Exhibit 10.16*
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CREDIT AGREEMENT
between
CREDITRUST CORPORATION
as Borrower
THE LENDERS PARTY HERETO
and
SUNROCK CAPITAL CORP.
as Agent
Dated as of October 28, 1998
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* A portion of this exhibit has been omitted based upon a request for
confidential treatment.
TABLE OF CONTENTS
Page
BACKGROUND .............................................................. 1
SECTION 1. DEFINITIONS ................................................. 1
1.1. Defined Terms ................................................. 1
1.2. Other Definitional Provisions ................................. 12
1.3. Construction .................................................. 12
SECTION 2. THE LOANS ................................................... 13
2.1. Loans ......................................................... 13
2.2. Loan Procedures ............................................... 14
2.3. General Provisions Regarding Loans ............................ 15
2.4. Fees .......................................................... 15
2.5. Notes; Repayment of Loans ..................................... 16
2.6. Interest on Loans ............................................. 16
2.7. Default Rate; Inability to Determine Interest Rate ............ 17
2.8. Termination and Extension of Commitment ....................... 17
2.9. Optional and Mandatory Prepayments of Loans ................... 18
2.10. Illegality .................................................... 18
2.11. Requirements of Law ........................................... 19
2.12. Taxes ......................................................... 20
2.13. Indemnity ..................................................... 21
2.14. Pro Rata Treatment, etc ....................................... 22
2.15. Payments; Loan Account ........................................ 22
2.16. Conversion and Continuation Options ........................... 23
SECTION 3. REPRESENTATIONS AND WARRANTIES .............................. 24
3.1. Financial Condition ........................................... 24
3.2. No Adverse Change ............................................. 24
3.3. Existence; Compliance with Law ................................ 24
3.4. Power; Authorization; Enforceable Obligations ................. 24
3.5. No Legal Bar .................................................. 25
3.6. No Material Litigation ........................................ 25
3.7. No Default .................................................... 25
3.8. Taxes ......................................................... 25
3.9. Federal Regulations ........................................... 25
3.10. ERISA ......................................................... 26
3.11. Investment Company Act; Public Utility Holding Company Act .... 26
3.12. Purpose of Loans .............................................. 27
3.13. Environmental Matters ......................................... 27
3.14. Patents, Trademarks, etc ...................................... 28
3.15. Ownership of Property ......................................... 28
3.16. Licenses, etc ................................................. 28
3.17. No Burdensome Restrictions .................................... 28
3.18. Labor Matters ................................................. 28
3.19. No Material Misstatements ..................................... 28
3.20. Asset Purchase Agreements and Receivables ..................... 28
3.21. Title to Collateral; Perfected Security Interest .............. 29
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3.22. Year 2000 ..................................................... 29
SECTION 4. CONDITIONS PRECEDENT; CLOSING ............................... 29
4.1. Conditions to Closing ......................................... 29
4.2. Conditions to Each Loan ....................................... 31
4.3. Conditions to Release of Collateral ........................... 32
4.4. Closing ....................................................... 33
SECTION 5. AFFIRMATIVE COVENANTS ....................................... 33
5.1. Financial Statements .......................................... 33
5.2. Certificates; Other Information ............................... 34
5.3. Payment of Obligations ........................................ 34
5.4. Conduct of Business and Maintenance of Existence .............. 35
5.5. Maintenance of Property; Insurance ............................ 35
5.6. Inspection of Property; Books and Records; Discussions ........ 36
5.7. Notices ....................................................... 36
5.8. Environmental Laws ............................................ 37
5.9. Compliance with Security Documents ............................ 37
5.10. Establishment of Borrower Collection Accounts ................ 37
SECTION 6. NEGATIVE COVENANTS .......................................... 37
6.1. Net Worth Covenant ............................................ 37
6.2. Limitation on Debt ............................................ 38
6.3. Limitation on Liens ........................................... 38
6.4. Prohibitions on Fundamental Changes ........................... 39
6.5. Limitation on Sale of Assets .................................. 39
6.6. Prohibitions on Acquisitions .................................. 40
6.7. Prohibition on Distributions .................................. 40
6.8. Limitation on Contingent Obligations .......................... 40
6.9. Transactions with Affiliates .................................. 40
6.10. Continuation of or Change in Business ......................... 40
6.11. Preservation of Status of Collateral .......................... 40
SECTION 7. EVENTS OF DEFAULT ........................................... 41
7.1. Events of Default ............................................. 41
7.2. Remedies ...................................................... 43
SECTION 8. THE AGENT ................................................... 45
8.1. Appointment ................................................... 45
8.2. Delegation of Duties .......................................... 45
8.3. Exculpatory Provisions ........................................ 45
8.4. Reliance by Agent ............................................. 45
8.5. Notice of Default ............................................. 46
8.6. Non-Reliance on Agent and Other Lenders ....................... 46
8.7. Indemnification ............................................... 46
8.8. Agent in its Individual Capacity .............................. 47
8.9. Successor Agent ............................................... 47
8.10. Beneficiaries ................................................. 47
SECTION 9. MISCELLANEOUS ............................................... 47
9.1. Amendments and Waivers ........................................ 47
ii
9.2. Notices ....................................................... 48
9.3. No Waiver; Cumulative Remedies ................................ 49
9.4. Survival of Representations and Warranties .................... 49
9.5. Payment of Expenses and Taxes ................................. 49
9.6. Successors and Assigns ........................................ 50
9.7. Confidentiality ............................................... 53
9.8. Adjustments; Set-off .......................................... 53
9.9. Counterparts .................................................. 54
9.10. Severability .................................................. 54
9.11. Integration ................................................... 54
9.12. GOVERNING LAW ................................................. 55
9.13. Submission To Jurisdiction; Waivers ........................... 55
9.14. Acknowledgements .............................................. 55
SCHEDULES
SCHEDULE I Lender and Commitment Information
SCHEDULE 3.6 Existing Litigation
SCHEDULE 3.10 ERISA Matters
SCHEDULE 3.13 Environmental Matters
SCHEDULE 6.2 Existing Debt of the Borrower
SCHEDULE 6.3 Existing Liens
EXHIBITS
EXHIBIT A Form of Borrowing Request
EXHIBIT B Form of Note
EXHIBIT C Form of Assignment and Acceptance
EXHIBIT D Form of Opinion
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") dated as of October 28, 1998, by and
among CREDITRUST CORPORATION, a Maryland corporation (the "Borrower"), the
financial institutions from time to time parties to this Agreement (the
"Lenders") and SUNROCK CAPITAL CORP., a Delaware corporation, as agent (in such
capacity, the "Agent").
