARTERLY COMPLIANCE REPORT. Within thirty (30) days after the
end of each fiscal quarter, Borrower shall provide to Bank a duly executed
and completed Covenant Compliance Certificate in the form of EXHIBIT
9.4(D), certified by Borrower's chief financial officer. Each such
certificate shall certify that there exists no Event of Default or Default
hereunder and that all representations and warranties contained in this
Agreement and the Loan Documents are true and correct as if made again
effective on the date of such certificate.
(e) MONTHLY MANAGEMENT-PREPARED FINANCIAL STATEMENTS. As soon as
available, and in any event within thirty (30) days after the end of each
fiscal month of the Borrower, the Borrower shall furnish to the Bank (i)
management-prepared internal financial statements of the Borrower for the
preceding month, prepared on a basis consistent with prior periods and in
accordance with generally accepted accounting principles. Such monthly
financial statements shall contain at least a balance sheet of the Borrower
as the end of such month and a statement of profit and loss for such month
and for the fiscal year to date. Each monthly financial statement shall be
accompanied by a certificate of the chief financial officer of the Borrower
dated as of such date and certifying that the monthly financial statement
so provided is correct and complete as of such date and fairly presents the
results of operations for the periods then ended, and that there exists no
Event of Default or Default hereunder and that all representations and
warranties contained in this Agreement and the Loan Documents are true and
correct as if made again effective on the date of such certificate.
(f) MONTHLY LEASE PORTFOLIO SUMMARY REPORT. The Borrower shall furnish
the Bank with a Lease Portfolio Summary Report and analysis, which shall
show the status of all Leases, including those which are delinquent, all in
such form and detail as the Bank shall reasonably request, as of the last
Business Day of each month, as soon as available and in any event within
fifteen (15) calendar days after the end of such month.
(g) MONTHLY BORROWING BASE CERTIFICATE. Within thirty (30) days after
the end of each month, or more frequently if requested by the Bank, the
Borrower shall furnish the Bank with a Borrowing Base Certificate and
listing of all of Borrower's Leases (excepting only the Trustee Leases).
(h) OTHER REPORTS AND INFORMATION. The Borrower shall deliver or cause
to be delivered to the Bank such information (not otherwise required to be
furnished under this Agreement or the Loan Documents) respecting its
business, affairs, assets, and liabilities, and such statements, lists of
property and accounts, reports, opinions, certifications, and documents as
the Bank may from time to time reasonably request.
ARTICLE 10.
DEFAULT AND REMEDIES
1 EVENTS OF DEFAULT. The occurrence of one or more of the
following events shall constitute an "Event of Default":
(a) DEFAULT UNDER THE LOAN DOCUMENTS. The occurrence of an Event of
Default under and as defined in any of the Loan Documents.
(b) PAYMENTS. The Borrower shall fail to make any payment of
principal, interest, fees, or other amounts with respect to any of the
Secured Obligations or any other obligations, liabilities or indebtedness
of the Borrower to the Bank, including without limitation the obligations
set forth in Sections 4.6(c), 4.6(d) and 4.6(e) of this Agreement, in the
Notes or otherwise, on or before the date such payment is due, and such
failure shall continue for a period of ten (10) calendar days.
(c) COVENANT DEFAULTS. The Borrower shall fail to perform or observe
any other covenant, agreement, or provision contained in this Agreement or
the other Loan Documents and such non-performance or non-observance shall
continue for a period of thirty days following receipt of notice thereof
from Bank.
(d) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made by the Borrower herein or in any certificate, schedule, statement,
report, notice or writing furnished by or on behalf of the Borrower to the
Bank, whether furnished prior to, contemporaneously with, or subsequent to
the execution of this Agreement, is untrue or is breached in any material
respect.
(e) DEFAULT ON INDEBTEDNESS. Any creditor or any representative of any
creditor of the Borrower declares, or is or becomes entitled to declare,
any liquidated indebtedness of the Borrower which exceeds Twenty-Five
Thousand Dollars ($25,000.00), to be due and payable prior to its expressed
maturity by reason of any default by the Borrower in the performance or
observance of any obligation or condition, or any such indebtedness becomes
due by its terms and is not promptly paid or extended.
(f) INSOLVENCY. The Borrower becomes insolvent or generally does not
pay its debts as they become due, or applies for, consents to, or
acquiesces in the appointment of a trustee or receiver of the Borrower or
any material portion of its property; or in the absence of such
application, consent, or acquiescence, a trustee or receiver is appointed
for the Borrower or for a substantial part of its property and is not
discharged within ninety (90) calendar days; or any bankruptcy,
reorganization, debt arrangement, or other proceeding under any bankruptcy
or insolvency law is instituted by or against the Borrower and, if
instituted against the Borrower, is consented to or acquiesced in by the
Borrower, or remains for thirty (30) calendar days undismissed.
(g) DISSOLUTION OR LIQUIDATION. Any dissolution or liquidation
proceeding is instituted by or against the Borrower and, if instituted
against the Borrower, is consented to or acquiesced in by the Borrower, or
remains for thirty (30) calendar days undismissed.
(h) TERMINATION OR SUSPENSION OF BUSINESS. The transaction of the
usual business of the Borrower is terminated or suspended.
(i) CHANGE IN OWNERSHIP. There occurs a substantial change of control
in the ownership of the capital stock of the Borrower and such change has
not been previously approved in writing by the Bank.
(j) JUDGMENTS. The entry of a money judgment against the Borrower in
excess of Twenty-Five Thousand Dollars ($25,000.00), unless such judgment
shall be satisfied, discharged, or stayed within sixty (60) calendar days
after the entry thereof, and if stayed, satisfied or discharged within ten
(10) calendar days after the expiration or lapse of any such stay.
(k) MATERIAL ADVERSE CHANGE. The occurrence of any material adverse
change in the condition of the Borrower, financial or otherwise.
(l) ERISA. The occurrence of any reportable event or any other fact or
circumstance which constitutes grounds for the termination of any Plan, as
defined in Section 7.6 hereof, of the Borrower by the Pension Benefit
Guaranty Corporation or for the appointment by an appropriate United States
District Court of a trustee to administer any such Plan shall have occurred
and be continuing for thirty (30) calendar days; or any Plan of the
Borrower shall be terminated within the meaning of ERISA; or a trustee
shall be appointed by the appropriate United States District Court to
administer any Plan of the Borrower; or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Plan of the
Borrower or to appoint a trustee to administer any such Plan; and, upon the
occurrence of any of the foregoing, the aggregate amount of the vested
unfunded liability under all such Plans exceeds ten percent (10%) of the
stockholders' equity of the Borrower, and such liability is not covered by
insurance.
2 REMEDIES NOT EXCLUSIVE. The rights and remedies provided in this
Agreement, the Note, and all other Loan Documents are cumulative, may be
exercised in such sequence or combination as the Bank may elect, and are
not exclusive of any rights or remedies otherwise provided by law.
3 REMEDIES UPON EVENT OF DEFAULT. If an Event of Default shall
have occurred, the Bank may exercise any one or more of the following
rights and remedies, and any other remedies provided in any of the Loan
Documents or under applicable law:
(a) ACCELERATION. Declare the unpaid balance of the Notes including
principal, interest, and any fees or other obligations, or any part
thereof, to be immediately due and payable, without demand, presentment, or
further notice of any kind, the same being hereby expressly waived by the
Borrower, whereupon it shall be due and payable.
(b) ADVANCES; TERMINATION. Refuse to make any further Advances, and
terminate this Agreement.
(c) JUDGMENT. Reduce any claim to judgment.
(d) OFFSET. Exercise the rights of offset and/or banker's lien against
the interests of the Borrower in and to every property of the Borrower
(other than escrow deposits managed by the Borrower, proceeds of the
Trustee Leases and property subject to the security interest of Trustee)
which is in the possession of the Bank to the extent of the full amount of
the Borrower's obligations to the Bank.
(e) FORECLOSURE. Exercise all those rights and remedies allowed to
secured parties by all applicable laws, including without limitation the
Uniform Commercial Code as enacted in Indiana and the Uniform Commercial
Code as enacted in any other jurisdiction in which the Collateral or any
portion thereof may be located.
(f) POSSESSION. Enter upon the premises of the Borrower and take
immediate possession of the Collateral, with or without legal process,
either personally or by means of a receiver appointed by a court of
competent jurisdiction.
(g) COLLECTION OF ACCOUNTS. Collect and receive all accounts, rents,
income, revenue, earnings, issues, and profits arising from the Collateral
or any part thereof, including, without limitation, the Leases (other than
the Trustee Leases).
(h) EXERCISE OF RIGHTS. Exercise any and all other rights afforded by
any applicable laws or by this Agreement and the Loan Documents at law, in
equity, or otherwise, including, but not limited to, the rights to bring
suits or other proceedings before any tribunal of competent jurisdiction,
either for specific performance of any covenant or condition contained in
the Loan Documents or in aid of the exercise of any right granted to the
Bank in this Agreement.
4 PERFORMANCE BY THE BANK. Should the Borrower fail to observe or
perform any covenant, duty, or promise by it to be observed or performed
under the terms of the Agreement or the Loan Documents, the Bank may, in
its sole discretion and without any obligation to do so, perform or attempt
to perform, such covenant, duty, or promise on behalf of the Borrower, and,
in the event the Bank should do so, the Borrower shall immediately upon
demand reimburse the Bank for all its expenses, disbursements, fees, and
costs incurred in connection therewith, with interest thereon at the rate
specified in the Note. The Bank does not assume and shall never have,
except by its express written consent, any liability or responsibility for
the performance of any covenant, duty, or promise of the Borrower
hereunder.
5 SET-OFF. The Borrower hereby irrevocably authorizes the Bank,
upon the occurrence of an Event of Default, to set off the liability of the
Borrower on the Note, without notice, against all deposits and credits of
the Borrower with, and any and all claims of the Borrower against, the Bank
at any time outstanding provided, however, that the Bank shall not offset
against deposits and credit of the Borrower held in trust or in a custodial
capacity for third parties or against the proceeds of the Trustee Leases
and property subject to the security interest of Trustee.
6 RELEASE. Upon repayment of the Advance (and all accrued interest
and related charges) relative to a Lease (other than a Trustee Lease), Bank
shall assign or release, at Borrower's discretion, its Security Interest
relative thereto.
7 ATTORNEYS AND ACCOUNTANTS. In the exercise of its rights under
this Agreement, the Note or the Loan Documents, the Bank may retain,
consult with, and otherwise utilize the services of counsel and of
accountants. Whenever attorneys or accountants are used by the Bank in the
exercise of any of its remedies under this Agreement, the Note or the other
Loan Documents, or otherwise, including collection or enforcement of this
Agreement, the Note or the other Loan Documents, or to enforce, defend,
declare, or adjudicate any of the Bank's rights under any of such
instruments and documents or in any of the Collateral, whether by suit,
negotiation, or otherwise, such reasonable attorneys' and accountants' fees
as are incurred by the Bank in connection therewith shall be payable by the
Borrower to Bank, which obligation shall survive any termination of this
Agreement.
ARTICLE 11.
MISCELLANEOUS
1 EXPENSES. The Borrower agrees to reimburse the Bank, upon
demand, for reasonable out-of-pocket expenses (including reasonable
attorneys' fees and legal expenses), incurred in connection with the
preparation, review, and amendment of this Agreement which obligation shall
survive any termination of this Agreement.
2 NON-LIABILITY OF BANK. The relationship between the Borrower and
the Bank is, and shall at all times remain, solely that of debtor and
creditor, and the Bank neither undertakes nor assumes any responsibility or
duty to review, inspect, supervise, pass judgment upon, or inform the
Borrower of any matter in connection with any aspect or phase of the
Borrower's businesses, operations, or condition, financial or otherwise.
The Borrower shall rely entirely upon its own judgment with respect to all
such matters, and any review of, inspection of, supervision of, exercise of
judgment on, or supply of information to the Borrower by the Bank in
connection with any such matter is for the protection and benefit of the
Bank, and neither the Borrower nor any third party is entitled to rely
thereon.
3 WAIVERS. No failure to exercise and no delay in exercising, on
the part of the Bank or any holder of the Note, of any power or right
hereunder or under the Note or the Loan Documents or the Lease Documents
and no course of dealing between the Borrower and the Bank or the holder of
the Note, shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
4 AMENDMENTS. No amendment, modification, or supplement to this
Agreement, the Note or the Loan Documents, or to any other document or
instrument executed or issued by any of the parties hereto in connection
with the transactions contemplated herein, shall be binding unless executed
in writing by all parties hereto; and this provision of this Agreement
shall not be subject to waiver by any party and shall be strictly enforced.
5 INTEREST RATE PROTECTION AGREEMENTS. Bank acknowledges that
Borrower may hereafter enter into one or more SWAP contracts, interest
hedging agreements or other rate contracts providing protection against
fluctuations in interest rates.
6 TAXES. The Borrower agrees to pay, and save the Bank harmless
from all liability for, any stamp or other taxes, except taxes imposed with
respect to or attributable to the income of Bank, which may be payable with
respect to the execution or delivery of this Agreement, the Notes and the
other Loan Documents, and any of the Leases, which obligation of the
Borrower shall survive the termination of this Agreement.
7 GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of Indiana, giving effect to
Federal laws applicable to national banking associations, but without
giving effect to the conflict of laws principles thereof. Any suit, action,
or proceeding against the Borrower with respect to this Agreement, the
Note, the other Loan Documents or the Collateral or any part thereof, may
be brought in the courts of the County of Marion, State of Indiana, or in
the United States District Court for the Southern District of Indiana, as
the Bank in its sole discretion may elect, and the Borrower hereby consents
to the jurisdiction of such courts for the purpose of any such suit,
action, or proceeding. Any suit, action, or proceeding brought by the
Borrower against the Bank with respect to this Agreement, the Note, the
other Loan Documents or the Collateral or any part thereof, shall be
brought in any of such courts; provided, however, that the Bank does not
waive its right to petition for removal of any action brought in the courts
of Marion County, Indiana to a United States District Court should it elect
to do so. The Borrower hereby irrevocably waives any and all objections to
the jurisdiction of such courts, including without limitation lack of
personal jurisdiction, lack of venue, and forum non convenient Service of
any writ, process, summons, or complaint upon the Borrower may be made by
mail upon it at the address stated in this Agreement, upon any registered
agent for service of process, or by any other method provided by law.
Service by any such method shall be conclusively deemed to be legally
sufficient in all respects, and the Borrower hereby irrevocably waives any
objection to the service or sufficiency of service of any writ, process,
summons, or complaint which is served in accordance with the foregoing.
8 SECTION TITLES. The section titles contained in this Agreement
are inserted for convenience only and shall not govern the interpretation
of any of the provisions of this Agreement.
9 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Bank and their respective successors
and assigns; provided, however, that the Borrower may not assign or
transfer any of its interest hereunder without the prior written consent of
the Bank, and, provided further, that the Bank may transfer, assign, or
grant participation in its rights hereunder, and such transferee, assignee,
or participant shall not be considered the Bank hereunder and the Borrower
shall be entitled to deal with the Bank as if such assignment, transfer, or
grant of a participation had not occurred.
10 RELIANCE BY THE BANK. All covenants, agreements,
representations, and warranties made herein by the Borrower shall,
notwithstanding any investigation by the Bank, be deemed to be material to
the Bank and to have been relied upon by the Bank and shall survive the
execution and delivery of this Agreement.
11 SEVERABILITY. The provisions of this Agreement are
severable. If any provision hereof shall be held invalid or unenforceable
in whole or in part by a court of competent jurisdiction, the remainder of
this Agreement shall not thereby fail or be rendered void or unenforceable,
but shall continue in full force and effect, with only the invalid or
unenforceable provision rendered a nullity and severed from this Agreement.
12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Borrower in this Agreement shall
survive the execution hereof, the delivery of the Note and the making of
all Advances, and the Bank shall be entitled to rely on such
representations and warranties at all times.
