EXHIBIT 10.1
EXECUTION COPY
$80,000,000
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 2002
AMONG
ASSET ACCEPTANCE, LLC
FINANCIAL CREDIT, LLC
CFC FINANCIAL, LLC
CONSUMER CREDIT, LLC
AS THE BORROWERS,
BANK ONE, NA,
AS AGENT
BANC ONE CAPITAL MARKETS, INC.,
AS LEAD ARRANGER AND SOLE BOOK RUNNER, AND
THE OTHER LENDERS PARTY HERETO
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................... 1
1.1 Certain Definitions........................................... 1
1.2 Other Definitions; Rules of Construction...................... 14
ARTICLE II. THE COMMITMENTS AND THE LOANS....................................... 15
2.1 Commitment of the Banks....................................... 15
2.2 Termination and Reduction of Commitment....................... 15
2.3 Fees.......................................................... 16
2.4 Disbursement of Loans......................................... 16
2.5 Conditions for First Disbursement............................. 17
2.6 Further Conditions for Disbursement........................... 19
2.7 Security and Collateral....................................... 20
2.8 Borrowing Base Adjustments.................................... 20
2.9 Conversion and Continuation of Outstanding Borrowings......... 21
2.10 Minimum Amount of Each Borrowing.............................. 21
2.11 Lending Installations......................................... 21
ARTICLE III PAYMENTS AND PREPAYMENTS OF LOANS................................... 26
3.1 Principal Payments and Prepayments............................ 26
3.2 Interest and Interest Payments................................ 26
3.3 Payment Method................................................ 27
3.4 No Setoff or Deduction........................................ 28
3.5 Payment on Non-Business Day; Payment Computations............. 28
3.6 Yield Protection.............................................. 28
3.7 Changes in Capital Adequacy Regulations....................... 29
3.8 Availability of Types of Borrowings........................... 29
3.9 Funding Indemnification....................................... 29
3.10 Taxes......................................................... 30
3.11 Bank Statements; Survival of Indemnity........................ 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................... 32
4.1 Corporate Existence and Power................................. 32
4.2 Authority..................................................... 32
4.3 Binding Effect................................................ 33
4.4 Subsidiaries.................................................. 33
4.5 Litigation.................................................... 33
4.6 Financial Condition........................................... 33
4.7 Use of Loans.................................................. 34
4.8 Consents, Etc................................................. 34
4.9 Taxes......................................................... 34
4.10 Title to Properties........................................... 34
4.11 ERISA......................................................... 35
4.12 Disclosure.................................................... 35
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4.13 Environmental Matters............................................. 35
4.14 Common Enterprise................................................. 35
ARTICLE V COVENANTS........ ........................................................ 36
5.1 Affirmative Covenants............................................. 36
5.2 Negative Covenants................................................ 40
ARTICLE VI DEFAULT.................................................................. 45
6.1 Events of Default................................................. 45
6.2 Remedies.......................................................... 48
ARTICLE VII. THE AGENT; TAXES; RATABLE PAYMENTS; BENEFIT OF AGREEMENT; ASSIGNMENTS
AND PARTICIPATIONS; DISTRIBUTION OF PROCEEDS........................... 49
7.1 Appointment; Nature of Relationship............................... 49
7.2 Powers............................................................ 50
7.3 General Immunity.................................................. 50
7.4 No Responsibility for Loans, Recitals, etc........................ 50
7.5 Action on Instructions of Banks................................... 50
7.6 Employment of Agents and Counsel.................................. 50
7.7 Reliance on Documents; Counsel.................................... 51
7.8 Agent's Reimbursement and Indemnification......................... 51
7.9 Notice of Default................................................. 51
7.10 Rights as a Bank.................................................. 51
7.11 Bank Credit Decision.............................................. 52
7.12 Successor Agent................................................... 52
7.13 Delegation to Affiliates.......................................... 52
7.14 Execution of Collateral Documents................................. 53
7.15 Collateral Releases............................................... 53
7.16 Ratable Payments.................................................. 53
7.17 Successors and Assigns............................................ 53
7.18 Participations.................................................... 54
7.19 Assignments....................................................... 54
7.20 Dissemination of Information...................................... 55
7.21 Tax Treatment..................................................... 55
7.22 Distribution of Proceeds of Collateral and Guaranties............. 55
ARTICLE VIII MISCELLANEOUS.......................................................... 56
8.1 Amendments, Etc................................................... 56
8.2 Notices........................................................... 57
8.3 No Waiver By Conduct; Remedies Cumulative......................... 58
8.4 Reliance on and Survival of Various Provisions.................... 58
8.5 Expenses; Indemnification......................................... 58
8.6 Counterparts...................................................... 59
8.7 Governing Law..................................................... 59
8.8 Table of Contents and Headings.................................... 59
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8.9 Construction of Certain Provisions................................ 59
8.10 Integration and Severability...................................... 59
8.11 Independence of Covenants......................................... 60
8.12 Interest Rate Limitation.......................................... 60
8.13 Nonliability of Banks............................................. 60
8.14 Consents to Renewals, Modifications and Other Actions and Events.. 60
8.15 Several Obligations; Benefits of this Agreement................... 61
8.16 Waivers, Etc...................................................... 61
8.17 Waiver Of Jury Trial.............................................. 64
EXHIBITS
Exhibit A Borrowing Base Certificate
Exhibit B Guaranty Agreement
Exhibit C Revolving Credit Note
Exhibit D Security Agreement
Exhibit E Request for Loan
Exhibit F Request for Continuation/Conversion
Exhibit G Assignment
SCHEDULES
Schedule 4.4 (Subsidiaries)
Schedule 5.2(e) (Indebtedness)
Schedule 5.2(f) (Liens)
Schedule 5.2(m) (Investments, Loans and Advances)
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THIS CREDIT AGREEMENT, dated as of September 30, 2002 (this
"Agreement"), is by and among ASSET ACCEPTANCE, LLC, a Delaware limited
liability company, FINANCIAL CREDIT, LLC, a Delaware limited liability company,
CFC FINANCIAL, LLC, a Delaware limited liability company, and CONSUMER CREDIT,
LLC, a Delaware limited liability company (collectively, the "Borrowers"), BANK
ONE, NA, a national banking association with its main office in Chicago,
Illinois ("Bank One"), STANDARD FEDERAL BANK, NA, a national banking
association, NATIONAL CITY BANK OF MICHIGAN/ILLINOIS, a national banking
association, FIFTH THIRD BANK, EASTERN MICHIGAN, a Michigan banking corporation,
and COMERICA BANK, a Michigan banking corporation (together with Bank One and
any other lenders party hereto from time to time by assignment pursuant to
Section 7.19, collectively, the "Banks" and, individually, a "Bank"), and BANK
ONE, NA, as LC Issuer and administrative agent on behalf of the Banks (the
"Agent").
INTRODUCTION
The Borrowers desire to obtain a revolving credit facility in the
aggregate principal amount of $80,000,000 in order to (i) finance the
recapitalization of Asset Acceptance Corp. and certain of its affiliates (the
"Recapitalization"), (ii) refinance the indebtedness outstanding under the
Credit Agreement dated as of June 26, 2000, as amended, among certain banks,
Bank One, as agent for such banks, and Asset Acceptance Corp., Xxx Acceptance
Corp., Financial Credit Corp and CFC Financial Corp. (successor by merger to
City Financial Corp.), as borrowers (such borrowers being, collectively, the
"Existing Borrowers" and such agreement, as amended, being the "Existing Credit
Agreement"), (iii) pay certain fees and expenses related to the
Recapitalization, and (iv) finance the purchase of portfolios of charged-off
consumer receivables, and the Banks are willing to establish such a credit
facility in favor of the Borrowers on the terms and conditions herein set forth.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. As used herein and in the Schedules and
Exhibits attached hereto, the following terms shall have the following
respective meanings:
"Adjusted EBITDA" of any person shall mean, for any period,
the sum, without duplication, of (a) the EBITDA of such person for such period,
plus (b) the Amortized Collections of such person for such period.
"Adjusted Receivables Balances" of any person at any date
shall mean the sum of (a) 50% of the aggregate amount of all Receivables owned
by such person with respect to which
a payment has been received by such person within the 90-days immediately
preceding such date plus (b) 0.25% of the aggregate amount of all other
Receivables of such person.
"Affiliate", when used with respect to any person shall mean
any other person which, directly or indirectly, controls or is controlled by or
is under common control with such person. For purposes of this definition
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
"Age Adjusted Percentage" shall mean, with respect to any
Receivables Portfolio of any Borrower, (a) for the period from and including the
date such Borrower or its predecessor acquires such Receivables Portfolio to and
including the end of the fourth full calendar month ending after such date,
eighty-five percent (85%), and (b) for any subsequent calendar month beginning
after such fourth full calendar month, the percent equal to eighty-five percent
(85%) less three percent (3%) for each successive calendar month that has begun
since the end of such fourth full calendar month.
"Aggregate Commitment" means the aggregate of the Commitments
of all of the Banks, not exceeding $80,000,000, as such amount may be reduced
from time to time pursuant to the terms hereof.
"Aggregate Outstanding Credit Exposure" means, at any time,
the aggregate of the Outstanding Credit Exposure of all the Banks.
"Amortized Collections" of any Borrower shall mean, for any
period, the aggregate Collections of such Borrower that are applied to amortize
the Receivables assets of such Borrower.
"Applicable Margin" shall mean, for purposes of determining
for any calendar quarter or portion thereof (the "Application Quarter") the
Floating Rate applicable to Floating Rate Loans then outstanding and for any
Interest Period or portion thereof the Eurodollar Rate applicable to Eurodollar
Loans then outstanding, as the case may be, the applicable margin (expressed as
a percentage per annum) in accordance with the following chart based upon the
ratio of the Consolidated Total Liabilities of the Borrowers to the Consolidated
EBITDA of the Borrowers as of the end of the latest fiscal quarter of the
Borrowers ended prior to the Application Quarter or Interest Period, as the case
may be, for which a compliance certificate has been furnished in accordance with
Section 5.1(d)(iv):
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Ratio of the Borrowers' Consolidated Applicable Margin for Floating Applicable Margin for
Total Liabilities to the Borrowers' Rate Loans Eurodollar Loans
Consolidated EBITDA (%) (%)
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Greater than 1.5 to 1.0 0.25 3.00
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Greater than 1.0 to 1.0 but equal to or 0.00 2.75
less than 1.5 to 1.0
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Equal to or less than 1.0 to 1.0 0.00 2.50
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Such ratio shall be determined from the then most recent compliance certificate
delivered by the Borrowers from time to time pursuant to Section 5.1(d)(iv).
Each change in the Applicable Margin shall be effective on the first day of the
first calendar month beginning after delivery of any such compliance
certificate; provided that, in the event that the Borrowers shall at any time
fail to furnish to the Banks any compliance certificate when and as required to
be delivered pursuant to Section 5.1(d)(iv), the maximum Applicable Margin shall
apply until such time as such compliance certificate is so delivered.
"Arranger" shall mean Banc One Capital Markets, Inc.
"Asset Acceptance" shall mean Asset Acceptance, LLC, a
Delaware limited liability company.
"Available Aggregate Commitment" means, at any time, the
Aggregate Commitment then in effect minus the Aggregate Outstanding Credit
Exposure at such time.
"Borrowing" shall mean the aggregation of Loans of the Banks
to be made to a Borrower or continuations and conversions of any Loans, made on
a single date and, in the case of any Eurodollar Loans, for a single Interest
Period, which Borrowings may be classified for purposes of this Agreement by
reference to the type of Loans comprising the related Borrowing, e.g., a
"Eurodollar Rate Borrowing" is a Borrowing comprised of Eurodollar Loans and a
"Floating Rate Borrowing" is a Borrowing comprised of Floating Rate Loans.
"Borrowing Base" shall mean, as of any date, the amount equal
to the aggregate Borrowing Base Value of all Receivables Portfolios of the
Borrowers as of such date.
"Borrowing Base Certificate" for any date shall mean an
appropriately completed report as of such date in substantially the form of
Exhibit A hereto, certified as true and correct as of such date by the chief
financial officer of the Borrowers.
"Borrowing Base Value" shall mean, for any period, with
respect to any Receivables Portfolio of any Borrower, the product of (a) the
purchase price paid by such Borrower (or its Affiliate predecessor in interest)
for such Receivables Portfolio, multiplied by
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(b) the Age Adjusted Percentage (expressed as a decimal) applicable to such
Receivables Portfolio for such period; provided that, if at any time after the
acquisition of any Receivables Portfolio by any Borrower such Borrower shall
sell or otherwise dispose of a portion of such Receivables Portfolio, whether in
one or a series of transactions, then the "Borrowing Base Value" for such
Receivables Portfolio shall be determined by the product of (a) a pro rata
portion of the purchase price paid by such Borrower for such Receivables
Portfolio (determined by the ratio that the aggregate face amount of the
remaining Receivables in such Receivables Portfolio bears to the aggregate face
amount of all the Receivables included in such Receivables Portfolio at the time
of its acquisition), multiplied by (b) the applicable Age Adjusted Percentage.
Notwithstanding anything to the contrary, the Borrowing Base Value with respect
to any Receivables Portfolio shall be determined exclusive of any Receivables in
such Receivables Portfolio that are not Eligible Receivables.
"Borrowing Date" means a date on which a Borrowing is made
hereunder.
"Business Day" means a day (other than a Saturday or Sunday)
on which banks generally are open in Detroit and Chicago for the conduct of
substantially all of their commercial lending activities and interbank wire
transfers can be made on the Fedwire system.
"Capital Lease" of any person shall mean any lease which, in
accordance with generally accepted accounting principles, is or should be
capitalized on the books of such person.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations thereunder.
"Collections" shall mean amounts obtained by any Borrower on
Receivables of such Borrower in the ordinary course of business through such
Borrower's collection efforts and from sales of such Receivables, where the sold
Receivables do not represent more than twenty percent (20%) of the related
Receivables Portfolio.
"Commitment" shall mean, with respect to each Bank, the
commitment of each such Bank to make Loans to the Borrowers pursuant to Section
2.1 and participate in Facility LCs issued upon the application of Asset
Acceptance in an aggregate amount outstanding at any time not exceeding the
respective commitment amount for each such Bank set forth next to the name of
each such Bank on the signature pages hereof, as such amounts may be reduced
from time to time pursuant to Section 2.2.
"Companies" is defined in Section 4.6.
"Consolidated" or "consolidated" shall mean, when used with
reference to any financial term in this Agreement, the aggregate for two or more
persons of the amounts signified by such term for all such persons determined on
a consolidated basis in accordance with generally accepted accounting principles
or, for unconsolidated entities, determined on a combined basis after
elimination of inter-company items as if such entities were consolidated in
accordance with generally accepted accounting principles. Unless expressly
stated otherwise,
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"Consolidated" and "consolidated" shall be deemed to mean the relevant financial
term with respect to the Borrower and its Subsidiaries.
"Contingent Liabilities" of any person shall mean, as of any
date, all obligations of such person or of others for which such person is
contingently liable, as obligor, guarantor or in any other capacity, or in
respect of which obligations such person assures a creditor against loss or
agrees to take any action to prevent any such loss (other than endorsements of
negotiable instruments for collection in the ordinary course of business),
including without limitation all reimbursement obligations of such person in
respect of any letters of credit, surety bonds or similar obligations and all
obligations of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the financial condition
of such other person.
"Consulting Services Agreement" shall mean the consulting
services agreement or agreements dated the Effective Date between the Borrowers
and Quad-C, as amended or modified from time to time.
"Credit Extension" means the making of a Borrowing or the
issuance of a Facility LC hereunder.
"Credit Extension Date" means the Borrowing Date for a
Borrowing or the issuance date for a Facility LC.
"Cumulative Net Income" of any person shall mean, as of any
date, the net income (after deduction for income and other taxes of such person
determined by reference to income or profits of such person) for the period
commencing on the specified date through the end of the most recently completed
fiscal year of such person (but without reduction for any net loss incurred for
any fiscal year during such period), taken as one accounting period, all as
determined in accordance with generally accepted accounting principles.
"Default" shall mean any of the events or conditions described
in Section 6.1 which might become an Event of Default with notice or lapse of
time or both.
"Dollars" and "$" shall mean the lawful money of the United
States of America.
"EBIT" of any person shall mean, for any period, the after-tax
net income (exclusive of any non-recurring gains or losses) of such person for
such period plus, to the extent deducted in determining such after-tax net
income for such period, (a) Interest Charges of such person for such period, and
(b) income and other taxes determined by reference to income or profits of such
person for such period.
"EBITDA" of any person shall mean, as of the last day of any
fiscal quarter of such person, the EBIT of such person for the period of four
fiscal quarters of such person then ended plus, to the extent deducted in
determining such EBIT for such period, depreciation and amortization charges
(excluding amortization of Receivables) of such person for such period.
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"Effective Date" shall mean the effective date specified in
the final paragraph of this Agreement.
"Eligible Receivable" of any Borrower shall mean any
Receivable owned by such Borrower that is payable in Dollars and in which such
Borrower has granted to the Agent for the benefit of the Banks and the Agent a
first-priority perfected security interest pursuant to the Security Agreement,
other than any such Receivable:
(a) that is not a bona fide existing obligation for which
good and sufficient consideration has been given;
(b) with respect to which such Borrower does not have
good and marketable title pursuant to a legal, valid and binding assignment to
such Borrower;
(c) that has been repurchased by, or returned or put-back
to, the person from whom such Borrower acquired such Receivable;
(d) all or any portion of which is subject to any Lien
(except that in favor of the Agent under the Security Documents), or if the
consideration of which such Receivable constitutes proceeds is subject to any
Lien;
(e) that is due from or has been acquired from any
Subsidiary or Affiliate of such Borrower (other than from an Existing Borrower
in the Recapitalization);
(f) that is subordinate or junior in right or priority of
payment to any other obligation or claim;
(g) that was not created in compliance, in all material
respects, with all Requirements of Law, or with respect to which such Borrower,
any Affiliate of such Borrower or any officer, employee, agent or representative
of such Borrower or any such Affiliate has not complied with all Requirements of
Law;
(h) that is not an "account," a "general intangible" or
"chattel paper" under and as defined in Article 9 of the Uniform Commercial Code
as then in effect in the State of Michigan; or
(i) that is not, or with respect to which any of the
underlying agreements, promissory notes or other instruments and documents is
not, in form and substance, reasonably satisfactory to the Agent.
"Employment Agreements" are defined in Section 2.5(o).
"Environmental Laws" at any date shall mean all provisions of
law, statute, ordinance, rules, regulations, judgments, writs, injunctions,
decrees, orders, awards and standards promulgated by the government of the
United States of America or any foreign government or by any state, province,
municipality or other political subdivision thereof or therein, or by any
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court, agency, instrumentality, regulatory authority or commission of any of the
foregoing concerning the protection of, or regulating the discharge of
substances into, the environment.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which, together with any Borrower or any Subsidiary of any
Borrower, would be treated as a single employer under Section 414 of the Code.
"Eurodollar Base Rate" means, with respect to a Eurodollar
Rate Borrowing for the relevant Interest Period, the applicable British Bankers'
Association LIBOR rate for deposits in U.S. dollars as reported by any generally
recognized financial information service as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity equal to such Interest Period, provided that, if no such British
Bankers' Association LIBOR rate is available to the Agent, the applicable
Eurodollar Base Rate for the relevant Interest Period shall instead be the rate
determined by the Agent to be the rate at which Bank One or one of its Affiliate
banks offers to place deposits in U.S. dollars with first-class banks in the
London interbank market at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period, in the approximate amount
of Bank One's relevant Eurodollar Loan and having a maturity equal to such
Interest Period.
"Eurodollar Business Day" shall mean a day which is both a
Business Day and a day on which dealings in Dollar deposits are carried out in
the London interbank market.
"Eurodollar Loan" means a Loan which, except as otherwise
provided in Section 3.2, bears interest at the applicable Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Rate
Borrowing for the relevant Interest Period, the sum of (i) the quotient of (a)
the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one
minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (ii) the Applicable Margin.
"Eurodollar Rate Borrowing" means a Borrowing which, except as
otherwise provided in Section 3.2, bears interest at the applicable Eurodollar
Rate.
"Event of Default" shall mean any of the events or conditions
described in Section 6.1.
"Excluded Taxes" shall mean, in the case of each Bank and the
Agent, taxes imposed on its overall net income, and franchise taxes imposed on
it, by (a) the jurisdiction under the laws of which such Bank or the Agent is
incorporated or organized or (b) the jurisdiction in which such Bank's or the
Agent's principal executive office or any applicable Lending Installation is
located.
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"Existing Borrowers" shall have the meaning assigned to such
term in the Introduction to this Agreement.
"Existing Credit Agreement" shall have the meaning assigned to
such term in the Introduction to this Agreement.
"Facility LC" is defined in Section 2.12.1.
"Facility LC Application" is defined in Section 2.12.3.
"Facility LC Collateral Account" is defined in Section
2.12.11.
"Federal Funds Rate" shall mean, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal Funds
transaction with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day by the Federal Reserve Bank of New York, or
if such rate is not so published for such day, the average of the quotations for
such day on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"Floating Rate" shall mean the per annum rate equal to the sum
of (a) the Applicable Margin plus (b) the greater of (i) the Prime Rate in
effect from time to time, and (ii) the sum of one-half of one (1/2 of 1%) per
annum plus the Federal Funds Rate in effect from time to time; which Floating
Rate shall change simultaneously with any change in such Applicable Margin or
Prime Rate or Federal Funds Rate, as the case may be.
"Floating Rate Borrowing" means a Borrowing which, except as
otherwise provided in Section 3.2, bears interest at the Floating Rate.
"Floating Rate Loan" means a Loan which, except as otherwise
provided in Section 3.2, bears interest at the Floating Rate.
"generally accepted accounting principles" shall mean
generally accepted accounting principles applied on a basis consistent with that
reflected in the financial statements referred to in Section 4.6 provided,
however, that if any change in generally accepted accounting principles from
those applied in preparing such financial statements affects the calculation of
any financial covenant contained in this Agreement, the Borrowers and the Agent
hereby agree to negotiate in good faith towards making appropriate amendments
acceptable to the Required Banks to the provisions of this Agreement to reflect
as nearly as possible the effect of the financial covenants as in effect on the
date hereof.
"Governmental Authority" means any nation or government, any
state and any political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranties" shall mean the guaranty or guaranties entered
into by each of the Guarantors in favor of the Agent for the benefit of the
Banks and the Agent pursuant to this
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Agreement in substantially the form annexed hereto as Exhibit B, as amended or
modified from time to time.
"Guarantors" shall mean Holdings and each of the domestic
Subsidiaries of the Borrowers, if any, from time to time.
"Holdings" shall mean Asset Acceptance Holdings, LLC, a
Delaware limited liability company and the holder of all of the membership
interests of the Borrowers.
"Indebtedness" of any person shall mean, as of any date,
without duplication, (a) all obligations of such person for borrowed money, (b)
all obligations of such person represented by any note, bond, debenture or
similar evidence of indebtedness, (c) all obligations of such person as lessee
under any Capital Lease, (d) all obligations which are secured by any Lien
existing on any asset or property of such person whether or not the obligation
secured thereby shall have been assumed by such person, (e) the unpaid purchase
price for goods, property or services acquired by such person (except for trade
accounts payable arising in the ordinary course of business that are not past
due), to the extent that (i) such purchase price is not payable within six
months of the incurrence of such payable and (ii) such payable is not in dispute
and subject to a good faith contest by such person, (f) all obligations of such
person to purchase goods, property or services where payment therefor is
required regardless of whether delivery of such goods or property or the
performance of such services is ever made or tendered (generally referred to as
"take or pay contracts"), (g) all liabilities of such person in respect of
Unfunded Benefit Liabilities under any Plan or of any ERISA Affiliate, (h) Net
Xxxx-to-Market Exposure under all Rate Management Obligations of such person,
and (i) all obligations of others similar in character to those described in
clauses (a) through (h) of this definition for which such person is contingently
liable, as obligor, guarantor, surety or in any other capacity, or in respect of
which obligations such person assures a creditor against loss or agrees to take
any action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such person in respect of
letters of credit, surety bonds or similar obligations and all obligations of
such person to advance funds to, or to purchase assets, property or services
from, any other person in order to maintain the financial condition of such
other person.