BACKGROUND
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1. The Borrower is engaged in the business of acquiring, managing and
collecting accounts of delinquent consumer debt, such as VISA(R), Mastercard(R)
and private label credit card accounts and consumer loan accounts issued by
originating institutions.
2. The Borrower has requested that the Lenders extend a revolving line of
credit to the Borrower for the purpose of providing funds to allow the Borrower
to acquire additional Receivables (as defined below) pursuant to certain asset
purchase agreements.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements herein set forth and for other consideration, the
receipt and sufficiency of which is hereby acknowledged and intending to be
legally bound hereby, covenant and agree as follows:
SECTION 1. DEFINITIONS
1.1. Defined Terms . As used in this Agreement, the following terms shall
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have the following meanings:
"Acquired Eligible Portfolio: an Eligible Portfolio which has been acquired
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by the Borrower and financed in part with the proceeds of a Loan.
"Affiliate": any Person (other than a Subsidiary, or an officer,
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director or employee of the Borrower who would not be an Affiliate but for
such Person's status as an officer, director and/or employee) which, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Borrower, and any member, director,
officer or employee of any such Person or any Subsidiary of the Borrower. For
purposes of this definition, "control" shall mean the power, directly or
indirectly, either to (i) vote 5% or more of the securities having ordinary
voting power for the election of directors of such Person or (ii) direct or
in effect cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Asset Purchase Agreement": each asset purchase agreement entered into
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between the Borrower and each Originating Institution in connection with the
purchase of Receivables by the Borrower from such Originating Institution.
"Base Rate": for any day, a rate per annum (rounded upwards, if necessary,
---------
to the next 1/100th of 1%) equal to the Prime Rate in effect on such day. Any
change in the Base Rate due to a change in the Prime Rate shall be effective on
the effective date of such change in the Prime Rate.
"Base Rate Borrowing": a Borrowing comprised of Base Rate Loans.
-------------------
"Base Rate Loans": Loans bearing interest at a rate determined by reference
---------------
to the Base Rate.
"Borrower Collection Accounts": the bank deposit account or accounts
----------------------------
established by the Borrower in the name of the Borrower, in each case in order
to receive payments on the Receivables from all Portfolios which have not been
transferred or become otherwise subject to a Securitized Offering, which is
assigned to and shall, upon the occurrence of an Event of Default, be subject to
the control of the Agent, for the benefit of the Lenders.
"Borrowing": a group of Loans of a single Type made by the Lenders on a
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single date and, as to Eurodollar Loans, as to which a single Interest Period is
in effect.
"Borrowing Request": a request made pursuant to Section 2.2 in
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substantially the form of Exhibit A hereto.
"Business Day": a day other than a Saturday, Sunday or other day on which
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commercial banks in Philadelphia, Pennsylvania or Baltimore, Maryland are
authorized or required by law to close; provided, however, that, when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London Interbank Market.
"Capital Lease": at any time, a lease with respect to which the lessee is
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required to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
"Capital Stock": any and all shares, interests, participation or other
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equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Change of Control": At any time after the Closing Date Xxxxxx X. Xxxxxx
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ceases for any reason to own and control, directly or indirectly, at least 51%
of the outstanding voting stock of the Borrower, provided, however, that if
Capital Stock of Borrower is sold in a public offering, no Change of Control
shall occur so long as he remains the owner of at least 25% of the outstanding
voting stock of the Borrower and remains the largest shareholder.
"Closing": as defined in Section 4.4.
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"Closing Date": as defined in Section 4.4.
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"Code": the Internal Revenue Code of 1986, as amended from time to time.
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"Collateral": all right, title and interest of the Borrower in and to the
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Receivables and other property described in Section 2 of the Security Agreement.