13 TERMINATION. Unless previously renewed pursuant to the
terms hereof, this Agreement shall terminate on the Termination Date, at
which time no further Advances shall be made. Upon such termination, the
Note shall be immediately due and payable. Notwithstanding such
termination, this Agreement shall, along with, nonetheless continue in full
force and effect with respect to any amounts due hereunder, until such
amounts have been repaid in full.
14 ENTIRE AGREEMENT. This Agreement, the Note, the Loan
Documents and all other documents related to any of the foregoing or
otherwise contemplated hereunder embody the final and entire agreement
between the parties hereto relating to the subject matter hereof and
supersede any and all prior commitments, arrangements, representations,
understandings and agreements and any and all oral agreements between the
parties relating to the subject matter hereof. There are no unwritten
agreements between the parties.
15 INDEMNITY. The Borrower shall indemnify and hold harmless
the Bank and its successors, assigns, agents and employees, from and
against any and all claims, actions, suits, proceedings, costs, expenses,
damages, fines, penalties and liabilities, including, without limitation,
reasonable attorney fees and costs, arising out of, connected with or
resulting from (a) the operation of the business of the Borrower, (b) the
Bank's preservation or attempted preservation of the Collateral, or (c) any
failure of the Security Interest granted to the Bank in the Collateral to
be or to remain perfected or to have the priority as contemplated herein
and in the Loan Documents; provided that, the Borrower shall have no
obligation to indemnify the Bank for any loss caused solely by the Bank's
gross negligence or willful misconduct. At the Bank's request, the Borrower
shall, at its own cost and expense, defend or cause to be defended any and
all such actions or suits that may be brought against the Bank and, in any
event, shall satisfy, pay and discharge any and all judgments, awards,
penalties, costs and fines that may be recovered against the Bank in any
such action, plus all attorneys' fees and costs related thereto to the
extent permitted by applicable law; provided, however, that the Bank shall
give the Borrower, to the extent the Bank seeks indemnification from the
Borrower under this Section 11.15, written notice of any such claim, demand
or suit as soon as practicable after the Bank has received written notice
thereof, and the Bank shall not settle any such claim, demand or suit, if
the Bank seeks indemnification therefor from the Borrower, without first
giving notice to Borrower of the Bank's desire to settle and obtaining the
consent of Borrower to the same, which consent Borrower hereby agrees not
to unreasonably withhold.
16 ROLE OF THE BANK. Notwithstanding any of the terms or
conditions hereof or of the other Loan Documents to the contrary, the Bank
shall not have, and by its execution and acceptance of this Agreement
hereby expressly disclaims, any obligation or responsibility for the
management, conduct or operation of the business and affairs of the
Borrower. Any term or condition hereof, or of any of the other Loan
Documents, permitting the Bank to take or refrain from taking any action
with respect to the Borrower or the Collateral shall be deemed solely to
permit the Bank to audit and review the management, operation and conduct
of the business and affairs of the Borrower and to maintain and preserve
the security given by the Borrower to the Bank, for the Secured
Obligations, and may not be relied upon by any other person. Further, the
Bank shall not have, have not assumed, and by its execution and acceptance
of this Agreement hereby expressly disclaims, any liability or
responsibility for the payment or performance of any indebtedness or
obligation of the Borrower, and no term or condition hereof, or of any of
the other Loan Documents, shall be construed otherwise.
17 NOTICES. All notices required or permitted to be given
hereunder shall be given in writing and shall be personally delivered or
sent by telecopier (receipt confirmed), by express courier service, or by
registered or certified United States mail, return receipt requested,
postage prepaid, addressed as follows (or to such other address as to which
any party hereto shall have given the other written notice):
If to the Borrower:
MERIDIAN FINANCIAL CORPORATION
8250 Haverstick Road, Suite 110
Indianapolis, IN 46240
Attn: ____________________________
with copy to:
BAKER & DANIELS
Suite 2700
300 North Meridian Street
Indianapolis, IN 46204
Attn: Daniel L. Boeglin, Esquire
If to the Bank:
LaSALLE NATIONAL BANK
1600 One American Square
Indianapolis, IN 46204
Attn: Gary L. Jacobson, Senior Vice
President
with copy to:
DANN PECAR NEWMAN & KLEIMAN, Professional
Corporation
One American Square, Suite 2300
Box 82008
Indianapolis, IN 46282-0008
Attn: Barry E. Beldin, Esquire
All notices hereunder shall be deemed given upon the earliest of (a)
actual delivery in person or by telecopier, (b) one (1) Business Day after
delivery to an express courier service, or (c) three (3) Business Days
after having been deposited in the United States mail, in accordance with
the foregoing.
18 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THE BORROWER AND THE BANK ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT FOR EACH SUCH PARTY TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT THE BORROWER AND THE BANK HAVE ALREADY RELIED ON THE
WAIVER IN ITS RELATED FUTURE DEALINGS WITH THE OTHER. THE BORROWER AND THE
BANK FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day of April, 1997.
MERIDIAN FINANCIAL CORPORATION, an Indiana
corporation
By:
Printed Name and Title
LASALLE NATIONAL BANK
By:
Printed
Name and Title
SECURITY AGREEMENT AND MASTER ASSIGNMENT OF LEASES
THIS SECURITY AGREEMENT AND MASTER ASSIGNMENT OF LEASES ("SECURITY
AGREEMENT") is made as of this day of April, 1997, by MERIDIAN
FINANCIAL CORPORATION (the "COMPANY"), an Indiana corporation with its
principal place of business located at 8250 Haverstick Road, Suite 110
Indianapolis, Indiana 46240 for the benefit of LASALLE NATIONAL BANK
("BANK"), a national banking association with offices at One American
Square, Suite 1800, Indianapolis, Indiana 46282.
RECITALS
WHEREAS, the Company and the Bank have entered into a Credit Agreement
of even date herewith (the "CREDIT AGREEMENT", as the same may be amended,
modified or supplemented from time to time); and
WHEREAS, the Credit Agreement requires that Company execute and
deliver this Security Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the
promises and mutual covenants herein contained, and other valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Bank to make advances pursuant to the
Credit Agreement, the Company, intending to be legally bound, hereby agrees
as follows:
ARTICLE 1.
DEFINITIONS
1 CREDIT AGREEMENT DEFINITIONS. Each capitalized term used herein
shall have the meaning ascribed to such term in the Credit Agreement.
ARTICLE 2.
GRANT OF SECURITY INTEREST
1 GRANT OF SECURITY INTEREST. To secure the payment and
performance by the Company of each and every one of the Secured
Obligations, including without limitation the payment of all indebtedness
now owed to the Bank, and all future Advances which may be made from time
to time by the Bank to the Company under the Credit Agreement or the Notes,
the Company does hereby pledge, assign, and transfer to the Bank, and grant
to the Bank a lien on and a Security Interest in, all of the Company's
right, title, and interest in and to the following, whether now owned or
hereafter acquired (collectively, the "Collateral"):
(a) All Leases, Lease Documents, contract rights, chattel paper,
goodwill, general intangibles, accounts, accounts receivable,
instruments, and documents;
(b) All Leased Equipment, equipment, inventory and fixtures,
including all attachments, accessions, accessories, tools, and
supplies;
(c) All deposit accounts, credits, and money held by the Bank in the
name of or for the benefit of the Company, including, without
limitation, the Lockbox Account and the Cash Collateral Account;
(d) All records and data relating to any of the Collateral described
herein, whether in the form of microfiche, microfilm, or electronic
media, together with all of Company's interest in and to all computer
software required to utilize, create, maintain, and process any such
records or data on electronic media; and
(e) All proceeds and products of the Collateral, both cash and non-
cash, and including, without limitation, any and all proceeds of any
insurance, indemnity, warranty or guaranty, any and all payments made
or due the Company in connection with the requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral (or any person acting under color of governmental
authority), and all rents, monies, payments and all other rights
arising out of the sale, lease or other disposition of any Collateral
described herein.
2 EXCLUDED ASSETS. Notwithstanding anything herein to the
contrary, the Bank's Security Interest shall not include a security
interest in any of the Leases and Leased Equipment which have been assigned
by Company to the Trustee under the Trust, the proceeds of any of the
Trustee Leases, the debt service reserve fund or any other deposit account
established by the Trustee in connection with the Trustee Leases, so long
as such Leases and Leased Equipment remain subject to such assignment. As
used herein, the term "Leases" shall be deemed to mean all of Company's
existing and hereafter executed Leases except the Trustee Leases.
3 IDENTIFICATION OF LEASES. As provided in the Credit Agreement
and herein, the Secured Obligations shall be secured by, INTER ALIA, all of
the Company's Leases, whether currently existing or hereafter entered into
by the Company, excluding only the Trustee Leases. The Leases consist of
the following: (i) all existing Leases identified on EXHIBIT A attached
hereto; and (ii) all Leases (other than a Trustee Lease) subsequently
entered into by the Company.
4 EXECUTION OF SUBSEQUENT ASSIGNMENTS. Pursuant to Section 6.3 of
the Credit Agreement, in conjunction with the delivery of any Request for
Advance to Bank, the Company shall also deliver to Bank (with a copy
simultaneously to its designated counsel) an executed original Lease
Assignment, in the form attached hereto as EXHIBIT B, for each specific
Lease (other than a Trustee Lease): (a) on the Effective Date of this
Security Agreement in connection with any such Lease then existing; (b) at
the time of a Request for Advance in connection with such Lease; or (c)
within ten (10) days after receipt by Borrower of the Lessee's written
acceptance of the Leased Equipment thereunder.
5 ORIGINAL LEASE DOCUMENTS TO BE DELIVERED TO BANK. As provided in
the Credit Agreement, all original Lease Documents pertaining to all Leases
shall be delivered to, and held by, Bank. The Lease Documents shall be
held by Bank to further secure the Secured Obligations.
ARTICLE 3.
DELIVERY OF LEASE DOCUMENTS TO PURCHASER OF LEASES
It is contemplated that Company may seek to sell some of the Leases,
from time to time, to third party purchasers (the "Purchaser"). At such
time as Company has arranged a proposed sale of any of the Leases to a
Purchaser, the Company shall provide Bank with prior written notice, and a
request for approval, of the proposed sale in the form of EXHIBIT C (a
"SHIPPING REQUEST"), attached hereto. The Shipping Request shall
specifically describe the Leases and include a computation and allocation
of the payment to be made by the Purchaser for the Leases, consistent with
the provisions of the Credit Agreement. The Bank shall use its best
efforts to review the Shipping Request and advise Company of its approval
or disapproval on within three (3) Business Days of its receipt. If the
Bank approves the Shipping Request, the Bank's wire transfer instructions
shall be promptly communicated to the Purchaser so that the total purchase
price for the Leases may be paid directly to the Bank. All payments in
respect of any Lease purchased by a Purchaser shall not be deemed received
by the Bank until such funds are received by federal funds wire transfer
and constitute immediately available funds in the Lockbox Account. All
such immediately available funds received by the Bank in the Lockbox
Account prior to 4:00 p.m. on a Business Day shall be deemed received on
such day and shall be applied to the Note as a prepayment on the same
Business Day, except as otherwise set forth in the Credit Agreement. Not
later than one Business Day following the Bank's receipt of Purchaser's
payment for the Leases, the Bank will mail the requisite Lease Documents to
the Purchaser, along with a Lease Sale Transmittal Letter (the "TRANSMITTAL
LETTER") in the form of EXHIBIT D attached hereto, by express overnight
mail.
ARTICLE 4.
LOCKBOX ACCOUNT
1 ESTABLISHMENT OF LOCKBOX AND CASH COLLATERAL ACCOUNTS. As
provided in the Credit Agreement, the Company will maintain a Lockbox
Account and Cash Collateral Account at the offices of the Bank. It is
expressly understood by the Company that it shall have no access whatsoever
to the Lockbox Account or the Cash Collateral Account. Without limiting
the foregoing, the Company shall have no right to issue, or request the
issuance of, and the Bank is hereby irrevocably instructed not to accept or
permit, any checks on, orders for withdrawal from, or other orders in
respect of, the Lockbox Account or the Cash Collateral Account. All
proceeds of sales of Leases and all Collections and other payment amounts
received by, or payable to, Company shall be initially deposited into the
Lockbox Account by Debtor.
2 SECURITY INTEREST IN LOCKBOX AND CASH COLLATERAL ACCOUNTS. The
Company hereby confirms the grant made by it to the Bank as security for
all present and future Secured Obligations, of a first lien and Security
Interest in the Lockbox Account and Cash Collateral Account.
3 ACCOUNT AGREEMENTS. The Company shall execute and deliver to
Bank such further agreements and instruments in connection with the Lockbox
Account and the Cash Collateral Account as Bank deems reasonably necessary
or advisable.
ARTICLE 5.
RELEASE OF COLLATERAL
1 CONDITIONS RESULTING IN RELEASE. The lien and Security Interest
provided for herein with respect to one or more Leases shall be released in
accordance with, and upon, the conditions set forth in Section 2.5 of the
Credit Agreement. Any provision of this Security Agreement
notwithstanding, Bank shall not be obligated to release any Lease except as
required by the Credit Agreement.
2 MANDATORY PREPAYMENT OR REPLACEMENT OF LEASES. If any such
release of any Lease under this Security Agreement shall create or result
in a Borrowing Base Deficiency, the Company shall promptly assign to Bank a
Qualified Lease not then already assigned to Bank or make payment to Bank
of the amount of such Borrowing Base Deficiency in accordance with the
terms of the Credit Agreement.
3 RELEASE OF DOCUMENTS WITHOUT RECOURSE. In the event it shall be
necessary for the Bank to assign or endorse any of the Lease Documents in
connection with any release hereunder, such assignment or endorsement shall
be without representation or warranty of any kind or nature and without
recourse to the Bank in any event whatsoever.
4 RETURN OF COLLATERAL. If the lien and Security Interest in favor
of the Bank in any Collateral is terminated pursuant hereto, the Bank shall
release and redeliver to the Company or its designee any such Collateral
then held by the Bank that is the subject of such terminated Security
Interest.
ARTICLE 6.
PAYMENTS ON LEASES
If, while this Security Agreement is in effect, the Company shall
become entitled to receive or shall receive any payment in respect of a
Lease, the Company agrees to accept the same as the agent for, and to hold
the same in trust on behalf of, the Bank and to deposit such payment into
the Lockbox Account. All sums of money so paid in respect of Leases (other
than the Trustee Leases) which are received by the Company and paid to the
Bank shall be deposited into the Lockbox Account and, at the option of the
Bank, without prior notice to the Company, credited against the Secured
Obligations or to the Company's general depository account with the Bank.
ARTICLE 7.
REPORTS CONCERNING EXISTING COLLATERAL
AND HEREAFTER ACQUIRED COLLATERAL
The Company will provide to the Bank the information required by the
Credit Agreement. Without in any manner limiting the foregoing, the
Company shall provide to the Bank a Request for Advance in connection with
each Loan, Monthly Lease Portfolio Summary Report and a Borrowing Base
Certificate monthly as required by Sections 3.1, 9.4(f) and 9.4(g),
respectively, of the Credit Agreement. Upon the request of the Bank, the
Company shall promptly provide additional information concerning, or a more
complete description of, any Lease, Leased Equipment, Location, the
Company's business, affairs, assets and liabilities or other information,
as Bank may reasonably request.