"Interest Charges" of any person shall mean, for any period,
without duplication, the aggregate amount of all interest paid or payable by
such person on Indebtedness of such person during such period.
"Interest Payment Date" shall mean (a) with respect to any
Eurodollar Loan, the last day of each Interest Period with respect to such
Eurodollar Loan and, in the case of any Interest Period exceeding three months,
those days that occur during such Interest Period at intervals of three months
after the first day of such Interest Period, and (b) in all other cases, the
last Business Day of each month, commencing with the first such Business Day
occurring after the date of this Agreement.
"Interest Period" means, with respect to a Eurodollar Rate
Borrowing, a period of one, two, three or six months commencing on a Business
Day selected by Asset Acceptance
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pursuant to this Agreement. Such Interest Period shall end on the day which
corresponds numerically to such date one, two, three or six months thereafter,
provided, however, that if there is no such numerically corresponding day in
such next, second, third or sixth succeeding month, such Interest Period shall
end on the last Business Day of such next, second third or sixth succeeding
month. If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"LC Fee" is defined in Section 2.12.4.
"LC Issuer" means Bank One (or any subsidiary or affiliate of
Bank One designated by Bank One) in its capacity as issuer of Facility LCs
hereunder.
"LC Obligations" means, at any time, the sum, without
duplication, of (i) the aggregate undrawn stated amount under all Facility LCs
outstanding at such time plus (ii) the aggregate unpaid amount at such time of
all Reimbursement Obligations.
"LC Payment Date" is defined in Section 2.12.5.
"Lending Installation" means, with respect to a Bank or the
Agent, the office, branch, subsidiary or affiliate of such Bank or the Agent
listed on the signature pages hereof or on a Schedule or otherwise selected by
such Bank or the Agent pursuant to Section 2.11.
"Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, option, conditional sale or
title retaining contract, sale and leaseback transaction, financing statement
filing, lessor's or lessee's interest under any lease, subordination of any
claim or right, or any other type of lien, charge, encumbrance, preferential
arrangement or other claim or right.
"Loan" shall mean any Loan made hereunder.
"Loan Documents" means this Agreement, the Notes, the Facility
LC Applications and the Security Documents.
"Modified Debt Service" of any person shall mean, for any
period, the sum, without duplication, of (a) Interest Charges of such person for
such period, plus (b) Taxes of such person for such period, plus (c) the amount
equal to the aggregate payments that would be required during three months in
order to amortize in monthly installments over 30 months the amount equal to the
average aggregate principal amount of the Loans outstanding during such period.
"Modify" and "Modification" are defined in Section 2.12.1.
"Multiemployer Plan" shall mean any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
10
"Net Xxxx-to-Market Exposure" of any person shall mean, as of
any date of determination, the excess (if any) of all unrealized losses over all
unrealized profits of such person arising from Rate Management Transactions.
"Unrealized losses" means the fair market value of the cost to such person of
replacing such Rate Management Transaction as of the date of determination
(assuming the Rate Management Transaction were to be terminated as of that
date), and "unrealized profits" means the fair market value of the gain to such
person of replacing such Rate Management Transaction as of the date of
determination (assuming such Rate Management Transaction were to be terminated
as of that date).
"Note" shall mean any Revolving Credit Note.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Loans, the Reimbursement Obligations, all accrued and
unpaid fees and all expenses, reimbursements, indemnities and other obligations
of the Borrowers to the Banks or to any Bank, the Agent, the LC Issuer or any
indemnified party arising under the Loan Documents.
"Other Taxes" shall have the meaning ascribed thereto in
Section 3.10(ii).
"Outstanding Credit Exposure" means, as to any Bank at any
time, the sum of (i) the aggregate principal amount of its Loans outstanding at
such time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations
at such time.
"Overdue Rate" shall mean (a) in respect of principal of
Floating Rate Loans, a rate per annum that is equal to the sum of three percent
(3%) per annum plus the Floating Rate, (b) in respect of principal of Eurodollar
Loans, a rate per annum that is equal to the sum of three percent (3%) per annum
plus the per annum rate in effect thereon until the end of the then current
Interest Period for such Eurodollar Loan and, thereafter, a rate per annum that
is equal to the sum of three percent (3%) per annum plus the Floating Rate, and
(c) in respect other amounts payable by the Borrower hereunder (other than
interest), a per annum rate that is equal to the sum of three percent (3%) per
annum plus the Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean Liens permitted by Section 5.2(f)
hereof.
"Person" or "person" shall include an individual, a
corporation, an association, a partnership, a limited liability company, a trust
or estate, a joint stock company, an unincorporated organization, a joint
venture, a trade or business (whether or not incorporated), a government
(foreign or domestic) and any agency or political subdivision thereof, or any
other entity.
"Plan" shall mean any pension plan (other than a Multiemployer
Plan) subject to Title IV of ERISA or to the minimum funding standards of
Section 412 of the Code which has been established or maintained by any
Borrower, any Subsidiary of any Borrower or any ERISA
11
Affiliate, or by any other person if such Borrower, any Subsidiary of such
Borrower or any ERISA Affiliate could have liability with respect to such
pension plan.
"Prime Rate" shall mean the per annum rate equal to the prime
rate of interest announced from time to time by Bank One or its parent (which is
not necessarily the lowest rate charged to any customer), changing when and as
said prime rate changes.
"Prohibited Transaction" shall mean any transaction involving
any Plan which is proscribed by Section 406 of ERISA or Section 4975 of the
Code.
"Pro Rata Share" means, with respect to a Bank, a portion
equal to a fraction the numerator of which is such Bank's Commitment and the
denominator of which is the Aggregate Commitment.
"Quad-C" shall mean Quad-C Management, Inc.
"Rate Management Obligations" shall mean any and all
obligations of the Borrowers, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (i) any
and all Rate Management Transactions, and (ii) any and all cancellations, buy
backs, reversals, terminations or assignments of any Rate Management
Transactions.
"Rate Management Transaction" shall mean any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into among a Borrower and any of the Banks, Bank One Corporation, or any of the
Banks' respective subsidiaries or affiliates or their successors, which is a
rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.
"Recapitalization" has the meaning assigned to such term in
the Introduction to this Agreement.
"Receivable" of a Borrower shall mean any right of such
Borrower to the payment of money arising out of a consumer financing
transaction, and which right was acquired by such Borrower with a group of
similar rights.
"Receivables Portfolio" of a Borrower shall mean any group of
Receivables of such Borrower acquired by such Borrower as part of a single
transaction.
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"Reimbursement Obligations" means, at any time, the aggregate
of all obligations of the Borrower then outstanding under Section 2.12 to
reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one
or more drawings under Facility LCs.
"Reportable Event" shall mean a reportable event as described
in Section 4043(b) of ERISA including those events as to which the thirty (30)
day notice period is waived under Part 2615 of the regulations promulgated by
the PBGC under ERISA.
"Required Banks" shall mean Banks holding not less than (i) 66
2/3% percent of the aggregate principal amount of the Loans then outstanding or
(ii) 66 2/3% percent of the aggregate Commitments if no Loans are then
outstanding.
"Requirements of Law" shall mean any requirement of law, rule
or regulation or Governmental Authority, whether federal, state or local
(including, without limitation, usury laws, the Federal Truth in Lending Act,
Regulation Z and Regulation B of the Board of Governors of the Federal Reserve
System, the Fair Debt Collection Practices Act, and the Uniform Consumer Credit
Code).
"Reserve Requirement" means, with respect to an Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
on Eurocurrency liabilities.
"Revolving Credit Loan" shall mean any borrowing under Section
2.4 evidenced by the Revolving Credit Notes and made pursuant to Section 2.1(a).
"Revolving Credit Note" shall mean any promissory note of the
Borrowers evidencing the Loans, in substantially the form annexed hereto as
Exhibit C, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
"Security Agreement" shall mean any security agreement entered
into by any Borrower or any Guarantor in favor of the Agent for the benefit of
the Banks and the Agent pursuant to this Agreement in substantially the form
annexed hereto as Exhibit D, as amended or modified from time to time.
"Security Documents" shall mean, collectively, the Guaranties,
the Security Agreements, any and all subordination agreements with respect to
Subordinated Debt, and all other agreements and documents, including financing
statements and similar documents, delivered pursuant to this Agreement or
otherwise entered into by any person to secure the Loans.
"Subordinated Debt" of any person shall mean, as of any date,
that Indebtedness of such person for borrowed money which is expressly
subordinate and junior in right and priority of payment to the Loans and other
Indebtedness of such person to the Banks in manner and by agreement satisfactory
in form and substance to the Required Banks.
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"Subsidiary" of any person shall mean any other person
(whether now existing or hereafter organized or acquired) in which (other than
directors qualifying shares required by law) at least a majority of the
securities or other ownership interests of each class having ordinary voting
power or analogous right (other than securities or other ownership interests
which have such power or right only by reason of the happening of a
contingency), at the time as of which any determination is being made, are
owned, beneficially and of record, by such person or by one or more of the other
Subsidiaries of such person or by any combination thereof. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Tangible Capital Funds" of any person shall mean, as of any
date, the sum of Tangible Net Worth plus Subordinated Debt of such person.
"Tangible Net Worth" of any person shall mean, as of any date,
(a) the amount of any capital stock, paid in capital and similar equity accounts
plus (or minus in the case of a deficit) the capital surplus and retained
earnings of such person and the amount of any foreign currency translation
adjustment account shown as a capital account of such person, less (b) the net
book value of all items of the following character which are included in the
assets of such person: (i) goodwill, including, without limitation, the excess
of cost over book value of any asset, (ii) organization or experimental
expenses, (iii) unamortized debt discount and expense, (iv) patents, trademarks,
trade names and copyrights, (v) treasury stock, (vi) deferred taxes and deferred
charges, (vii) franchises, licenses and permits, and (viii) other assets which
are deemed intangible assets under generally accepted accounting principles.
"Taxes" shall mean any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and any and all
liabilities with respect to the foregoing, but excluding Excluded Taxes and
Other Taxes.
"Termination Date" shall mean the earlier to occur of (a) the
second to last day immediately preceding the third anniversary of the date of
this Agreement, and (b) the date on which the Commitments shall be terminated
pursuant to Section 2.2 or 6.2.
"Total Liabilities" of any person shall mean, as of any date,
all liabilities of such person, determined in accordance with generally accepted
accounting principles, other than Subordinated Debt.
"Type" means, with respect to any Borrowing, its nature as a
Floating Rate Borrowing or a Eurodollar Rate Borrowing and with respect to any
Loan, its nature as a Floating Rate Loan or a Eurodollar Loan.
"Unfunded Benefit Liabilities" shall mean, with respect to any
Plan as of any date, the amount of the unfunded benefit liabilities determined
in accordance with Section 4001(a)(18) of ERISA.
1.2 Other Definitions; Rules of Construction. As used herein and
in the Schedules and Exhibits attached hereto, the terms "Agent," "Bank," "Bank
One," "Banks," "Borrower" and
14
"this Agreement" shall have the respective meanings ascribed thereto in the
introductory paragraph of this Agreement. Such terms, together with the other
terms defined in Section 1.1, shall include both the singular and the plural
forms thereof and shall be construed accordingly. All computations required
hereunder and all financial terms used herein shall be made or construed in
accordance with generally accepted accounting principles unless such principles
are inconsistent with the express requirements of this Agreement. Use of the
terms "herein", "hereof", and "hereunder" shall be deemed references to this
Agreement in its entirety and not to the Section or clause in which such term
appears. References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
ARTICLE II.
THE COMMITMENTS AND THE LOANS
2.1 Commitment of the Banks. Each Bank agrees, for itself only,
subject to the terms and conditions of this Agreement, (i) to make Revolving
Credit Loans to the Borrowers pursuant to Section 2.4 from time to time from and
including the Effective Date to but excluding the Termination Date, and (ii) to
participate in Facility LCs issued upon the request of Asset Acceptance, not to
exceed in aggregate principal amount at any time outstanding the amount
determined pursuant to the next following sentence. Notwithstanding anything in
this Agreement to the contrary, (a) the Outstanding Credit Exposure of any Bank
at any time shall not exceed the amount of its respective Commitment at such
time, and (b) the aggregate Outstanding Credit Exposure of all Banks at any time
outstanding shall not exceed the amount of the Borrowing Base as of the close of
business on the last day of the month next preceding the date any such Credit
Extension. The Loans may be made or continued as Floating Rate Borrowings or
Eurodollar Rate Borrowings, or a combination thereof, as selected by Asset
Acceptance in accordance with Sections 2.4 and 2.9. The LC Issuer will issue
Facility LCs hereunder on the terms and conditions set forth in Section 2.12.
2.2 Termination and Reduction of Commitment.
(a) The Borrowers shall have the right to terminate the
Commitments or reduce the amount of the Commitments at any time and from time to
time, provided that (i) each of the Borrowers shall give notice of such
termination or reduction to the Agent (with sufficient executed copies for each
Bank) specifying the amount and effective date thereof, (ii) each partial
reduction of the amount of the Commitments shall be in a minimum amount of
$1,000,000 and in an integral multiple of $500,000 and shall reduce the
Commitments of all of the Banks proportionately in accordance with the
respective commitment amounts for each such Bank set forth in the signature
pages hereof next to name of each such Bank, (iii) no such termination or
reduction shall be permitted with respect to any portion of the Commitments as
to which a request for a Loan pursuant to Section 2.4 is then pending, and (iv)
the Commitments may not be terminated if any Loans are then outstanding and the
amount of the Commitments may not be reduced below the aggregate principal
amount of Loans then outstanding.
15
(b) The Commitments or the amount of the Commitments, as
the case may be, or any portion thereof, terminated or reduced, as the case may
be, pursuant to this Section 2.2 may not be reinstated.
2.3 Fees.
(a) The Borrowers agree to pay to each Bank a commitment
fee on the daily average unused amount of its respective Commitment, for the
period from the Effective Date to but excluding the Termination Date, at a rate
equal to the one-half of one percent (1/2 of 1%) per annum. Accrued commitment
fees shall be payable quarterly in arrears on the last Business Day of each
March, June, September and December, commencing on the first such Business Day
occurring after the Effective Date, and on the Termination Date.
(b) The Borrowers further agree to pay to the Banks a
closing fee in the amount of $200,000 for this Agreement. Such closing fee shall
be payable on or prior to the Effective Date and shall be shared among the Banks
on a pro rata basis in accordance with their respective Commitments.
(c) The Borrowers further agree to pay to the Agent
agency fees for its services as Agent under this Agreement, the Notes and the
Security Documents and an arrangement fee for this Agreement in such amounts and
on such schedule as may from time to time be agreed upon by the Borrowers and
the Agent.
2.4 Disbursement of Loans.
(a) Asset Acceptance shall select the Type of Borrowing
and, in the case of each Eurodollar Rate Borrowing, the Interest Period
applicable thereto from time to time. Asset Acceptance shall give the Agent
irrevocable notice in the form of Exhibit E hereto (a "Borrowing Notice") not
later than 1:00 p.m. (Detroit time) on the Borrowing Date of each Floating Rate
Borrowing and three Eurodollar Business Days before the Borrowing Date for each
Eurodollar Rate Borrowing, specifying:
(i) the Borrowing Date, which shall be a
Business Day or a Eurodollar Business Day, as the case may be, of such
Borrowing,
(ii) the identity of the Borrower and the
aggregate amount of such Borrowing,
(iii) the Type of Borrowing selected, and
(iv) in the case of each Eurodollar Rate
Borrowing, the Interest Period applicable thereto.
(b) On the Borrowing Date, each Bank shall promptly make
available its Loan or Loans in funds immediately available in Detroit to the
Agent at its address specified pursuant to Article VIII. The Agent will make the
funds so received from the Banks available to the Borrower requesting the
Borrowing by depositing the proceeds thereof, in immediately available funds, in
an account maintained and designated by such Borrower at the principal office of
the
16
Agent. Unless the Agent shall have received notice from any Bank prior to the
date such Borrowing is requested to be made under this Section 2.4 that such
Bank will not make available to the Agent such Bank's pro rata portion of such
Borrowing, the Agent may assume that such Bank has made such portion available
to the Agent on the date such Borrowing is requested to be made in accordance
with this Section 2.4. If and to the extent such Bank shall not have so made
such pro rata portion available to the Agent, the Agent may (but shall not be
obligated to) make such amount available to the relevant Borrower, and such Bank
and the relevant Borrower severally agree to pay to the Agent forthwith on
demand such amount together with interest thereon, for each day from the date
such amount is made available to the relevant Borrower by the Agent until the
date such amount is repaid to the Agent, at the Federal Funds Rate. If such Bank
shall pay such amount to the Agent together with interest, such amount so paid
shall constitute a Loan by such Bank as a part of such Borrowing for purposes of
this Agreement. The failure of any Bank to make its pro rata portion of any such
Borrowing available to the Agent shall not relieve any other Bank of its
obligation make available its pro rata portion of such Borrowing on the date
such Borrowing is requested to be made, but no Bank shall be responsible for
failure of any other Bank to make such pro rata portion available to the Agent
on the date of any such Borrowing.
(c) All Revolving Credit Loans made under this Section
2.4 shall be evidenced by the Revolving Credit Notes, and all such Loans shall
be due and payable and bear interest as provided in Article III. Each Bank is
hereby authorized by the Borrowers to record on schedules attached to its Notes,
or in its books and records, the date and amount of each Loan, the amount of
each payment or prepayment of principal thereon, and the other information
provided for on such schedule, which schedule or books and records, as the case
may be, shall constitute prima facie evidence of the information so recorded,
provided, however, that failure of any Bank to record, or any error in
recording, any such information shall not relieve any Borrower of its obligation
to repay the outstanding principal amount of the Revolving Credit Loans, all
accrued interest thereon and other amounts payable with respect thereto. Subject
to the terms and conditions of this Agreement, the Borrowers may borrow
Revolving Credit Loans under this Section 2.4, prepay Revolving Credit Loans
pursuant to Section 3.1 and reborrow Revolving Credit Loans under this Section
2.4.
(d) Each Borrower other than Asset Acceptance hereby
irrevocably appoints and authorizes Asset Acceptance to act as its agent in
requesting Loans on such Borrower's behalf.
2.5 Conditions for First Credit Extension. The obligation of the
Banks to make the first Credit Extension hereunder is subject to receipt by each
Bank and the Agent of the following documents with respect to each Borrower and
completion of the following matters, in form and substance satisfactory to each
Bank and the Agent:
(a) Charter Documents. Certificates of recent date of the
appropriate authority or official of each Borrower's state of formation listing
all charter documents of such Borrower on file in that office and certifying as
to the good standing and existence of such Borrower, together with copies of
such charter documents, certified as of a recent date by such authority or
official and certified as true and correct as of the Effective Date by a duly
authorized officer of such Borrower;
17
(b) Operating Agreement and Company Authorizations.
Copies of the operating agreement of each Borrower together with all authorizing
resolutions and evidence of other company action taken by such Borrower to
authorize the execution, delivery and performance by each Borrower of this
Agreement, the Security Documents to which it is a party and the Notes and the
consummation by such Borrower of the transactions contemplated hereby, certified
as true and correct as of the Effective Date by a duly authorized member,
manager or officer of such Borrower;
(c) Incumbency Certificates. Certificates of incumbency
of each Borrower containing, and attesting to the genuineness of, the signatures
of those members, managers, or officers authorized to act on behalf of such
Borrower in connection with this Agreement, the Security Documents to which it
is a party and the Notes and the consummation by such Borrower of the
transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized member, manager or officer of such Borrower;
(d) Note. The Revolving Credit Notes duly executed on
behalf of each of the Borrowers for each Bank;
(e) Consents, Approvals, Etc. Copies of all governmental
and nongovernmental consents, approvals, authorizations, declarations,
registrations or filings, if any, required on the part of any Borrower in
connection with the execution, delivery and performance of this Agreement, the
Security Documents, the Notes or the transactions contemplated hereby or as a
condition to the legality, validity or enforceability of this Agreement, the
Security Documents or the Notes, certified as true and correct and in full force
and effect as of the Effective Date by a duly authorized officer of such
Borrower, or, if none is required, a certificate of a duly authorized officer of
each Borrower to that effect;
(f) Payment of Fees. The Borrowers shall have paid to the
Banks the closing fee under Section 2.3(b) and all fees required to be paid to
the Agent under Section 2.3(c), in immediately available funds;
(g) Security Documents. The Security Documents duly
executed on behalf of the Borrowers and any Guarantors party thereto granting to
the Agent the collateral and security intended to be provided pursuant to
Section 2.7, together with:
(i) Recording, Filing, Etc. Evidence of the
recordation, filing and other action (including payment of any applicable taxes
or fees) in such jurisdictions as the Agent and the Banks may deem necessary or
appropriate with respect to the Security Documents, including the filing of
financing statements and similar documents which the Agent and the Banks may
deem necessary or appropriate to create, preserve or perfect the liens, security
interests and other rights intended to be granted to the Agent and the Banks
hereunder, together with Uniform Commercial Code and other record searches in
such offices as the Agent may reasonably request; and
(ii) Casualty and Other Insurance. Evidence that
the casualty and other insurance required pursuant to Section 5.1(c) and the
Security Documents is in full force and effect;
18
(h) Subordination Agreements. Subordination agreements,
or confirmations and extensions of existing subordination agreements, in form
and substance satisfactory to the Bank duly executed by or on behalf of each
holder of Subordinated Debt;
(i) Recapitalization Documents. The Asset Contribution
and Securities Purchase Agreement, and any asset purchase agreements, stock
purchase agreements, merger agreements, resolutions or other documents pursuant
to which the Recapitalization was or is to be effected, together with the
Consulting Services Agreement, each in form and substance acceptable to the
Agent;
(j) Opinion of Counsel. A written opinion of the
Borrower's counsel, addressed to the Banks in form and substance acceptable to
the Agent, and an opinion of counsel to the Existing Borrowers relating to the
Recapitalization addressed to the Banks in form and substance acceptable to the
Agent;
(k) Existing Credit Agreement. Evidence that the Existing
Credit Agreement has been terminated and all indebtedness, liabilities and
obligations outstanding thereunder shall have been paid in full, or will be paid
from the proceeds of the first disbursement of Loans hereunder;
(l) Business Plan. A five-year business plan of the
Borrowers, in form and detail reasonably acceptable to the Agent;
(m) Compliance Certificate. A statement certified to by
the chief financial officer or other authorized officer of the Borrowers showing
a computation of compliance by the Borrowers with Section 5.2(a), (b), (c), and
(d) hereof (which computation shall accompany such certificate and shall be in
reasonable detail) and stating that on the initial Borrowing Date no Default or
Event of Default has occurred and is continuing;
(n) Solvency Certificate. A solvency certificate
certified to by the chief financial officer of each Borrower and each Guarantor;
(o) Employment Agreements. Evidence that Asset Acceptance
has entered into employment agreements (the "Employment Agreements") with X.
Xxxxxxx, X. Xxxxxxx, and X. Xxxxxx for a term of not less than three years and
on other terms and conditions acceptable to the Agent;
(p) Facility LC Application. If the initial Credit
Extension will be the issuance of a Facility LC, a properly completed Facility
LC Application; and
(q) Miscellaneous. Such other documents and completion of
such other matters as the Agent or the Banks may reasonably request.