"Commitment": as to any Lender, the obligation of such Lender to make Loans
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to the Borrower hereunder in an aggregate principal amount at any one time
outstanding not to exceed the amount set forth opposite such Lender's name on
Schedule I hereto or in the Assignment and Acceptance pursuant to which such
Lender becomes a party to this Agreement, as the same may be permanently
terminated and extended from time to time pursuant to the provisions of Section
2.8 or changed by subsequent assignments pursuant to subsection 9.6(b).
"Commitment Fee": as defined in subsection 2.4(b).
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"Commitment Percentage": as to any Lender at any time, the proportion
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(expressed as a percentage) that such Lender's Commitment bears to the Total
Commitment (or, at any time after the Commitments shall have expired or been
terminated, the percentage which the amount of such Lender's Loans constitutes
of the aggregate amount of the Loans of the Lenders then outstanding).
"Commonly Controlled Entity": an entity, whether or not incorporated, which
--------------------------
is under common control with the Borrower within the meaning of Section 4001 of
ERISA or is part of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the Code.
"Contingent Obligation": with respect to any Person any obligation (except
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the endorsement in the ordinary course of business of instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any Debt of
any other Person (for the purpose of this definition, the "Primary Obligor") in
any manner, whether directly or indirectly, including (without limitation) Debt
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Debt of the Primary Obligor or any Property or
assets constituting security therefor;
(b) to advance or supply funds
(i) for the purpose of payment of such Debt, or
(ii) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary Obligor or
otherwise to advance or make available funds for the purchase or
payment of such Debt or obligation; or
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(c) to lease Property or to purchase Securities or other Property or
services primarily for the purpose of assuring the owner of such Debt or
obligation of the ability of the Primary Obligor to make payment of the
Debt or obligation.
For purposes of computing the amount of any Contingent Obligation, in connection
with any computation of Debt or other obligation, it shall be assumed that,
without duplication, the Debt or other obligation of the Primary Obligor that is
the subject of such Contingent Obligation is a direct obligation of the issuer
of such Contingent Obligation.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any material agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound the breach of which could reasonably be expected to have a
Material Adverse Effect.
"Debt": For any Person: (a) obligations created, issued or incurred by such
----
Person for borrowed money (whether by loan, the issuance and sale of debt
securities or the sale of property to another Person subject to an understanding
or agreement, contingent or otherwise, to repurchase such property from such
Person); (b) obligations of such Person to pay the deferred purchase or
acquisition price of property or services, other than trade accounts payable
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered; (c)
indebtedness of others secured by a Lien on the property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person
(but excluding any such Debt to the extent that such Debt exceeds the fair
market value of such assets, as established by the Borrower to the reasonable
satisfaction of the Agent, unless such Debt is assumed by such Person); (d) the
non-contingent obligations of such Person under letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person; (e) obligations under Capital Leases of such Person; (f)
Contingent Obligations of such Person; (g) all non-contingent payment
obligations of such Person under any interest rate protection agreement
(including without limitation any interest rate swaps, caps, floors, collars and
similar agreements) and currency swaps and similar agreements; (h) the liability
of such Person in respect of banker's acceptances and the estimated liability
under any participating mortgage, convertible mortgage or similar arrangement;
(i) all indebtedness, payment obligations and contingent obligations of any
partnership in which such Person holds a general partnership interest but only
if and to the extent such Person has recourse liability for such obligations;
and (j) all obligations, liabilities, reserves and any other items that would be
listed as a liability on a balance sheet of such Person determined on a
consolidated basis in accordance with GAAP, but excluding all general
contingency reserves and reserves for deferred income taxes and investment
credit and excluding trade accounts payable excluded from this definition
pursuant to clause (b) above.
4
"Default": any of the events specified in Section 7, whether or not any
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requirement for the giving of notice, the lapse of time, or both, or any other
condition precedent therein set forth, has been satisfied.
"Distribution": in respect of any corporation or limited liability company,
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(a) dividends, distributions or other payments on account of any capital stock
of the corporation or interests in the limited liability company (except
distributions in common stock of such corporation); (b) the redemption or
acquisition of such stock or interests or of warrants, rights or other options
to purchase such stock or interests (except when solely in exchange for common
stock of such corporation); and (c) any payment on account of, or the setting
apart of any assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of any share of any
class of capital stock of such corporation or of interests in such limited
liability company or any warrants or options to purchase any such stock or
interests.
"Dollars" and "$": dollars in lawful currency of the United States of
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America.
"Eligible Portfolio": any Portfolio which at the time of purchase has a XXX
------------------
Recovery Estimate of not less than the product of * .
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or binding requirements of any Governmental Authority, or binding Requirement of
Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment, as now or may at
any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar
---------------------------------
Loan, the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements applicable to any Lender in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System or other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to any Eurodollar Loan for any
--------------------
Interest Period, the rate of interest per annum for a period equal to such
Interest Period published from time to time in the Wall Street Journal as the
-------------------
average of the London interbank offered rates of interest per annum for Dollars
quoted by major banks designated by the British Bankers' Association (or
appropriate successor) or if the Wall Street Journal shall
-------------------
* Text omitted based upon request for confidential treatment.