ARTICLE 8.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that:
(1) all of the representations and warranties set forth in the Credit
Agreement are true and correct;
(2) the Company is the legal and equitable owner of the Collateral,
and its interests therein are free and clear of all liens, security
interests, charges, and encumbrances of every kind and nature (except as
provided in the Credit Agreement);
(3) the Company has good right, power, and lawful authority to
pledge, assign, and deliver the Collateral in the manner contemplated by
this Security Agreement;
(4) no consent or approval (other than any which may be incidental to
any filing which may be necessary to perfect the security interests in the
Collateral) of any governmental body, regulatory authority, person, trust,
or entity is or will be either (i) necessary to the validity of the rights
created hereunder, or (ii) required prior to the assignment, transfer, and
delivery of any of the Collateral to the Bank;
(5) to the Company's knowledge, no material dispute, right of setoff,
counterclaim, or defense exists with respect to all or any part of the
Collateral, except with respect to Advance Payments paid by Lessees;
(6) this Security Agreement constitutes the legal, valid, and binding
obligation of the Company enforceable against the Company and the
Collateral in accordance with its terms (subject to limitations as to
enforceability which might result from bankruptcy, reorganization,
arrangement, insolvency, or other similar laws affecting creditors' rights
generally);
(7) in making and closing each Lease, the Company has fully complied
with, and all Lease Documents delivered with respect to such Leases comply
with, all applicable federal, state, and local laws, regulations, and
rules, including, but not limited to, laws relating to disclosure of credit
terms, equality of credit opportunity, real estate settlement procedures,
and usury laws;
(8) immediately upon the execution and delivery of the Credit
Agreement, the Note, and other Loan Documents, and upon the assignment,
transfer, and delivery of the Collateral to the Bank as contemplated
herein, the Bank shall have valid first priority Security Interests in the
Collateral;
(9) this Security Agreement is made with full recourse to the Company
and pursuant to and upon all the warranties, representations, covenants and
agreements on the part of the Company contained herein, in the Credit
Agreement and otherwise in writing in connection herewith or therewith;
(10) the chief executive office of the Company is located at the
address set forth in the first paragraph of this Security Agreement. The
Company will not move such offices without giving the Bank thirty (30)
calendar days prior written notice. Other than as permitted by the Credit
Agreement, the Company shall not change its name, identity or corporate
structure so long as the Secured Obligations remain unpaid. The originals
of all documents evidencing the Collateral (except that which has been
delivered to the Bank) and the only original books of accounts and records
of the Company relating thereto are, and will continue to be, kept at such
chief executive office;
(11) the Company will not sell, assign, transfer, exchange, settle any
claim with respect to, or otherwise dispose of, or grant any option with
respect to, the Collateral, nor will it create, incur or permit to exist
any pledge, lien, mortgage, hypothecation, security interest, charge,
option or any other encumbrance with respect to any of the Collateral or
any interest therein, or any proceeds thereof, except for (i) the Security
Interest provided by this Security Agreement, and (ii) any sale or other
disposition provided for under the terms of this Security Agreement or the
Credit Agreement;
(12) The Lease Documents related to the Borrowing Base Leases are
genuine and not subject to any security interest, liens, offsets or
counterclaims, except: a) with respect to Advance Payments paid by Lessees;
and b) the Security Interest provided by this Security Agreement;
(13) The Lease Documents related to the Borrowing Base Leases, and
delivered to the Bank, are the only documents executed for the Leased
Equipment described therein;
(14) The terms of the Leases are in compliance with all applicable
laws and regulations;
(15) There is no deficiency with respect to the Leases, and the Leases
are not otherwise in default; and
(16) The Leased Equipment described in the Leases has been delivered
to and accepted by, and is in the possession of, the Lessees identified in
the Leases.
ARTICLE 9.
COLLECTIONS
1 COLLECTIONS ON LEASES. As provided in the Credit Agreement, all
Collections with respect to the Leases shall be paid directly to the Bank
and deposited in the Lockbox Account.
2 ACCOUNTING. Upon notice from the Bank to the Company, given
after the occurrence and during the continuation of an Event of Default,
the Company shall furnish to the Bank not later than the tenth (10th)
business day after the end of each month a report and accounting of all
collections received during the preceding month including: (a) the name of
the Lessee, (b) the Company's Lease number for the Lease, (c) current
principal balance of the Lease, (d) current number and amount of past due
payments on the Lease, and (e) the amount of the Collections received
during such months with respect to the Lease.
3 DEFAULTED LEASES; COLLECTION AND FORECLOSURE PROCEEDINGS. If the
Company wishes to institute collection or foreclosure proceedings with
respect to a Lease, it shall substitute other Collateral so that it is
entitled, pursuant to the terms of the Credit Agreement to a release of
such Lease. If the Company does not own sufficient other collateral to
obtain a release of such Lease, then, so long as an Event of Default has
not occurred and is continuing, the Bank may, upon written request of the
Company, deliver to an attorney, as the agent of the Bank, upon such terms
and conditions as the Bank in its sole discretion may establish, for the
purpose of enabling said attorney to institute in the name of the Company
or the Bank, or in their names or in the names of their nominees, as the
Bank may determine, collection, repossession, foreclosure and/or other
recovery proceedings on any Lease in default or with respect to any Leased
Equipment thereunder, such instruments and documents in the possession of
the Bank as may be required for the successful prosecution of collection or
recovery proceedings; provided, however, that all such Collateral and all
proceeds of any such collection, repossession, foreclosure and/or other
recovery efforts shall remain subject to this Security Agreement and to the
Security Interests granted herein and all such proceeds shall be delivered
to the Bank as and when and in the form received. The Company hereby
covenants and agrees that, without the prior written consent of the Bank,
which consent shall not be unreasonably withheld, it will not request or
accept, in lieu of recovery, any discount on, or any conveyance,
endorsement, transfer, or assignment of any right, title, or interest in
and to any of the real, personal, or mixed properties sold, mortgaged,
hypothecated, assigned, transferred, set over, or conveyed to the Company
as security for any of the Leases if, after giving effect to any such
proposed transaction, the Applicable Borrowing Base would be less than the
aggregate outstanding principal balance of the Secured Obligations.
ARTICLE 10.
DEFAULT
1 EVENTS OF DEFAULT. The occurrence of one or more of the
following events shall constitute an Event of Default:
(a) the occurrence of an Event of Default as described in Article 10
of the Credit Agreement;
(b) any default in or breach of any covenant, term, condition,
representation, or warranty contained herein by the Company; or
(c) the Collateral, or any portion thereof, should diminish in value
so that the aggregate outstanding principal balance of the Secured
Obligations exceeds the Applicable Borrowing Base, whether such diminution
is caused by the default of any Lessee, an uninsured loss to the Leased
Equipment underlying any Lease, resulting from defect of title to or
casualty to the Leased Equipment or otherwise, and such excess shall not
have been paid to the Bank immediately after demand.
2 REMEDIES IN EVENT OF DEFAULT. If one or more Events of Default
shall occur, then the Bank, at its option, in addition to any and all other
rights and remedies which it may then have under this Security Agreement,
under the Credit Agreement, under any other instrument, or at law or in
equity or otherwise, may:
(a) Declare the unpaid balance of the Secured Obligations, or of a
part thereof, to be immediately due and payable;
(b) Transfer the Collateral or any part thereof into the Bank's name,
or the name of its nominee;
(c) In the name of the Company, or otherwise, to demand, collect,
receive, and receipt for all sums or payments due to the Company from
Lessees, including Collections and proceeds of Collateral;
(d) In the name of the Company, or otherwise, compromise, settle and
give acquittance for, and prosecute and discontinue any suits or legal
proceedings with respect to any or all of the Collateral;
(e) Take any action which the Bank may reasonably deem necessary or
desirable in order to realize on the Collateral, including the power to
take possession all books and records relating to the Collateral, to
perform any contract, endorse in the name of the Company, without recourse
to the Bank, any checks, drafts, notes, or other instruments or documents
received in payment of or on account of the Collateral;
(f) Enter upon the premises where any of the Collateral, including,
without limitation, Leased Equipment, not in the possession of the Bank is
located and take possession thereof and remove the same, with or without
judicial process;
(g) Reduce its claim to judgment or foreclose or otherwise enforce
the Security Interests herein granted and assigned, in whole or in part, by
any available judicial procedure;
(h) After any required notice, sell, lease, or otherwise dispose of
all or any part of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, and any such sale or
other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the
sale of any part of the Collateral shall not exhaust the Bank's power of
sale, but sales may be made from time to time, and at any time, until all
the Collateral has been sold or until all Secured Obligations have been
fully paid and performed), and at any such sale the Bank may participate as
a buyer and bid on and purchase any of the Collateral;
(i) In its discretion, retain the Collateral in full satisfaction of
the Secured Obligations; and
(j) Exercise any and all other rights, remedies, and privileges it
may have under the Uniform Commercial Code, this Security Agreement, or any
of the other Loan Documents.
3 BANK APPOINTED ATTORNEY-IN-FACT. Effective upon the occurrence
and continuation of an Event of Default, the Company hereby irrevocably
appoints and constitutes the Bank the Company's attorney-in-fact, with full
power of substitution, to: (a) transfer any Lease (other than a Trustee
Lease) and related Lease Documents to a purchaser, and (b) for the purpose
of carrying out the provisions of this Security Agreement, take any action
and execute and endorse in the name of the Company, without recourse to the
Bank, any instrument or document which the Bank may deem necessary or
advisable to accomplish the purpose hereof. This appointment is coupled
with an interest and, accordingly, is irrevocable. Without limiting the
generality of the foregoing, the Bank shall have the right and power to
receive, endorse, and collect checks and other orders for the payment of
money made payable to the Company representing any payment or reimbursement
made under, pursuant, or with respect to the Collateral or any part thereof
and to give full discharge for the same. The authority of the Bank to act
pursuant to the foregoing appointment shall lapse if, prior to acceleration
of the Secured Obligations, the Company shall have fully cured, to the
satisfaction of the Bank, the Event of Default. Whether or not an Event of
Default shall have occurred or be continuing, the Company hereby authorizes
the Bank in its discretion at any time and from time to time to complete
any assignment which heretofore was, or hereafter at any time may be,
executed and delivered in blank by the Company to the Bank; provided,
however, that if no Event of Default has occurred or is continuing, the
Bank may complete any such assignment only pursuant to the direction of the
Company.
4 COLLECTIONS ON COLLATERAL BY THE BANK. Upon the occurrence and
continuation of an Event of Default, the Bank shall be entitled, but not
obligated, at any time and from time to time, to notify and direct any or
all account debtors and/or Lessees with respect to any of the Collateral to
thereafter make all Rentals and other payments on such Collateral directly
to the Bank or such other person or entity designated by the Banks,
regardless of whether the Company was previously making Collections
thereon. The Bank shall account to the Company for all such payments
received. Each account debtor and/or Lessee making such Rentals or other
payments to the Bank or such other person or entity designated by the Bank
shall be fully protected in relying on the written statement of the Bank
that it then holds the Security Interests herein granted and assigned which
entitled it to receive such payment, and the receipt of the Bank or of such
other person or entity designated by the Bank for such payment shall be
full acquittance therefore to the account debtor and/or Lessee making such
payment.
5 APPLICATION OF PROCEEDS. Until all Secured Obligations have been
paid in full, any and all proceeds received by the Bank from any sale or
other remedy pursuant to this Article 10 shall be applied by the Bank as
follows:
First, to the payment of all costs and expenses incurred by the Bank
in connection with the administration and enforcement of this Security
Agreement, including the reasonable fees and the expenses of counsel and
accountants employed in connection therewith;
Second, to the payment of all other costs and expenses of sale or
other disposition of any of the Collateral, including the out-of-pocket
expenses of the Bank and the reasonable fees and out-of-pocket expenses of
counsel employed in connection therewith;
Third, to the payment in full of the Secured Obligations and all
interest and fees thereon, in such order as the Bank shall determine; and
Fourth, the balance (if any) of such proceeds shall be paid to the
Company, its successors or assigns, or as a court of competent jurisdiction
may direct.
In the event that such proceeds are not sufficient to satisfy the
Secured Obligations in full, the Company shall remain liable to the Bank
for any deficiency.
ARTICLE 11.
MISCELLANEOUS
1 FURTHER ASSURANCES. The Company will:
(a) upon the request of the Bank, promptly correct any defect, error,
or omission which may be discovered in the contents of this
Security Agreement or in the execution hereof, and will do such
further acts and things, and execute, acknowledge, endorse, and
deliver such further instruments, agreements, schedules, and
certificates, including, but not limited to, (a) notes,
assignments, chattel mortgages, security agreements, and
financing statements covering the title to any real, personal, or
mixed property now owned or hereafter acquired by the Company and
now or hereafter constituting Collateral, and (b) schedules and
certificates respecting all or any of the Collateral at the time
subject to the Security Interest granted hereunder, or the items
or amounts received by the Company in full or partial payment or
otherwise as proceeds of any of the Collateral, that the Bank may
at any time and from time to time reasonably request in
connection with the administration or enforcement of this
Security Agreement or related to the Collateral or any part
thereof. Any such instrument, agreement, schedule, or
certificate shall be executed by a duly authorized officer of the
Company and shall be in such form and detail as the Bank may
reasonably specify. Promptly upon the request of the Bank, the
Company will mark, or permit the Bank to mark in a reasonable
manner, the Company's books, records, and accounts showing or
dealing with the Collateral with a notation clearly setting forth
that a Security Interest in the Collateral has been granted to
the Bank, which notation shall be in form and substance
satisfactory to the Bank.
(b) do all acts and things, and will execute and file or record all
instruments (including mortgages, pledges, assignments, security
agreements, financing statements, amendments to financing
statements, continuation statements, etc.) required, or
reasonably requested, by the Bank, to establish, perfect,
maintain, and continue the perfection and priority of the
Security Interest of the Bank in the Collateral, and the Company
will pay the costs and expenses of: (i) all filings and
recordings, including taxes thereon (other than those imposed
with respect to the net income of Bank); (ii) all searches
reasonably deemed necessary by the Bank; (iii) the cost and
reasonable fees of Bank's counsel for advice and document review,
to establish and determine the validity and the priority of such
Security Interest of the Bank; and (iv) also to satisfy all other
liens which in the reasonable opinion of the Bank might
prejudice, imperil, or otherwise affect the Collateral or the
existence or priority of such Security Interest. The Company
hereby authorizes the Bank to execute and file on behalf, and in
the place and stead, of the Company any financing statement,
amendment to financing statement (including those listing
additional Collateral), continuation statements and copy and
information requests and to file such statements, amendments,
continuation and requests without the signature of the Company.
2 WAIVERS. The Company, for itself and all who may claim under the
Company, as far as the Company now or hereafter lawfully may, waives all
right to have all or any portion of the Collateral marshalled and the
Company agrees that any court having jurisdiction over this Security
Agreement may order the sale of all or any portion of the Collateral. Any
sale of, or the grant of options to purchase (for the option period thereof
or after exercise thereof), or any other realization upon, all or any
portion of the Collateral under Article 10 of this Security Agreement shall
operate to divest all right, title, and interest, either at law or in
equity, of the Company in and to the Collateral so sold, optioned, or
realized upon, and shall be a perpetual bar, both at law and in equity,
against the Company and against any and all persons claiming or attempting
to claim the Collateral so sold, optioned, or realized upon or any part
thereof, from, through, and under the Company. No delay on the part of the
Bank in exercising any of its rights hereunder, and no failure on the part
of the Bank to give any notice or make any demand which may be given to or
made upon the Company, shall constitute a waiver thereof, or impair the
right of the Bank to take any action or to exercise any power under this
Security Agreement or the Credit Agreement, or otherwise. Each and every
remedy given the Bank shall, to the extent permitted by law, be cumulative
and shall be in addition to any other remedy given hereunder or now or
hereafter existing at law or in equity or by statute. The exercise of any
one or more remedies with respect to some of the Collateral shall not
preclude the later exercise of such remedy with respect to any other
Collateral nor the exercise of any other remedy.