2.6 Further Conditions for Credit Extension. The obligation of the
Banks to make any Credit Extension (including the first Credit Extension), is
further subject to the satisfaction of the following conditions precedent:
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(a) The representations and warranties contained in
Article IV hereof and in the Security Documents (unless such representation or
warranty explicitly relates solely to an earlier date) shall be true and correct
in all material respects on and as of the date such Credit Extension is made
(both before and after such Credit Extension is made) as if such representations
and warranties were made on and as of such date;
(b) No Default or Event of Default shall exist or shall
have occurred and be continuing on the date such Credit Extension is made
(whether before or after such Credit Extension is made); and
(c) The Banks and the Agent shall have received the
Borrowing Base Certificate required pursuant to Section 5.1(d)(v) as of the
close of business on the last day of the month next preceding the date such
Credit Extension is made; provided that if, after giving effect to such Credit
Extension and any repayment of any Loans to be made on the date such Credit
Extension is made, the Aggregate Outstanding Credit Exposure will be increased
above the amount of the Borrowing Base as shown on the Borrowing Base
Certificate as of such prior month-end, then the Banks and the Agent shall have
received an updated Borrowing Base Certificate as of a later date demonstrating
Borrowing Base availability to support such increased Aggregate Outstanding
Credit Exposure.
The Borrowers shall be deemed to have made a representation and warranty to the
Banks and the Agent at the time of the making of each Credit Extension to the
effects set forth in clauses (a) and (b) of this Section 2.6. For purposes of
this Section 2.6, the representations and warranties contained in Section 4.6
hereof shall be deemed made with respect to both the financial statements
referred to therein and the most recent financial statements delivered pursuant
to Section 5.1(d)(ii) and (iii).
2.7 Security and Collateral. To secure the payment when due of the
Notes and all other obligations of the Borrowers under this Agreement to the
Banks and the Agent, the Borrowers shall execute and deliver on the Effective
Date, or cause to be executed and delivered, to the Banks and the Agent,
Security Documents granting the following:
(a) Security interests in all present and future
accounts, inventory, general intangibles, chattel paper, instruments, equipment,
fixtures, and all other personal property of the Borrowers, including, without
limitation, rights under each of the documents to which any Borrower is party
effecting or implementing the Recapitalization.
(b) Guarantees of all Guarantors.
(c) All other security and collateral described in the
Security Documents.
2.8 Borrowing Base Adjustments. The Borrowers agree that if at any
time any Receivable fails to constitute an Eligible Receivable for any reason,
the Agent may, at any time and notwithstanding any prior classification of
eligibility, classify such Receivable as ineligible and exclude the same from
the computation of the Borrowing Base without in any way impairing the rights of
the Banks and the Agent in and to the same under the Security Documents.
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2.9 Conversion and Continuation of Outstanding Borrowings.
Floating Rate Borrowings shall continue as Floating Rate Borrowings unless and
until such Floating Rate Borrowings are converted into Eurodollar Rate
Borrowings pursuant to this Section 2.9 or are repaid in accordance with Section
3.1. Each Eurodollar Rate Borrowing shall continue as a Eurodollar Rate
Borrowing until the end of the then applicable Interest Period therefor, at
which time such Eurodollar Rate Borrowing shall be automatically converted into
a Floating Rate Borrowing unless (x) such Eurodollar Rate Borrowing is or was
repaid in accordance with Section 3.1 or (y) Asset Acceptance shall have given
the Agent a Conversion/Continuation Notice (as defined below) requesting that,
at the end of such Interest Period, such Eurodollar Rate Borrowing continue as a
Eurodollar Rate Borrowing for the same or another Interest Period. Subject to
the terms of Section 2.4, Asset Acceptance may elect from time to time to
convert all or any part of a Floating Rate Borrowing into a Eurodollar Rate
Borrowing. Asset Acceptance shall give the Agent irrevocable notice in the form
of Exhibit F hereto (a "Conversion/Continuation Notice") of each conversion of a
Floating Rate Borrowing into a Eurodollar Rate Borrowing or continuation of a
Eurodollar Rate Borrowing not later than 1:00 p.m. (Detroit time) at least three
Eurodollar Business Days prior to the date of the requested conversion or
continuation, specifying:
(a) the requested date, which shall be a Eurodollar
Business Day, of such conversion or continuation,
(b) the identity of the Borrower and the aggregate amount
and Type of the Borrowing which is to be converted or continued, and
(c) the amount of such Borrowing which is to be converted
into or continued as a Eurodollar Rate Borrowing and the duration of the
Interest Period applicable thereto.
2.10 Minimum Amount of Each Borrowing. Each Eurodollar Rate
Borrowing shall be in the minimum amount of $1,000,000 (and in multiples of
$100,000 if in excess thereof), and each Floating Rate Borrowing shall be in the
minimum amount of $200,000 (and in multiples of $50,000 if in excess thereof),
provided, however, that any Floating Rate Borrowing may be in the amount of the
unused Aggregate Commitment. The aggregate number of Eurodollar Rate Borrowings
outstanding at any one time under this Agreement may not exceed five.
2.11 Lending Installations. Each Bank may book its Loans at any
Lending Installation selected by such Bank and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Bank for the benefit of any such Lending Installation. Each
Bank may, by written notice to the Agent and the Borrowers in accordance with
Article VIII, designate replacement or additional Lending Installations through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.12 Facility LCs.
2.12.1. Issuance. The LC Issuer hereby agrees, on the terms
and conditions set forth in this Agreement, to issue standby letters of
credit (each, a "Facility LC") and to renew, extend, increase, decrease
or otherwise modify each Facility LC ("Modify," and
21
each such action a "Modification"), from time to time from and
including the date of this Agreement and prior to the Facility
Termination Date upon the request of Asset Acceptance; provided that
immediately after each such Facility LC is issued or Modified, (i) the
aggregate amount of the outstanding LC Obligations shall not exceed
$2,000,000, and (ii) the Aggregate Outstanding Credit Exposure of all
Banks shall not exceed the lesser of the Aggregate Commitment or the
amount of the Borrowing Base as of the date of the most recent
Borrowing Base Certificate furnished to the Agent and the Banks. No
Facility LC shall have an expiry date later than the earlier of (x) the
fifth Business Day prior to the Termination Date and (y) one year after
its issuance.
2.12.2. Participations. Upon the issuance or Modification by
the LC Issuer of a Facility LC in accordance with this Section 2.12,
the LC Issuer shall be deemed, without further action by any party
hereto, to have unconditionally and irrevocably sold to each Bank, and
each Bank shall be deemed, without further action by any party hereto,
to have unconditionally and irrevocably purchased from the LC Issuer, a
participation in such Facility LC (and each Modification thereof) and
the related LC Obligations in proportion to its Pro Rata Share.
2.12.3. Notice. Subject to Section 2.12.1, Asset Acceptance
shall give the LC Issuer notice prior to 11:00 a.m. (Detroit time) at
least five Business Days prior to the proposed date of issuance or
Modification of each Facility LC, specifying the beneficiary, the
proposed date of issuance (or Modification) and the expiry date of such
Facility LC, and describing the proposed terms of such Facility LC and
the nature of the transactions proposed to be supported thereby. Upon
receipt of such notice, the LC Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each Bank, of the contents thereof
and of the amount of such Bank's participation in such proposed
Facility LC. The issuance or Modification by the LC Issuer of any
Facility LC shall, in addition to the conditions precedent set forth in
Sections 2.5 and 2.6 (the satisfaction of which the LC Issuer shall
have no duty to ascertain), be subject to the conditions precedent that
such Facility LC shall be satisfactory to the LC Issuer and that Asset
Acceptance shall have executed and delivered such application agreement
and/or such other instruments and agreements relating to such Facility
LC as the LC Issuer shall have reasonably requested (each, a "Facility
LC Application"). In the event of any conflict between the terms of
this Agreement and the terms of any Facility LC Application, the terms
of this Agreement shall control.
2.12.4. LC Fees. Asset Acceptance shall pay to the Agent, for
the account of the Banks ratably in accordance with their respective
Pro Rata Shares, with respect to each Facility LC, a letter of credit
fee at a per annum rate equal to the Applicable Margin for Eurodollar
Loans in effect from time to time on the average daily undrawn stated
amount under such standby Facility LC, such fee to be payable in
arrears on the last day of each calendar quarter, (the "LC Fee"). Asset
Acceptance shall also pay to the LC Issuer for its own account (x) at
the time of issuance of each Facility LC, a fronting fee in an amount
to be agreed upon between the LC Issuer and Asset Acceptance, and (y)
documentary and processing charges in connection with the issuance or
Modification of and draws under
22
Facility LCs in accordance with the LC Issuer's standard schedule for
such charges as in effect from time to time.
2.12.5. Administration; Reimbursement by Banks. Upon receipt
from the beneficiary of any Facility LC of any demand for payment under
such Facility LC, the LC Issuer shall notify the Agent and the Agent
shall promptly notify Asset Acceptance and each other Bank as to the
amount to be paid by the LC Issuer as a result of such demand and the
proposed payment date (the "LC Payment Date"). The responsibility of
the LC Issuer to Asset Acceptance and each Bank shall be only to
determine that the documents (including each demand for payment)
delivered under each Facility LC in connection with such presentment
shall be in conformity in all material respects with such Facility LC.
The LC Issuer shall endeavor to exercise the same care in the issuance
and administration of the Facility LCs as it does with respect to
letters of credit in which no participations are granted, it being
understood that in the absence of any gross negligence or willful
misconduct by the LC Issuer, each Bank shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or
any condition precedent whatsoever, to reimburse the LC Issuer on
demand for (i) such Bank's Pro Rata Share of the amount of each payment
made by the LC Issuer under each Facility LC to the extent such amount
is not reimbursed by Asset Acceptance pursuant to Section 2.12.6 below,
plus (ii) interest on the foregoing amount to be reimbursed by such
Bank, for each day from the date of the LC Issuer's demand for such
reimbursement (or, if such demand is made after 11:00 a.m. (Detroit
time) on such date, from the next succeeding Business Day) to the date
on which such Bank pays the amount to be reimbursed by it, at a rate of
interest per annum equal to the Federal Funds Effective Rate for the
first three days and, thereafter, at a rate of interest equal to the
rate applicable to Floating Rate Advances.
2.12.6. Reimbursement by Asset Acceptance . Asset Acceptance
shall be irrevocably and unconditionally obligated to reimburse the LC
Issuer on or before the applicable LC Payment Date for any amounts to
be paid by the LC Issuer upon any drawing under any Facility LC,
without presentment, demand, protest or other formalities of any kind;
provided that neither Asset Acceptance nor any Bank shall hereby be
precluded from asserting any claim for direct (but not consequential)
damages suffered by Asset Acceptance or such Bank to the extent, but
only to the extent, caused by (i) the willful misconduct or gross
negligence of the LC Issuer in determining whether a request presented
under any Facility LC issued by it complied with the terms of such
Facility LC or (ii) the LC Issuer's failure to pay under any Facility
LC issued by it after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC. All such
amounts paid by the LC Issuer and remaining unpaid by Asset Acceptance
shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to (x) the rate applicable to Floating Rate Loans
for such day if such day falls on or before the applicable LC Payment
Date and (y) the sum of 2% plus the rate applicable to Floating Rate
Loans for such day if such day falls after such LC Payment Date. The LC
Issuer will pay to each Bank ratably in accordance with its Pro Rata
Share all amounts received by it from Asset Acceptance for application
in payment, in whole or in part, of the Reimbursement Obligation in
respect of any Facility LC issued by the LC Issuer, but only to the
extent such Bank has made payment to the LC Issuer in respect of
23
such Facility LC pursuant to Section 2.12.5. Subject to the terms and
conditions of this Agreement (including without limitation the
submission of a Borrowing Notice in compliance with Section 2.4 and the
satisfaction of the applicable conditions precedent set forth in
Sections 2.5 and 2.6), the Borrower may request an Advance hereunder
for the purpose of satisfying any Reimbursement Obligation.
2.12.7. Obligations Absolute. Asset Acceptance's obligations
under this Section 2.12 shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which Asset Acceptance may have or have had against
the LC Issuer, any Bank or any beneficiary of a Facility LC. Asset
Acceptance further agrees with the LC Issuer and the Banks that the LC
Issuer and the Banks shall not be responsible for, and Asset Acceptance
's Reimbursement Obligation in respect of any Facility LC shall not be
affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, fraudulent or
forged, or any dispute between or among any of the Borrowers, any of
their Affiliates, the beneficiary of any Facility LC or any financing
institution or other party to whom any Facility LC may be transferred
or any claims or defenses whatsoever of any Borrower or of any of its
Affiliates against the beneficiary of any Facility LC or any such
transferee. The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Facility
LC. Asset Acceptance agrees that any action taken or omitted by the LC
Issuer or any Bank under or in connection with each Facility LC and the
related drafts and documents, if done without gross negligence or
willful misconduct, shall be binding upon Asset Acceptance and shall
not put the LC Issuer or any Bank under any liability to Asset
Acceptance. Nothing in this Section 2.12.7 is intended to limit the
right of Asset Acceptance to make a claim against the LC Issuer for
damages as contemplated by the proviso to the first sentence of Section
2.12.6.
2.12.8. Actions of LC Issuer. The LC Issuer shall be entitled
to rely, and shall be fully protected in relying, upon any Facility LC,
draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document reasonably believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the LC Issuer.
The LC Issuer shall be fully justified in failing or refusing to take
any action under this Agreement unless it shall first have received
such advice or concurrence of the Required Banks as it reasonably deems
appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take
any such action. Notwithstanding any other provision of this Section
2.12, the LC Issuer shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement in accordance with a
request of the Required Banks, and such request and any action taken or
failure to act pursuant thereto shall be binding upon the Banks and any
future holders of a participation in any Facility LC.
24
2.12.9. Indemnification. Asset Acceptance hereby agrees to
indemnify and hold harmless each Bank, the LC Issuer and the Agent, and
their respective directors, officers, agents and employees from and
against any and all claims and damages, losses, liabilities, costs or
expenses which such Bank, the LC Issuer or the Agent may incur (or
which may be claimed against such Bank, the LC Issuer or the Agent by
any Person whatsoever) by reason of or in connection with the issuance,
execution and delivery or transfer of or payment or failure to pay
under any Facility LC or any actual or proposed use of any Facility LC,
including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the LC Issuer may incur by reason
of or in connection with (i) the failure of any other Bank to fulfill
or comply with its obligations to the LC Issuer hereunder (but nothing
herein contained shall affect any rights Asset Acceptance may have
against any defaulting Bank) or (ii) by reason of or on account of the
LC Issuer issuing any Facility LC which specifies that the term
"Beneficiary" included therein includes any successor by operation of
law of the named Beneficiary, but which Facility LC does not require
that any drawing by any such successor Beneficiary be accompanied by a
copy of a legal document, satisfactory to the LC Issuer, evidencing the
appointment of such successor Beneficiary; provided that Asset
Acceptance shall not be required to indemnify any Bank, the LC Issuer
or the Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (x) the
willful misconduct or gross negligence of the LC Issuer in determining
whether a request presented under any Facility LC complied with the
terms of such Facility LC or (y) the LC Issuer's failure to pay under
any Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC. Nothing in
this Section 2.12.9 is intended to limit the obligations of Asset
Acceptance under any other provision of this Agreement.
2.12.10. Banks' Indemnification. Each Bank shall, ratably in
accordance with its Pro Rata Share, indemnify the LC Issuer, its
affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by Asset Acceptance) against
any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such
as result from such indemnitees' gross negligence or willful misconduct
or the LC Issuer's failure to pay under any Facility LC after the
presentation to it of a request strictly complying with the terms and
conditions of the Facility LC) that such indemnitees may suffer or
incur in connection with this Section 2.12 or any action taken or
omitted by such indemnitees hereunder.
2.12.11. Facility LC Collateral Account. Asset Acceptance
agrees that it will, upon the request of the Agent or the Required
Banks and until the final expiration date of any Facility LC and
thereafter as long as any amount is payable to the LC Issuer or the
Banks in respect of any Facility LC, maintain a special collateral
account pursuant to arrangements satisfactory to the Agent (the
"Facility LC Collateral Account") at the Agent's office at the address
specified pursuant to Section 8.2, in the name of Asset Acceptance but
under the sole dominion and control of the Agent, for the benefit of
the Banks and in which Asset Acceptance shall have no interest other
than as set forth in Section 6.2. Asset Acceptance hereby pledges,
assigns and grants to the Agent, on behalf of and for the ratable
benefit of the Banks and the LC Issuer, a security interest in all of
25
Asset Acceptance's right, title and interest in and to all funds which
may from time to time be on deposit in the Facility LC Collateral
Account to secure the prompt and complete payment and performance of
the Obligations. The Agent will invest any funds on deposit from time
to time in the Facility LC Collateral Account in certificates of
deposit of Bank One having a maturity not exceeding 30 days. Nothing in
this Section 2.12.11 shall either obligate the Agent to require Asset
Acceptance to deposit any funds in the Facility LC Collateral Account
or limit the right of the Agent to release any funds held in the
Facility LC Collateral Account in each case other than as required by
Section 8.1.
2.12.12. Rights as a Bank. In its capacity as a Bank, the LC
Issuer shall have the same rights and obligations as any other Bank.
ARTICLE III.
PAYMENTS AND PREPAYMENTS OF LOANS
3.1 Principal Payments and Prepayments.
(a) Unless earlier payment is required under this
Agreement, the Borrowers shall pay to the Banks on the Termination Date the
entire outstanding principal amount of the Loans.
(b) The Borrowers may from time to time pay, without
penalty or premium, all outstanding Floating Rate Borrowings, or, in a minimum
aggregate amount of $100,000 or any integral multiple of $100,000 in excess
thereof, any portion of the outstanding Floating Rate Borrowings upon two
Business Days' prior notice to the Agent. The Borrowers may from time to time
pay, subject to the payment of any funding indemnification amounts required by
Section 3.7 but without penalty or premium, all outstanding Eurodollar Rate
Borrowings, or, in a minimum aggregate amount of $1,000,000 or any integral
multiple of $500,000 in excess thereof, any portion of the outstanding
Eurodollar Rate Borrowings upon three Business Days' prior notice to the Agent.
(c) If on any date the Aggregate Outstanding Credit
Exposure of all Banks shall exceed the lesser of (i) the Aggregate Commitment
(including, without limitation, as a result of a reduction under Section 2.2),
or (ii) the amount of the Borrowing Base as of the date of the most recent
Borrowing Base Certificate received by the Agent and the Banks, the Borrowers
shall forthwith pay to the Bank, subject to the payment of any funding
indemnification amounts required by Section 3.7, an amount for application to
the outstanding principal amount of the Loans, such that the aggregate amount of
such payments is not less than the amount of such excess.
3.2 Interest and Interest Payments. The relevant Borrower shall
pay interest to the Banks on the unpaid principal amount of each Loan, for the
period commencing on the date such Loan is made until such Loan is paid in full,
on each Interest Payment Date and at maturity (whether at stated maturity, by
acceleration or otherwise), and thereafter on demand, at, with respect to each
Eurodollar Loan, the applicable Eurodollar Rate for the related Eurodollar
26
Interest Period, and, with respect to each Floating Rate Loan, the Floating
Rate. Notwithstanding the foregoing, the Borrowers shall pay interest on demand
by the Agent at the Overdue Rate on the outstanding principal amount of any Loan
and any other amount payable by the Borrowers hereunder (other than interest) at
any time on or after an Event of Default if required in writing by the Required
Banks. Changes in the rate of interest on that portion of any Borrowing
maintained as a Floating Rate Borrowing will take effect simultaneously with
each change in the Alternate Base Rate. No Interest Period may end after the
Termination Date. Interest accrued on each Floating Rate Borrowing shall be
payable on each Interest Payment Date, commencing with the first such date to
occur after the Effective Date and at maturity. Interest accrued on each
Eurodollar Rate Borrowing shall be payable on the last day of its applicable
Interest Period, on any date on which the Eurodollar Rate Borrowing is prepaid,
whether by acceleration or otherwise, and at maturity. Interest on Eurodollar
Loans and commitment fees shall be calculated for actual days elapsed on the
basis of a 360-day year. Interest shall be payable for the day an Borrowing is
made but not for the day of any payment on the amount paid if payment is
received prior to noon (local time) at the place of payment.
3.3 Payment Method.
(a) All payments to be made by the Borrowers hereunder
will be made to the Agent for the account of the Banks in Dollars and in
immediately available funds not later than 1:00 p.m. Detroit time on the date on
which such payment shall become due at the principal office of the Agent
specified pursuant to Section 8.2. Payments received after 1:00 p.m. Detroit
time shall be deemed to be payments made prior to 1:00 p.m. Detroit time on the
next succeeding Business Day. Each Borrower hereby authorizes the Agent to
charge its accounts with the Agent in order to cause timely payment of amounts
due hereunder to be made (subject to sufficient funds being available in such
accounts for that purpose).
(b) At the time of making each such payment, each
Borrower shall, subject to the other terms and conditions of this Agreement,
specify to the Agent that Borrowing or other obligation of such Borrower
hereunder to which such payment is to be applied. In the event that a Borrower
fails to so specify the relevant obligation or if an Event of Default shall have
occurred and be continuing, the Agent may apply such payments as it may
determine in its sole discretion.
(c) On the day such payments are deemed received, the
Agent shall remit to the Banks at their respective address specified for notices
pursuant to Section 8.2 (except in the case of Reimbursement Obligations for
which the LC Issuer has not been fully indemnified by the Banks, or as otherwise
specifically required hereunder) their pro rata shares of such payments in
immediately available funds. In the case of payments of principal and interest
on any Borrowing, such pro rata shares shall be determined with respect to each
such Bank by the ratio which the outstanding principal balance of its Loan
included in such Borrowing bears to the outstanding principal balance of the
Loans of all of the Banks included in such Borrowing, in the case of payments of
Reimbursement Obligations, such pro rata shares shall be determined with respect
to each such Bank by the ratio which the amount that such Bank has reimbursed
the LC Issuer bears to the outstanding Reimbursement Obligations, and in the
case of fees paid pursuant to Section 2.3 and other amounts payable hereunder
(other than the Agent's fees payable pursuant to Section 2.3(c) and amounts
payable to any Bank under Section 3.6), such pro rata
27
shares shall be determined with respect to each such Bank by the ratio which the
Commitment of such Bank bears to the Commitments of all the Banks.
3.4 No Setoff or Deduction. All payments of principal and interest
on the Loans and other amounts payable by the Borrowers hereunder shall be made
by the Borrowers without setoff or counterclaim, and free and clear of, and
without deduction or withholding for, or on account of, any present or future
taxes, levies, imposts, duties, fees, assessments, or other charges of whatever
nature, imposed by any governmental authority, or by any department, agency or
other political subdivision or taxing authority.
3.5 Payment on Non-Business Day; Payment Computations. Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or any other amount due hereunder
becomes due and payable on a day which is not a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, in the case
of any installment of principal, interest shall be payable thereon at the rate
per annum determined in accordance with this Agreement during such extension.
Computations of interest on Floating Rate Loans shall be made on the basis of a
year of 365 or 366 days, for the actual number of days elapsed, including the
first day but excluding the last day of the relevant period.