5
cease to publish such a rate, in such other financial publication of recognized
standing as the Agent shall select.
"Eurodollar Borrowing": a Borrowing comprised of Eurodollar Loans.
--------------------
"Eurodollar Loan": any Loan bearing interest at a rate determined by
---------------
reference to the Eurodollar Rate in accordance with the provisions of Section 2.
"Eurodollar Rate": with respect to each Interest Period pertaining to a
---------------
Eurodollar Loan, a rate per annum determined in accordance with the following
formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
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1.00 - Applicable Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 7, provided that
----------------
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
------------
"Exposure": as to any Lender at any date, an amount equal to the aggregate
--------
principal amount of all Loans made by such Lender then outstanding
"Fee Letter": that certain letter dated the Closing Date between the
----------
Lenders and the Agent providing for the allocation of interest and fees payable
hereunder and under the Notes, as the same may hereafter be amended, modified or
supplemented pursuant to the applicable provisions thereof.
"GAAP": at any time with respect to the determination of the character or
----
amount of any asset or liability or item of income or expense, or any
consolidation or other accounting computation, generally accepted accounting
principles as in effect on the date of, or at the end of the period covered by,
the financial statements from which such asset, liability, item of income, or
item of expense, is derived, or, in the case of any such computation, as in
effect on the date when such computation is required to be determined.
"Governmental Authority": any nation or government, any state or other
----------------------
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Insolvency": with respect to any Multiemployer Plan, the condition that
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such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
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6
"Interest Payment Date": as to any Loan, the first day of each month
---------------------
commencing on November 1, 1998.
"Interest Period": with respect to any Eurodollar Loan:
---------------
(a) initially the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending one,
three or six months thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one,
three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Lender not less than two Business Days prior to the last day of
the then current Interest Period with respect thereto;
provided that, the foregoing provisions relating to Interest Periods are subject
-------- ----
to the following:
(i) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless, with respect to Eurodollar Loans only, such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day;
(ii) with respect to Eurodollar Loans, any Interest Period that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iii) an Interest Period that otherwise would extend beyond the
Termination Date shall end on the Termination Date.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).
"Loan Account": as defined in subsection 2.14(d).
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"Loans": the revolving loans made by the Lenders to the Borrower pursuant
to Section 2.2(a). Each Loan shall be a Eurodollar Loan or a Base Rate Loan.
7
"Loan Documents": this Agreement, the Notes, the Security Agreement and the
--------------
Support Agreement.
"Material Adverse Effect": a material adverse effect on (a) the business,
-----------------------
financial condition or results of operations of the Borrower or (b) the ability
of the Borrower duly and punctually to pay its material Debts or (c) the ability
of the Borrower duly and punctually to perform its obligations hereunder or
under any of the other Loan Documents.
"Material Subsidiary": any Subsidiary of the Borrower having at any time
-------------------
assets valued on its books in excess of $2,000,000.
"Materials of Environmental Concern": any gasoline or petroleum (including
----------------------------------
crude oil or any fraction thereof) or petroleum products or any hazardous or
toxic substances, materials or wastes, defined or regulated as such in or under
any Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls, and ureaformaldehyde insulation.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
------------------
Section 4001(a)(3) of ERISA.
"Net Proceeds": with respect to a Receivable, all monies in available funds
------------
collected, received or otherwise recovered from or for the account of the
related Obligor on such Receivable. Third-Party Fees incurred in connection with
collecting a Receivable will be deducted from collections on such Receivable and
will not constitute Net Proceeds.
"Net Worth" at any particular date, Stockholder's Equity as required by
---------
GAAP to be reported on the Borrower's financial statements.
"Note or Notes": the individual or collective reference to the promissory
-------------
note or notes of the Borrower in the form of Exhibit B executed and delivered as
provided in Section 2.6.
"Obligor": as to any Receivable, means any Person who owes or may be liable
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for payments under such Receivable.
"Originating Institution": any of the banking institutions and merchants
-----------------------
that originated any of the Receivables.
"Participant": as defined in subsection 8.6(b).
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"XXX" or "Portfolio Analysis Tool": the Borrower's proprietary computer
--- -----------------------
software which it uses to review and analyze the Receivables in each Portfolio
in order to project anticipated recoveries on such Receivables over certain time
periods.
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"XXX Recovery Estimate": the valuation of the recovery potential of a
---------------------
Portfolio performed by the Borrower to project its expected value through the
application of XXX.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust, joint
------
stock company, limited liability company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is covered by
----
ERISA and in respect of which the Borrower or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Portfolio": at any date, the aggregate Receivables purchased by the
---------
Borrower from an Originating Institution pursuant to an Asset Purchase
Agreement.
"Portfolio Purchase Price": for each Portfolio, an amount equal to the
------------------------
purchase price of such Portfolio paid or to be paid pursuant to the Asset
Purchase Agreement in respect thereof.
"Prime Rate": the rate of interest per annum published from time to time in
----------
the Wall Street Journal which is designated as the prime rate for domestic
commercial banks or, if the Wall Street Journal shall cease to publish such a
prime rate, in such other financial publication of recognized standing as the
Agent shall select.