3 NOTICE. Reasonable notification of the time and place of any
public sale of any of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of any of
the Collateral is to be made, shall be sent to the Company and to any other
person entitled by law to notice. It is agreed that notice of any
Collateral sale or other disposition given not less than ten (10) calendar
days prior to the taking of such action to which the notice relates is
reasonable notification, and that such notice is sufficient if it states
only the type and amount of the Collateral to be sold, together with the
time and place of sale. All notices required or permitted to be given
hereunder shall be given in writing and shall be personally delivered or
sent by telecopier (receipt confirmed), by express courier service, or by
registered or certified United States mail, return receipt requested,
postage prepaid, addressed as follows (or to such other address as to which
any party hereto shall have given the other written notice):
If to the Company:
MERIDIAN FINANCIAL CORPORATION
8250 Haverstick Road, Suite 110
Indianapolis, Indiana 46240
Attn:
If to the Bank:
Attn: Gary L. Jacobson, Senior Vice President
LaSALLE NATIONAL BANK
1600 One American Square
Indianapolis, Indiana 46204
All notices hereunder shall be deemed given upon the earliest of: (a)
actual delivery in person or by telecopier, (b) one (1) Business Day after
delivery to an express courier service, or (c) three (3) Business Days
after having been deposited in the United States mail, in accordance with
the foregoing.
4 COSTS AND EXPENSES. The Company shall pay: (a) all reasonable
out-of-pocket expenses including, without limitation, any recording or
filing fees, cost of insurance policies and endorsements thereof and all
taxes levied or assessed upon the Collateral (or any similar fees or
taxes), incurred by the Bank in connection with the enforcement and
administration of this Security Agreement and the Credit Agreement and the
rights of the Bank thereunder, including, without limitation, the fees and
disbursements of counsel for the Bank; and (b) any and all present and
future stamp and other similar taxes with respect to the enforcement and
administration of this Security Agreement and with respect to the
transactions contemplated herein and in the Credit Agreement (except those
taxes attributable to the net income of Bank).
5 INDEMNIFICATION. The Company shall indemnify and hold the Bank
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, judgments, suits, costs, expenses, and disbursements of
any kind whatsoever, except for gross negligence or willful misconduct of
the Bank or its employees (the "INDEMNIFIED LIABILITIES"), which may be
imposed on, incurred by, or asserted against the Bank in any way relating
to or arising out of this Security Agreement or the Credit Agreement or any
of the transactions contemplated herein or therein, including any such
Indemnified Liabilities which may result (directly or indirectly) from any
claims made, or any actions, suits, or proceedings commenced or threatened,
whether in an original action or by counterclaim by or on behalf of any
creditor (excluding the Bank), security holder, shareholder, customer,
obliger, trustee, director, officer, employee, and/or agent of the Company
acting in such capacity, the Company, or any governmental regulatory body
or authority. The undertakings of the Company set forth in this Section
shall survive the payment in full of the Note and the termination of this
Security Agreement and the Credit Agreement.
6 TERMINATION. This Security Agreement shall terminate when all
the Secured Obligations have been fully paid and performed and Bank shall
have no further obligation to make any Advance under the Credit Agreement
or the Notes, at which time the Bank shall reassign and redeliver, without
recourse upon, or representation or warranty by, the Bank and at the
expense of the Company, to the Company, or to such other person or persons
as the Company shall designate, against receipt, such of the Collateral (if
any) as shall not have been sold or otherwise disposed of by the Bank
pursuant to the terms hereof or of the Credit Agreement, and shall still be
held by the Bank together with appropriate instruments of reassignment and
release.
7 NON-ASSUMPTION OF LIABILITY. Nothing herein contained shall
relieve the Company from performing any covenant, agreement, or obligation
on the part of the Company to be performed under or in respect to any of
the Collateral or from any liability to any party or parties having an
interest therein, nor shall anything herein be construed to impose any
liability on the Bank for the acts or omissions of the Company in
connection with any of the Collateral. The Bank shall not assume or become
liable for, nor shall it be deemed or construed to have assumed or become
liable for, any obligation of the Company with respect to any of the
Collateral, or otherwise, by reason of the grant to it of security
interests in the Collateral. The Bank shall use reasonable care in the
custody and preservation of such of the Collateral as comes into its
possession. No act or omission of the Bank's counsel in reviewing document
submissions prior to or following the execution of this Security Agreement
with respect to any of the Leases or any other Collateral shall, in any
way, be deemed to excuse, release or waive any errors, omissions or defects
in the procedures, documentation or other practices of the Company. It is
understood that the failure of any representation or warranty of the
Company with regard to the validity or enforceability of any of the Lease
Documents or other Collateral shall be solely dependent upon the Company to
assure, at all times, that such warranty or representation continues to be
true.
8 GOVERNING LAW. This Security Agreement shall be governed by and
construed in accordance with the internal laws of the State of Indiana,
giving effect to federal law applicable to national banking associations,
without giving effect to the conflict of law principles thereof.
9 COUNTERPARTS; EFFECTIVENESS. This Security Agreement and any
amendments, waivers, consents, or supplements thereto may be executed in
any number of counterparts, and by different parties hereto in separate
counterparts, but all such counterparts together shall constitute but one
and the same agreement. This Security Agreement shall become effective
when the Credit Agreement becomes effective.
10 SUCCESSORS AND ASSIGNS. This Security Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that the Company may
not assign its interest in this Security Agreement, nor delegate its duties
thereunder, without the prior written consent of the Bank.
11 ACCEPTANCE WAIVED. Notice of acceptance of this Security
Agreement is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed as of the day and year first above written.
MERIDIAN FINANCIAL CORPORATION,
an Indiana corporation
By:
Printed Name and Title
LASALLE NATIONAL BANK
By:
Gary L. Jacobson, Senior Vice
President
<<Date>>/dll/lnb/security.agt
<PAGE>
EXHIBIT "A"
IDENTIFICATION OF EXISTING LEASES
<TABLE>
<CAPTION>
State and
County Where Principal
Lease Equipment Balance
NUMBER LESSEE CONCEPT IS LOCATED OF LEASE
<S> <C> <C> <C> <C>
9608002-001 Terry Fazoli's 132,550.23
Enterprises
9607001-001 Pizza OK Papa John's 49,833.07
9607001-002 Pizza OK Papa John's 80,556.93
9610001-001 Tina Leuta Great Steak 85,330.86
& Potato
9609001-001 Parish Pizza Papa John's 106,428.03
9609001-002 Parish Pizza Papa John's 29,354.07
9609001-003 Parish Pizza Papa John's 38,928.52
9611001-001 Shteiwi-Faraj Great Steak 116,524.16
& Potato
9611001-002 Shteiwi-Faraj Great Steak 25,246.90
& Potato
9611001-003 Shteiwi-Faraj Great Steak 122,603.62
& Potato
9605001-001 F&L Krystal's 106,594.47
Enterprises
9605001-002 F&L Krystal's 124,182.37
Enterprises
9611002-001 D. Pizza Papa John's 93,527.38
Company
9603003-003 Waverly Italian Oven 47,064.80
Village Ovens
9411003-002 Lake Worth Delancey 6,702.29
Deli, LLC Street Deli
9411003-003 Lake Worth Delancey 3,328.89
Deli, LLC Street Deli
9411003-005 Lake Worth Delancey 52,158.63
Deli, LLC Street Deli
</TABLE>
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "AGREEMENT") is
entered into as of March , 1997, by and among MERIDIAN FINANCIAL
CORPORATION, an Indiana corporation ("BORROWER"), INROADS CAPITAL PARTNERS,
L.P. ("INROADS"), MESIROW CAPITAL PARTNERS VII, L.P. ("MESIROW"), EDGEWATER
PRIVATE EQUITY FUND II, L.P. ("EDGEWATER") (Inroads, Mesirow and Edgewater
collectively, the "JUNIOR CREDITORS") and LASALLE NATIONAL BANK, a national
banking association ("LENDER").
R E C I T A L S
A. Borrower and Lender have entered into a Credit Agreement dated as
of April , 1997 (the "CREDIT AGREEMENT") pursuant to which, among other
things, Lender has agreed, subject to the terms and conditions set forth in
the Credit Agreement, to make certain loans and financial accommodations to
Borrower.
B. Borrower and Junior Creditors have entered into a Securities
Purchase Agreement of dated as of March , 1997 (the "SECURITIES PURCHASE
AGREEMENT") pursuant to which Junior Creditors are extending credit to
Borrower as evidenced by Subordinated Notes issued thereunder in the
aggregate principal amount of up to $3,500,000.00 (the "JUNIOR NOTES").
C. As an inducement to and as one of the conditions precedent to the
agreement of Lender to make loans to Borrower under the Credit Agreement,
Lender has required the execution and delivery of this Agreement by Junior
Creditors and Borrower.
NOW THEREFORE, in order to induce Lender to make loans to Borrower
under the Credit Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the parties
hereto hereby agree as follows:
1. DEFINITIONS. The following terms shall have the following
meanings in this Agreement:
1 COLLECTION ACTION shall mean (a) to make demand for or
accelerate the Junior Debt or (b) to initiate or participate
with others in any suit, action or proceeding against
Borrower to (i) enforce payment of or to collect the whole
or any part of the Junior Debt or (ii) commence judicial
enforcement of any of the rights and remedies under the
Junior Debt Documents or applicable law with respect to the
Junior Debt or the Junior Debt Documents.
2 JUNIOR DEBT shall mean all of the obligations of Borrower to
Junior Creditors evidenced by the Junior Notes and all other
amounts now or hereafter owed by Borrower to Junior
Creditors.
3 JUNIOR DEBT DOCUMENTS shall mean the Junior Notes, the
Securities Purchase Agreement and all other documents and
instruments evidencing or pertaining to all or any portion
of the Junior Debt.
4 JUNIOR DEFAULT shall mean any default (including any payment
default) under the Junior Debt Documents beyond any
applicable grace period with respect thereto which has not
been unconditionally waived by Junior Creditors and which
results in the acceleration of the maturity, or entitles
Junior Creditors to accelerate the maturity, of all or a
portion of the Junior Debt.
5 LENDER means the Lender and any other lenders that are from
time to time parties to the Credit Agreement, and their
respective successors and permitted assigns thereunder.
6 NONPAYMENT DEFAULT shall mean any default (other than a
Payment Default) under the Senior Credit Documents beyond
any applicable grace period with respect thereto (a) which
results in the acceleration of the maturity of the Senior
Indebtedness or (b) which entities Lender to accelerate the
maturity of the Senior Indebtedness and which Lender, in
good faith, deems likely to have a material adverse effect.
7 PAYMENT DEFAULT means any default in the payment of
principal of or interest on or with respect to the Senior
Indebtedness beyond any applicable grace period with respect
thereto.
8 SENIOR CREDIT AGREEMENT means the Credit Agreement, together
with any credit agreement or similar document from time to
time executed by Borrower to evidence any refinancings or
successive refinancings of the Credit Agreement as permitted
hereunder, in each case as amended, modified, supplemented,
restated, refinanced or renewed from time to time and in
effect.
9 SENIOR CREDIT DOCUMENTS means the Senior Credit Agreement,
the Notes, the Security Agreement, the Master Assignment of
Leases, the Assignments Of Lease, the Collateral Assignment
Of Life Insurance Policies and all other documents,
instruments and agreements executed or delivered in
connection therewith, in each case as amended, modified,
supplemented, restated, refinanced or renewed from time to
time as permitted hereunder and in effect.
10 SENIOR INDEBTEDNESS means all monetary obligations of
Borrower to Lender arising under, or with respect to, the
Senior Credit Agreement, the Senior Credit Documents and
under any other agreements or instruments entered into after
the date hereof to amend, waive, modify, supplement,
restate, renew, extend or refinance, in whole or in part
(herein collectively called "MODIFICATIONS") indebtedness of
the Borrower under the Senior Credit Agreement as permitted
hereunder, including, without limitation: (a) obligations
with respect to the principal of, (b) premium, if any, (c)
interest on (including interest accruing after the filing of
a petition initiating any proceeding pursuant to any
bankruptcy law, whether or not such interest is allowed as a
claim in such proceeding), and (d) fees and expenses,
including, without limitation, legal fees; however, the
amount of Senior Indebtedness shall be reduced by the sum of
(x) any principal payments on the Term Loans actually
received by Lender after the date hereof and (y) any actual
prepayment of Senior Indebtedness to the extent Borrower
acknowledges in writing that such prepayments reduce the
availability of borrowings under the Senior Credit Agreement
as in effect on the date of this Agreement or as amended as
permitted hereunder; PROVIDED, that Senior Indebtedness
shall not include any increases in the principal amount of
the indebtedness of Borrower to Lender in excess of
$10,000,000.00, which amount shall be reduced by principal
payments on the Term Loans actually received by Lender.
All other capitalized terms not defined herein shall have the meanings
ascribed to such terms in the Credit Agreement described below.
2. SUBORDINATION.
1 AGREEMENT TO SUBORDINATE. Borrower and each of the Junior
Creditors agree that the Indebtedness evidenced by the Junior
Notes and all other Junior Debt are junior to and subordinated in
right of payment, to the extent and manner provided in this
Section 2, to the prior payment in full of all Senior
Indebtedness, and that such subordination is for the benefit of
the holders of the Senior Indebtedness. The Junior Creditors
further represents that the neither the Junior Notes or any part
of the Junior Debt has not heretofore been subordinated in favor
of or sold, assigned, pledged or otherwise transferred or
encumbered, in whole or in part, to any other person, firm or
corporation, and that the Junior Creditors hold no security
therefor, except as may be set forth in EXHIBIT 2.1 to this
agreement. The Junior Creditors acknowledge that notwithstanding
the time of filing of any financing statement or other instrument
for the purpose of perfecting any mortgage, security interest or
lien in, to or upon the assets of Borrower, the security interest
granted Senior Creditor shall have priority over any mortgage,
security interest or lien granted to the Junior Creditors by
Borrower.
2 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution
to creditors of Borrower in a liquidation or dissolution of
Borrower in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding (each hereinafter referenced
to as a "Proceeding") relating to Borrower or substantially all
of its property:
(a) the Senior Indebtedness shall be paid in full in cash
before any Junior Creditor shall be entitled to receive any
payment of Junior Debt; and
(b) until the Senior Indebtedness is paid in full in cash,
any distribution to which any Junior Creditor would be entitled
but for this subsection 2.2 shall be made to holders of Senior
Indebtedness, as their interests may appear, except that Junior
Creditors may receive securities (the "Reorganization
Securities") that are subordinated to Senior Indebtedness and to
any securities received by the Lenders in connection with such
bankruptcy, reorganization, insolvency, receivership or similar
proceedings to at least the same extent as the Junior Debt is
subordinated to the Senior Indebtedness.
In the event of the liquidation or dissolution of Borrower,
or bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Borrower or its property, Junior
Creditors shall execute and file any proofs of claim in respect
of the Junior Debt reasonably requested by Lender in connection
with any such proceeding and hereby irrevocably authorize,
empower and appoint Lender, as their agent and attorney-in-fact
to execute, verify, deliver and file such proofs of claim upon
the failure of any Junior Creditor to do so at least thirty (30)
days before the expiration of the time to file any such proof of
claim; provided, however, Lender shall have no obligation to file
any such proof of claim and shall have no liability to the Junior
Creditors or Borrower should Lender not file any proof of claim
on behalf of the Junior Creditors.
For purposes of this Agreement, a distribution may consist
of cash, securities or other property, by set-off or otherwise.
The Senior Indebtedness shall continue to be treated as
Senior Indebtedness and the provisions of this Agreement shall
continue to govern the relative rights and priorities of Lender
and Junior Creditors even if all or part of the Senior
Indebtedness, or the security interests securing the Senior
Indebtedness, are subordinated, set aside, avoided or disallowed
in connection with any such Proceeding and this Agreement shall
be reinstated if at any time any payment of Senior Indebtedness
is rescinded or must otherwise be returned by any holder of
Senior Indebtedness or any representative of such holder.