3.6 Yield Protection. If, on or after the date of this Agreement,
the adoption of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change in the interpretation or administration thereof by any
governmental or quasi-governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Bank or applicable Lending Installation or the LC Issuer with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:
(a) subjects any Bank or any applicable Lending
Installation or the LC Issuer to any Taxes, or changes the basis of taxation of
payments (other than with respect to Excluded Taxes) to any Bank or the LC
Issuer in respect of its Eurodollar Loans, Facility LCs or participation
therein, or
(b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Bank
or any applicable Lending Installation or the LC Issuer (other than reserves and
assessments taken into account in determining the interest rate applicable to
Eurodollar Rate Borrowings), or
(c) imposes any other condition the result of which is to
increase the cost to any Bank or any applicable Lending Installation or the LC
Issuer of making, funding or maintaining its Eurodollar Loans, or of issuing or
participating in Facility LCs, or reduces any amount receivable by any Bank or
any applicable Lending Installation or the LC Issuer in connection with its
Eurodollar Loans, Facility LCs or participations therein, or requires any Bank
or any applicable Lending Installation or the LC Issuer to make any payment
calculated by reference to the amount of Eurodollar Loans Facility LCs or
participations therein held or interest or LC Fees received by it, by an amount
deemed material by such Bank or the LC issuer as the case may be,
28
and the result of any of the foregoing is to increase the cost to such Bank or
applicable Lending Installation or the LC Issuer, as the case may be, of making
or maintaining its Eurodollar Loans or Commitment or of issuing or participating
in Facility LCs or to reduce the return received by such Bank or applicable
Lending Installation or the LC Issuer, as the case may be, in connection with
such Eurodollar Loans, Commitment, Facility LCs or participations therein, then,
within 15 days of demand by such Bank or the LC Issuer, as the case may be, the
Borrowers shall pay such Bank or the LC Issuer, as the case may be, such
additional amount or amounts as will compensate such Bank or the LC Issuer, as
the case may be, for such increased cost or reduction in amount received.
3.7 Changes in Capital Adequacy Regulations. If a Bank or the LC
Issuer determines the amount of capital required or expected to be maintained by
such Bank or the LC Issuer, any Lending Installation of such Bank or the LC
Issuer or any corporation controlling such Bank or the LC Issuer is increased as
a result of a Change, then, within 15 days of demand by such Bank or the LC
Issuer, the Borrowers shall pay such Bank or the LC Issuer the amount necessary
to compensate for any shortfall in the rate of return on the portion of such
increased capital which such Bank or the LC Issuer reasonably determines is
attributable to this Agreement, its Outstanding Credit Exposure or its
Commitment to make Loans and issue or participate in Facility LCs, as the case
may be, hereunder (after taking into account such Bank's or the LC Issuer's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Bank or the LC Issuer or any
Lending Installation or any corporation controlling any Bank or the LC Issuer.
"Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in
effect in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
3.8 Availability of Types of Borrowings. If any Bank determines
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Banks determine that (i) deposits of
a type and maturity appropriate to match fund Eurodollar Rate Borrowings are not
available or (ii) the interest rate applicable to Eurodollar Rate Borrowings
does not accurately reflect the cost of making or maintaining Eurodollar Rate
Borrowings, then the Agent shall suspend the availability of Eurodollar Rate
Borrowings and require any affected Eurodollar Rate Borrowings to be repaid or
converted to Floating Rate Borrowings, subject to the payment of any funding
indemnification amounts required by Section 3.9.
3.9 Funding Indemnification. If any payment of a Eurodollar Rate
Borrowing occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Rate Borrowing is not made on the date specified by a Borrower for
any reason other than default by the Banks, the Borrowers will
29
indemnify each Bank for any loss (but not loss of profit or margin) or cost
incurred by it resulting therefrom, including, without limitation, any loss or
cost in liquidating or employing deposits acquired to fund or maintain such
Eurodollar Rate Borrowing.
3.10 Taxes. (a) All payments by the Borrowers to or for the account
of any Bank, the LC Issuer or the Agent hereunder or under any Note or Facility
LC Application shall be made free and clear of and without deduction for any and
all Taxes. If any Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Bank, the LC Issuer or the Agent,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.10) such Bank, the LC Issuer or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions, (iii) such
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (iv) such Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.
(b) In addition, the Borrowers hereby agree to pay any
present or future stamp or documentary taxes and any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
under any Note or Facility LC Application or from the execution or delivery of,
or otherwise with respect to, this Agreement or any Note or Facility LC
Application ("Other Taxes").
(c) The Borrowers hereby agree to indemnify the Agent,
the LC Issuer and each Bank for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed on amounts
payable under this Section 3.10) paid by the Agent, the LC Issuer or such Bank
as a result of its Commitment, any Loans made by it hereunder, or otherwise in
connection with its participation in this Agreement and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
Payments due under this indemnification shall be made within 30 days of the date
the Agent, the LC Issuer or such Bank makes demand therefor pursuant to Section
3.11.
(d) Each Bank that is not incorporated under the laws of
the United States of America or a state thereof (each a "Non-U.S. Bank") agrees
that it will, not later than the date it becomes a party to this Agreement, (i)
deliver to the Agent two duly completed copies of United States Internal Revenue
Service Form W-8BEN or W-8ECI, certifying in either case that such Bank is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, and (ii) deliver to the
Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and
certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Bank further undertakes to deliver to each of the
Borrowers and the Agent (x) renewals or additional copies of such form (or any
successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the
most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Borrowers or the Agent. All forms
or amendments described in the preceding sentence shall certify that such Bank
is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change
30
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form or amendment with respect to it and such Bank advises the Borrowers and the
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(e) For any period during which a Non-U.S. Bank has
failed to provide the Borrowers with an appropriate form pursuant to clause (d),
above (unless such failure is due to a change in treaty, law or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, occurring subsequent to the date on which a form originally was
required to be provided), such Non-U.S. Bank shall not be entitled to
indemnification under this Section 3.10 with respect to Taxes imposed by the
United States; provided that, should a Non-U.S. Bank which is otherwise exempt
from or subject to a reduced rate of withholding tax become subject to Taxes
because of its failure to deliver a form required under clause (iv), above, the
Borrowers shall take such steps as such Non-U.S. Bank shall reasonably request
to assist such Non-U.S. Bank to recover such Taxes.
(f) Any Bank that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this Agreement or
any Note pursuant to the law of any relevant jurisdiction or any treaty shall
deliver to the Borrowers (with a copy to the Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate.
(g) If the U.S. Internal Revenue Service or any other
governmental authority of the United States or any other country or any
political subdivision thereof asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or properly completed, because such Bank
failed to notify the Agent of a change in circumstances which rendered its
exemption from withholding ineffective, or for any other reason), such Bank
shall indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax, withholding therefor, or otherwise, including penalties and
interest, and including taxes imposed by any jurisdiction on amounts payable to
the Agent under this subsection, together with all costs and expenses related
thereto (including attorneys fees and time charges of attorneys for the Agent,
which attorneys may be employees of the Agent). The obligations of the Banks
under this Section 3.10(g) shall survive the payment of the Obligations and
termination of this Agreement.
3.11 Bank Statements; Survival of Indemnity. To the extent
reasonably possible, each Bank shall designate an alternate Lending Installation
with respect to its Eurodollar Loans to reduce any liability of the Borrower to
such Bank under Sections 3.6, 3.7 and 3.10 or to avoid the unavailability of
Eurodollar Rate Borrowings under Section 3.8, so long as such designation is
not, in the judgment of such Bank, disadvantageous to such Bank. Each Bank shall
deliver a written statement of such Bank to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 3.6, 3.7, 3.9 or 3.10. Such
written statement shall set forth in reasonable detail the calculations upon
which such Bank determined such amount and shall be final, conclusive and
binding on the Borrowers in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as
31
though each Bank funded its Eurodollar Loan through the purchase of a deposit of
the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that is
the case or not. Unless otherwise provided herein, the amount specified in the
written statement of any Bank shall be payable on demand after receipt by the
Borrowers of such written statement. The obligations of the Borrowers under
Sections 3.6, 3.7, 3.9 and 3.10 shall survive payment of the Obligations and
termination of this Agreement.
3.12 Replacement of Bank. If any Borrower is required pursuant to
Section 3.6, 3.7 or 3.10 to make any additional payment to any Bank or if any
Bank's obligation to make or continue, or to convert Floating Rate Advances
into, Eurodollar Advances shall be suspended pursuant to Section 3.8 (any Bank
so affected an "Affected Bank"), the Borrowers may elect, if such amounts
continue to be charged or such suspension is still effective, to replace such
Affected Bank as a Bank party to this Agreement, provided that no Default or
Event of Default shall have occurred and be continuing at the time of such
replacement, and provided further that, concurrently with such replacement, (i)
another bank or other entity which is reasonably satisfactory to the Borrowers
and the Agent shall agree, as of such date, to purchase for cash the Loans and
other Obligations due to the Affected Bank pursuant to an assignment
substantially in the form of Exhibit G and to become a Bank for all purposes
under this Agreement and to assume all obligations of the Affected Bank to be
terminated as of such date and to comply with the requirements of Section 7.19
applicable to assignments, and (ii) the Borrowers shall pay to such Affected
Bank in same day funds on the day of such replacement (A) all interest, fees and
other amounts then accrued but unpaid to such Affected Bank by the Borrowers
hereunder to and including the date of termination, including without limitation
payments due to such Affected Bank under Sections 3.6, 3.7 and 3.10, and (B) an
amount, if any, equal to the payment which would have been due to such Bank on
the day of such replacement under Section 3.9 had the Loans of such Affected
Bank been prepaid on such date rather than sold to the replacement Bank.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Banks and the Agent that:
4.1 Corporate Existence and Power. Each Borrower is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and is duly qualified to do business, and is
in good standing, in all additional jurisdictions where such qualification is
necessary under applicable law. Each Borrower has all requisite power to own or
lease the properties used in its business and to carry on its business as now
being conducted and as proposed to be conducted, and to execute and deliver the
Loan Documents to which it is a party and to engage in the transactions
contemplated by this Agreement.
4.2 Authority. The execution, delivery and performance by each
Borrower of this Agreement, the Security Documents and the Notes have been duly
authorized by all necessary company action and are not in contravention of any
law, rule or regulation, or any judgment,
32
decree, writ, injunction, order or award of any arbitrator, court or
governmental authority, or of the terms of such Borrower's charter or operating
agreement or of any contract or undertaking to which such Borrower is a party or
by which such Borrower or its property may be bound or affected and will not
result in the imposition of any Lien except for Permitted Liens.
4.3 Binding Effect. This Agreement is, and each Security Document
to which a Borrower is a party and the Notes when delivered hereunder will be,
legal, valid and binding obligations of the Borrowers enforceable against each
Borrower in accordance with their respective terms. The Guaranty to which each
Guarantor is a party when delivered hereunder will be a legal, valid and binding
obligation of such Guarantor enforceable against it in accordance with its
terms.
4.4 Subsidiaries. As of the Effective Date, Schedule 4.4 hereto
correctly sets forth the name, jurisdiction of formation and ownership of each
Subsidiary, direct or indirect, of any Borrower. Each such Subsidiary and each
person becoming a Subsidiary of any Borrower after the Effective Date is and
will be a limited liability company, partnership or corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation and is and will be duly qualified to do business in each additional
jurisdiction where such qualification is or may be necessary under applicable
law. Each Subsidiary of the Borrower has and will have all requisite power to
own or lease the properties used in its business and to carry on its business as
now being conducted and as proposed to be conducted. All outstanding shares of
capital stock of each class or other ownership interests of each Subsidiary of
any Borrower have been and will be validly issued and (to the extent such
concepts are relevant with respect to such ownership interests) are and will be
fully paid and nonassessable and, except as otherwise indicated in Schedule 4.4
hereto or disclosed in writing to the Banks from time to time, are and will be
owned, beneficially and of record, by such Borrower or another Subsidiary of
such Borrower free and clear of any Liens.
4.5 Litigation. There is no action, suit or proceeding pending or,
to the best of any Borrower's knowledge, threatened against or affecting any
Borrower or any Subsidiary of any Borrower before or by any court, governmental
authority or arbitrator, which if adversely decided might result, either
individually or collectively, in any material adverse change in the business,
properties, operations or condition, financial or otherwise, of any Borrower or
any Subsidiary of any Borrower or in any material adverse effect on the
legality, validity or enforceability of the Loan Documents and, to the best of
any Borrower's knowledge, there is no basis for any such action, suit or
proceeding.
4.6 Financial Condition. The consolidated balance sheet of the
Existing Borrowers under the Existing Credit Agreement and their Subsidiaries
(the "Companies") and the consolidated statements of income, retained earnings
and cash flows of the Companies for the fiscal year ended December 31, 2001 and
reported on by Xxxxxx Xxxxxxxx, independent certified public accountants, and
the interim consolidated balance sheet and interim consolidated statements of
income, retained earnings and cash flows of the Companies, as of or for the
six-month period ended on June 30, 2002, copies of which have been furnished to
the Bank, fairly present, and the consolidated financial statements of Holdings
and its Subsidiaries delivered pursuant to Section 5.1(d) will fairly present,
the consolidated financial position of the Borrowers and their Subsidiaries as
at the respective dates thereof, and the consolidated results
33
of operations of the Borrowers and their Subsidiaries for the respective periods
indicated, all in accordance with generally accepted accounting principles
consistently applied (subject, in the case of said interim statements, to
year-end audit adjustments). Prior to the Recapitalization, there has been no
material adverse change in the business, properties, operations or condition,
financial or otherwise, of the Companies since December 31, 2001. As of the
Effective Date, there is no material Contingent Liability of any of the
Companies that is not reflected in such financial statements or in the notes
thereto.
4.7 Use of Loans. The Borrowers will use the proceeds of the Loans
to finance the Recapitalization, to retire the indebtedness under the Existing
Credit Agreement, and to finance the purchase of portfolios of charged-off
Receivables and for general corporate purposes. None of the Borrowers or any
Subsidiary of any Borrower extends or maintains, in the ordinary course of
business, credit for the purpose, whether immediate, incidental, or ultimate, of
buying or carrying margin stock (within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
Loan will be used for the purpose, whether immediate, incidental, or ultimate,
of buying or carrying any such margin stock or maintaining or extending credit
to others for such purpose. After applying the proceeds of each Loan such margin
stock will not constitute more than 25% of the value of the assets (either of
any Borrower alone or of such Borrower and its Subsidiaries on a consolidated
basis) that are subject to any provisions of this Agreement that may cause the
Loan to be deemed secured, directly or indirectly, by margin stock.
4.8 Consents, Etc. Except for such consents, approvals,
authorizations, declarations, registrations or filings delivered by the
Borrowers pursuant to Section 2.5(e), if any, each of which is in full force and
effect, no consent, approval or authorization of or declaration, registration or
filing with any governmental authority or any nongovernmental person or entity,
including without limitation any creditor, lessor or stockholder of any Borrower
or any Subsidiary of any Borrower, is required on the part of any Borrower or
any Guarantor in connection with the execution, delivery and performance of the
Loan Documents or the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of the Loan Documents.
4.9 Taxes. As of the Effective Date, the Companies, the Borrowers
and each of their Subsidiaries have filed all tax returns (federal, state and
local) required to be filed and have paid all taxes shown thereon to be due,
including interest and penalties, or have established adequate financial
reserves on their respective books and records for payment thereof. None of the
Borrower, the Companies or any Subsidiary of the Companies knows of any actual
or proposed tax assessment or any basis therefor, and no extension of time for
the assessment of deficiencies in any federal or state tax has been granted by
any of the Companies or any such Subsidiary.
4.10 Title to Properties. Except as otherwise disclosed in the
latest balance sheet delivered pursuant to Section 4.6 or 5.1(d) of this
Agreement, the Borrowers have good and marketable fee simple title to all of the
real property, and a valid and indefeasible ownership interest in all of the
other properties and assets, reflected in said balance sheet or subsequently
acquired by the Borrowers. All of such properties and assets are free and clear
of any Lien except for Permitted Liens.
34
4.11 ERISA. As of the Effective Date, the Companies, the Borrowers,
their Subsidiaries, their ERISA Affiliates and their Plans will be in compliance
in all material respects with those provisions of ERISA and of the Code which
are applicable with respect to any Plan. No Prohibited Transaction and no
Reportable Event has occurred with respect to any Plan. None of the Borrowers,
any of their Subsidiaries or any of the ERISA Affiliates is an employer with
respect to any Multiemployer Plan. The Borrowers, their Subsidiaries and the
ERISA Affiliates have met the minimum funding requirements under ERISA and the
Code with respect to each of their respective Plans, if any, and have not
incurred any liability to the PBGC or any Plan. The execution, delivery and
performance of the Loan Documents and the operative documents of the
Recapitalization do not constitute a Prohibited Transaction. There is no
material Unfunded Benefit Liability with respect to any Plan.
4.12 Disclosure. No report or other information furnished in
writing by or on behalf of the Companies or any Borrower to any Bank or the
Agent in connection with the negotiation or administration of this Agreement
contains any material misstatement of fact or omits to state any material fact
or any fact necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made. Neither this Agreement, the
Notes, the Security Documents nor any other document, certificate, or report or
statement or other information furnished to any Bank or the Agent by or on
behalf of the Borrowers in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances in which they were made. There is no
fact known to such Borrower which materially and adversely affects, or which in
the future may (so far as such Borrower can now foresee) materially and
adversely affect, the business, properties, operations or condition, financial
or otherwise, of such Borrower or any of its Subsidiaries, which has not been
set forth in this Agreement or in the other documents, certificates, statements,
reports and other information furnished in writing to the Banks by or on behalf
of such Borrower in connection with the transactions contemplated thereby.
4.13 Environmental Matters. Each of the Borrowers and their
Subsidiaries is in compliance with all Environmental Laws in jurisdictions in
which any of them owns or operates, or has owned or operated, a facility or
site, or arranges or has arranged for disposal or treatment of hazardous
substances, solid wastes or other wastes or holds or has held any interest in
real property or otherwise. No demand, claim, notice, action, administrative
proceeding, investigation or inquiry, whether brought by any governmental
authority, private person or entity or otherwise, arising under, relating to or
in connection with any Environmental Laws is pending or threatened against any
Borrower or any of its Subsidiaries, any real property in which any Borrower or
any such Subsidiary holds or has held an interest or any past or present
operation of the Companies, the Borrowers or any such Subsidiary.
4.14 Common Enterprise. The Borrowers are engaged in business as an
integrated group. The successful and economical operation of the integrated
group requires financing on such basis that credit supplied by the Banks is
available to the Borrowers and may be transferred among them after being
disbursed by the Banks. The Loans made by the Banks to the Borrowers on a joint
and several basis will benefit, directly or indirectly, all of the Borrowers and
their Subsidiaries by strengthening and providing significant economies to the
integrated group,
35
inasmuch as the successful operation and condition of each Borrower is dependent
upon the continued successful performance of the integrated group as a whole.
ARTICLE V.
COVENANTS
5.1 Affirmative Covenants. Each of the Borrowers covenants and
agrees that, until the Termination Date and thereafter until the payment in full
of the principal of and accrued interest on the Notes and the performance of all
other obligations of the Borrowers under this Agreement, unless the Required
Banks shall otherwise consent in writing, it shall, and shall cause each of its
Subsidiaries to:
(a) Preservation of Existence, Etc. Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and its qualification as a foreign company in good standing
in each jurisdiction in which such qualification is necessary under applicable
law and the rights, licenses, permits (including those required under
Environmental Laws), franchises, patents, copyrights, trademarks and trade names
material to the conduct of its businesses; and defend all of the foregoing
against all claims, actions, demands, suits or proceedings at law or in equity
or by or before any governmental instrumentality or other agency or regulatory
authority.
(b) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and orders of any
governmental authority whether federal, state, local or foreign (including
without limitation ERISA, the Code, Environmental Laws and all Requirements of
Law), in effect from time to time; and pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income, revenues or property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might give rise to Liens upon such properties or
any portion thereof, except to the extent that payment of any of the foregoing
is then being contested in good faith by appropriate legal proceedings and with
respect to which adequate financial reserves have been established on the books
and records of such Borrower or such Subsidiary, as the case may be, as
determined in accordance with generally accepted accounting principles.
(c) Maintenance of Properties; Insurance. Maintain,
preserve and protect all property that is material to the conduct of its
business or any of its Subsidiaries and keep such property in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times in accordance with customary and prudent
business practices for similar businesses; and, in addition to that insurance
required under the Security Documents, maintain in full force and effect
insurance with responsible and reputable insurance companies or associations in
such amounts, on such terms and covering such risks, including fire and other
risks insured against by extended coverage, as is usually carried by companies
engaged in similar businesses and owning similar properties similarly situated
and maintain in full force and effect
36
public liability insurance, insurance against claims for personal injury or
death or property damage occurring in connection with any of its activities or
any properties owned, occupied or controlled by it, in such amount as it shall
reasonably deem necessary, and maintain such other insurance as may be required
by law or as may be reasonably requested by the Agent for purposes of assuring
compliance with this Section 5.1(c).
(d) Reporting Requirements. Furnish to the Banks and the
Agent the following:
(i) Promptly and in any event within three
calendar days after becoming aware of the occurrence of (A) any Event of Default
or Default, (B) the commencement of any material litigation against, by or
affecting such Borrower or any Subsidiary of such Borrower, and any material
adverse developments therein, or (C) entering into any material contract or
undertaking that is not entered into in the ordinary course of business or (D)
any development in the business or affairs of such Borrower or any such
Subsidiary which has resulted in or which is likely, in the reasonable judgment
of such Borrower, to result in a material adverse change in the business,
properties, operations or condition, financial or otherwise, of such Borrower or
any such Subsidiary, taken as a whole, a statement of the chief financial
officer of such Borrower setting forth details of each such Event of Default or
Default and such litigation, material contract or undertaking or development and
the action which such Borrower or such Subsidiary, as the case may be, has taken
and proposes to take with respect thereto, if any;
(ii) As soon as available and in any event within
45 days after the end of each of the first three fiscal quarters of each fiscal
year of the Borrowers, the consolidated balance sheet of Holdings and its
consolidated Subsidiaries as of the end of such quarter, and the related
consolidated statements of income, retained earnings and cash flows for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding date or period of the preceding
fiscal year, all in reasonable detail and duly certified (subject to year-end
audit adjustments) by the chief financial officer of Holdings as having been
prepared in accordance with generally accepted accounting principles;
(iii) As soon as available and in any event within
120 days after the end of each fiscal year of the Borrowers, a copy of the
consolidated balance sheet of Holdings and its consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of income,
retained earnings and cash flows of Holdings and its consolidated Subsidiaries
for such fiscal year, with a customary audit report of an independent certified
public accountants selected by Holdings and acceptable to the Required Banks,
without qualifications unacceptable to the Required Banks, together with a
certificate of such accountants stating (A) that they have reviewed this
Agreement and stating further whether, in the course of their review of such
financial statements, they have become aware of any Event of Default or Default,
and, if such an Event of Default or Default is continuing, a statement setting
forth the nature and status thereof, and (B) that a computation by such Borrower
(which computation shall accompany such certificate and shall be in reasonable
detail) showing compliance with Section 5.2(a), (b), (c), and (d) hereof is in
conformity with the terms of this Agreement;
37
(iv) Not later than the 45th day after the end of
each fiscal quarter of such Borrower, including, without limitation, the fourth
fiscal quarter of each fiscal year of such Borrower, a certificate of the chief
financial officer of such Borrower stating (a) that no Event of Default or
Default has occurred and is continuing or, if an Event of Default or Default has
occurred and is continuing, a statement setting forth the details thereof and
the action which such Borrower have taken and propose to take with respect
thereto, and (b) that a computation (which computation shall accompany such
certificate and shall be in reasonable detail) showing compliance with Section
5.2(a), (b), (c), (d) and (o) hereof in conformity with the terms of this
Agreement, and in addition, not later than the 45th day after the end of each
fiscal quarter of such Borrower, including, without limitation, the fourth
fiscal quarter of each fiscal year of such Borrower, a report, in form and
substance satisfactory to the Banks, with respect to the aggregate impairment
reserve of such Borrower and the changes therein since the last quarterly report
delivered pursuant to this Section;
(v) Not later that the 15th day after the end of
each month, the following, prepared as of the close of business on the last day
of each such month, in form and detail satisfactory to the Agent, and all
certified as true and correct by the chief financial officer of the Borrower:
(A) a Borrowing Base Certificate,
together with supporting schedules, setting forth such information as the Agent
may request with respect to the aging, value and other information relating to
the computation of the Borrowing Base and the eligibility of any property or
assets included in such computation;
(B) a bulk purchase report showing all
acquired Receivables Portfolios of the Borrowers and the collection performance
of each such Receivables Portfolio; and
(C) an active balance report of the
Borrowers setting forth a summary and aging of all Receivables, broken out by
Receivables Portfolios, and identifying all Receivables on which any Borrower
has collected any payment during the immediately preceding period of 90 days;
(vi) Promptly and in any event within 10 Business
Days after receiving or becoming aware thereof, (A) a copy of any notice of
intent to terminate any Plan filed with the PBGC, (B) a statement of the chief
financial officer of such Borrower setting forth the details of the occurrence
of any Reportable Event with respect to any Plan, (C) a copy of any notice that
such Borrower, any Subsidiary of such Borrower or any ERISA Affiliate may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or to appoint a trustee to administer any Plan, or (D) a copy of any notice
of failure to make a required installment or other payment within the meaning of
Section 412(n) of the Code or Section 302(f) of ERISA with respect to a Plan;
(vii) Promptly upon request by the Agent, a copy
of any management letter or comparable analysis prepared by the auditors for
such Borrower or any of its Subsidiaries; and
38
(viii) Promptly, such other information respecting
the business, properties, operations or condition, financial or otherwise, of
such Borrower or any of its Subsidiaries as the Agent or any Bank may from time
to time reasonably request.