"Property": any interest in any kind of property or asset, whether real,
--------
personal or mixed, and whether tangible or intangible.
"Receivable": any receivable generated on a credit card account, revolving
----------
account, or installment account and identified on a Schedule of Receivables.
"Receivable File": with respect to each Receivable, (i) the related Asset
---------------
Purchase Agreement; (ii) any other documents or records received from or made by
the related Originating Institution in respect of such Receivable; (iii) a copy
of the marked computer records indicating the interest of the Agent on behalf of
the Lenders, as evidenced by a Schedule of Receivables; and (iv) any and all
other documents that the Borrower shall keep on file, in accordance with its
customary procedures, relating to such Receivable or the related Obligor.
"Receivables Purchase Agreement": an agreement pursuant to which the
------------------------------
Borrower agrees to sell to a Special Purpose Entity, and such Special Purpose
Entity agrees to purchase, all or any portion of the Receivables.
9
"Regulation U": Regulation U of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation X": Regulation X of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Related Collateral": as defined in the Security Agreement.
------------------
"Reorganization": with respect to any Multiemployer Plan, the condition
--------------
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, except to the extent that notice thereof has been waived by the PBGC.
"Required Lenders": at any time, Lenders, the Exposure of which aggregate
----------------
at least 66 2/3% of the Total Exposure at such time.
"Requirement of Law": as to any Person, the certificate of incorporation,
------------------
by-laws, operating agreement or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer": the chief executive officer, president, or chief
-------------------
financial officer.
"S&P": Standard & Poor's Rating Group, a division of XxXxxx-Xxxx
---
Corporation.
"Schedule of Receivables": the computer records (which may consist of a
-----------------------
CD-Rom) containing a true and complete list of all of the Receivables owned by
the Borrower, delivered to the Agent which Schedule shall be updated by the
Borrower on a monthly basis.
"Security": "security" as defined in Section 2(1) of the Securities Act of
--------
1933, as amended.
"Security Agreement": the Security Agreement of even date herewith between
------------------
the Borrower and the Agent granting to the Agent for the ratable benefit of the
Lenders a security interest in the Borrower's Receivables and other Property as
described therein, as the same may hereafter be amended, modified or
supplemented pursuant to the applicable provisions thereof.
10
"Securitized Offering": an offering of notes or other securities backed by
--------------------
receivables similar to the Receivables pursuant to which such receivables are
transferred by the Borrower to another Person making the offering.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA, but
--------------------
which is not a Multiemployer Plan.
"Solvent": as to any Person, as of the time of determination, the financial
-------
condition under which the following conditions are satisfied:
(a) the fair market value of the assets of such Person will exceed the
debts and liabilities, subordinated, contingent or otherwise, of such
Person;
(b) the present fair saleable value of the Property of such Person
will be greater than the amount that will be required to pay the probable
liability of such Person on its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become
absolute and matured;
(c) such Person will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and
(d) such Person will not have unreasonably small capital with which to
conduct the businesses in which it is engaged as such businesses are then
conducted and are proposed to be conducted after the date thereof.
"Special Purpose Entity": any special purpose corporation, limited
----------------------
partnership, limited liability company, trust or other vehicle created by
Borrower solely for the purpose of a Securitized Offering.
"Subsidiary": as to any Person, (i) any corporation, limited liability
----------
company, company or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock, interests, shares or similar items of
beneficial interest normally entitled to vote for the election of one or more
directors, members or trustees (regardless of any contingency which does or may
suspend or dilute the voting rights) is at such time owned directly or
indirectly by such person or one or more of such Person's Subsidiaries, or any
partnership of which such Person is a general partner or of which 50% or more of
the partnership interests is at the time directly or indirectly owned by such
Person or one or more of such Person's Subsidiaries, and (ii) any corporation,
company, trust, partnership or other entity which is controlled or capable of
being controlled by such Person or one or more of such Person's subsidiaries.
"Support Agreement": the Support Agreement of even date herewith from
-----------------
Xxxxxx X. Xxxxxx in favor of the Agent for the ratable benefit of the Lenders,
as the same may hereafter be amended, modified or supplemented pursuant to the
applicable provisions thereof.
11
"Termination Date": October 28, 2001, or any subsequent date to which the
----------------
Termination Date shall have been extended pursuant to subsection 2.8(c).
"Third-Party Fees": with respect to a Receivable, the amount of any court
----------------
costs, fees and compensation paid or owed to unrelated third-parties (generally,
contingency fee lawyers) retained or otherwise engaged by the Borrower, under
fee or compensation arrangements that are contingent upon, and determined by
reference to, amounts recovered in respect of the related Receivable.
"Total Commitment": at any time, the aggregate amount of the Lenders'
----------------
Commitments, as in effect at such time.
"Total Exposure": at any time, the aggregate amount of the Lenders'
--------------
Exposures at such time.
"Tranche": the collective reference to Eurodollar Loans in each case whose
-------
Interest Periods begin on the same date and end on the same later date (whether
or not such Loans originally were made on the same date).
"Type": when used in respect of any Loan or Borrowing, shall refer to the
----
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, "Rate" shall include the
Eurodollar Rate or the Base Rate.