3 DEFAULT ON SENIOR INDEBTEDNESS.
(a) Upon the final maturity of any Senior Indebtedness by lapse
of time, acceleration or otherwise, all such Senior Indebtedness shall
first be paid in full, or such payment duly provided for in cash or in
a manner satisfactory to the holders of such Senior Indebtedness,
before any payment is made by Borrower or any Person acting on behalf
of Borrower on account of any Junior Debt.
(b) Borrower may not pay any Junior Debt and may not acquire any
Junior Debt for cash or property (other than capital stock of Borrower
or Reorganization Securities) if:
(i) a Payment Default on any Senior Indebtedness occurs and
is continuing that results in the acceleration of the maturity of
such Senior Indebtedness or permits holders of such Senior
Indebtedness to accelerate its maturity; or
(ii) Borrower receives from Lender a notice of a Nonpayment
Default ("NONPAYMENT DEFAULT NOTICE").
If subsection 2.14 and the other provisions of this Section 2
otherwise permit the payment or acquisition at that time, Borrower may
resume regularly scheduled (unaccelerated) principal payments and
interest payments on the Junior Debt and may resume payment of other
amounts due on the Junior Debt when the Payment Default or Nonpayment
Default referred to in clauses (i) and (ii) above is cured or waived
or acceleration of payment of the Senior Indebtedness is rescinded or
annulled. In addition, for purposes of clause (ii) only of this
subsection 2.3(b), Borrower may resume payments on the Junior Debt and
may acquire Junior Notes when 120 days pass after the Nonpayment
Default Notice is given (the "PAYMENT BLOCKAGE PERIOD"); PROVIDED,
that the Senior Indebtedness has not been accelerated prior to
termination of such Payment Blockage Period and subsection 2.14 and
the other provisions of this Section 2 otherwise permit the payment
with respect to the Junior Debt or the acquisition of the Junior Notes
at that time; and PROVIDED, FURTHER, that while any number of such
Nonpayment Default Notices may be given during any consecutive 360-day
period, the aggregate number of days during which Payment Blockage
Periods shall be in effect shall not exceed 120 days during any 360-
day period. For all purposes of this subsection 2.3, no default
which, to the knowledge of Lender or any other holder of Senior
Indebtedness under the Senior Credit Agreement whereby such default
arises, existed or was continuing on the date of the commencement of
any Payment Blockage Period shall be, or be made, the basis for the
commencement of a second Payment Blockage Period, whether or not
within a period of 360 consecutive days, unless such default shall
have been cured or waived for a period of not less than 180 days. Any
Nonpayment Default Notice which fails to comply with the provisions of
this paragraph shall not be effective for purposes of clause (ii) or
otherwise.
After the cure or waiver of any Payment Default, or the expiration of
any Payment Blockage Period (or, if earlier, the cure or waiver of the
Nonpayment Default upon which such Payment Blockage Period is based),
any regularly scheduled interest or principal payment not made when
due as a result of such Payment Blockage Period (the "BLOCKED
PAYMENTS") may be made, together with any accrued and unpaid interest
with respect to such overdue payment(s).
4 ACCELERATION OF JUNIOR NOTE. If payment of any Junior Debt is
accelerated because of a Junior Default, the Junior Creditors and
Borrower shall promptly notify Lender of such acceleration.
5 WHEN DISTRIBUTION MUST BE PAID OVER. (a) In the event that
Borrower shall make any payment to Junior Creditors on account of any
Junior Debt at a time when such payment is prohibited by subsection
2.2 or 2.3, such payment shall be held by Junior Creditors in trust
for the benefit of, and shall be paid forthwith over and delivered to,
Lender for distribution to the holders of Senior Indebtedness for
application to the payment of all Senior Indebtedness remaining unpaid
to the extent necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
(b) If a distribution is made to Junior Creditors that because
of this Section 2 should not have been made to Junior Creditors,
Junior Creditors shall hold it in trust for holders of Senior
Indebtedness and pay it over in accordance with the foregoing
paragraph.
6 SUBROGATION. After all Senior Indebtedness is paid in full and
until the Junior Debt is paid in full, Junior Creditors shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to Junior Creditors have been applied
to the payment of Senior Indebtedness. A distribution made under this
Section 2 to holders of Senior Indebtedness which otherwise would have
been made to Junior Creditors is not, as between Junior Creditors and
Borrower, a payment by Borrower on Senior Indebtedness.
7 RELATIVE RIGHTS. This Agreement defines the relative rights of
the Junior Creditors and holders of Senior Indebtedness. Nothing
herein shall:
(a) impair, as between Borrower and Junior Creditors, the,
obligation of Borrower, which is absolute and unconditional, to pay
principal of and interest on the Junior Notes in accordance with their
terms;
(b) affect the relative rights of Junior Creditors and creditors
of Borrower other than their rights in relation to the holders of
Senior Indebtedness; or
(c) prevent Junior Creditors from exercising all available
remedies upon a Junior Default, subject to: (i) the rights of holders
of Senior Indebtedness to receive distribution and payments otherwise
payable to Junior Creditors, (ii) any Payment Blockage Period, and
(iii) the issuance of Standstill Notices as provided in this
Agreement.
If Borrower fails because of this Agreement to pay principal of, or
interest on, or any other amounts due under, the Junior Notes on the
due date, such failure, subject to any grace period set forth in the
Junior Debt Documents, shall constitute a Junior Default.
8 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present
or future holder of any Senior Indebtedness to enforce subordination
as herein provided shall at any time, in any way, be prejudiced or
impaired by any act or failure to act on the part of Borrower or by
any act (other than to give a written waiver in respect thereof) or
failure to act, in good faith, by any such holder, or by any
noncompliance by Borrower with terms, provisions land covenants of
this Agreement, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.
9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of Borrower referred to in
this Agreement, Junior Creditors shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding
is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution, delivered
to Junior Creditors, for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders
of the Senior Indebtedness and other indebtedness of Borrower, the
amount thereof or payable therein, the amount or amounts paid or
distribution thereon and all other facts pertinent thereto or to this
Agreement; PROVIDED, THAT LENDER HAS BEEN PROVIDED WRITTEN NOTICE OF
SUCH PROCEEDING AND A REASONABLE OPPORTUNITY TO APPEAR AND BE HEARD IN
SUCH MATTER.
10 NOTICE TO JUNIOR CREDITORS. Junior Creditors shall not be
charged with knowledge of the existence of any fact that would
prohibit the making of any payment in respect of Junior Debt to Junior
Creditors, unless and until Junior Creditors shall have received
written notice thereof as contemplated hereby; and, prior to the
receipt of any such written notice, Junior Creditors shall be entitled
in all respects to assume that no such fact exist.
11 SALE, TRANSFER, ETC. Junior Creditors shall not sell, assign,
pledge, dispose of or otherwise transfer all or any portion of the
Junior Debt (a) without giving prior written notice of such action to
Lender and (b) unless prior to the consummation of any such action,
the transferee thereof shall execute and deliver to Lender an
agreement substantially identical to this Agreement providing for the
continued subordination and forbearance of the Junior Debt to the
Senior Indebtedness as provided herein and for the continued
effectiveness of all of the rights of Lender arising under this
Agreement.
Notwithstanding the failure of any such transferee to execute or
deliver to Lend an agreement substantially identical to this
Agreement, the subordination effected hereby shall survive any sale,
assignment, pledge, disposition or other transfer of all or any
portion of the Junior Debt, and the terms of this Agreement shall be
binding upon the successors and assigns of the Junior Creditors, as
provided in Section 9 below.
12 LEGENDS. Until the Senior Indebtedness is paid in full in cash,
each Junior Note at all times shall contain in a conspicuous manner
the following legend:
"This Note and the indebtedness evidenced hereby are subordinate
in the manner and to the extent set forth in that certain
Subordination and Intercreditor Agreement (the "Intercreditor
Agreement") dated as of April ___, 1997 by and among Maker, Payee and
the other parties thereto to the Senior Indebtedness (as defined in
such Intercreditor Agreement); and each holder of this Note, by its
acceptance hereof, shall be bound by the provisions of the
Intercreditor Agreement."
13 RESTRICTION ON ACTION BY JUNIOR CREDITOR. If any Junior Default
(other than a Junior Default caused by (i) the Borrower becoming
insolvent, or admitting in writing its inability to pay its debts as
they mature, or making an assignment for the benefit of creditors, or
applying for or consenting to the appointment of a trustee or receiver
for a major part of its properties or (ii) a trustee or receiver being
appointed for the Borrower or a material part of properties and the
order of such appointment is not discharged, vacated or stayed within
sixty (60) days after such appointment or (iii) a Bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or
other proceedings for relief under any bankruptcy or similar law or
laws for the relief of debtors, are instituted by or against the
Borrower and, if so instituted, are consented to by the Borrower, or
if contested, are not dismissed by the adverse parties or by an order,
decree or judgment within sixty (60) days after such institution)
shall have occurred and be continuing, Junior Creditors shall deliver
to Lender written notice of such Junior Default (a "JUNIOR DEFAULT
NOTICE") not less than five (5) days prior to the date of any
acceleration of the Junior Debt or the taking of any other Collection
Action in respect to such Junior Default. Upon Lender's receipt of a
Junior Default Notice, Lender may, by written notice to Junior
Creditors (a "STANDSTILL NOTICE"), invoke a standstill period (the
"STANDSTILL PERIOD") whereby the Junior Creditors shall not accelerate
any Junior Debt or take any other Collection Action until the earlier
of (a) the acceleration of the Senior Indebtedness or (b) 120 days
after Lender's receipt of such Junior Default Notice; PROVIDED,
however, if the Standstill Period has elapsed and all then-existing
Junior Defaults have not been cured or waived, no subsequent
Standstill Notice shall be effective until such Junior Defaults are
cured or waived.
14 PAYMENTS OTHERWISE PERMITTED. Notwithstanding any provision of
this Agreement, the Junior Notes or the Junior Debt Documents to the
contrary: (a) Borrower shall not make any payments and the Junior
Creditors shall not receive: (i) any payments of interest on or with
respect to the Junior Debt prior to January 1, 1998; nor (ii) payments
of principal and other amounts owing on the Junior Debt or under the
Junior Debt Documents prior to January 1, 2001; and (b) Borrower shall
not acquire, and Junior Creditors shall not sell to Borrower, any
portion of the Junior Debt prior to January 1, 2001.
3. CONTINUED EFFECTIVENESS OF THIS AGREEMENT. The terms of this
Agreement, the subordination effected hereby, and the rights and the
obligations of Junior Creditors or Lender arising hereunder, shall not be
affected, modified or impaired in any manner or to any extent by: (a) any
amendment or modification of or supplement to the Senior Credit Agreement,
any of the other Loan Documents or any of the Junior Debt Documents; (b)
the validity or enforceability of any such documents; or (c) any exercise
or non-exercise of any right, power or remedy under or in respect of the
Senior Indebtedness or the Junior Debt or any of the instruments or
documents referred to in clause (a) above. Junior Creditors and each
holder of Junior Debt hereby acknowledge that the provisions of this
Agreement are intended to be enforceable at all times, whether before the
commencement of, after the commencement of, in connection with or premised
on the occurrence of a reorganization, insolvency, receivership or similar
proceeding.
4. REPRESENTATIONS AND WARRANTIES.
1 JUNIOR CREDITORS. Each Junior Creditor, as to itself only,
hereby represents and warrants to Agent and Lenders as follows:
4.1.1 BINDING AGREEMENTS. This Agreement, when executed
and delivered, will constitute the valid and legally binding
obligation of such Junior Creditor enforceable in accordance
with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditor's rights generally and by equitable principles.
4.1.2 NO DIVESTITURE. Such Junior Creditor is the
current owner and holder of the Junior Note and Junior Debt
and may, pursuant to the Securities Purchase Agreement, be
required to purchase an additional Junior Note, in the
amount described opposite its name below:
Principal Principal Percentage
Amount of Amount of Of
NAME JUNIOR NOTE ADDITIONAL NOTE JUNIOR DEBT
Inroads $230,769.24 $1,384,615.38 46.1538%
Mesirow $134,615.38 $ 807,692.31 26.9231%
Edgewater $134,615.38 $ 807,692.31 26.9231%
4.1.3 DEFAULT UNDER JUNIOR NOTE. No Junior Default
exists under or with respect to its Junior Note or any of
the other Junior Debt Documents.
4.1.4 CONFLICTING AGREEMENTS; LITIGATION. No provisions
of any mortgage, indenture, contract, agreement, statute,
rule, regulation, judgment, decree or order binding on such
Junior Creditor conflicts with, or requires any consent
which has not already been obtained under, or would in any
way prevent the execution, delivery or performance of the
terms of this Agreement by such Junior Creditor. The
execution, delivery and carrying out of the terms of this
Agreement will not constitute a default under, or result in
the creation or imposition of, or obligation to create, any
Lien upon the property of such Junior Creditor pursuant to
the terms of any such mortgage, indenture, contract or
agreement. No pending or, to the best of such Junior
Creditor's knowledge, threatened, litigation, arbitration or
other proceedings if adversely determined would in any way
prevent the performance of the terms of this Agreement by
such Junior Creditor.
2 BY THE LENDER. The Lender hereby represents and warrants to
each Junior Creditor that this Agreement, when executed and
delivered, will constitute the valid and legally binding
obligation of Lender enforceable in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally and
by equitable principles.
5. JUNIOR DEFAULT NOTICE. Upon the occurrence of each Junior
Default, Junior Creditor and Borrower shall provide Lender with written
notice thereof and Junior Creditors shall notify Lender in the event such
Junior Default is cured or waived.
6. MODIFICATION. Any modification or waiver of any provision of
this Agreement, or any consent to any departure by any Junior Creditor
herefrom, shall not be effective in any event unless the same is in writing
and signed by Lender, and then such modification, waiver or consent shall
be effective only in the specific instance and for the specific purpose
given. Any notice to or demand on Junior Creditors in any event not
specifically required of Lender, hereunder shall not entitle Junior
Creditors to any other or further notice or demand in the same, similar or
other circumstances unless specifically required hereunder.
7. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied or sent by overnight courier service or
United States mail certified or registered and shall be deemed to have been
given (a) if delivered in person, when delivered; (b) if delivered by
telecopy, on the date of transmission if transmitted on a Business Day
before 4:00 p.m. (Chicago time) or, if not, on the next succeeding Business
Day, and a copy thereof is mailed via United States certified or registered
mail; (c) if delivered by overnight courier, one Business Day after
delivery to such courier properly addressed; or (d) if by the United States
mail, four Business Days after deposit in the United States mail, postage
prepaid and properly addressed.
Notices shall be addressed as follows:
(a) If to Junior Creditors, to:
Inroads Capital Partners, L.P.
1603 Orrington Avenue
Suite 2050
Evanston, IL 60201
Attn: Jerrold B. Carrington
Telecopy: (847) 864-9692
and
Mesirow Capital Partners VII, L.P.
350 North Clark Street
Chicago, IL 60610
Attn: Michael Smith
Telecopy: (312) 595-6211
and
Edgewater Private Equity Fund II, L.P.
666 Grand Avenue
Suite 2002
Des Moines, IA 50309
Attn: Mark McManigal
Telecopy: (515) 245-5660
With copies to:
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
Attn: Peter M. Howard
Telecopy: (312) 715-4800
(b) If to Borrower:
Meridian Financial Corporation
8250 North Haverstick
Suite 110
Indianapolis, IN 46240
Attn: Michael F. McCoy
Telecopy: (317) 722-2905
With a copy to:
Baker & Daniels
300 N. Meridian Street
Suite 2700
Indianapolis, IN 46204
Attn: Daniel L. Boeglin
Telecopy: (317) 237-1000
(c) If to Lender:
LaSalle National Bank
One American Square
Suite 1600
Indianapolis, IN 46282
Attn: Gary Jacobson
Telecopy: (317) 756-7021
With a copy to:
Dann, Pecar, Newman & Kleiman, P.C.