(e) Accounting, Access to Records, Books, Etc. Maintain a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in accordance
with generally accepted accounting principles and to comply with the
requirements of this Agreement and, at any reasonable time and from time to
time, (i) permit any Bank or the Agent or any agents or representatives thereof
to examine and make copies of and abstracts from the records and books of
account of, and visit the properties of such Borrower and its Subsidiaries, and
to discuss the affairs, finances and accounts of such Borrower and its
Subsidiaries with their respective directors, officers, employees and
independent auditors, and by this provision such Borrower does hereby authorize
such persons to discuss such affairs, finances and accounts with any Bank or the
Agent, and (ii) permit independent agents or representatives acceptable to the
Required Banks to conduct an annual comprehensive field audit of such Borrower's
books, records, properties and assets, including, without limitation, all
collateral subject to the Security Documents, at the expense of such Borrower.
(f) Further Assurances. Execute and deliver, within 30
days after request therefor by the Agent or the Required Banks, all further
instruments and documents and take all further action that may be necessary or
desirable, or that the Agent or the Required Banks may request, in order to give
effect to, and to aid in the exercise and enforcement of the rights and remedies
of the Agent and the Banks under. In addition, each Borrower agrees to deliver
to the Agent (with copies for each of the Banks) from time to time upon the
acquisition or creation of any Subsidiary not listed in Schedule 4.4 hereto
supplements to Schedule 4.4 such that such Schedule, together with such
supplements, shall at all times accurately reflect the information provided for
thereon. Nothing herein shall be deemed to limit the restrictions of Section
5.2(f).
(g) Additional Security and Collateral. Promptly, and in
any event within 30 days after request therefor by the Agent or the Required
Banks, (i) execute and deliver, and cause each Subsidiary of such Borrower to
execute and deliver, additional Security Documents sufficient to grant to the
Agent for the benefit of the Agent and the Banks liens and security interests in
any after-acquired property of the types described in Section 2.7, and (ii)
cause each Person becoming a domestic Subsidiary of such Borrower after the
Effective Date to execute and deliver to the Banks and the Agent a Guaranty and
other Security Documents, together with other related items described in Section
2.5, sufficient to grant to the Agent of the benefit of the Banks and the Agent
security interests in substantially all the personal property assets of such
Person described in Section 2.7. Such Borrower shall notify the Agent, within 10
days after the occurrence thereof, of the acquisition of any property by such
Borrower that is not subject to the existing Security Documents, any person's
becoming a Subsidiary of such Borrower, and any other event or condition that
may require additional action of any nature in order to preserve the
effectiveness and perfected status of the liens and security interests of the
Agent and the Banks with respect to such property pursuant to the Security
Documents. Nothing herein shall be deemed to limit the restrictions of Section
5.2(f).
39
5.2 Negative Covenants. Until the Termination Date and thereafter
until the payment in full of the principal of and accrued interest on the Notes
and the performance of all other obligations of the Borrowers under this
Agreement, each Borrower agrees that, unless the Required Banks shall otherwise
consent in writing, it shall not, and shall not permit any of its Subsidiaries
to (it being understood that for any period ending on or prior to the
Recapitalization, the combined Consolidated Adjusted EBITDA, Consolidated
Cumulative Net Income and Consolidated Modified Debt Service of Asset Acceptance
Corp. and Xxx Acceptance Corp. shall be used for computing the following ratios
of Asset Acceptance, LLC, and the Consolidated Adjusted EBITDA, Consolidated
Cumulative Net Income and Consolidated Modified Debt Service of Financial Credit
Corp, Consumer Credit Corp. and CFC Financial Corp. shall be used for computing
the following ratios of Financial Credit, LLC, Consumer Credit, LLC and CFC
Financial, LLC, respectively):
(a) Ratio of Total Liabilities to Consolidated Adjusted
EBITDA. Permit or suffer the ratio of (i) the Consolidated Total Liabilities of
the Borrowers and their consolidated Subsidiaries to (ii) the Consolidated
Adjusted EBITDA of the Borrowers and their consolidated Subsidiaries at any time
to exceed 2.0 to 1.0; such ratio to be determined as of the last day of each
fiscal quarter of the Borrowers for the period of four fiscal quarters of the
Borrowers then ending.
(b) Tangible Capital Funds. Permit or suffer the
Consolidated Tangible Capital Funds of the Borrowers and their consolidated
Subsidiaries at any time to be less than the sum of (i) $20,000,000, plus (ii)
50% of Consolidated Cumulative Net Income of the Borrowers and their
consolidated Subsidiaries for the period commencing January 1, 2002.
(c) Ratio of Total Liabilities to Tangible Capital Funds.
Permit or suffer the ratio of the Consolidated Total Liabilities of the
Borrowers and their consolidated Subsidiaries to the Tangible Capital Funds of
the Borrowers and their consolidated Subsidiaries to be greater than 3.0 to 1.0;
such ratio to be determined as of the last day of each fiscal quarter of the
Borrowers.
(d) Debt Service Coverage Ratio. Permit or suffer the
ratio of (i) the Consolidated Adjusted EBITDA of the Borrowers to (ii)
Consolidated Modified Debt Service of the Borrowers to be less than 1.5 to 1.0,
such ratio to be determined as of the last day of each fiscal quarter of the
Borrowers.
(e) Indebtedness; Contingent Liabilities. Create, incur,
assume or in any manner become liable in respect of, or suffer to exist, any
Indebtedness or other Contingent Liabilities other than:
(i) The Loans and the Reimbursement Obligations;
(ii) The Indebtedness described in Schedule
5.2(e) hereto, having the same terms as those existing on the date of this
Agreement, but no extension or renewal thereof shall be permitted;
40
(iii) Indebtedness in aggregate outstanding
principal amount not exceeding $2,000,000 which is secured by one or more liens
permitted by Section 5.2(f)(vi) hereof;
(iv) Subordinated Debt; and
(v) Rate Management Transactions.
(f) Liens. Create, incur or suffer to exist any Lien on
any of the assets, rights, revenues or property, real, personal or mixed,
tangible or intangible, whether now owned or hereafter acquired, of any Borrower
or any Subsidiary of any Borrower, other than:
(i) Liens for taxes not delinquent or for taxes
being contested in good faith by appropriate proceedings and as to which
adequate financial reserves have been established on its books and records;
(ii) Liens (other than any Lien imposed by ERISA)
created and maintained in the ordinary course of business which are not material
in the aggregate, and which would not have a material adverse effect on the
business or operations of any Borrower or any of its Subsidiaries and which
constitute (A) pledges or deposits under worker's compensation laws,
unemployment insurance laws or similar legislation, (B) good faith deposits in
connection with bids, tenders, contracts or leases to which such Borrower or any
of its Subsidiaries is a party for a purpose other than borrowing money or
obtaining credit, including rent security deposits, (C) liens imposed by law,
such as those of carriers, warehousemen and mechanics, if payment of the
obligation secured thereby is not yet due, (D) Liens securing taxes, assessments
or other governmental charges or levies not yet subject to penalties for
nonpayment, and (E) pledges or deposits to secure public or statutory
obligations of such Borrower or any such Subsidiary, or surety, customs or
appeal bonds to which such Borrower or any such Subsidiary is a party;
(iii) Liens affecting real property which
constitute minor survey exceptions or defects or irregularities in title, minor
encumbrances, easements or reservations of, or rights of others for, rights of
way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of such real property,
provided that all of the foregoing, in the aggregate, do not at any time
materially detract from the value of said properties or materially impair their
use in the operation of the businesses of such Borrower or any of its
Subsidiaries;
(iv) Liens created pursuant to the Security
Documents and Liens expressly permitted by the Security Documents;
(v) Each Lien described in Schedule 5.2(f)
hereto may be suffered to exist upon the same terms as those existing on the
Effective Date;
(vi) Any Lien created to secure payment of a
portion of the purchase price of or existing at the time of acquisition of, any
tangible fixed asset acquired by the Borrower or any of their Subsidiaries may
be created or suffered to exist upon such fixed asset if the outstanding
principal amount of the Indebtedness secured by such Lien does not at any time
exceed 100% of the purchase price paid by the Borrower or such Subsidiary for
such fixed asset,
41
and the aggregate principal amount of all Indebtedness secured by such Liens
does not exceed $2,000,000, provided that such Lien does not encumber any other
asset at any time owned by the Borrower or such Subsidiary, and provided,
further, that not more than one such Lien shall encumber such fixed asset at any
one time;
(vii) licenses, leases or subleases granted to
third parties in the ordinary course of business not interfering in any material
respect with the business of such Borrower or any of its Subsidiaries;
(viii) Liens arising from precautionary UCC
financing statements regarding operating leases permitted by this Agreement; and
(ix) Liens arising from judgments, decrees or
attachment in circumstances not constituting an Event of Default under Section
6.1(f), provided that cash or other property (other than proceeds of insurance
payable by reason of such judgments, decrees or attachments) may only be pledged
by a Borrower or any of its Subsidiaries as security therefor to the extent the
amount of such cash plus the fair market value of such other property does not
exceed $250,000 in the aggregate.
(g) Merger; Acquisitions; Etc. Purchase or otherwise
acquire, whether in one or a series of transactions, all or a substantial
portion of the business, assets, rights, revenues or property, real, personal or
mixed, tangible or intangible, of any person, or all or a substantial portion of
the capital stock of or other ownership interest in any other person; nor merge
or consolidate or amalgamate with any other person or take any other action
having a similar effect; nor enter into any joint venture or similar arrangement
with any other person; nor otherwise create or acquire any Subsidiary, provided,
however, that this Section 5.2(g) shall not prohibit any merger, consolidation
or amalgamation or acquisition by any Borrower or any Subsidiary if (i) such
Borrower or such Subsidiary shall be the surviving or continuing corporation
thereof, (ii) immediately before and after such merger, consolidation or
amalgamation or acquisition, no Default or Event of Default shall exist or shall
have occurred and be continuing and the representations and warranties contained
in Article IV shall be true and correct on and as of the date thereof (both
before and after such merger or acquisition is consummated) as if made on the
date such merger or acquisition is consummated, and (iii) prior to the
consummation of such merger or acquisition, such Borrower shall have provided to
the Banks and the Agent an opinion of counsel and a certificate of the chief
financial officer of such Borrower (attaching computations to demonstrate
compliance with all financial covenants hereunder), each stating that such
merger or acquisition complies with this Section 5.2(g) and that any other
conditions under this Agreement relating to such transaction have been
satisfied.
In addition, this Section 5.2(g) shall not prohibit the Borrowers or
any of their Subsidiaries from consummating any of the following transactions:
(v) the assets of any Subsidiary of any Borrower may be
transferred to such Borrower or any wholly-owned domestic Subsidiary of such
Borrower, and any Subsidiary of any Borrower may be merged with and into, or be
voluntarily dissolved or liquidated into, such Borrower or any wholly-owned
domestic Subsidiary of such Borrower, so long as such Borrower or such
wholly-owned Subsidiary, as the case may be, is the surviving company of any
such
42
merger, dissolution or liquidation, and if the surviving company is a
Subsidiary, such Subsidiary shall have delivered to the Agent for the benefit of
the Banks a Guaranty and a Security Agreement;
(w) the Borrowers and their wholly-owned domestic Subsidiaries may
sell or otherwise transfer accounts receivable and/or inventory between or among
themselves in the ordinary course of business for resale by such Borrowers or
such wholly-owned domestic Subsidiaries as the case may be;
(x) the Borrowers and any of their Subsidiaries may lease, as
lessor, equipment, machinery or its real property, and license, in the ordinary
course of business, patents, trademarks, copyrights and know-how, to one or more
Borrowers or their wholly-owned Subsidiaries, so long as such lease or license
is for fair market value (determined in good faith by the managers, members or
senior management of such lessor);
(y) subject to compliance with Section 2.7, 5.1(f) and 5.1(g), the
Borrowers or any of their wholly-owned Subsidiaries may create wholly-owned
Subsidiaries; and
(z) the Recapitalization.
(h) Disposition of Assets; Etc. Sell, lease, license,
transfer, assign or otherwise dispose of all or a substantial portion of its
business, assets, rights, revenues or property, real, personal or mixed,
tangible or intangible, whether in one or a series of transactions, other than
inventory or Receivables sold in the ordinary course of business upon customary
credit terms and sales of scrap or obsolete material or equipment.
(i) Inconsistent Agreements. Enter into any agreement
containing any effective provision which would be violated or breached by this
Agreement or any of the transactions contemplated hereby or by performance by
such Borrower or its Subsidiaries of any of their obligations in connection
therewith in any material respect.
(j) Nature of Business. Make any substantial change in
the nature of its business from that engaged in on the date of this Agreement by
its predecessor Existing Borrower or engage in any other businesses other than
those in which its predecessor Existing Borrower is engaged on the date of this
Agreement.
(k) Payments and Modification of Subordinated Debt.
Except as expressly permitted under the terms of the related subordination
agreements in favor of the Banks and the Agent, make any optional payment,
prepayment or redemption of any Subordinated Debt, nor amend or modify, or
consent or agree to any amendment or modification, which would shorten any
maturity or increase the amount of any payment of principal or increase the rate
(or require earlier payment) of interest on any such Subordinated Debt, nor
amend any agreement under which any Subordinated Debt is issued or created or
otherwise related thereto, nor enter into any agreement or arrangement providing
for the defeasance of any Subordinated Debt.
(l) Dividends and Other Restricted Payments. Make, pay,
declare or authorize any dividend, payment or other distribution in respect of
any class of its membership
43
interests or any dividend, payment or distribution in connection with the
redemption, purchase, retirement or other acquisition, directly or indirectly,
of its membership interests, other than such dividends, payments or other
distributions to the extent payable solely in membership interests of such
Borrower, or amend or modify the Consulting Services Agreement to increase the
amount payable thereunder, provided, however, that (i) such Borrower may make,
pay, declare or authorize distributions to Holdings in any quarter ending after
the Effective Date in an aggregate amount not greater than the amount necessary
(when combined with amounts paid by each other Borrower and each other
Subsidiary of Holdings, if any) for Holdings to make the distributions to its
members required or permitted pursuant to Section 6.4 of the Amended and
Restated Limited Liability Company Agreement dated September 30, 2002 among
Holdings, AAC Holding Corp., Consumer Credit Corp. and AAC Investors, Inc., as
in effect on the date hereof, (ii) if no Default or Event of Default shall exist
or shall have occurred and be continuing and no Default or Event of Default
under any other provision of this Agreement would result therefrom, each
Borrower may make, pay, declare or authorize distributions to Holdings in any
quarter ending after the Effective Date in an aggregate amount not greater than
the amount to permit Holdings to make payments to employees or former employees
of such Borrower or any of its Subsidiaries in respect of share repurchases or
payments in respect of share appreciation rights following the termination of
their employment, provided that the aggregate amount distributed by all of the
Borrowers in any fiscal year for such payments does not exceed $500,000,
together with any unused amount from prior fiscal years and net cash proceeds
received by Holdings in such fiscal year from the sale or issuance of Holdings
membership interests to employees of the Borrowers or their Subsidiaries, and
(iii) if no Default or Event of Default shall exist or shall have occurred and
be continuing and no Default or Event of Default under any other provision of
this Agreement would result therefrom, other dividends, payments and other
distributions that in the aggregate do not exceed $500,000 for all of the
Borrowers during any fiscal year of the Borrowers, and provided, further, that
Asset Acceptance may distribute up to $800,000 to Holdings on the Effective Date
to fund the repayment of the Note Payable on Demand of $550,000 to AAC Holding
Corp. and the Note Payable on Demand of $250,000 to Consumer Credit Corp. For
purposes of this Section 5.2(l), "membership interests" shall include membership
interests and any securities exchangeable for or convertible into membership
interests and any warrants, rights or other options to purchase or otherwise
acquire membership interests or such securities, together with appreciation
rights or other contractual obligations linked to the value of such membership
interests.
(m) Investments, Loans and Advances. Purchase or
otherwise acquire any capital stock of or other ownership interest in, or debt
securities of or other evidences of Indebtedness of, any other person; nor make
any loan or advance of any of its funds or property or make any other extension
of credit to, or make any investment or acquire any interest whatsoever in, any
other person; nor incur any Contingent Liability; other than (i) commission,
travel and similar advances made to officers and employees in the ordinary
course of business, (ii) commercial paper of any United States issuer having the
highest rating then given by Xxxxx'x Investors Service, Inc., or Standard &
Poor's Corporation, direct obligations of and obligations fully guaranteed by
the United States of America or any agency or instrumentality thereof, or
certificates of deposit of any commercial bank which is a member of the Federal
Reserve System and which has capital, surplus and undivided profit (as shown on
its most recently published statement of condition) aggregating not less than
$100,000,000, provided, however, that each of the foregoing investments has a
maturity date not later than 180 days after
44
the acquisition thereof by any Borrower or any of its Subsidiaries, or shares in
mutual funds that invest solely in such securities, and (iii) those investments,
loans, advances and other transactions described in Schedule 5.2(m) hereto,
having the same terms as existing on the date of this Agreement, but no
extension or renewal thereof shall be permitted. Nothing in this Section 5.2(m)
shall prohibit (i) the purchase by any Borrower of Receivables Portfolios in the
ordinary course of business, (ii) any Indebtedness permitted under Section
5.2(e), (iii) any transaction permitted under Section 5.2(g), or (iv) the
Recapitalization.
(n) Transactions with Affiliates. Enter into, become a
party to, or become liable in respect of, any contract or undertaking with any
Affiliate except (i) in the ordinary course of business and on terms not less
favorable to such Borrower than those which could be obtained if such contract
or undertaking were an arm's length transaction with a person other than an
Affiliate, and (ii) the Consulting Services Agreement.
(o) Ratio of Adjusted Receivables Balances to Loans.
Permit or suffer the ratio of (i) the Consolidated Adjusted Receivables Balances
of the Borrowers to (ii) the Aggregate Outstanding Credit Exposure to be less
than 1.00 to 1.00 at any time.
ARTICLE VI.
DEFAULT
6.1 Events of Default. The occurrence of any one of the following
events or conditions shall be deemed an "Event of Default" hereunder unless
waived pursuant to Section 8.1:
(a) Nonpayment. Any Borrower shall fail to pay when due
any principal of or interest on the Notes, any Reimbursement Obligation or any
fees or any other amount payable hereunder; or
(b) Misrepresentation. Any representation or warranty
made by the Borrowers in Article IV hereof or by any Borrower or any Subsidiary
in any of the Loan Documents or in any other certificate, report, financial
statement or other document furnished by or on behalf of the Borrowers or any of
their Subsidiaries in connection with this Agreement, shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) Certain Covenants. Any Borrower shall fail to perform
or observe any term, covenant or agreement contained in Article V hereof; or
(d) Other Defaults. Any Borrower or any Subsidiary shall
fail to perform or observe any other term, covenant or agreement contained in
this Agreement or in any Security Document, and any such failure shall remain
unremedied for 15 calendar days after notice thereof shall have been given to
the Borrowers by the Agent (or such longer or shorter period of time as may be
specified in such Security Document);
(e) Other Indebtedness. Any Borrower or any Subsidiary
shall fail to pay any part of the principal of, the premium, if any, or the
interest on, or any other payment of money
45
due under any of its Indebtedness at any time owing to any Bank (other than
Indebtedness hereunder), beyond any period of grace provided with respect
thereto, or any Borrower or any Subsidiary fails to perform or observe any other
term, covenant or agreement contained in any agreement, document or instrument
evidencing or securing any such Indebtedness owing to any Bank, or under which
any such Indebtedness was issued or created, beyond a period of grace, if any,
provided with respect thereto, or the occurrence or existence of any default,
event of default or other similar condition or event (however described) with
respect to any Rate Management Transaction; or any Borrower or any Subsidiary
shall fail to pay any part of the principal of, the premium, if any, or the
interest on, or any other payment of money due under any of its Indebtedness at
any time owing to any other Person, beyond any period of grace provided with
respect thereto, which individually or together with other such Indebtedness as
to which any such failure exists has an aggregate outstanding principal amount
in excess of $2,000,000; or any Borrower or any Subsidiary fails to perform or
observe any other term, covenant or agreement contained in any agreement,
document or instrument evidencing or securing any such Indebtedness owing to any
other Person having such aggregate outstanding principal amount, or under which
any such Indebtedness was issued or created, beyond any period of grace, if any,
provided with respect thereto; or
(f) Judgments. One or more judgments or orders for the
payment of money in an aggregate amount of $2,000,000 or more that are not
covered by insurance shall be rendered against the Borrowers or any of them or
any of their Subsidiaries, or any other judgment or order (whether or not for
the payment of money) shall be rendered against or shall affect the Borrowers or
any of them or any of their Subsidiaries which causes or could cause a material
adverse change in the business, properties, operations or condition, financial
or otherwise, of the Borrowers or any of their Subsidiaries or which does or
could have a material adverse effect on the legality, validity or enforceability
of any of the Loan Documents, and either (i) such judgment or order shall have
remained unsatisfied and the Borrowers or such Subsidiary shall not have taken
action necessary to stay enforcement thereof by reason of pending appeal or
otherwise, prior to the expiration of the applicable period of limitations for
taking such action or, if such action shall have been taken, a final order
denying such stay shall have been rendered, or (ii) enforcement proceedings
shall have been commenced by any creditor upon any such judgment or order; or
(g) ERISA. The occurrence of a Reportable Event that
results in or could result in liability of any Borrower, any Subsidiary, or any
ERISA Affiliate to the PBGC or to any Plan and such Reportable Event is not
corrected within thirty (30) days after the occurrence thereof; or the
occurrence of any Reportable Event which could constitute grounds for
termination of any Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer any Plan and such
Reportable Event is not corrected within thirty (30) days after the occurrence
thereof; or the filing by any Borrower or any of its Subsidiaries or any ERISA
Affiliate of a notice of intent to terminate a Plan or the institution of other
proceedings to terminate a Plan, if such termination could have a material
adverse effect on the business, properties, operations or condition, financial
or otherwise, of any Borrower or any Subsidiary or any Borrower or any
Subsidiary or any ERISA Affiliate shall fail to pay when due any liability to
the PBGC or to a Plan; or the PBGC shall have instituted proceedings to
terminate, or to cause a trustee to be appointed to administer, any Plan; or any
person engages in a Prohibited Transaction with respect to any Plan which
results in or could result in liability of
46
any Borrower or any Subsidiary, any ERISA Affiliate, any Plan of the Borrower,
its Subsidiaries or their ERISA Affiliates or any fiduciary of any such Plan; or
failure by such Borrower, any Subsidiary or any of their ERISA Affiliates to
make a required installment or other payment to any Plan within the meaning of
Section 302(f) of ERISA or Section 412(n) of the Code that results in or could
result in liability of the Borrower, any Subsidiary or any ERISA Affiliate to
the PBGC or any Plan; or the withdrawal of the Borrower, any Subsidiary or any
ERISA Affiliate from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(9a)(2) of ERISA; or the Borrower, any
Subsidiary or any ERISA Affiliate becomes an employer with respect to any
Multiemployer Plan without the prior written consent of the Required Banks; or
(h) Insolvency, Etc. Any Borrower or any Subsidiary shall
be dissolved or liquidated (or any judgment, order or decree therefor shall be
entered), or shall generally not pay its debts as they become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or shall institute, or there
shall be instituted against the Borrowers or any Subsidiary any proceeding or
case seeking to adjudicate it a bankrupt or insolvent or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief or protection of debtors or seeking the entry of an
order for relief, or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its assets, rights,
revenues or property, and, if such proceeding is instituted against such
Borrower or such Subsidiary and is being contested by such Borrower or such
Subsidiary, as the case may be, in good faith by appropriate proceedings, such
proceeding shall remain undismissed or unstayed for a period of 60 days; or any
Borrower or any Subsidiary shall take any action (corporate or other) to
authorize or further any of the actions described above in this subsection; or
(i) Security Documents. Any "event of default" defined in
any Security Document shall have occurred and be continuing, or any material
provision of any Security Document shall at any time for any reason cease to be
valid, binding and enforceable against any obligor thereunder, or the validity,
binding effect or enforceability thereof shall be contested by any person, or
any obligor shall deny that it has any or further liability or obligation
thereunder, or any Security Document shall be terminated, invalidated or set
aside, or be declared ineffective or inoperative or in any way cease to give or
provide to the Agent and the Banks the benefits purported to be created thereby;
or
(j) Subordinated Debt Defaults. Any default under any
subordination agreement in favor of the Agent or the Banks with respect to any
Subordinated Debt shall have occurred and be continuing beyond any applicable
grace period; or any material provision of any such subordination agreement or
any other subordination terms of any Subordinated Debt shall at any time for any
reason cease to be valid and binding and enforceable against any Borrower or any
Subsidiary or any holder of any Subordinated Debt, or the validity, binding
effect or enforceability thereof shall be contested by any Borrower or any
Subsidiary or any holder of any Subordinated Debt; or any Borrower or any
Subsidiary or any such holder shall deny that it has any further obligation
under any such subordination terms or any such subordination agreement, or any
such subordination terms or subordination agreement shall be terminated,
invalidated or
47
set aside, or be declared ineffective or inoperative or in any way ceases to
give or provide to the Agent and the Banks the benefits purported to be created
thereby; or
(k) Control. Quad-C and/or its Affiliates shall cease to
own directly or indirectly, free and clear of all Liens, at least 51% of the
membership interests of each of the Borrowers;
(l) Employment Agreement Defaults. Asset Acceptance shall
default in any material respect under any of the Employment Agreements; or
(m) Environmental Liabilities. Any Borrower shall incur
liabilities in excess of $1,000,000 in the aggregate as a result of violation of
Environmental Laws, or otherwise for remediation or cleanup of discharge of
substances into the environment.