"Voting Stock": capital stock of any class or classes of a corporation the
------------
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the directors (or Persons performing similar functions) and,
as applicable, any equity, participation or ownership interests in any
partnership, business trust, joint stock company, limited liability company,
trust, unincorporated association, joint venture or any other Person which
interests are similar by analogy to capital stock or ownership rights giving
rise to voting or governance rights.
1.2. Other Definitional Provisions. Unless otherwise specified therein,
-----------------------------
all terms defined in this Agreement shall have the defined meanings when used in
the Notes, the other Loan Documents or any certificate or other document made or
delivered pursuant hereto.
1.3. Construction. (a) Unless the context of this Agreement otherwise
------------
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole, "or" has the inclusive meaning represented by
the phrase "and/or," and "including" has the meaning represented by the phrase
"including without limitation." References in this Agreement to "determination"
of or by the Agent or the Lenders shall be deemed to include good faith
estimates by the Agent or the Lenders (in the case of quantitative
determinations) and good faith beliefs by the Agent or the Lenders (in the case
of qualitative determinations). Whenever the Agent or the Lenders are granted
the right herein to act in their sole discretion or to grant or withhold consent
such right shall be exercised in good faith. All references herein to the
"knowledge of" or "best knowledge of" a Borrower shall be deemed to refer to the
knowledge of
12
a Responsible Officer thereof. The words "hereof," "herein," "hereunder",
"hereby" and similar terms in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. The section and other
headings contained in this Agreement and the Table of Contents preceding this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, schedule and exhibit references are to this Agreement
unless otherwise specified.
(b) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate) applied on a basis consistent (except for changes concurred
in by the Borrower's independent public accountants) with the financial
statements contained in the Borrower's final prospectus dated July 29, 1998 and
the Borrower's form 10-Q filed September 11, 1998. As used herein and in the
Notes, and any certificate or other document made or delivered pursuant hereto,
accounting terms relating to the Borrower thereof not defined in subsection 1.1
and accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP. In the
event that any future change in GAAP, without more, materially affects the
Borrower's compliance with any financial covenant herein, the Borrower and the
Lenders and the Agent shall use their best efforts to modify such covenant in
order to account for such change and to secure for the Lenders the intended
benefits of such covenant.
SECTION 2. THE LOANS
2.1. Loans. (a) Subject to the terms and conditions and relying upon the
-----
representations and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Loans to the Borrower for the purpose described in
Section 3.12, at any time and from time to time on or after the date hereof and
until the Termination Date or until the Commitment of such Lender shall have
been terminated in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding not exceeding the amount of such Lender's
Commitment, provided that, no Loan made by the Lenders shall exceed 80% of the
-------------
Portfolio Purchase Price for the Eligible Portfolio being acquired with the
proceeds of such Loan and provided further that (i) no Loan shall be made if
---------------------
after giving effect to the making of such Loan and the simultaneous application
of the proceeds thereof, the outstanding aggregate principal amount of all Loans
made by all Lenders exceeds the Total Commitment at such time and (ii) at all
times the outstanding aggregate principal amount of all Loans required to be
made by each Lender shall equal the product of (y) its Commitment Percentage
times (z) the outstanding aggregate principal amount of all Loans required to be
made pursuant to Section 2.2 at such time.
(b) Each Loan shall be made as part of a Borrowing consisting
of Loans made by the Lenders ratably in accordance with their Commitment
Percentages and Section 2.14; provided, however, that, the failure of any Lender
to make any Loan shall not in itself relieve any other Lender of its obligation
to lend hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan required to be
made by such other Lender).
13
Within the foregoing limits, the Borrower may borrow, repay and reborrow
under the Commitments on or after the date hereof and prior to the Termination
Date, subject to the terms, provisions and limitations set forth herein.
2.2. Loan Procedures. (a) In order to request a Borrowing, the Borrower
---------------
shall hand deliver or telecopy (or notify by telephone and promptly confirm by
hand delivery or telecopy) to the Agent the completed Borrowing Request (i) in
the case of a Eurodollar Borrowing, not later than 2:00 p.m., Philadelphia time,
three Business Days before a proposed Borrowing and (ii) in the case of a Base
Rate Borrowing, not later than 11:00 a.m., Philadelphia time, on the day of a
proposed Borrowing. Such notice shall be irrevocable and shall in each case
specify (x) whether the Borrowing then being requested is to be a Eurodollar
Borrowing or a Base Rate Borrowing; (y) the date of such Borrowing (which shall
be a Business Day) and the amount thereof; and (z) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto. If no election
as to the Type of Borrowing is specified in any such notice, then the requested
Revolving Borrowing shall be a Base Rate Borrowing. If no Interest Period with
respect to any Eurodollar Borrowing is specified in any such notice, then the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Agent shall promptly advise the Lenders of any notice given
pursuant to this Section 2.2 and of each Lender's portion of the requested
Borrowing.