One American Square
Suite 2300
Box 82008
Indianapolis, IN 46282
Attn: Barry Beldin
Telecopy: (317) 632-2962
or in any case, to such other address as the party addressed
shall have previously designated by written notice to the serving
party, given in accordance with this Section 7. A notice not
given as provided above shall, if it is in writing, be deemed
given if and when actually received by the party to whom given.
8. SEVERABILITY. In the event that any provision of this Agreement
is deemed to be invalid, illegal or unenforceable by reason of the
operation of any law or by reason of the interpretation placed thereon by
any court or governmental authority, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby, and the affected provision shall
be modified to the minimum extent permitted by law so as most fully to
achieve the intention of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of Lender and shall be binding upon
the successors and assigns of Junior Creditors and Borrower.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall be one and the same instrument.
11. DEFINES RIGHTS OF CREDITORS. The provisions of this Agreement
are solely for the purpose of defining the relative rights of Junior
Creditors and Lender and shall not be deemed to create any rights or
priorities in favor of any other person or entity, including, without
limitation, Borrower. Borrower understands and agrees that the provisions
of this Agreement are for the benefit of Lender only and may not be
asserted by Borrower as a defense to any claim for payment under the Junior
Notes or otherwise under the Junior Debt Documents.
12. CONFLICT. In the event of any conflict between any term,
covenant or condition of this Agreement and any term, covenant or condition
of any of the Junior Debt Documents, the provisions of this Agreement shall
control and govern.
13. HEADINGS. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
14. TERMINATION. This Agreement shall terminate upon the
indefeasible payment in full in cash of the Senior Indebtedness.
15. APPLICABLE LAW. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the internal laws (as opposed
to conflict of laws provisions) of the State of Indiana.
16. CONSENT TO JURISDICTION AND SERVICE QF PROCESS. EACH OF THE
JUNIOR CREDITORS AND BORROWER HEREBY CONSENT TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARION, STATE OF
INDIANA AND IRREVOCABLY AGREE THAT, SUBJECT TO LENDER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
JUNIOR DEBT DOCUMENTS OR THE LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. EACH OF THE JUNIOR CREDITORS AND BORROWER ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE JUNIOR DEBT
DOCUMENTS OR THE SENIOR CREDIT DOCUMENTS. EACH OF THE JUNIOR CREDITORS
AND BORROWER IRREVOCABLY AGREE THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS TO WHICH AGENT IS A PARTY IN ANY SUCH COURT MAY BE MAILED BY
REGISTERED MAIL TO JUNIOR CREDITORS AND BORROWER AT THEIR RESPECTIVE
ADDRESSES PROVIDED IN SECTION 7, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY
JUNIOR CREDITORS AND BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR LENDER
TO BRING PROCEEDINGS AGAINST JUNIOR CREDITORS OR BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION.
17. WAIVER OF JURY TRIAL. EACH OF THE JUNIOR CREDITORS, BORROWER AND
LENDER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE JUNIOR DEBT
DOCUMENTS OR THE SENIOR CREDIT DOCUMENTS, OR ANY DEALINGS AMONG THEM
RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THE SENIOR CREDIT DOCUMENTS AND THE JUNIOR DEBT DOCUMENTS. EACH
OF THE JUNIOR CREDITORS AND BORROWER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF
AGENT OR LENDERS. 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 WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE JUNIOR CREDITORS AND
BORROWER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT LENDER HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THE LOAN DOCUMENTS AND THAT LENDER WILL CONTINUE TO RELY
ON THE WAIVER IN ITS RELATED FURTHER DEALINGS. EACH OF THE JUNIOR
CREDITORS AND BORROWER RELATED FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT 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 (UNLESS SUCH WRITING MAKES SPECIFIC REFERENCE
TO THIS SECTION 17), AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE
SENIOR CREDIT DOCUMENTS OR AGREEMENTS RELATING TO THE SENIOR INDEBTEDNESS
OR THE JUNIOR DEBT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the Junior Creditors, Borrower and Lender have caused
this Agreement to be executed this day of ,
1997.
JUNIOR CREDITORS:
INROADS CAPITAL PARTNERS, L.P.
BY: INROADS GENERAL PARTNERS, L.P.,
ITS GENERAL PARTNER
BY:
Title:
MESIROW CAPITAL PARTNERS VII, L.P.
By: MESIROW FINANCIAL SERVICES, INC.,
its general partner
By:
Title:
EDGEWATER PRIVATE EQUITY FUND II, L.P.
By: GORDON MANAGEMENT, INC.,
its general partner
By:
Title:
BORROWER:
MERIDIAN FINANCIAL CORPORATION
By:
Its:
LENDER:
LASALLE NATIONAL BANK
By:
Its:
INITIAL CREDIT LINE NOTE
$5,000,000
Indianapolis, Indiana
Effective Date: April , 1997
Maturity: Six (6) months after Effective Date
On or before six (6) months after the Effective Date of this Initial
Credit Line Note ("THIS NOTE"), MERIDIAN FINANCIAL CORPORATION, an Indiana
corporation ("MAKER"), promises to pay to the order of LASALLE NATIONAL
BANK, a national banking association ("BANK", which term shall include any
holder hereof and any parent, subsidiary or affiliate bank) at such place
as the Bank may designate or, in the absence of such designation, at any of
the Bank's offices, the outstanding principal sum of Five Million Dollars
($5,000,000.00) or so much of the principal amount of the revolving line of
credit represented by this Note as may be disbursed and outstanding by the
Bank under the terms of the Credit Agreement described below, and to pay
interest on the unpaid principal balance outstanding from time to time
until paid in full, as herein provided.
This Note evidences indebtedness incurred or to be incurred by the
Maker under a revolving line of credit extended to the Maker by the Bank
under that certain Credit Agreement dated of even dated herewith (the
"CREDIT AGREEMENT"), which line of credit is referred to in the Credit
Agreement as the "INITIAL CREDIT LINE". All capitalized and designated
terms in this Note shall have the meanings ascribed to them in the Credit
Agreement. The proceeds of the Initial Credit Line may be advanced and
repaid and re-advanced on any Business Day until maturity, as further
provided in the Credit Agreement. That portion of the Initial Credit Line
outstanding from time to time shall be determined by reference to the books
and records of the Bank on which all Advances under the Initial Credit Line
and all payments by the Maker on account of the Initial Credit Line shall
be recorded. Such books and records shall be deemed to be correct as to
such matters.
Interest on the unpaid principal balance of the Initial Credit Line
evidenced by this Note shall accrue from the date of each Advance until
repaid or until maturity at a rate equal to the interest rate set forth in
Sections 4.3(a) or Section 4.3(b) of the Credit Agreement, as the case may
be. Reference is made to Article 4 of the Credit Agreement for designation
of the Rate Option, conversion and continuation rights and other provisions
applicable to the accrual, computation and payment of interest under this
Note. After maturity, whether by acceleration or scheduled maturity, until
paid in full, and so long as there shall exist any Event of Default as
defined under the Credit Agreement, the Initial Credit Line shall accrue
interest at a rate determined by adding three percent (3%) per annum to the
otherwise Applicable Margin.
Accrued interest will be payable monthly commencing on the first day
of May, 1997, and continuing on the first day of the month following the
month in which such interest accrues. Receipt of a check or other item of
payment in itself shall not constitute payment. A payment by check or
other item of payment drawn on the Bank shall be credited (conditional upon
final collection) on the same day received. A payment by check and other
item of payment drawn on any other bank or financial institution shall, for
the purpose of determining the outstanding principal balance and
calculating interest, be credited (conditional upon final collection) after
allowing one (1) Business Day for collection. Acceptance by the Bank of
any payment which is less than full payment of the amount due and owing or
which is not in immediately available funds shall not constitute a waiver
of the Bank's right to receive payment in full at such or at any other time
in immediately available funds.
The entire outstanding principal balance of the Initial Credit Line
evidenced by this Note, together with all accrued interest thereon, shall
be due and payable in full on that date which is six (6) months after the
Effective Date of this Note. Principal may be prepaid in part or in whole
as provided in the Credit Agreement.
All amounts payable under the terms of this Note shall be payable with
reasonable attorneys' fees and without relief from valuation and
appraisement laws.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to
any renewals or extensions of the time of payment hereof without notice.
If any installment of interest or principal due under the terms of
this Note is not paid within ten (10) calendar days after the same becomes
due, then the Bank or any subsequent holder of this Note may, subject to
the terms of the Credit Agreement, at its option and without notice,
declare the entire principal amount of the Note and all accrued interest
immediately due and payable. Reference is made to the Credit Agreement
which provides for mandatory partial prepayments under certain
circumstances, for acceleration of the maturity of this Note upon the
happening of "Events of Default" as defined in Section 10.1 therein and for
other rights and remedies of the Bank.
THE BANK AND MAKER AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON
OR ARISING OUT OF THIS NOTE, THE CREDIT AGREEMENT OR ANY OTHER RELATED
INSTRUMENT OR AGREEMENT, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTIONS OF EITHER OF THEM. NEITHER THE BANK
NOR THE MAKER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE
DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER THE
BANK OR MAKER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
Notice of acceptance of this Note is hereby waived.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]
This Note is made under and will be governed by the internal laws
of the State of Indiana, giving effect to federal laws applicable to
national banking associations, but without reference to conflict of law
provisions thereof.
MERIDIAN FINANCIAL CORPORATION
By:
Printed Name and Title
AGREEMENT
THIS AGREEMENT IS MADE, ENTERED INTO, AND EFFECTIVE THIS 18TH DAY OF
SEPTEMBER, 1996 BY AND BETWEEN AT&T COMMERCIAL FINANCE CORPORATION AND
MERIDIAN FINANCIAL CORPORATION.
1. DEFINITIONS.
For the purposes of this Agreement:
(a) "Agreement" shall mean this Agreement between AT&T-CFC and the Company,
as the same may be amended, modified or supplemented, in writing, from
time to time.
(b) "AT&T-CFC" shall mean AT&T Commercial Finance Corporation, a Delaware
corporation.
(c) "Closing Date" shall mean, with respect to an item of Paper subject to
a Confirmation Letter, the business day by which the Company shall have
complied with all requirements set forth in Paragraph 8 of this
Agreement and AT&T-CFC shall have paid the Purchase Price to the
Company.
(d) "Complete Credit Package" shall include all of the items listed on
Exhibit A to this Agreement, together with such additional items that
AT&T-CFC may reasonably request with respect to a Customer.
(e) "Company" shall mean Meridian Financial Corporation, an Indiana
corporation.
(f) "Customer" shall mean the lessee or debtor, as the case may be, under
any item of Paper.
(g) "Confirmation Letter" shall mean a letter in the form of Exhibit B
hereto sent by telecopy to the Company which sets forth AT&T-CFC's
conditional agreement to purchase the Paper specified therein, the
Purchase Price of that Paper, the method of calculation thereof, and
other information relating thereto, if any, which shall be deemed to be
agreed to by the Company and AT&T-CFC upon the Company's acceptance of
the Purchase Price paid by AT&T-CFC.
(h) "Equipment" shall mean the machinery and equipment, other personal
property and all proceeds thereof subject to or covered by any Paper.
(i) "Expiration Date" shall mean with respect to a Confirmation Letter a
date sixty (60) calendar days after the date of that Confirmation
Letter.
(j) "Paper" shall mean all chattel paper (as defined in the Uniform
Commercial Code), now existing or hereafter arising out of the sale or
lease by the Company of any Equipment to any Customer, including without
limitation, equipment leases and conditional sale contracts.
(k) "Purchase Price" shall be the amount AT&T-CFC is willing to pay for an
item of Paper as set forth in a Confirmation Letter. The formulae for
determining the Purchase Price are set forth in Exhibit C hereto which
formulae are subject to change from time to time by AT&T-CFC on thirty
(30) days prior written notice to the Company.
(l) "Related Documents" shall mean, with respect to any Paper, related
instruments, guaranties, security agreements, representations and
warranties, letters of credit, financing statements, recourse
agreements, certificates of title, and other documents.
(m) "Repurchase Price" shall mean, the Unpaid Balance of any item of Paper
discounted to present value using the discount rate employed to compute
the Purchase Price, plus all out-of-pocket expenses. The term "out-of-
pocket expenses" shall include, without limitation, the cost of
repossession of Equipment, storage and sale of Equipment, compliance
with applicable legal requirements, reasonable outside attorneys' fees
and court costs, and similar costs and expenses incurred by AT&T-CFC in
connection with such Paper, including, without limitation, out-of-pocket
costs incurred by AT&T-CFC related to the acquisition of the Paper.
(n) "Unpaid Balance" shall mean the aggregate unpaid balance of any item of
Paper (including interest or finance charges) or the aggregate unpaid
rentals thereunder, as the case may be, including (without limitation)
the amount of any purchase option price, mandatory purchase price,
renewal option, or put option price (e.g., price payable by a Customer
under a purchase agreement upon demand by the Company) or other
payments, to the extent included in the computation of the Purchase
Price for such Paper.
2. CREDIT CONSIDERATION.
(a) With respect to Paper the Company decides to sell, the Company grants
to AT&T-CFC for the term of this Agreement a right of first acceptance
of all items of such Paper originated by the Company constituting
Equipment lease transactions between the Company and its national
franchise customers where the original cost of the related Equipment
equals or exceeds $150,000.00.
(b) As required pursuant to Paragraph 2(a), the Company will offer to sell
Paper to AT&T-CFC by delivering a Complete Credit Package for a Customer
and any other information reasonably requested by AT&T-CFC. With
respect to those franchise concepts and parameters set forth on Exhibit
D to this Agreement, AT&T-CFC shall provide its credit decision with
respect to the application and, if the credit decision is positive, a
Confirmation Letter with respect to the particular items of Paper
offered within five (5) business days after AT&T-CFC's receipt of a
Complete Credit Package. Any failure by AT&T-CFC to communicate its
decision to the Company concerning such an item of Paper within the
aforesaid five (5) business day period shall be deemed to constitute
AT&T-CFC's rejection of the Company's offer to sell such Paper. As to
all other items of Paper, AT&T-CFC shall have ten (10) business days to
complete its review, and any failure by AT&T-CFC to communicate its
credit decision to the Company within the aforesaid ten (10) business
day period shall be deemed to constitute AT&T-CFC's rejection of the
Company's offer to sell such Paper. Each credit approval, as evidenced
by a Confirmation Letter, shall be in effect until the Expiration Date;
provided, however, such Confirmation Letter and credit approval may be
terminated in writing by AT&T-CFC, at its election and AT&T-CFC shall
have no further duties or responsibilities pursuant to such Confirmation
Letter, if on or before the Closing Date (i) the Customer or any
guarantor or other provider of credit enhancement suffers any material
adverse change in its financial condition or management; (ii) there
exists an Event of Default (as hereinafter defined) with respect to the
Company; (iii) the Customer is in default of any obligation under the
offered Paper or any other item of Paper or other obligation held by or
due the Company, AT&T-CFC or any affiliate of AT&T-CFC; or (iv) any
Equipment subject to the Paper has not been timely delivered or has been
destroyed, repossessed, sold or substantially damaged. The Company
shall not sell or offer to sell an item of Paper to any other person or
entity during any period in which a Confirmation Letter covering such
Paper is in effect.
(c) When, from time to time during the term of this Agreement, the Company
is presented with a proposed leasing or financing transaction where the
cost of equipment and/or real estate in such transaction would exceed
$1,000,000 (each, an "Oversized Transaction"), the Company shall, so
long as the Company is not precluded by the proposed Customer from doing
so, forward the details of such Oversized Transaction to AT&T-CFC.