6.2 Remedies.
(a) Upon the occurrence and during the continuance of any
Event of Default, the Agent, with the consent of the Required Banks may and,
upon being directed to do so by the Required Banks, shall, by notice to the
Borrowers (i) terminate the obligations of the Banks to make Loans hereunder and
the obligation and power of the LC Issuer to issue Facility LCs, (ii) declare
the outstanding principal of, and accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts owing under the Loan Documents
to be immediately due and payable, or (iii) demand immediate delivery of cash
collateral, and the Borrowers agrees to deliver such cash collateral upon
demand, in an amount equal to the maximum amount that may be available to be
drawn at any time prior to the stated expiry of all outstanding Facility LCs,
which funds shall be held in the Facility LC Collateral Account, or any one or
more of the foregoing, whereupon the Commitments shall terminate forthwith and
all such amounts, including such cash collateral, shall become immediately due
and payable, as the case may be, provided that in the case of any Event of
Default described in Section 6.1(h) with respect to the Borrower, the
Commitments shall automatically terminate forthwith and all such amounts,
including such cash collateral, shall automatically become immediately due and
payable without notice; in all cases without demand, presentment, protest,
diligence, notice of dishonor or other formality, all of which are hereby
expressly waived.
(b) The Agent, with the consent of the Required Banks may
and, upon being directed to do so by the Required Banks shall, in addition to
the remedies provided in Section 6.2(a), exercise and enforce any and all other
rights and remedies available to it, whether arising under this Agreement, the
Facility LC Application, the Security Documents or the Notes or under applicable
law, in any manner deemed appropriate by the Agent, including suit in equity,
action at law, or other appropriate proceedings, whether for the specific
performance (to the extent permitted by law) of any covenant or agreement
contained in this Agreement, the Facility LC Application, any Security Document
or in the Notes or in aid of the exercise of any power granted in this
Agreement, any Security Document or the Notes.
(c) Upon the occurrence and during the continuance of any
Event of Default, each Bank may at any time and from time to time, without
notice to any Borrower (any requirement for such notice being expressly waived
by the Borrowers) set off and apply against
48
any and all of the obligations of the Borrowers now or hereafter existing under
this Agreement, whether owing to such Bank or any other Bank or the Agent, any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank to or for
the credit or the account of any Borrower and any property of any Borrower from
time to time in possession of the Bank, irrespective of whether or not such Bank
or the Agent or any other Bank shall have made any demand hereunder and although
such obligations may be contingent and unmatured. The Borrowers hereby grant to
the Banks and the Agent a lien on and security interest in all such deposits,
indebtedness and property as collateral security for the payment and performance
of the obligations of the Borrowers under this Agreement. The rights of the
Banks under this Section 6.2(c) are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Banks may
have.
(d) The Agent may at any time or from time to time after
funds are deposited in the Facility LC Collateral Account, apply such funds to
the payment of the Obligations and any other amounts as shall from time to time
have become due and payable by the Borrowers to the Banks or the LC Issuer under
the Loan Documents.
(e) At any time while any Default is continuing, none of
the Borrowers nor any Person claiming on behalf of or through any Borrower shall
have any right to withdraw any of the funds held in the Facility LC Collateral
Account. After all of the Obligations have been indefeasibly paid in full and
the Aggregate Commitment has been terminated, any funds remaining in the
Facility LC Collateral Account shall be returned by the Agent to the Borrowers
or paid to whomever may be legally entitled thereto at such time.
ARTICLE VII.
THE AGENT; TAXES; RATABLE PAYMENTS; BENEFIT OF AGREEMENT;
ASSIGNMENTS AND PARTICIPATIONS; DISTRIBUTION OF PROCEEDS
7.1 Appointment; Nature of Relationship. Bank One is hereby
appointed by each of the Banks as its contractual representative (herein
referred to as the "Agent") hereunder and under each Security Document, and each
of the Banks irrevocably authorizes the Agent to act as the contractual
representative of such Bank with the rights and duties expressly set forth
herein and in the Security Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
VII. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Bank by reason of this Agreement or any Security
Document and that the Agent is merely acting as the contractual representative
of the Banks with only those duties as are expressly set forth in this Agreement
and the Security Documents. In its capacity as the Banks' contractual
representative, the Agent (a) does not hereby assume any fiduciary duties to any
of the Banks, (b) is a "representative" of the Banks within the meaning of the
term "secured party" of the Michigan Uniform Commercial Code and (c) is acting
as an independent contractor, the rights and duties of which are limited to
those expressly set forth in this Agreement and the Security Documents. Each of
the Banks hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all of
which claims each Bank hereby waives.
49
7.2 Powers. The Agent shall have and may exercise such powers
under this Agreement and the Security Documents as are specifically delegated to
the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto. The Agent shall have no implied duties to the Banks, or any
obligation to the Banks to take any action thereunder except any action
specifically provided by this Agreement and the Security Documents to be taken
by the Agent.
7.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to any Borrower, any Guarantor,
the Banks or any Bank for any action taken or omitted to be taken by it or them
hereunder or under any Security Document or in connection herewith or therewith
except to the extent such action or inaction is determined in a final
non-appealable judgment by a court of competent jurisdiction to have arisen from
the gross negligence or willful misconduct of such Person.
7.4 No Responsibility for Loans, Recitals, etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into, or verify (a) any statement,
warranty or representation made in connection with this Agreement, the Notes,
any Security Document or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements of any obligor under the Loan
Documents, including, without limitation, any agreement by an obligor to furnish
information directly to each Bank; (c) the satisfaction of any condition
specified in Article II, except receipt of items required to be delivered solely
to the Agent; (d) the existence or possible existence of any Default or Event of
Default; (e) the validity, enforceability, effectiveness, sufficiency or
genuineness of the Loan Documents or any other instrument or writing furnished
in connection therewith; (f) the value, sufficiency, creation, perfection or
priority of any Lien in any collateral security; or (g) the financial condition
of the Borrowers or any Guarantor or their Subsidiaries. The Agent shall have no
duty to disclose to the Banks information that is not required to be furnished
by the Borrowers to the Agent at such time, but is voluntarily furnished by a
Borrower to the Agent (either in its capacity as Agent or in its individual
capacity).
7.5 Action on Instructions of Banks. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any Security Document in accordance with written instructions signed by the
Required Banks, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks. The Banks hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any Security Document unless it shall be requested in writing to do so by the
Required Banks. The Agent shall be fully justified in failing or refusing to
take any action hereunder, under the Notes and under any Security Document
unless it shall first be indemnified to its satisfaction by the Banks pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.
7.6 Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under the Notes and any Security Document by
or through employees, agents, and attorneys-in-fact and shall not be answerable
to the Banks, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
50
counsel concerning the contractual arrangement between the Agent and the Banks
and all matters pertaining to the Agent's duties under the Loan Documents.
7.7 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
7.8 Agent's Reimbursement and Indemnification. The Banks agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (a) for any amounts not
reimbursed by the Borrowers for which the Agent is entitled to reimbursement by
the Borrowers under this Agreement and the Security Documents, (b) for any other
expenses incurred by the Agent on behalf of the Banks, in connection with the
preparation, execution, delivery, administration and enforcement of this
Agreement, the Notes and the Security Documents (including, without limitation,
for any expenses incurred by the Agent in connection with any dispute between
the Agent and any Bank or between two or more of the Banks) and (c) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement, the Notes and the Security Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby (including, without limitation, for any such amounts incurred by or
asserted against the Agent in connection with any dispute between the Agent and
any Bank or between two or more of the Banks), or the enforcement of any of the
terms of this Agreement, the Notes and the Security Documents or of any such
other documents, provided that (i) no Bank shall be liable for any of the
foregoing to the extent any of the foregoing is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Agent and (ii) any indemnification
required pursuant to Section 3.10(vii) shall, notwithstanding the provisions of
this Section 7.8, be paid by the relevant Bank in accordance with the provisions
thereof. The obligations of the Banks under this Section 7.8 shall survive
payment of the Loans and termination of this Agreement.
7.9 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received written notice from a Bank or a Borrower
referring to this Agreement describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the Banks.
7.10 Rights as a Bank. In the event the Agent is a Bank, the Agent
shall have the same rights and powers hereunder and under any Security Document
with respect to its Commitment and its Loans as any Bank and may exercise the
same as though it were not the Agent, and the term "Bank" or "Banks" shall, at
any time when the Agent is a Bank, unless the context otherwise indicates,
include the Agent in its individual capacity. The Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any Security
51
Document, with the Borrowers or any of their Subsidiaries in which the Borrowers
or such Subsidiary is not restricted hereby from engaging with any other Person.
7.11 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the financial statements prepared by the Companies or the Borrowers and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents.
7.12 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Banks and the Borrowers, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice received by the Agent from the Required Banks, such removal to
be effective on the date specified by the Required Banks. Upon any such
resignation or removal, the Required Banks shall have the right to appoint, on
behalf of the Borrower and the Banks, a successor Agent. If no successor Agent
shall have been so appointed by the Required Banks within thirty days after the
resigning Agent's giving notice of its intention to resign, then the resigning
Agent may appoint, on behalf of the Borrower and the Banks, a successor Agent.
Notwithstanding the previous sentence, the Agent may at any time without the
consent of the Borrowers or any Bank, appoint any of its Affiliates which is a
commercial bank as a successor Agent hereunder. If the Agent has resigned or
been removed and no successor Agent has been appointed, the Banks may perform
all the duties of the Agent hereunder and the Borrowers shall make all payments
in respect of the Loans and other obligations of the Borrowers under this
Agreement, the Notes and the Security Documents to the applicable Bank and for
all other purposes shall deal directly with the Banks. No successor Agent shall
be deemed to be appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank having capital
and retained earnings of at least $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning or removed Agent. Upon the effectiveness of the
resignation or removal of the Agent, the resigning or removed Agent shall be
discharged from its duties and obligations hereunder, under the Notes and under
the Security Documents. After the effectiveness of the resignation or removal of
an Agent, the provisions of this Article VII shall continue in effect for the
benefit of such Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder, under the Notes and under the
Security Documents. In the event that there is a successor to the Agent by
merger, or the Agent assigns its duties and obligations to an Affiliate pursuant
to this Section 7.12, then the term "Prime Rate" as used in this Agreement shall
mean the prime rate or other analogous rate of the new Agent.
7.13 Delegation to Affiliates. The Borrowers and the Banks agree
that the Agent may delegate any of its duties under this Agreement and the
Security Documents to any of its Affiliates. Any such Affiliate (and such
Affiliate's directors, officers, agents and employees) which performs duties in
connection with this Agreement and the Security Documents shall be
52
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under this Agreement and
the Security Documents.
7.14 Execution of Collateral Documents. The Banks hereby empower
and authorize the Agent to execute and deliver to the Borrower on behalf of the
Banks the Security Documents and all related financing statements and any
financing statements, agreements, documents or instruments as shall be necessary
or appropriate to effect the purposes of the Security Documents.
7.15 Collateral Releases. The Banks hereby empower and authorize
the Agent to execute and deliver to the appropriate Borrower on behalf of the
Banks any agreements, documents or instruments as shall be necessary or
appropriate to effect any releases of collateral which shall be permitted by the
terms hereof or of any Security Document or which shall otherwise have been
approved by the Required Banks (or, if required by the terms of this Agreement,
all of the Banks) in writing.
7.16 Ratable Payments. If any Bank, whether by setoff or otherwise,
has payment made to it upon its Outstanding Credit Exposure in a greater
proportion than that received by any other Bank, such Bank agrees, promptly upon
demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held
by the other Banks so that after such purchase each Bank will hold its Pro Rata
Share of Aggregate Outstanding Credit Exposure. If any Bank, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Loans or such amounts which may
be subject to setoff, such Bank agrees, promptly upon demand, to take such
action necessary such that all Banks share in the benefits of such collateral
ratably in proportion to their respective Pro Rata Shares of the Aggregate
Outstanding Credit Exposure. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
7.17 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Banks and their respective successors and assigns, except that (a) the
Borrowers shall not have the right to assign their rights or obligations under
this Agreement, the Facility LC Applications, the Notes or the Security
Documents without the prior written consent of all the Banks and (b) any
assignment by any Bank must be made in compliance with Section 7.19. The parties
to this Agreement acknowledge that clause (b) of this Section 7.17 relates only
to absolute assignments and does not prohibit assignments creating security
interests, including, without limitation, any pledge or assignment by any Bank
of all or any portion of its rights under this Agreement and any Note to a
Federal Reserve Bank; provided, however, that no such pledge or assignment
creating a security interest shall release the transferor Bank from its
obligations hereunder unless and until the parties thereto have complied with
the provisions of Section 7.19. The Agent may treat the Person which made any
Loan or which holds any Note as the owner thereof for all purposes hereof unless
and until such Person complies with Section 7.19; provided, however, that the
Agent may in its discretion (but shall not be required to) follow instructions
from the Person which made any Loan or which holds any Note to direct payments
relating to such Loan or Note to another Person. Any assignee of the rights to
any Loan or any Note agrees by acceptance of such assignment to be bound by all
the terms and provisions of this Agreement, the Notes and the Security
Documents. Any request, authority or consent of any Person, who at the time of
53
making such request or giving such authority or consent is the owner of the
rights to any Loan (whether or not a Note has been issued in evidence thereof),
shall be conclusive and binding on any subsequent holder or assignee of the
rights to such Loan.
7.18 Participations.
(a) Any Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time sell to one or more banks or
other entities ("Participants") participating interests in any Outstanding
Credit Exposure of such Bank, any Note held by such Bank, any Commitment of such
Bank or any other interest of such Bank under the Loan Documents. In the event
of any such sale by a Bank of participating interests to a Participant, such
Bank's obligations under the Loan Documents shall remain unchanged, such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, such Bank shall remain the owner of its Outstanding Credit
Exposure and the holder of any Note issued to it in evidence thereof for all
purposes under this Agreement, the Notes and the Security Documents, all amounts
payable by the Borrowers under this Agreement shall be determined as if such
Bank had not sold such participating interests, and the Borrowers and the Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, the Notes and the
Security Documents.
(b) Each Bank shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of this Agreement, the Notes and the Security Documents other than
any amendment, modification or waiver with respect to any Credit Extension or
Commitment in which such Participant has an interest which would require consent
of all of the Banks pursuant to the terms of Section 8.1 or of any Security
Document.
(c) The Borrowers agree that each Participant shall be
deemed to have the right of setoff provided in Section 6.2(c) in respect of its
participating interest in amounts owing under this Agreement, the Notes and the
Security Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Bank thereunder, provided that each Bank
shall retain the right of setoff provided in Section 6.2(c) with respect to the
amount of participating interests sold to each Participant. The Banks agree to
share with each Participant, and each Participant, by exercising the right of
setoff provided in Section 6.2(c), agrees to share with each Bank, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with Section 7.16 as if each Participant were a Bank.
7.19 Assignments.
(a) Any Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time assign to one or more banks
or other entities ("Purchasers") all or any part of its rights and obligations
under the Loan Documents. Such assignment shall be substantially in the form of
Exhibit G hereto or in such other form as may be agreed to by the parties
thereto and approved by the Agent. The consent of the Borrowers, the LC Issuer
and the Agent shall be required prior to an assignment becoming effective with
respect to a Purchaser which is not a Bank or an Affiliate thereof; provided,
however, that if an Event of Default has occurred and is continuing, the consent
of the Borrower shall not be required. Such consent shall
54
not be unreasonably withheld or delayed. Each such assignment with respect to a
Purchaser which is not a Bank or an Affiliate thereof shall (unless each of the
Borrower and the Agent otherwise consents) be in an amount not less than the
lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Bank's
Commitment (calculated as at the date of such assignment) or outstanding Loans
(if the applicable Commitment has been terminated).
(b) Upon (i) delivery to the Agent of an assignment,
together with any consents required by Section 7.19(a), and (ii) payment by the
parties to such an assignment of a $4,000 fee to the Agent for processing such
assignment (unless such assignment is of a Bank's entire interest in the Loan
Documents to an Affiliate of such Lender, or such fee is waived by the Agent),
such assignment shall become effective on the effective date specified in such
assignment. The assignment shall contain a representation by the Purchaser to
the effect that none of the consideration used to make the purchase of the
Commitment and Outstanding Credit Exposure under the applicable assignment
agreement constitutes "plan assets" as defined under ERISA and that the rights
and interests of the Purchaser in and under the Loan Documents will not be "plan
assets" under ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Bank party to this Agreement and any other
related documents executed by or on behalf of the Banks and shall have all the
rights and obligations of a Bank under this Agreement, the Notes and the
Security Documents, to the same extent as if it were an original party hereto,
and no further consent or action by the Borrowers, the Banks or the Agent shall
be required to release the transferor Bank with respect to the of Commitment and
Outstanding Credit Exposure assigned to such Purchaser. Upon the consummation of
any assignment to a Purchaser pursuant to this Section 7.19(b), the transferor
Bank, the Agent and the Borrower shall, if the transferor Bank or the Purchaser
desires that its Loans be evidenced by a Note, make appropriate arrangements so
that a new Note or, as appropriate, replacement Note is issued to such
transferor Bank and a new Note or, as appropriate, replacement Note, is issued
to such Purchaser, in each case in principal amounts reflecting their respective
Commitments, as adjusted pursuant to such assignment.
7.20 Dissemination of Information. Subject to the terms of Section
8.18, each of the Borrowers authorizes each Bank to disclose to any of its
subsidiaries or Affiliates or their successors, or to any of its subsidiaries or
Affiliates or their successors, or to any Participant or Purchaser or any other
Person acquiring an interest in this Agreement, the Notes and the Security
Documents by operation of law (each a "Transferee") and any prospective
Transferee any and all information in such Bank's possession concerning the
Borrowers, provided that any such Transferee or prospective Transferee agrees to
be bound by the provisions of Section 8.18 with respect to any such information.
7.21 Tax Treatment. If any interest in this Agreement, the Facility
LC Applications, the Notes or the Security Documents is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 3.10(iv).
7.22 Distribution of Proceeds of Collateral and Guaranties. All
proceeds of any realization on the collateral pursuant to the Security Documents
and any payments received by
55
the Agent or any Bank pursuant to the Guaranties subsequent to and during the
continuance of any Event of Default shall be allocated and distributed by the
Agent as follows:
(a) First, to the payment of all reasonable costs and
expenses, including without limitation all reasonable attorneys' fees, of the
Agent and the Banks in connection with the enforcement of this Agreement, the
Notes and the Security Documents and otherwise administering this Agreement;
(b) Second, to the payment of all fees required to be
paid under Section 2.3 of this Agreement owing to the Banks, the LC Issuer and
the Agent, on a pro rata basis in accordance with the ratio that the amount of
such fees owing to each such Bank, the LC Issuer or the Agent, as the case may
be, bears to the aggregate amount of such fees owing to all the Banks, the LC
Issuer and the Agent, for application to payment of such liabilities;
(c) Third, to the Banks (and/or their subsidiaries,
affiliates or successors in connection with any Rate Management Transactions)
for payment of all outstanding obligations consisting of principal, interest and
obligations under Rate Management Transactions, on a pro rata basis in
accordance with the ratio that the amount of such principal, interest and Rate
Management Transaction obligations owing to each such Bank bears to the
aggregate amount of such principal, interest and other obligations owing to all
the Banks, for application to payment of such principal, interest and other
obligations;
(d) Fourth, to the payment of any and all other
obligations under this Agreement, the Facility LC Applications, the Notes and
the Security Documents owing to the Banks, the LC Issuer and the Agent, on a pro
rata basis in accordance with the ratio that the amount of such obligations
owing to each such Bank, the LC Issuer or the Agent, as the case may be, bears
to the total amount of such obligations owing to all the Banks, the LC Issuer
and the Agent, for application to payment of such obligations; and
(e) Fifth, to the Borrower or such other Person as may be
legally entitled thereto.
ARTICLE VIII.