(b) Subject to Section 2.3(a), each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the designated account of the Agent in
Philadelphia, Pennsylvania, not later than 2:00 p.m., Philadelphia time, and the
Agent shall by 3:00 p.m., Philadelphia time, wire transfer the amounts so
received to the designated account of the Borrower or, if a Borrowing shall not
occur on such date because any condition precedent herein specified shall not
have been met, return the amounts so received to the respective Lenders. Unless
the Agent shall have received notice from a Lender prior to the date of any
Borrowing that such Lender will not make available to the Agent such Lender's
portion of such Borrowing, the Agent may assume that such Lender has made such
portion available to the Agent on the date of such Borrowing in accordance with
this paragraph (b) and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have made such portion available to the Agent,
such Lender and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Agent at the interest rate applicable at the time to the
Loans comprising such Borrowing. If such Lender shall repay to the Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement.
2.3. General Provisions Regarding Loans. (a) The Borrower may refinance all
----------------------------------
or any part of any Borrowing with any other Borrowing, subject to the conditions
and limitations set forth herein and elsewhere in this Agreement. Any Borrowing
or part thereof so refinanced shall be deemed to be repaid in accordance with
Section 2.5 with the proceeds of a new Borrowing hereunder and the proceeds of
the new Borrowing, to the extent they do not exceed
14
the principal amount of the Borrowing being refinanced, shall not be paid by the
Lenders to the Agent or by the Agent to the Borrower pursuant to Section 2.2(b).
(b) All Borrowings, conversions and continuations of Loans hereunder
and all selections of Interest Periods hereunder shall be in such amounts and be
made pursuant to such elections that, after giving effect thereto, (A) the
aggregate principal amount of the Loans comprising each Tranche of Eurodollar
Loans shall be equal to $1,000,000 or a whole multiple of $100,000 in excess
thereof and (B) the Borrower shall not have outstanding at any one time more
than in the aggregate six (6) separate Tranches of Eurodollar Loans.
(c) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Termination Date.
2.4. Fees.
----
(a) Upon the execution of this Agreement, the Borrower agrees to pay
to the Agent for the benefit of the Lenders a closing fee of $100,000.
(b) The Borrower agrees to pay to the Agent for the benefit of the
Lenders, on the first day of each month and on the date on which the Commitments
shall be terminated as provided herein, a commitment fee (a "Commitment Fee") at
--------------
a rate per annum equal to one quarter of one percent (1/4%) on the average daily
amount of the unused Commitments of the Lenders during the preceding month (or
shorter period commencing with the date hereof or ending with the Termination
Date or any date on which the Commitments shall be terminated). All Commitment
Fees shall be computed on the basis of the actual number of days elapsed over a
year of 360 days. The Commitment Fee shall commence to accrue on the date
hereof, and shall cease to accrue on the earlier of the Termination Date and the
termination of the Commitments as provided herein.
(c) The Borrower agrees to pay to the Agent for the benefit of the
Lenders a facility fee of $100,000 which shall be deemed fully earned at Closing
but which shall be payable in two installments of $50,000 each on the first and
second anniversaries of the Closing Date.
(d) The Borrower agrees to pay the Agent for its own account a
collateral management fee equal to $5,000 per month; the first such payment to
be due at Closing and thereafter on the first day of each month beginning
November 1, 1998.
(e) All fees shall be paid on the dates due, in immediately available
funds, to the Agent for distribution, if and as appropriate, among the Lenders.
Once paid, none of the fees shall be refundable under any circumstances, other
than as a result of an error in calculation.
2.5. Notes; Repayment of Loans. (a) The Loans made by each Lender shall be
-------------------------
evidenced by a single promissory note duly executed on behalf of the Borrower,
dated the
15
Closing Date, in substantially the form attached hereto as Exhibit B with the
blanks appropriately filled, payable to such Lender in a principal amount equal
to the Commitment of such Lender. Each Note shall bear interest from the date
thereof on the outstanding principal balance thereof as set forth in Section
2.6.
(b) The outstanding principal balance of each Borrowing (that is, the
total amount of the Loans made to purchase an Acquired Eligible Portfolio) which
has not been prepaid in full pursuant to the provisions of subsection 2.9 on or
before the date which is six (6) months after the date such Borrowing was made
shall be payable in twenty four (24) equal monthly installments commencing on
the first day of the month following such six-month anniversary and on the first
day of each month thereafter; provided, however, that the outstanding principal
-------- -------
balance of all Loans shall be due and payable on the Termination Date.
(c) Each Lender shall, and is hereby authorized by the Borrower to,
endorse on the schedule attached to the relevant Note held by such Lender (or on
a continuation of such schedule attached to each such Note and made a part
thereof), or otherwise to record in such Lender's internal records, an
appropriate notation evidencing the date and amount of each Loan of such Lender,
each payment or prepayment of principal of any Loan and the other information
provided for on such schedule; provided, however, that the failure of any Lender
-------- -------
to make such a notation or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loan made by such Lender in accordance
with the terms hereof and of the relevant Note.
2.6. Interest on Loans. (a) Subject to the provisions of Section 2.7, each
-----------------
Base Rate Loan shall bear interest (computed on the basis of the actual number
of days elapsed over a year of 360 days) at a rate per annum equal to the Base
Rate plus 1/2%.
----
(b) Subject to the provisions of Section 2.7, each Eurodollar Loan
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to the Eurodollar Rate for
the Interest Period in effect for such Loan plus 2.5%.