AT&T-CFC shall promptly review the terms of the such proposed Oversized
Transaction and confer with the Company regarding the fee or commission
to be paid to the Company in the event AT&T-CFC finances such Oversized
Transaction. In the event that AT&T-CFC and the Company cannot agree as
to the terms of such fee or commission within fifteen (15) days of the
Company's submission of the details of the proposed Oversized
Transaction to AT&T-CFC, then (i) the Company's referral obligations
hereunder shall be deemed satisfied, (ii) the Company may market such
proposed Oversized Transaction to other parties, (iii) AT&T-CFC shall be
deemed to have declined such Oversized Transaction, and (iv) AT&T-CFC
shall not directly finance (by origination) such Oversized Transaction
and AT&T-CFC shall not indirectly finance (by acquisition or referral
from another party) such Oversized Transaction if and only if the
Company demonstrates that it has been awarded the Oversized Transaction,
in writing, by the prospective Customer. If, notwithstanding
subparagraph 2(c)(iv), AT&T-CFC directly finances or indirectly finances
such Oversized Transaction (when the Company has been awarded such
Oversized Transaction in writing), the Company shall be paid a fee or
commission by AT&T-CFC which is the average of (x) the fee calculated in
the manner set forth, in good faith, in the initial transmittal of the
details of the proposed Oversized Transaction to AT&T-CFC and (y) the
highest or last fee or commission proposed, in good faith, by AT&T-CFC
during its negotiations with the Company.
(d) All credit and other decisions as to whether or not AT&T-CFC is willing
to purchase an item of Paper or deal with a prospective Customer are
solely and exclusively in the discretion of AT&T-CFC. This Agreement
does not obligate AT&T-CFC to purchase any item of Paper or any minimum
volume of Paper.
3. SALE OF PAPER.
Each sale of Paper to AT&T-CFC shall be without recourse as to the
Customer's ability to pay and shall convey to AT&T-CFC all of the right,
title and interest of the Company in and to:
(a) the Paper and all Related Documents;
(b) rentals, installments and other payments due and to become due
thereunder including, without limitation, all amounts payable by
Customers upon the exercise of any renewal options, purchase options,
mandatory purchase obligations or for any put option price (to the
extent included in the computation of the Purchase Price as reflected in
a Confirmation Letter) and all rights to the proceeds of insurance
covering the Equipment under any Paper, together with all of the rights
and remedies of the Company (but none of its obligations) thereunder and
under any Related Documents, including the right to take in the
Company's name, any and all proceedings legal, equitable or otherwise,
that the Company might otherwise take save for such assignment;
(c) all liens and security interests the Company holds in the Equipment
subject to the Paper; and
(d) all proceeds of all of the foregoing in any form.
AT&T-CFC shall have in addition to all other rights hereunder, the right
to:
(i) receive and retain all payments and rights thereto under any item of
Paper,
(ii) use or sell and dispose of Equipment and any of the Company's rights
thereto, and
(iii) apply and use such payments, rights, Equipment and proceeds to
satisfy any obligations of the Company hereunder; provided, however,
that none of the foregoing rights shall limit or impair the rights of
the Customer under such Paper.
4. GRANT OF SECURITY INTEREST
The Company hereby grants to AT&T-CFC a security interest in all Equipment,
wherever located, subject to or covered by all Paper purchased by AT&T-CFC
from the Company, and
in all proceeds thereof in any form.
5. NO ASSUMPTION OF OBLIGATIONS.
All obligations of the Company, if any, under the Paper shall remain the
sole and exclusive obligations of the Company, and notwithstanding any sale
of Paper to AT&T-CFC, AT&T-CFC DOES NOT ASSUME ANY OBLIGATIONS OF THE
COMPANY OR ANY OTHER PERSON OR ENTITY UNDER OR PURSUANT TO THE PAPER OR
WITH RESPECT TO ANY EQUIPMENT, AND AT&T-CFC SHALL HAVE NO DUTIES OR
RESPONSIBILITIES TO THE CUSTOMERS WITH RESPECT THERETO.
6. COMPUTATION AND PAYMENT OF PURCHASE PRICE.
(a) For each item of Paper which is acceptable to AT&T-CFC, AT&T-CFC hereby
agrees to pay to the Company the Purchase Price for such item of Paper
which, unless otherwise agreed by the parties, shall be the discounted
present value thereof, using the discount rates set forth in Exhibit C
hereto, as the same may change from time to time, as provided in
Paragraph 1(k).
(b) AT&T-CFC shall deliver its check or wire transfer to the order of the
Company (or make payment in such other place or manner as the Company
and AT&T-CFC may agree) in the amount of the Purchase Price within three
(3) business days after AT&T-CFC's receipt from the Company of all of
the items set forth in Paragraph 8.
- 1 -
<PAGE>
7. FORM OF PAPER.
All Paper and Related Documents sold to AT&T-CFC shall be substantially in
the form of Exhibit E hereto, unless otherwise agreed by AT&T-CFC in
writing, and shall include, among other things, a master lease agreement
("Master Lease Agreement") and a schedule ("Schedule").
8. DELIVERY OF PAPER AND OTHER DOCUMENTS TO AT&T-CFC.
For each item of Paper sold to AT&T-CFC hereunder, the Company shall
deliver to AT&T-CFC at least three (3) business days before AT&T-CFC shall
be required to pay the Purchase Price:
(a) the one and only signed original counterparts of all items of the Paper
with the Master Lease Agreement and each Schedule sold to AT&T-CFC
marked "Original Counterpart No. 1.";
(b) all original copies of Related Documents, except for executed copies
retained by the Customer;
(c) the acknowledgment copies of Uniform Commercial Code financing
statements filed by the Company against each Customer in all appropriate
jurisdictions covering the Equipment which is described in such Paper,
and duly assigned to AT&T-CFC, in form and substance satisfactory to
AT&T-CFC;
(d) copies of the purchase orders, invoices, bills of sale and bills of
lading with respect to all Equipment subject to the Paper that relates
to the purchase thereof by the Company;
(e) an Assignment in the form of Exhibit F to this Agreement;
(f) evidence of insurance coverage on such Equipment, insuring AT&T-CFC's
interest therein and otherwise in form and substance satisfactory to
AT&T-CFC showing AT&T-CFC as loss payee (casualty) and an additional
insured (liability);
(g) the estoppel letter in the form of Exhibit G hereto;
(h) UCC-1 financing statements executed by the Company covering the
Company's interests in the Paper to be acquired by AT&T-CFC and the
Equipment subject to such Paper; and
(i) such other documents and instruments as AT&T-CFC may reasonably request
duly executed by the Company to further implement and effectuate the
purposes of this Agreement.
All documentation with respect to the transfer of Paper to AT&T-CFC shall
be in form and substance satisfactory to AT&T-CFC, and AT&T-CFC, at its
election, may conduct (or have conducted on its behalf) physical
inspections of the Equipment prior to or after payment of the Purchase
Price of a related item of paper.
9. WARRANTIES ON PAPER; DOCUMENTATION.
(a) As to each item of Paper now or hereafter sold by the Company to AT&T-
CFC, the Company warrants, represents and guarantees that, as of the
related Closing Date:
(1) it owns the item of Paper and the Related Documents free and clear
of all liens and security interests except those that are both
disclosed to AT&T-CFC in writing and are satisfied prior to, or
contemporaneously with, such closing;
(2) it is the owner of the Equipment described in the Paper or has a
perfected first security interest or lien thereon effective against
all persons and entities and free from all security interests,
liens, and encumbrances, except for the rights of the Customer under
the particular item of Paper, any security interests or liens in
favor of AT&T-CFC and those that are both disclosed and satisfied as
provided in Paragraph 9(a)(1);
(3) it has accomplished any filing, recordation or any other action
which is required to perfect the first priority security interest of
AT&T-CFC in the Equipment, subject to the rights of the Customer
therein pursuant to the terms of the Paper;
(4) such Paper and all Related Documents are true, valid and genuine;
and, based on the facts and circumstances and the applicable laws
then in existence, are binding and enforceable against the Customer
and the Company (where the Company is a party thereto) in accordance
with their respective terms, and the Master Lease Agreement and each
Schedule sold to AT&T-CFC shall be the one and only signed, original
version of each;
(5) such Paper is the only paper with respect to the Equipment described
therein and the balances due with respect to such Paper as provided
by the Company are true and accurate in all respects;
(6) such Paper and all Related Documents are free from all defenses,
setoffs and counterclaims of any kind, and no suit or other legal
action or proceeding, administrative, judicial or otherwise, has
been brought or threatened to be brought by or against the Company
in connection therewith;
(7) all signatures, names, addresses, amounts and other statements of
fact contained in the Paper and all Related Documents are true and
correct;
(8) the Equipment has been delivered to the Customer under such Paper
and has been unconditionally accepted by and is then in the actual
possession of such Customer at the respective equipment locations
shown in the Paper, and is being used in business operations and not
for personal, family, or household purposes;
(9) it has no knowledge of any denial of liability or the assertion of
any claim of invalidity or other defense by any Customer on or with
respect to any such Paper;
(10) any discounts or adjustments to which the Company has agreed are
written and apparent on the face of such Paper or Related Documents;
(11) except as provided in Paragraphs 9(a)(1) and 9(a)(2), it has not
sold, assigned or encumbered any such Paper, any Related Documents
or the Equipment covered thereby to others, nor has the Company done
any act, or omitted to do any act, which impairs the validity or
enforceability of any such Paper;
(12) the Customer under each such item of Paper shall have taken all
necessary corporate or other action and shall have obtained all
necessary permits or authorizations with respect to the execution
and delivery of such Paper and all Related Documents and performance
thereof;
(13) the assertion, statement and computation of all rentals,
interest, fees and other charges under any item of Paper have been
accurately made and charged, are not usurious, and are in full
conformity and compliance with all applicable laws, rules and
regulations;
(14) the Company's records pertaining to the Paper and all Related
Documents are accurate in all material respects;
(15) the Paper, the form and substance of the Paper, the transaction
giving rise to such Paper and the sale and delivery of the Equipment
to the Customer all conform with all applicable laws, rules and
regulations;
(16) no payments have been made on such Paper by the Company, any
affiliate of the Company, or by any vendor or broker who referred
the Customer to the Company;
(17) no Customer or any other responsible party with respect to the
Paper, including any endorser or guarantor thereof, is the subject
of any bankruptcy or insolvency proceeding;
(18) all insurance policies, certificates and coverages relating to
the Equipment or otherwise required under the Paper and conform with
all applicable laws, rules and regulations; and
(19) no Equipment covered by the Paper has been destroyed,
repossessed, sold or substantially damaged.
(b) The representations, warranties and guarantees set forth in Paragraph
9(a)(4) (subject to the qualifications set forth in that paragraph) are
continuing representations, warranties and guarantees that extend beyond
the Closing Date. In addition, the Company represents, warrants and
guarantees that it shall comply with all of its warranties and other
obligations, if any, with respect to the Equipment covered by such
Paper.
(c) The Company acknowledges that AT&T-CFC shall be relying upon the
warranties of the Company as to such item of Paper purchased, and the
Company agrees that the knowledge of AT&T-CFC of any breach of any such
warranties at the time of its purchase of any item of Paper, or at any
time before or thereafter, or the failure of AT&T-CFC to call any such
breach to the attention of the Company, shall not impair, limit or
constitute any waiver of any such warranties or of the obligations of
the Company with respect to such Paper, and that the Company shall
remain fully liable for any such breach. Furthermore, the review of any
such Paper by AT&T-CFC and the furnishing of any comments in respect
thereof to the Company or the failure to do so in any case, shall not
impair, limit, or constitute any waiver of any of the obligations or
warranties of the Company with respect to such Paper.
(d) In the event any filing or recording of any financing statements or
other documents are made by AT&T-CFC, or any such financing statements
or documents are prepared by or the execution thereof are supervised by
AT&T-CFC in respect of any Paper, it shall be solely for the convenience
of the Company and shall in no way impair, limit or constitute any
waiver of the obligations or warranties of the Company with respect to
its obligation to assure due compliance with any filing requirements.
(e) Until the Company has made full, final and irrevocable payment of the
Repurchase Price for an item of Paper pursuant to Paragraph 13, the
Company shall not, without the prior written consent of AT&T-CFC, waive,
modify, extend, renew, release, or discharge the terms or conditions of
any Paper purchased by AT&T-CFC or any Related Documents, or release any
related Equipment covered thereby or thereunder, repossess any Equipment
or consent to the return thereof, or accept any amounts payable under
the Paper (except payments due and paid prior to the Closing Date on
which it was sold by the Company to AT&T-CFC).
10. ESTOPPEL LETTERS.
As a condition precedent to the payment of the Purchase Price for any item
of Paper to AT&T-CFC, AT&T-CFC shall have received an estoppel letter in
the form of Exhibit G hereto, or such other or different form as AT&T-CFC
may agree to accept.
11. WAIVERS; GRANTS; DUTIES.
(a) The Company hereby waives presentment, demand, notice of nonpayment,
notice of dishonor, and protest as to all Paper sold to AT&T-CFC
hereunder. The Company shall transmit and deliver to AT&T-CFC,
immediately upon receipt thereof, all payments on account of any Paper
which the Company may receive subsequent to AT&T-CFC's purchase thereof,
and such payments are received and held by the Company in trust for
AT&T-CFC. The Company agrees that AT&T-CFC may sign or endorse in the
Company's name all checks and other remittances received and all notes
or other instruments, if any, evidencing obligations under the Paper and
any assignments thereof, and the Company hereby grants to AT&T-CFC an
irrevocable and durable power of attorney for such purposes. The
Company agrees that, at any time after the Closing Date of an item of
Paper, AT&T-CFC may take any one or more of the following actions with
respect to any Paper or any Related Documents or any Equipment subject
to such Paper, any Customer or other responsible party thereunder, at
any time and from time to time, without impairing, limiting or otherwise
affecting the obligations of the Company under this Agreement (the
"Permitted Actions"):
(i) make changes, modifications, amendments or alterations or
experience same by operation of law or otherwise;
(ii) grant releases or discharges or experience same by operation of
law or otherwise;
(iii) settle, compromise, adjust, compound, collect, liquidate or
accept partial payments of or with respect to any rights, claims,
liabilities, Equipment or other security;
(iv) grant renewals and extensions of time for payment (including
extensions of time beyond the original term) or otherwise;
(v) fail to perfect or to continue the perfection of any security
interest; or
(vi) permit the substitution of a Customer or any other responsible
party thereunder.
(b) The Company shall not be obligated to repurchase an item of Paper in
the event that:
(i) AT&T-CFC takes one or more of the Permitted Actions within its
control solely for the purpose of effectuating a repurchase event
under Paragraph 13(a) with respect to such item of Paper; and
(ii) there is no separate and independent basis for repurchase of such
item of Paper pursuant to Paragraph 13(a) other than the basis for
repurchase effectuated by said one or more Permitted Actions
described in subparagraph (i).
12.ADDITIONAL WARRANTIES BY THE COMPANY.
The Company represents, covenants and warrants to AT&T-CFC that:
(a)the Company is duly organized, validly existing and in good standing
under laws of its state of incorporation and the Company is duly qualified
as a foreign corporation to do business in each state in which the leasing
or ownership of property or the nature of the business of the Company
requires such qualification;
(b)The Company has good and marketable title to all properties and
assets, whether real or personal, shown on the latest balance sheets of
the Company furnished to AT&T-CFC prior to the execution of this
Agreement, subject to no mortgage, security interest, pledge, lien or
encumbrance except as are shown on said balance sheets and except for
current taxes not now in default, and since the date of the latest of
such balance sheets there has been no material adverse change in the
condition, financial or otherwise, of the Company from that shown on
said balance sheets;
(c)at the date of such balance sheets, the Company has no material
(individually or in the aggregate) liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise, due or to
become due, other than as reflected or reserved against in said balance
sheets, and there have been no material changes since such date, and the
Company has no material liability for federal or state income taxes
other than as shown on said balance sheets and except for taxes relating
to operations since the date of said balance sheets and no federal or
state tax deficiency assessment has been made or threatened against the
Company and there is no pending claim of deficiency or recommendation of
the assessment of any deficiency against the Company;
(d)the execution and delivery of this Agreement and the performance
thereof by the Company are not in violation of any provisions of the
Company's Articles of Incorporation or by-laws or any indenture or
mortgage or other Agreement which the Company is a party or under which
it may be bound;
(e)the Company has taken all necessary corporate action to authorize its
execution, delivery and performance of the Agreement; and
(f)during the term of this Agreement, the Company will furnish to AT&T-
CFC:
(i) within ninety (90) days after the end of each fiscal year, a balance
sheet and statements of profit and loss and surplus of the Company as
at the end of such fiscal year, all prepared in accordance with
generally accepted principles and practices of accounting
consistently applied, and certified by independent certified public
accountants selected by the Company and acceptable to AT&T-CFC; and
(ii) within forty-five (45) days after the end of each of the first
three quarters of each fiscal year, a balance sheet of the Company
and statements of profit and loss and surplus as at the end of such
quarter, all prepared in accordance with generally accepted
principles and practices of accounting consistently applied and
certified by the chief financial officer of the Company.