MISCELLANEOUS
8.1 Amendments, Etc.
(a) No amendment, modification, termination or waiver of
any provision of this Agreement nor any consent to any departure therefrom shall
be effective unless the same shall be in writing and signed by the Borrower and
the Required Banks and, to the extent any rights or duties of the Agent or the
LC Issuer may be affected thereby, the Agent or the LC Issuer, respectively,
provided, however, that no such amendment, modification, termination, waiver or
consent shall, without the consent of the Agent and all of the Banks, (i)
authorize or permit the extension of time for, or any reduction of the amount
of, any payment of the principal of, or interest on, the Notes, the
Reimbursement Obligations, any fees or other amount payable hereunder, or extend
the expiry date of any Facility LC to a date after the Termination Date, (ii)
56
amend, extend or terminate the respective Commitments of any Bank set forth on
the signature pages hereof or modify the provisions of this Section regarding
the taking of any action under this Section or the definition of Required Banks
or any provision of this Agreement requiring the consent of all of the Banks,
(iii) provide for the discharge of any Guarantor or the release of any material
portion of the collateral subject to any Security Document, except as expressly
contemplated by this Agreement or the Security Documents, (iv) permit any
Borrower to assign its rights under this Agreement, (iv) modify the percentages
set forth in the definition of Age Adjusted Percentage, or (v) modify any other
provision of this Agreement which by its terms requires the consent of all of
the Banks.
(b) Any such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(c) Notwithstanding anything herein to the contrary, no
Bank that is in default of any of its obligations, covenants or agreements under
this Agreement shall be entitled to vote (whether to consent or to withhold its
consent) with respect to any amendment, modification, termination or waiver of
any provision of this Agreement or any departure therefrom or any direction from
the Banks to the Agent, and, for purposes of determining the Required Banks at
any time when any Bank is in default under this Agreement, the Commitments and
Loans of such defaulting Banks shall be disregarded.
8.2 Notices.
(a) Except as otherwise provided in Section 8.2(c)
hereof, all notices and other communications hereunder shall be in writing and
shall be delivered or sent to the Borrowers at 0000 Xxxxxx Xxxx, Xxxxxx,
Xxxxxxxx 00000, Attention: Xxxx X. Xxxxxx, Facsimile No. (000) 000-0000,
Facsimile Confirmation No. (000) 000-0000, with a copy to Holdings, c/o Quad-C
Management, Inc., 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxxxxxxxx, XX 00000, Phone: (434)
000-0000, Fax: (000) 000-0000, and to the Agent, the LC Issuer and the Banks at
their respective addresses for notices set forth on the signature pages hereof,
or to such other address as may be designated by the Borrowers, the Agent or any
Bank by notice to the other parties hereto. All notices and other communications
shall be deemed to have been given at the time of actual delivery thereof to
such address, or if sent by certified or registered mail, postage prepaid, to
such address, on the third day after the date of mailing, or if sent by
facsimile transmission, upon confirmation of receipt by telephone at the number
specified pursuant to this Section 8.2 for confirmation, provided, however, that
notices to the Bank shall not be effective until received.
(b) Notices by the Borrowers to the Agent with respect to
terminations or reductions of the Commitment pursuant to Section 2.2, requests
for Credit Extensions pursuant to Section 2.4, Conversion/Continuation Notices
pursuant to Section 2.9, and notices of prepayment pursuant to Section 3.1 shall
be irrevocable and binding on the Borrowers.
(c) Any notice to be given by the Borrowers to the Agent
pursuant to Sections 2.4 or 2.9 and any notice to be given by the Agent or any
Bank hereunder, may be given by telephone, and all such notices given by the
Borrowers must be promptly confirmed in writing
57
in the manner provided in Section 8.2(a). Any such notice given by telephone
shall be deemed effective upon receipt thereof by the party to whom such notice
is to be given.
8.3 No Waiver By Conduct; Remedies Cumulative. No course of
dealing on the part of the Agent, the LC Issuer or any Bank, nor any delay or
failure on the part of the Agent, the LC Issuer or any Bank in exercising any
right, power or privilege hereunder shall operate as a waiver of such right,
power or privilege or otherwise prejudice the Agent's, the LC Issuer's or such
Bank's rights and remedies hereunder; nor shall any single or partial exercise
thereof preclude any further exercise thereof or the exercise of any other
right, power or privilege. No right or remedy conferred upon or reserved to the
Agent, the LC Issuer or any Bank under the Loan Documents is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy granted thereunder or
now or hereafter existing under any applicable law. Every right and remedy
granted by the Loan Documents or by applicable law to the Agent, the LC Issuer
or any Bank may be exercised from time to time and as often as may be deemed
expedient by the Agent, the LC Issuer or any Bank and, unless contrary to the
express provisions of the Loan Documents, irrespective of the occurrence or
continuance of any Default or Event of Default.
8.4 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Borrowers herein or
in any certificate, report, financial statement or other document furnished by
or on behalf of the Borrowers in connection with this Agreement shall be deemed
to be material and to have been relied upon by the Bank, notwithstanding any
investigation heretofore or hereafter made by the Banks or on the Banks' behalf,
and those covenants and agreements of the Borrowers set forth in Section 3.6 and
8.5 hereof shall survive the repayment in full of the Loans and the termination
of the Commitments.
8.5 Expenses; Indemnification.
(a) The Borrowers agree to pay, or reimburse the Agent
and the Banks and any of them, as applicable, for the payment of, on demand, (i)
the reasonable fees and expenses of counsel to the Agent, including without
limitation the fees and expenses of Xxxxxxxxx Xxxxxx PLLC, in connection with
the preparation, execution, delivery and administration of this Agreement, the
Security Documents and the Notes and the consummation of the transactions
contemplated hereby, and in connection with advising the Agent as to its rights
and responsibilities with respect thereto, and in connection with any
amendments, waivers or consents in connection therewith, (ii) all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing or recording of this Agreement, any Security
Document and the Notes, and the consummation of the transactions contemplated
hereby, and any and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes or fees, and (iii) all reasonable costs
and expenses of the Agent, the LC Issuer and the Banks (including reasonable
fees and expenses of counsel and whether incurred through negotiations, legal
proceedings or otherwise) in connection with any Default or Event of Default or
the enforcement of, or the exercise or preservation of any rights under, the
Loan Documents or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement.
58
(b) The Borrowers hereby indemnify and agree to hold
harmless the Banks, the LC Issuer and the Agent, and their respective officers,
directors, employees and agents, from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature whatsoever
(including reasonable attorneys' fees and disbursements incurred in connection
with any investigative, administrative or judicial proceeding whether or not
such person shall be designated as a party thereto) which the Banks, the LC
Issuer or the Agent or any such person may incur or which may be claimed against
any of them by reason of or in connection with entering into this Agreement or
the transactions contemplated hereby, including without limitation those arising
under Environmental Laws; provided, however, that the Borrowers shall not be
required to indemnify any such Bank, the LC Issuer or the Agent, or such other
person, to the extent, but only to the extent, that such claim, damage, loss,
liability, cost or expense is attributable to the gross negligence or willful
misconduct of such Bank, the LC Issuer or the Agent, as the case may be.
8.6 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.7 Governing Law. This Agreement is a contract made under, and
shall be governed by and construed in accordance with, the law of the State of
Michigan applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State. Each
of the Borrowers and the Banks further agrees that any legal action or
proceeding with respect to any Loan Document or the transactions contemplated
hereby may be brought in any court of the State of Michigan, or in any court of
the United States of America sitting in Michigan, and each of the Borrowers and
the Banks hereby submits to and accepts generally and unconditionally the
jurisdiction of those courts with respect to their persons and property. Nothing
in this paragraph shall affect the right of the Banks and the Agent to bring any
such action or proceeding against the Borrowers or their property in the courts
of any other jurisdiction. Each of the Borrowers and the Banks hereby
irrevocably waive any objection to the laying of venue of any such suit or
proceeding in the above described courts.
8.8 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for the convenience of reference
only and shall in no way modify any of the terms or provisions hereof.
8.9 Construction of Certain Provisions. If any provision of this
Agreement refers to any action to be taken by any person, or which such person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such person, whether or not expressly
specified in such provision.
8.10 Integration and Severability. This Agreement, the Facility LC
Applications, the Notes and the Security Documents embody the entire agreement
and understanding among the Borrowers and the Banks, and supersede all prior
agreements and understandings, relating to the subject matter hereof. In case
any one or more of the obligations of the Borrowers under this Agreement, the
Facility LC Applications, the Security Documents or the Notes shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the
59
remaining obligations of the Borrowers shall not in any way be affected or
impaired thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of the Borrowers under this Agreement, the Facility LC Applications,
any Security Document or the Notes in any other jurisdiction.
8.11 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default or any event
or condition which with notice or lapse of time, or both, could become such a
Default or an Event of Default if such action is taken or such condition exists.
8.12 Interest Rate Limitation. Notwithstanding any provision of the
Loan Documents, in no event shall the amount of interest paid or agreed to be
paid by the Borrower exceed an amount computed at the highest rate of interest
permissible under applicable law. If, from any circumstances whatsoever,
fulfillment of any provision of the Loan Documents at the time performance of
such provision shall be due, shall involve exceeding the interest rate
limitation validly prescribed by law which a court of competent jurisdiction may
deem applicable hereto, then, ipso facto, the obligations to be fulfilled shall
be reduced to an amount computed at the highest rate of interest permissible
under applicable law, and if for any reason whatsoever any Bank shall ever
receive as interest an amount which would be deemed unlawful under such
applicable law such interest shall be automatically applied to the payment of
principal of the Borrowings outstanding hereunder (whether or not then due and
payable) and not to the payment of interest, or shall be refunded to the
Borrowers if such principal and all other obligations of the Borrowers to the
Bank have been paid in full.
8.13 Nonliability of Banks. The relationship between the Borrowers
on the one hand and the Banks, the LC Issuer and the Agent on the other hand
shall be solely that of borrower and lender. Neither the Agent, the LC Issuer,
the Arranger nor any Bank shall have any fiduciary responsibilities to the
Borrowers. Neither the Agent, the LC Issuer, the Arranger nor any Bank
undertakes any responsibility to the Borrowers to review or inform the Borrowers
of any matter in connection with any phase of the Borrowers' business or
operations. The Borrowers agree that neither the Agent, the LC Issuer, the
Arranger nor any Bank shall have liability to the Borrowers (whether sounding in
tort, contract or otherwise) for losses suffered by any Borrower in connection
with, arising out of, or in any way related to, the transactions contemplated
and the relationship established by the Loan Documents, or any act, omission or
event occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent, the LC Issuer, the Arranger nor any Bank
shall have any liability with respect to, and the Borrowers hereby waive,
release and agree not to xxx for, any special, indirect, consequential or
punitive damages suffered by any Borrower in connection with, arising out of, or
in any way related to the Loan Documents or the transactions contemplated
thereby.
8.14 Consents to Renewals, Modifications and Other Actions and
Events. This Agreement and all of the obligations of the Borrowers hereunder
shall remain in full force and effect without regard to and shall not be
released, affected or impaired by: (a) any amendment,
60
assignment, transfer, modification of or addition or supplement to the
Obligations, this Agreement, any Facility LC Application, any Security Document
or the Notes; (b) any extension, indulgence, increase in the Obligations or
other action or inaction in respect of this Agreement, the Facility LC
Applications, the Security Documents or the Notes or otherwise with respect to
the Obligations, or any acceptance of security for, or guaranties of, any of the
Obligations, or any surrender, release, exchange, impairment or alteration of
any such security of guaranties, including, without limitation, the failing to
perfect a security interest in any such security or abstaining from taking
advantage or of realizing upon any guaranties or upon any security interest in
any such security; (c) any default by the Borrowers under, or any lack of due
execution, invalidity or unenforceability of, or any irregularity or other
defect in, this Agreement, the Facility LC Applications, the Security Documents
or the Notes; (d) any waiver by the Banks or any other person of any required
performance or otherwise of any condition precedent or waiver of any requirement
imposed by this Agreement, the Facility LC Applications, the Security Documents
or the Notes, any guaranties or otherwise with respect to the Obligations; (e)
any exercise or non-exercise of any right, remedy, power or privilege in respect
of this Agreement, the Facility LC Applications, the Security Documents or the
Notes; (f) any sale, lease, transfer or other disposition of the assets of the
Borrowers or any consolidation or merger of any Borrower with or into any other
person, corporation, or entity, or any transfer or the disposition by any
Borrower or any other holder of membership interests in any of the Borrowers;
(g) any bankruptcy, insolvency, reorganization or similar proceedings involving
or affecting any Borrower; (h) the release or discharge of any Borrower from the
performance or observance of any agreement, covenant, term or condition under
any of the Obligations or contained in this Agreement, the Facility LC
Applications, the Security Documents or the Notes by operation of law, or (i)
any other cause whether similar or dissimilar to the foregoing which, in the
absence of this provision, would release, affect or impair the obligations,
covenants, agreements and duties of any Borrower hereunder, including without
limitation any act or omission by the Agent or any Bank or any other person
which increases the scope of such Borrower's risk; and in each case described in
this paragraph whether or not such Borrower shall have notice or knowledge of
any of the foregoing, each of which is specifically waived by each of the
Borrowers.
8.15 Several Obligations; Benefits of this Agreement. The
respective obligations of the Banks hereunder are several and not joint and no
Bank shall be the partner or agent of any other (except to the extent to which
the Agent is authorized to act as such). The failure of any Bank to perform any
of its obligations hereunder shall not relieve any other Bank from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 8.5, 8.13 and 7.10 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.
8.16 Waivers, Etc. Each Borrower unconditionally waives: (a) notice
of any of the matters referred to in Section 8.14 above; (b) all notices which
may be required by statute, rule or law or otherwise to preserve any rights of
the Agent and the Banks, including, without limitation, presentment to and
demand of payment or performance from the other Borrowers and protest for
non-payment or dishonor; (c) any right to the exercise by the Agent or any Bank
of
61
any right, remedy, power or privilege in connection with this Agreement, the
Facility LC Applications, the Security Documents or the Notes; (d) any
requirement that the Agent or any Bank, in the event of any default by the any
Borrower, first make demand upon or seek to enforce remedies against, such
Borrower or any other Borrower before demanding payment under or seeking to
enforce this Agreement, the Facility LC Applications, the Security Documents or
the Notes against any other Borrower; (e) any right to notice of the disposition
of any security which the Agent and the Banks may hold from the Borrowers or
otherwise and any right to object to the commercial reasonableness of the
disposition of any such security; and (f) all errors and omissions in connection
with the administration of any of the Obligations or the Loan Documents, or any
other act or omission of the Agent or any Bank which changes the scope of the
Borrower's risk. The obligations of the Borrowers hereunder shall be complete
and binding forthwith upon the execution of this Agreement and subject to no
condition whatsoever, precedent or otherwise, and notice of acceptance hereof or
action in reliance hereon shall not be required.
8.17 Joint and Several Obligations; Contribution Rights; Savings
Clause.
(a) Notwithstanding anything to the contrary set forth
herein or in any Note, the obligations of the Borrowers hereunder and under the
Facility LC Applications, Security Documents and the Notes are joint and
several.
(b) If any Borrower makes a payment in respect of the
indebtedness, obligations and liabilities of the Borrowers to the Banks under
this Agreement, the Facility LC Applications, the Security Documents and the
Notes (collectively, the "Bank Obligations"), it shall have the rights of
contribution set forth below against the other Borrowers; provided that such
Borrower shall not exercise its right of contribution until all the Bank
Obligations have been paid in full. If any Borrower makes a payment in respect
of the Bank Obligations that is smaller in proportion to its Payment Share (as
hereinafter defined) than such payments made by the other Borrowers are in
proportion to the amounts of their respective Payment Shares, the Borrower
making such proportionately smaller payment shall, when permitted by the
preceding sentence, pay to the other Borrowers an amount such that the net
payments made by the Borrowers in respect of the Bank Obligations shall be
shared among the Borrowers pro rata in proportion to their respective Payment
Shares. If any Borrower receives any payment that is greater in proportion to
the amount of its Payment Share than the payments received by the other
Borrowers are in proportion to the amounts of their respective Payment Shares,
the Borrower receiving such proportionately greater payment shall, when
permitted by the second preceding sentence, pay to the other Borrowers an amount
such that the payments received by the Borrowers shall be shared among the
Borrowers pro rata in proportion to their respective Payment Shares.
Notwithstanding anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of any Borrower that shall accrue pursuant
to this paragraph shall be paid nor shall it be deemed owed pursuant to this
paragraph until all of the Bank Obligations shall be paid in full.
For purposes hereof, the "Payment Share" of each Borrower
shall be the sum of (i) the aggregate proceeds of the Bank Obligations received
by such Borrower (and, if received subject to a repayment obligation, remaining
unpaid on the Determination Date (as hereinafter defined)), plus (ii) the
product of (A) the aggregate Bank Obligations remaining unpaid on the
62
date such Bank Obligations become due and payable in full, whether by stated
maturity, acceleration, or otherwise (the "Determination Date"), reduced by the
amount of such Bank Obligations attributed to Borrowers pursuant to clause (i)
above, times (B) a fraction, the numerator of which is such Borrower's net worth
on the effective date of this Agreement, and the denominator of which is the
aggregate net worth of all Borrowers on such date.
(c) It is the intent of each Borrower and the Banks that
each Borrower's maximum Bank Obligations shall be in, but not in excess of:
(i) in a case or proceeding commenced by or
against such Borrower under the Bankruptcy Code on or within one year from the
date on which any of the Bank Obligations are incurred, the maximum amount that
would not otherwise cause the Bank Obligations (or any other obligations of such
Borrower to the Banks) to be avoidable or unenforceable against such Borrower
under (A) Section 548 of the Bankruptcy Code or (B) any state fraudulent
transfer or fraudulent conveyance act or statute applied in such case or
proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or
against such Borrower under the Bankruptcy Code subsequent to one year from the
date on which any of the Bank Obligations are incurred, the maximum amount that
would not otherwise cause the Bank Obligations (or any other obligations of such
Borrower to the Banks) to be avoidable or unenforceable against such Borrower
under any state fraudulent transfer or fraudulent conveyance act or statute
applied in any such case or proceeding by virtue of Section 544 of the
Bankruptcy Code; or
(iii) in a case or proceeding commenced by or
against such Borrower under any law, statute or regulation other than the
Bankruptcy Code (including, without limitation, any other bankruptcy,
reorganization, arrangement, moratorium, readjustment of debt, dissolution,
liquidation or similar debtor relief laws), the maximum amount that would not
otherwise cause the Bank Obligations (or any other obligations of such Borrower
to the Banks) to be avoidable or unenforceable against such Borrower under such
law, statute or regulation including, without limitation, any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such case or
proceeding.
8.18 Confidentiality. Each of the Agent and each Bank agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section to (i) any Purchaser of or participant in, or any
prospective Purchaser of or Participant in, any of its rights or obligations
under this Agreement or (ii) any direct or indirect
63
contractual counterparty or prospective counterparty's professional advisor) to
any credit derivative transaction relating to obligations of any Borrower, (g)
with the consent of Asset Acceptance, (h) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Agent or any Bank on a nonconfidential basis from
a source other than any Borrower, or (i) to the National Association of
Insurance Commissioners or any other similar organization. In addition, the
Agent and the Banks may disclose the existence of this Agreement and information
about this Agreement to market data collectors, similar service providers to the
lending industry, and service providers to the Agent and the Banks in connection
with the administration and management of this Agreement, the other Loan
Documents, the Commitments, and the Credit Extensions. For the purposes of this
Section, "Information" means all information received from any Borrower or
Affiliate relating to any such Person or its business, other than any such
information that is available to the Agent or any Bank on a nonconfidential
basis prior to disclosure by any Borrower or any such Affiliate. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
8.19 WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LC ISSUER, THE
BANKS AND THE BORROWERS, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM. NONE OF THE
AGENT, THE LC ISSUER, THE BANKS OR THE BORROWERS SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED
WITH ANY OTHER ACTION IN 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 THE AGENT, ANY BANK OR THE BORROWERS EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY EACH OF THEM.
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64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ASSET ACCEPTANCE, LLC
By:____________________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
FINANCIAL CREDIT, LLC
By:____________________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
CFC FINANCIAL, LLC
By:____________________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
CONSUMER CREDIT, LLC
By:____________________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
65
Commitment Amount: $35,000,000 BANK ONE, NA, individually and
as Agent and LC Issuer
Address for Notices:
Bank One, NA By:_______________________________
00 Xxxxx Xxxx Xxxxxx, Xxxxx 000 Print Name:_______________________
Xx. Xxxxxxx, Xxxxxxxx 00000 Its:________________________
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
Facsimile Confirmation No. (000) 000-0000
Commitment Amount: $10,000,000 STANDARD FEDERAL BANK, NA
Address for Notices:
By:_______________________________
Standard Federal Bank, NA Print Name:_______________________
0000 Xxxx Xxx Xxxxxx Xxxx Xxx:________________________
Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxxx
Facsimile No.: (000) 000-0000
Facsimile Confirmation No.: (000) 000-0000
Commitment Amount: $10,000,000 NATIONAL CITY BANK OF MICHIGAN/
ILLINOIS
Address for notices:
National City Bank of Michigan/Illinois By:_______________________________
000 Xxxx Xxxxxx, 00xx Xxxxx Print Name:_______________________
Locator R-J65-4P Its:________________________
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Facsimile Confirmation No.: (000) 000-0000
66
Commitment Amount: $15,000,000 FIFTH THIRD BANK,
EASTERN MICHIGAN
Address for notices:
Fifth Third Bank, Eastern Michigan By:_______________________________
0000 Xxxx Xxxxxx, Xxxxx 0000 Print Name:_______________________
MD JTWN5F Its:________________________
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Nazareth
Facsimile No.: (000) 000-0000
Facsimile Confirmation No.: (000) 000-0000
Commitment Amount: $10,000,000 COMERICA BANK
Address for notices:
By:_______________________________
Comerica Bank Print Name:_______________________
000 Xxxxxxxx Xxx., 0xx Xxxxx Xxx:________________________
Xxxxxxx, Xxxxxxxx
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Facsimile Confirmation No.: (000) 000-0000
67
EXECUTION COPY
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of June 25, 2003
(this "Amendment"), is by and among ASSET ACCEPTANCE, LLC, a Delaware limited
liability company, FINANCIAL CREDIT, LLC, a Delaware limited liability company,
CFC FINANCIAL, LLC, a Delaware limited liability company, and CONSUMER CREDIT,
LLC, a Delaware limited liability company (collectively, the "Existing
Borrowers"), MED-FI ACCEPTANCE, LLC, a Delaware limited liability company (the
"New Borrower" and, together with the Existing Borrowers, collectively, the
"Borrowers" and, individually, a "Borrower"), BANK ONE, NA, a national banking
association with its main office in Chicago, Illinois ("Bank One"), STANDARD
FEDERAL BANK, NA, a national banking association, NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS, a national banking association, FIFTH THIRD BANK, EASTERN
MICHIGAN, a Michigan banking corporation, and COMERICA BANK, a Michigan banking
corporation (together with Bank One, collectively, the "Banks" and,
individually, a "Bank"), and BANK ONE, NA, as LC Issuer and administrative agent
on behalf of the Banks (in such capacity, the "Agent").
INTRODUCTION
A. The Existing Borrowers, the Banks and the Agent have
entered into the Credit Agreement, dated as of September 30, 2002 (the "Credit
Agreement").
B. The Existing Borrowers have requested that the New
Borrower be added to the Credit Agreement as a "Borrower", and the Banks and the
Agent are willing to so modify the Credit Agreement on the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein and in the Credit Agreement contained, the parties
hereto agree as follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
Effective upon the date the conditions precedent set forth in
Article 3 of this Amendment are satisfied, which date (the "Amendment Date")
shall be determined by the Agent in its sole discretion, the Credit Agreement
hereby is amended as follows:
1.1 As used in the Credit Agreement and all other Loan
Documents, the term "Borrower" and all pronouns understood in the context to
mean such a "Borrower" or any such "Borrower" shall mean and include the New
Borrower and the Existing Borrowers, as if the New Borrower originally were a
signatory to the Credit Agreement.
1.2 The Section in the Credit Agreement labeled "1.22"
properly is relabeled as "7.22."
1.3 Exhibits A, C, D, E and F attached to this Amendment
are substituted for Exhibits A, C, D, E and F, respectively, attached to the
Credit Agreement.
1.4 Schedule 4.4 attached to this Amendment is
substituted for Schedule 4.4 attached to the Credit Agreement.
ARTICLE 2. NEW BORROWER JOINDER
2.1 The New Borrower hereby acknowledges that it has
received and reviewed a copy of the Credit Agreement and the other Loan
Documents and unconditionally agrees hereby to: (a) join the Credit Agreement
and the other Loan Documents as a "Borrower", and hereby does so join the Credit
Agreement and the other Loan Documents, (b) be bound by, and hereby ratifies and
confirms, all covenants, agreements, consents, submissions, appointments,
acknowledgments and other terms and provisions attributable to each "Borrower"
under the Credit Agreement and the other Loan Documents, and does hereby agree
that it is so bound, and (c) perform all obligations at all times, and from time
to time, required of it as a "Borrower" by the Credit Agreement and the other
Loan Documents.
ARTICLE 3. CONDITIONS PRECEDENT
As conditions precedent to the effectiveness of this Amendment, the
Banks and the Agent shall receive the following documents and the following
matters shall be completed, all in form and substance satisfactory to each Bank
and the Agent:
3.1 This Amendment duly executed on behalf of the
Borrowers, the Banks and the Agent, and the acknowledgment at the end of this
Amendment duly executed on behalf of the Guarantor.
3.2 The Borrowers shall execute and deliver to the Banks
replacement Revolving Credit Notes (the "Replacement Revolving Credit Notes")
substantially in the form of Exhibit C attached to this Amendment, properly
completed for each Bank.
3.3 The Borrowers shall execute and deliver to the Agent
a second amended and restated security agreement, substantially in the form of
Exhibit D attached to this Amendment (the "Replacement Security Agreement"), and
the New Borrower shall execute and deliver, or cause to be executed and
delivered, to the Agent all certificates, other Security Documents, opinions of
counsel and other items required under Section 2.5 of the Credit Agreement, with
respect to the New Borrower.
3.4 All other documents, payments and legal matters in
connection with the transactions contemplated by this Amendment shall have been
executed, delivered and complete, as applicable, and shall be in form and
substance satisfactory to Agent and its counsel.
First Amendment to Credit Agreement
-2-
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Agent to enter into this
Amendment, each Borrower represents and warrants that:
4.1 The execution, delivery and performance by each
Borrower of this Amendment, the Replacement Revolving Credit Notes and the
Replacement Security Agreement, and the execution, delivery and performance by
the New Borrower of the other Security Documents to which it is a party
delivered hereunder, are within its corporate powers, have been duly authorized
by all necessary corporate action and are not in contravention of any law, rule
or regulation, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of such Borrower's
charter or by-laws, or of any contract or undertaking to which such Borrower is
a party or by which such Borrower or its property is or may be bound or
affected.
4.2 This Amendment is and, when executed and delivered,
the Replacement Revolving Credit Notes and the Replacement Security Agreement
will be, legal, valid and binding obligations of the Borrowers, enforceable
against the Borrowers in accordance with their respective terms. The Security
Documents to which the New Borrower is a party delivered hereunder are legal,
valid and binding obligations of the New Borrower, enforceable against the New
Borrower in accordance with their respective terms.
4.3 No consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental person or entity, including without limitation any creditor or
stockholder of any Borrower, is required on the part of any Borrower in
connection with the execution, delivery and performance of this Amendment, the
Replacement Revolving Credit Notes, the Replacement Security Agreement, the
other Security Documents to which the New Borrower is a party delivered
hereunder or the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of this Amendment, the New Revolving Credit
Notes or such Security Documents.
4.4 After giving effect to the amendments contained in
Article 1 of this Amendment, the representations and warranties contained in
Article 4 of the Credit Agreement and the representations and warranties
contained in the Security Documents are true on and as of the date hereof with
the same force and effect as if made on and as of the date hereof.
ARTICLE 5. MISCELLANEOUS
5.1 If any Borrower shall fail to perform or observe any
term, covenant or agreement in this Amendment, or any representation or warranty
made by the Borrowers in this Amendment shall prove to have been incorrect in
any material respect when made, such occurrence shall be deemed to constitute an
Event of Default.
5.2 All references to the Credit Agreement in any
Security Document or any other document, instrument or certificate referred to
in the Credit Agreement or delivered in
First Amendment to Credit Agreement
-3-
connection therewith or pursuant thereto, hereafter shall be deemed references
to the Credit Agreement, as amended hereby. All references to the Revolving
Credit Notes in the Credit Agreement, any Security Document or any other
document, instrument or certificate referred to in the Credit Agreement or
delivered in connection therewith or pursuant thereto, hereafter shall be deemed
references to the Replacement Revolving Credit Notes. All references to the
Security Agreement in the Credit Agreement, any other Security Document or any
other document, instrument or certificate referred to in the Credit Agreement or
delivered in connection therewith or pursuant thereto, hereafter shall be deemed
references to the Replacement Security Agreement.
5.3 The Security Documents, any and all certificates or
financing statements executed pursuant to the Credit Agreement or in connection
therewith and, subject to the amendments herein provided, the Credit Agreement
shall in all respects continue in full force and effect for the benefit of the
Agent and the Banks.
5.4 Capitalized terms used but not defined herein shall
have the respective meanings ascribed thereto in the Credit Agreement.
5.5 This Amendment shall be governed by and construed in
accordance with the laws of the State of Michigan.
5.6 The Borrowers jointly and severally agree to pay the
reasonable fees and expenses of Xxxxxxxxx Xxxxxx PLLC, counsel for the Agent, in
connection with the negotiation and preparation of this Amendment and the
documents referred to herein and the consummation of the transactions
contemplated hereby, and in connection with advising the Agent as to its rights
and responsibilities with respect thereto.
5.7 This Amendment may be executed upon any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
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First Amendment to Credit Agreement
-4-
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the date first-above written.
ASSET ACCEPTANCE, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
FINANCIAL CREDIT, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
CFC FINANCIAL, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
CONSUMER CREDIT, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
MED-FI ACCEPTANCE, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
First Amendment to Credit Agreement
-5-
BANK ONE, NA, individually and
as Agent and LC Issuer
By:_______________________________
Print Name:_______________________
Its:________________________
STANDARD FEDERAL BANK, NA
By:_______________________________
Print Name:_______________________
Its:________________________
NATIONAL CITY BANK OF MICHIGAN/
ILLINOIS
By:_______________________________
Print Name:_______________________
Its:________________________
FIFTH THIRD BANK,
EASTERN MICHIGAN
By:_______________________________
Print Name:_______________________
Its:________________________
COMERICA BANK
By:_______________________________
Print Name:_______________________
Its:________________________
First Amendment to Credit Agreement
-6-
ACKNOWLEDGMENT OF GUARANTOR
As of the date first set forth above, the undersigned hereby
acknowledges that it has reviewed and fully consents to the foregoing First
Amendment to Credit Agreement (the "First Amendment"), that each of the Security
Documents (as defined in the Credit Agreement amended by the First Amendment;
hereinafter the "Credit Agreement"), including without limitation the
undersigned's Guaranty Agreement dated as of September 30, 2002 in favor of the
Agent for the benefit of the Banks, made by the undersigned in favor of the
Agent and the Banks continues in full force and effect to secure and guarantee,
as the case may be, among other things, all the indebtedness, obligations and
liabilities of the Borrowers, including without limitation the New Borrower, to
the Banks and the Agent under the Credit Agreement, as amended by the First
Amendment, and the Replacement Revolving Credit Notes, and acknowledges and
agrees that it has no defenses, counterclaims or offsets with respect thereto.
All references to the Credit Agreement and the Revolving Credit Notes in any
Security Document or any other document, instrument or certificate referred to
in the Credit Agreement or delivered in connection therewith or pursuant
thereto, hereafter shall be deemed references to the Credit Agreement, as
amended by the First Amendment, and the Replacement Revolving Credit Notes,
respectively. Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement or the First
Amendment, as the case may be.
ASSET ACCEPTANCE HOLDINGS, LLC
By:_______________________________
Its:___________________________
First Amendment to Credit Agreement
-7-
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of August 11, 2003
(this "Amendment"), is by and among ASSET ACCEPTANCE, LLC, a Delaware limited
liability company, FINANCIAL CREDIT, LLC, a Delaware limited liability company,
CFC FINANCIAL, LLC, a Delaware limited liability company, and CONSUMER CREDIT,
LLC, a Delaware limited liability company, and MED-FI ACCEPTANCE, LLC, a
Delaware limited liability company (collectively, the "Borrowers" and,
individually, a "Borrower"), BANK ONE, NA, a national banking association with
its main office in Chicago, Illinois ("Bank One"), STANDARD FEDERAL BANK, NA, a
national banking association, NATIONAL CITY BANK OF MICHIGAN/ILLINOIS, a
national banking association, FIFTH THIRD BANK, EASTERN MICHIGAN, a Michigan
banking corporation, and COMERICA BANK, a Michigan banking corporation (together
with Bank One, collectively, the "Banks" and, individually, a "Bank"), and BANK
ONE, NA, as LC Issuer and administrative agent on behalf of the Banks (in such
capacity, the "Agent").
INTRODUCTION
A. The Borrowers, the Banks and the Agent have entered
into the Credit Agreement, dated as of September 30, 2002, as amended by the
First Amendment to Credit Agreement, dated as of June 25, 2003 (the "Credit
Agreement"), pursuant to which the Banks provide to the Borrowers a revolving
credit facility in the aggregate principal amount of $80,000,000.
B. The Borrowers have requested that the amount of the
credit facility provided under the Credit Agreement be increased by $20,000,000,
and that the termination date of the credit facility be extended one year, and
the Banks and the Agent are willing to so modify the Credit Agreement on the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein and in the Credit Agreement contained, the parties
hereto agree as follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
Effective upon the date the conditions precedent set forth in
Article 3 of this Amendment are satisfied, which date (the "Amendment Date")
shall be determined by the Agent in its sole discretion, the Credit Agreement
hereby is amended as follows:
1.1 The definition of the term "Aggregate Commitment" in
Section 1.1 is amended and restated in full as follows:
"Aggregate Commitment" shall mean the aggregate of
the Commitments of all of the Banks, not exceeding $100,000,000, as
such amount may be increased or reduced from time to time pursuant to
the terms hereof.
1.2 The definition of the term "Commitment" in Section
1.1 is amended and restated in full as follows:
"Commitment" shall mean, with respect to each Bank,
the commitment of each such Bank to make Loans to the Borrowers
pursuant to Section 2.1 and participate in Facility LCs issued upon the
application of Asset Acceptance in an aggregate amount outstanding at
any time not exceeding the respective commitment amount for each such
Bank set forth next to the name of each such Bank on the signature
pages to the Second Amendment, as such amounts may be reduced from time
to time pursuant to Section 2.2.
1.3 The following definitions of the terms "Second
Amendment" and "Second Amendment Date", respectively, are added to Section 1.1
in alphabetical order:
"Second Amendment" shall mean the Second Amendment to
this Agreement, dated as of July 31, 2003.
"Second Amendment Date" shall mean the Amendment Date
(as defined in the Second Amendment).
1.4 The definition of the term "Subordinated Debt" in
Section 1.1 is amended and restated in full as follows:
"Subordinated Debt" of any person shall mean, as of
any date, that Indebtedness of such person for borrowed money which is
satisfactory in form and substance to the Required Banks, is on terms
and conditions satisfactory to the Required Banks, and is expressly
subordinate and junior in right and priority of payment to the Loans
and other Indebtedness of such person to the Banks in manner and by
agreement satisfactory in form and substance to the Required Banks.
1.5 The definition of the term "Termination Date" in
Section 1.1 is amended and restated in full as follows:
"Termination Date" shall mean the earlier to occur of
(a) September 28, 2006, and (b) the date on which the Commitments shall
be terminated pursuant to Section 2.2 or 6.2.
1.6 Section 4.15, "Reportable Transaction", is added to
the Credit Agreement immediately following Section 4.14, as follows:
4.15 Reportable Transaction. The Borrowers do not intend
to treat the Loans, Facility LCs and related transactions as being a
"reportable transaction" (within the meaning of Treasury Regulation
Section 1.6011-4). In the event the
Second Amendment to Credit Agreement
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Borrowers determine to take any action inconsistent with such
intention, they will promptly notify the Agent thereof.
1.7 The following sentence is added to the end of Section
8.18:
Notwithstanding anything herein to the contrary, confidential
Information shall not include, and the Agent and each Bank (and each
employee, representative or other agent of the Agent or any Bank) may
disclose to any and all Persons, without limitation of any kind, the
"tax treatment" and "tax structure" (in each case, within the meaning
of Treasury Regulation Section 1.6011-4) of the transactions
contemplated hereby and all materials of any kind (including opinions
or other tax analyses) that are or have been provided to such Bank
relating to such tax treatment or tax structure; provided that with
respect to any document or similar item that in either case contains
information concerning such tax treatment or tax structure of the
transactions contemplated hereby as well as other information, this
sentence shall only apply to such portions of the document or similar
item that relate to such tax treatment or tax structure.
ARTICLE 2.
REALLOCATION OF LOANS AND FACILITY LCS ON AMENDMENT DATE
2.1 Effective on the Amendment Date, subject to Section
2.2 below, each Bank hereby sells, grants, assigns and conveys to each other
Bank, without recourse, warranty, or representation of any kind, except as
specifically provided herein, an undivided percentage in such Bank's right,
title and interest in and to its outstanding Loans and participation interests
in Facility LCs in the respective dollar amounts and percentages as necessary so
that, from and after such sale, each such Bank's outstanding Loans and
participation interests in Facility LCs shall equal such Bank's Pro Rata Share
(calculated based upon the amount of its Commitment after giving effect to this
Amendment) of the outstanding Loans and LC Obligations. Effective on the
Amendment Date, each Bank hereby purchases and accepts each such grant,
assignment and conveyance from each of such other Banks. Each Bank so purchasing
hereby agrees that its respective purchase price for the portion of the
outstanding Loans and participation interests in Facility LCs purchased hereby
shall equal the respective dollar amount necessary so that, from and after such
payments, each Bank's outstanding Loans and participation interests in Facility
LCs shall equal such Bank's Pro Rata Share (calculated based upon the amount of
its Commitment after giving effect to this Amendment) of the outstanding Loans
and LC Obligations. The amounts payable by each Bank that has a net greater
purchasing obligation shall be payable on the Amendment Date by wire transfer of
immediately available funds to the Agent. The Agent, in turn, shall wire
transfer any such funds received to each Bank that has a net greater selling
obligation, in same day funds, for the sole account of each such Bank. Each Bank
hereby represents and warrants to each other Bank that it owns the Loans and
participation interests in Facility LCs being sold and assigned hereby for its
own account and has not sold, transferred or encumbered any or all of its
interest in such Loans and participation interests in Facility LCs. Each Bank
hereby acknowledges and agrees that, except for each other Bank's
representations and warranties contained in the foregoing sentence, it has
entered into this
Second Amendment to Credit Agreement
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Amendment with respect to such increase on the basis of its own independent
investigation and has not relied upon, and will not rely upon, any explicit or
implicit written or oral representation, warranty or other statement of the
Banks or the Agent concerning the authorization, execution, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this Amendment, the
Credit Agreement or any related agreements or other documents.
2.2 Notwithstanding anything in Section 2.1 above or in
the Credit Agreement to the contrary, in order to avoid the prepayment of
Eurodollar Loans that are outstanding as of the Amendment Date (the "Existing
Eurodollar Loans"), (a) the Banks shall continue to share in the Existing
Eurodollar Loans until the end of their current Interest Periods in accordance
with the Banks' respective Pro Rata Shares calculated based upon the amount of
their respective Commitments before giving effect to this Amendment, (b) the
outstanding Loans as of the Amendment Date that are acquired by any Bank
pursuant to the participations under Section 2.1 above shall be limited to
Floating Rate Loans, (c) on and after the Amendment Date, all new Eurodollar
Borrowings, including any continuations or conversions thereof, shall be shared
by the Banks in accordance with their respective Pro Rata Shares calculated
based upon the amount of their respective Commitments after giving effect to
this Amendment, and their respective shares of the then outstanding Floating
Rate Loans shall be deemed adjusted through the purchasing and selling of
participations therein (in accordance with the procedures set forth in Section
2.1 above) such that each Bank's overall share of all the Loans shall be in an
amount in accordance with their respective Pro Rata Shares calculated based upon
the amount of their respective Commitments after giving effect to this
Amendment, and (d) the Borrowers shall not at any time be allowed to request any
Borrowing or Facility LC that would cause any Bank's Outstanding Credit Exposure
to exceed any such Bank's Commitment after giving effect to this Amendment.
ARTICLE 3. CONDITIONS PRECEDENT
As conditions precedent to the effectiveness of this Amendment, the
Banks and the Agent shall receive the following documents and the following
matters shall be completed, all in form and substance satisfactory to each Bank
and the Agent:
3.1 This Amendment duly executed on behalf of the
Borrowers, the Banks and the Agent, and the acknowledgment at the end of this
Amendment duly executed on behalf of the Guarantor.
3.2 The Borrowers shall execute and deliver to the Banks
replacement Revolving Credit Notes (the "Replacement Revolving Credit Notes")
substantially in the form of Exhibit C attached to the Credit Agreement,
properly completed for each Bank in the amount, for each such Bank respectively,
of its Commitment set forth on the signature pages of this Amendment.
3.3 The Borrowers shall have paid to the Agent (a) for
the account of the Banks the following fees: (i) for each Bank, a fee in the
amount equal to one-tenth of one percent (1/10 of 1%) of the amount of such
Bank's Commitment before giving effect to this Amendment, and (ii) for each
Bank, an additional fee in the amount of one-fifth of one percent (1/5 of 1%) of
the
Second Amendment to Credit Agreement
-4-
difference between the amount of such Bank's Commitment before giving effect to
this Amendment and the amount of such Bank's Commitment after giving effect to
this Amendment, and (b) for the account of the Agent and Banc One Capital
Markets, Inc., such other fees, in such amounts and at such times, to which the
Borrowers and the Agent otherwise shall have agreed.
3.4 All other documents, payments and legal matters in
connection with the transactions contemplated by this Amendment shall have been
executed, delivered and complete, as applicable, and shall be in form and
substance satisfactory to Agent and its counsel.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Agent to enter into this
Amendment, each Borrower represents and warrants that:
4.1 The execution, delivery and performance by each
Borrower of this Amendment and the Replacement Revolving Credit Notes are within
its corporate powers, have been duly authorized by all necessary corporate
action and are not in contravention of any law, rule or regulation, or any
judgment, decree, writ, injunction, order or award of any arbitrator, court or
governmental authority, or of the terms of such Borrower's charter or by-laws,
or of any contract or undertaking to which such Borrower is a party or by which
such Borrower or its property is or may be bound or affected.
4.2 This Amendment is and, when executed and delivered,
the Replacement Revolving Credit Notes will be, legal, valid and binding
obligations of the Borrowers, enforceable against the Borrowers in accordance
with their respective terms.
4.3 No consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental person or entity, including without limitation any creditor or
stockholder of any Borrower, is required on the part of any Borrower in
connection with the execution, delivery and performance of this Amendment, the
Replacement Revolving Credit Notes or the transactions contemplated hereby or as
a condition to the legality, validity or enforceability of this Amendment or the
Replacement Revolving Credit Notes.
4.4 After giving effect to the amendments contained in
Article 1 of this Amendment, the representations and warranties contained in
Article 4 of the Credit Agreement and the representations and warranties
contained in the Security Documents are true on and as of the date hereof with
the same force and effect as if made on and as of the date hereof.
ARTICLE 5. MISCELLANEOUS
5.1 If any Borrower shall fail to perform or observe any
term, covenant or agreement in this Amendment, or any representation or warranty
made by the Borrowers in this
Second Amendment to Credit Agreement
-5-
Amendment shall prove to have been incorrect in any material respect when made,
such occurrence shall be deemed to constitute an Event of Default.
5.2 All references to the Credit Agreement in any
Security Document or any other document, instrument or certificate referred to
in the Credit Agreement or delivered in connection therewith or pursuant
thereto, hereafter shall be deemed references to the Credit Agreement, as
amended hereby. All references to the Revolving Credit Notes in the Credit
Agreement, any Security Document or any other document, instrument or
certificate referred to in the Credit Agreement or delivered in connection
therewith or pursuant thereto, hereafter shall be deemed references to the
Replacement Revolving Credit Notes.
5.3 The Security Documents, any and all certificates or
financing statements executed pursuant to the Credit Agreement or in connection
therewith and, subject to the amendments herein provided, the Credit Agreement
shall in all respects continue in full force and effect for the benefit of the
Agent and the Banks.
5.4 Capitalized terms used but not defined herein shall
have the respective meanings ascribed thereto in the Credit Agreement.
5.5 This Amendment shall be governed by and construed in
accordance with the laws of the State of Michigan.
5.6 The Borrowers jointly and severally agree to pay the
reasonable fees and expenses of Xxxxxxxxx Xxxxxx PLLC, counsel for the Agent, in
connection with the negotiation and preparation of this Amendment and the
documents referred to herein and the consummation of the transactions
contemplated hereby, and in connection with advising the Agent as to its rights
and responsibilities with respect thereto.
5.7 This Amendment may be executed upon any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
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Second Amendment to Credit Agreement
-6-
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the date first-above written.
ASSET ACCEPTANCE, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
FINANCIAL CREDIT, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
CFC FINANCIAL, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
CONSUMER CREDIT, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
MED-FI ACCEPTANCE, LLC
By:_______________________________
Xxxxxxxxx X. Xxxxxxx XX
Its: President
Second Amendment to Credit Agreement
-0-
Xxxxxxxxxx Xxxxxx: $40,000,000 BANK ONE, NA, individually and
as Agent and LC Issuer
By:_______________________________
Print Name:_______________________
Its:________________________
Commitment Amount: $15,000,000 COMERICA BANK
By:_______________________________
Print Name:_______________________
Its:________________________
Commitment Amount: $15,000,000 FIFTH THIRD BANK,
EASTERN MICHIGAN
By:_______________________________
Print Name:_______________________
Its:________________________
Commitment Amount: $15,000,000 NATIONAL CITY BANK OF MICHIGAN/
ILLINOIS
By:_______________________________
Print Name:_______________________
Its:________________________
Commitment Amount: $15,000,000 STANDARD FEDERAL BANK, NA
By:_______________________________
Print Name:_______________________
Its:________________________
Second Amendment to Credit Agreement
-8-
ACKNOWLEDGMENT OF GUARANTOR
As of the date first set forth above, the undersigned hereby
acknowledges that it has reviewed and fully consents to the foregoing Second
Amendment to Credit Agreement (the "Second Amendment"), that each of the
Security Documents (as defined in the Credit Agreement amended by the Second
Amendment; hereinafter the "Credit Agreement"), including without limitation the
undersigned's Guaranty Agreement dated as of September 30, 2002 in favor of the
Agent for the benefit of the Banks, made by the undersigned in favor of the
Agent and the Banks continues in full force and effect to secure and guarantee,
as the case may be, among other things, all the indebtedness, obligations and
liabilities of the Borrowers to the Banks and the Agent under the Credit
Agreement, as amended by the Second Amendment, and the Replacement Revolving
Credit Notes, and acknowledges and agrees that it has no defenses, counterclaims
or offsets with respect thereto. All references to the Credit Agreement and the
Revolving Credit Notes in any Security Document or any other document,
instrument or certificate referred to in the Credit Agreement or delivered in
connection therewith or pursuant thereto, hereafter shall be deemed references
to the Credit Agreement, as amended by the Second Amendment, and the Replacement
Revolving Credit Notes, respectively. Capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement or the Second Amendment, as the case may be.
ASSET ACCEPTANCE HOLDINGS, LLC
By:_______________________________
Its:___________________________
Second Amendment to Credit Agreement
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