13. REPURCHASE OF PAPER.
(a)In the event that there has been a breach, failure or default of any
warranty, representation, covenant or other obligation of the Company
under or pursuant to this Agreement, upon demand by AT&T-CFC, the
Company shall immediately repurchase the Paper affected by such breach,
failure or default by paying in full the Repurchase Price for such Paper
within fifteen (15) days after demand for repurchase by AT&T-CFC. If
the Company disputes that it is obligated to repurchase an item of Paper
demand for repurchase of which has been made by AT&T-CFC pursuant to
this Paragraph 13(a), the Company must initiate arbitration proceedings,
as provided in Paragraph 13(d), within fifteen (15) days after demand
for repurchase by AT&T-CFC. If the Company has not commenced such
arbitration proceedings within such fifteen (15) day period, it shall be
conclusively presumed that the Company is obligated to repurchase the
related item of Paper.
(b)The Repurchase Price shall be an amount computed as set forth in
Paragraph 1(m). In the event of any failure by the Company to
repurchase any item of Paper, AT&T-CFC may (but shall not be required
to) liquidate or otherwise dispose of such Paper, including, in the
event the Customer is in default under such Paper, the repossession and
disposition of Equipment, and the Company shall be liable for any
resulting deficiencies and all reasonable expenses incurred in
connection therewith. Any repossessed Equipment may be sold for cash or
on credit or re-leased, and the net sale proceeds or lease rentals
(present-valued) received by AT&T-CFC shall be applied to the Repurchase
Price obligation owed by the Company.
(c)If any such breach, failure or default occurs, the repurchase of
Paper and payment of the Repurchase Price resulting therefrom shall be
made whether or not the Customer is in default under the Paper. Full,
final and irrevocable payment of the Repurchase Price shall release and
satisfy all claims of AT&T-CFC against the Company with respect to such
Paper except that the Company's duty to indemnify AT&T-CFC, as provided
in Paragraph 17, shall survive any such payment.
(d)Arbitration proceedings may be commenced by the Company in the event
the Company disputes that it is obligated to repurchase an item of
Paper. Arbitration shall be administered by the American Arbitration
Association ("AAA") under its Commercial Arbitration Rules, and its
Expedited Procedures shall apply; provided, however, the following
procedures and requirements shall apply in any such arbitration
proceeding:
(i) The only matter that shall be arbitrable is whether or not the
Company is obligated under this Agreement to repurchase an item of
Paper purchased by AT&T-CFC hereunder. In the event the arbitrator
determines that the Company is so obligated, the arbitrator shall
apply the Repurchase Price to such item of Paper, together with
interest on such Repurchase Price from the date of demand for
repurchase by AT&T-CFC until full, final and irrevocable payment of
the Repurchase Price by the Company at a rate of interest equal to
the discount rate of interest used to calculate the Purchase Price
paid by AT&T-CFC for such Paper, and the arbitrator shall issue
his/her award in that amount with the continuing interest obligation
until payment of the award by the Company. A judgment on any award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
(ii) There shall be one arbitrator selected by the AAA from a list of
proposed arbitrators sent to both parties. The arbitrator shall
have at least ten (10) years of commercial equipment leasing
experience.
(iii) The arbitration proceeding and all arbitration hearings shall
take place in New York, New York.
(iv) The filing fee for the arbitration shall be paid by the Company.
Each party shall be responsible for its own costs, expenses and
attorneys fees in the arbitration proceeding; provided, however,
that the losing party shall be solely responsible to pay for all AAA
and arbitrator fees and expenses including the AAA filing fee.
(v) The arbitrator shall issue his/her final decision, in writing,
within sixty (60) days after the Company commences the arbitration
proceeding.
(vi) The arbitrator shall not limit, expand or otherwise modify the
terms of this Agreement.
(vii) Notices given to the parties in the arbitration proceeding shall
comply with the requirements set forth in Paragraph 24.
14. DEFAULT BY THE COMPANY.
An event of default with respect to the Company ("Event of Default") shall
exist if:
(a) the Company shall fail to repurchase and pay for any item of Paper
from AT&T-CFC, as provided in Paragraph 13, which repurchase is not the
subject of a pending arbitration proceeding pursuant to Paragraph 13(d);
or
(b) the Company defaults in any other payment obligations, or in the
performance of observance of any other covenant, agreement, warranty,
representation, or provision contained in this Agreement, or any other
agreement with AT&T-CFC, and such default shall have continued for a
period of twenty (20) days after written notice thereof to the Company
from AT&T-CFC; provided, however, if the default is curable and Company
shall have commenced in good faith and employing its best efforts to
cure such default within said twenty (20) day period, then an additional
twenty (20) days shall be afforded to Company to cure such default; or
(c) the Company defaults in the payment of any indebtedness of the Company
or under any agreement or instrument under or pursuant to which any such
indebtedness may have been issued, created, assumed, or guaranteed by
the Company and such default shall continue for more than the grace
period, if any, therein specified, and such indebtedness be declared due
and payable; or
(d) the Company shall cease to do business as a going concern; admit in
writing its inability to pay its debts generally as they become due;
make an assignment for the benefit of its creditors; commence a
proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial part of its
property; or a complaint petition, answer or other document seeking
reorganization, arrangement, liquidation or any similar relief under the
Bankruptcy Code or any other applicable law or statute of the United
States of America or any state is filed by the Company or against the
Company (and only if filed against the Company is not dismissed within
thirty (30) days); or a court of competent jurisdiction shall enter an
order, judgment or decree appointing a receiver, trustee, liquidator or
conservator (or shall otherwise assume custody or control) of the
Company or of the whole or any substantial part of its assets; or
(e) any written information furnished by or on behalf of the Company to
AT&T-CFC relating to the sale of any Paper or the financial condition or
business affairs of the Company is determined by AT&T-CFC to be false or
misleading in any material respect;
In addition to other rights and remedies available to AT&T-CFC pursuant to
this Agreement or applicable law or in equity, at any time an Event of
Default under Paragraph 14(a) exists and is continuing, AT&T-CFC, at its
sole election and option, may require the Company to repurchase all items
of Paper sold to AT&T-CFC by the Company, and if so required, the Company
shall immediately pay the aggregate Repurchase Price for all items of
Paper.
15. REASSIGNMENT.
Concurrently with the full, final and irrevocable payment by the Company of
the Repurchase Price pursuant to Paragraph 13 or 14 for any Paper, AT&T-CFC
shall reassign such item of Paper to the Company or such other single party
as the Company may direct, in writing, "AS IS" and without recourse,
representation or warranty of any kind, express or implied, except that
AT&T-CFC shall warrant that the Paper is free and clear of liens and
encumbrances created by or through AT&T-CFC. At the request of the
Company, AT&T-CFC shall provide the Company or such other single party as
the Company may direct, in writing, with copies of appropriate documents or
computerized material relating to repurchased Paper showing AT&T-CFC's
payment records in respect thereof. All financing statements relating to
the subject Paper shall be reassigned to the Company or such other single
party as the Company may direct, in writing, and AT&T-CFC shall deliver to
the Company or such other single party as the Company may direct, in
writing, such original copies of the Paper and Related Documents as may
have been previously delivered to AT&T-CFC by the Company.
16. ABSOLUTE SALE.
EACH SALE AND ASSIGNMENT OF PAPER TO AT&T-CFC IS AN ABSOLUTE AND
UNCONDITIONAL TRANSFER FROM THE COMPANY TO AT&T-CFC AND NOT AS A LOAN OR
OTHER SECURED FINANCING TO THE COMPANY. However, if any transactions
hereunder are deemed or construed to be loans or other secured financings
to the Company, the Company hereby grants to AT&T-CFC a security interest
in all Paper assigned to AT&T-CFC, together with all payments due or to
become due under such Paper, and all proceeds of all of the foregoing, in
any form.
- 2 -
<PAGE>
17. INDEMNITY.
The Company agrees, at its sole cost and expense, and without limiting any
other rights which AT&T-CFC has hereunder, to indemnify AT&T-CFC and hold
AT&T-CFC harmless from and against any and all losses, damages, penalties,
claims, suits and actions (collectively "Claims") which may be incurred by
AT&T-CFC and arising from or related to:
(a) claims by a Customer or a third party, in contract, tort or strict
liability concerning or relating to any Equipment, including, without
limitation, defective Equipment or any alleged infringement or violation
of a patent, copyright, trade secret or other third party proprietary
right; or
(b) any Event of Default by or with respect to the Company.
18. NON-SOLICITATION.
AT&T-CFC agrees that the Business Finance Division ("BFD") of AT&T-CFC (as
BFD is presently constituted or is hereafter only renamed, but not
restructured or otherwise changed) will not directly target and solicit for
future equipment lease transactions Customers under items of Paper
purchased by AT&T-CFC from the Company hereunder. This limitation shall
not apply: (i) to Customers who are already customers of AT&T-CFC, AT&T
Capital Corporation ("AT&T Capital"), or any of AT&T Capital's
subsidiaries, affiliates, or business units at the time of purchase of the
item of Paper from the Company hereunder; (ii) to any business unit,
subsidiary or affiliate of AT&T Capital other than BFD; (iii) at any time
after termination of this Agreement; or (iv) at any time after an Event of
Default occurs.
19. TERMINATION.
Either AT&T-CFC or the Company may terminate this Agreement upon thirty
(30) days written notice to the other party. Notwithstanding any
termination of this Agreement, the rights and obligations of AT&T-CFC and
the Company under this Agreement shall survive with respect to all Paper
and Related Documents assigned by the Company to AT&T-CFC pursuant to a
Confirmation Letter issued prior to the effective date of such termination.
20. ASSIGNMENT.
The Company shall not assign any of its rights and or delegate any of its
duties and obligations under this Agreement, in whole or in part, without
the prior written consent of AT&T-CFC, and any unauthorized purported
assignment shall be null and void. AT&T-CFC may sell or assign any Paper
purchased hereunder to any person or entity, subject to the terms and
conditions of this Agreement without the consent of the Company, and AT&T-
CFC may assign its rights and delegate its duties and obligations under
this Agreement, in whole or in part, without the consent of the Company;
provided, however, that the right of first acceptance set forth in
Paragraph 2(a) shall not survive any such assignment by AT&T-CFC unless the
Company otherwise agrees in writing.
21. RELATIONSHIP OF THE PARTIES.
Nothing contained in this Agreement shall be construed to place AT&T-CFC
and the Company in a relationship as partners, joint venturers, or
principal and agent. Neither AT&T-CFC nor the Company are authorized to
make any contract, agreement, warranty or representation on behalf of the
other or to create any obligation, express or implied, on behalf of the
other. Neither party shall act as or represent itself as an agent, partner
or joint venturer of the other party.
22. CREDIT MATTERS.
The Company authorizes AT&T-CFC or any of its affiliates to obtain credit
bureau reports regarding the Company, and to make such other credit
inquiries that AT&T-CFC feels are necessary or desirable.
23. CONFIDENTIALITY.
Any information or material which is transmitted by AT&T-CFC to the Company
or by the Company to AT&T-CFC shall be treated as confidential by the
recipient except for information which:
(a) was already known to the recipient prior to disclosure to it hereunder;
or
(b) becomes available to the recipient on a non-confidential basis from a
source other than the provider hereunder; or
(c) is or becomes available to the public other than as a result of the
disclosure by the recipient; or
(d) is required to be disclosed under applicable law, rule or regulation.
24. NOTICES.
Any notice hereunder by AT&T-CFC or the Company shall be in writing and
delivered by registered or certified mail (notices so mailed shall be
deemed given three (3) days after being mailed) or by telecopy (effective
upon receipt where there is an electronically generated confirmation of
receipt) or reputable overnight delivery (effective upon receipt) to the
addresses set forth below or to such other addresses for which notice of
change has been given.
If to the Company: Meridian Financial Corporation
8250 Haverstick Road, #110
Indianapolis, IN 46240
Attn: Gerald Gerichs
Telecopy No. 317-722-2905
- 3 -
<PAGE>
If to AT&T-CFC: AT&T Commercial Finance Corporation
44 Whippany Road
Morristown, NJ 07962
Attn: President, Business Finance Division
Telecopy No. 201-397-3218
With a copy to: AT&T Commercial Finance Corporation
44 Whippany Road
Morristown, NJ 07962
Attn: Chief Counsel, Business Finance Division
Telecopy No. 201-397-3218
25. TAXES.
The Company shall be liable for and shall pay (to AT&T-CFC or, if
permitted, directly to the appropriate authority) when due all taxes
imposed applicable to the lessor or seller under an item of Paper and the
related Equipment subject thereto attributable to the period ending on the
date such Paper is assigned to AT&T-CFC. In addition, the Company shall be
liable for any sales tax, use tax, documentary stamp tax or similar tax
attributable to the sale of any item of Paper to AT&T-CFC.
26. MERGER; AMENDMENT.
This Agreement and the Exhibits hereto constitute the entire agreement
between AT&T-CFC and the Company as to the subject matter hereof and
supersede all prior or contemporaneous oral or written agreements,
negotiations or understandings. This Agreement may not be amended or
altered, except in and by a writing signed by AT&T-CFC and the Company.
27. WAIVER.
The failure of either AT&T-CFC or the Company to enforce on one or more
occasions any right or remedy under this Agreement shall not be construed
as having created a custom contrary to the specific provisions of this
Agreement, or as having in any way modified or waived the same.
28. ENFORCEABILITY.
The provisions of this Agreement shall be severable; and if any provision
of this Agreement is held to be invalid or unenforceable, it shall be
construed to have the broadest interpretation which would make it valid and
enforceable. Invalidity or unenforceability of one provision shall not
affect any other provision of this Agreement.
- 4 -
<PAGE>
29. NO THIRD PARTY BENEFICIARIES.
This Agreement is solely for the benefit of AT&T-CFC, the Company and their
permitted successors and assigns, and no other person or entity, including
without limitation any Customer, shall have any rights or remedies under
this Agreement.
30. GOVERNING LAW; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW JERSEY. THE PARTIES CONSENT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN NEW
JERSEY, AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF PROCEEDINGS IN ANY SUCH COURT. THE COMPANY
AND AT&T-CFC WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives effective the date first above
written.
AT&T Commercial Finance Corporation Meridian Financial Corporation
By: By:
Print Name: Print Name:
Title: Title:
570b3
- 5 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,984,206
<SECURITIES> 0
<RECEIVABLES> 6,190,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,063,056
<CURRENT-LIABILITIES> 0
<BONDS> 6,032,275
0
3,203,060
<COMMON> 68,553
<OTHER-SE> (1,171,156)
<TOTAL-LIABILITY-AND-EQUITY> 10,063,056
<SALES> 0
<TOTAL-REVENUES> 639,796
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 301,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 456,037
<INCOME-PRETAX> (117,360)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,360)
<EPS-PRIMARY> (196.36)
<EPS-DILUTED> 0
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