----
(c) Accrued interest on each Loan shall be payable on each Interest
Payment Date for the period ending on the last day of the immediately preceding
month and in the case of each Eurodollar Loan also on the last day of each
Interest Period for such Loan; provided that, interest accruing on overdue
-------- ----
amounts pursuant to Section 2.7 shall be payable on demand as provided in the
Notes. The Eurodollar Rate or the Base Rate for each Interest Period or day
within an Interest Period shall be determined by the Agent, and such
determination shall be conclusive absent manifest error.
2.7. Default Rate; Inability to Determine Interest Rate. (a) To the extent
--------------------------------------------------
not contrary to any Requirement of Law, upon the occurrence and during the
continuation of an Event of Default, any principal, past due interest, fee or
other amount outstanding hereunder or under the Notes shall, at the option of
the Required Lenders, bear interest for each day thereafter until paid in full
(after as well as before judgment) at a rate per annum which shall be equal to
2.5% above the Base Rate (but in no event shall any such rate exceed the maximum
rate
16
permitted by any Requirement of Law). The Borrower acknowledges that such
increased interest rate reflects, among other things, the fact that such loans
or other amounts have become a substantially greater risk given its default
status and that the Lenders are entitled to additional compensation for such
risk.
(b) In the event, and on each occasion, that on the day two Business
Days prior to the commencement of any Interest Period for a Eurodollar Loan, the
Agent shall have determined (which determination absent manifest error shall be
conclusive and binding upon the Borrower) that reasonable means do not exist for
ascertaining the Eurodollar Base Rate, the Agent shall, as soon as practicable
thereafter, give written, telegraphic or telephonic notice of such determination
to the Borrower and the Lenders, and any request by the Borrower for a
Eurodollar Loan or for conversion to or maintenance of a Eurodollar Loan
pursuant to the terms of this Agreement shall be deemed a request for a Base
Rate Loan. After such notice shall have been given and until the circumstances
giving rise to such notice no longer exist, each request for a Eurodollar Loan
shall be deemed to be a request for a Base Rate Loan. Each determination by the
Agent hereunder shall be conclusive absent manifest error.
2.8. Termination and Extension of Commitment. (a) The Commitments shall be
---------------------------------------
automatically terminated on the Termination Date.
(b) Subject to the terms and conditions set forth in this paragraph,
upon at least three Business Days' prior irrevocable written or telecopy notice
to the Agent, the Borrower may at any time prior to the Termination Date
permanently terminate the Total Commitment. In connection with any such
termination, the Borrower shall repay the entire outstanding principal amount of
the Loans, together with all accrued and unpaid Commitment Fees and other sums
due to the Agent and the Lenders hereunder and under the Notes, including (if
such termination occurs prior to July 28, 2001) a prepayment fee in the amount
of one percent (1%) of the amount of the Total Commitment so terminated.
(c) Unless either the Borrower or any Lender through the Agent,
notifies the other party in writing at least ninety (90) days prior to the then
current Termination Date that it does not elect to extend its Commitment beyond
such Termination Date, then, subject to the condition precedent that on or
before the Termination Date then in effect the Borrower pays to the Agent for
the benefit of the Lenders an extension fee of $50,000, (i) the Commitments
shall without further act by any party hereto, be extended by one year beyond
the Termination Date then in effect and (ii) the term "Termination Date" shall
thereafter mean the date which is one year after the Termination Date then in
effect.
2.9. Optional and Mandatory Prepayments of Loans. (a) The Borrower shall
-------------------------------------------
have the right at any time and from time to time to prepay any Loan, in whole or
in part, without premium or penalty (but in any event subject to Section 2.13),
upon prior written, telecopy or telephonic notice to the Agent given no later
than 2:00 p.m., Philadelphia time, one Business Day before any proposed
prepayment.
17
(b) If a certificate delivered pursuant to subsection 5.2(b) shows
that during the period since the date of acquisition of all Acquired Eligible
Portfolios which have been owned by the Borrower for at least six months and not
transferred by the Borrower in connection with a Securitized Offering, the Net
Proceeds received by the Borrower on account of the Receivables in all such
Acquired Eligible Portfolios is less than seventy percent (70%) of the XXX
Recovery Estimate for all such Acquired Eligible Portfolios for such period,
then Borrower shall prepay to the Agent for the account of the Lenders, an
amount equal to the product of (x) one percent (1%) times (y) the aggregate
amount of the Loans made by the Lenders and applied toward the Portfolio
Purchase Price of all such Acquired Eligible Portfolios, times (z) the
difference (rounded to the nearest whole number) between (i) seventy and (ii)
the percentage of Net Proceeds actually collected on all such Acquired Eligible
Portfolios during such period. Such amount shall be applied as a prepayment of
such Loans and shall be made ratably among the Lenders in accordance with their
respective Commitment Percentages and shall be applied to installments due on
such Loans in inverse order of maturity.
(c) Upon the sale or transfer by the Borrower of all or any part of
the Receivables in an Acquired Eligible Portfolio in connection with a
Securitized Offering, whether pursuant to a Receivables Purchase Agreement or
otherwise, the Borrower shall immediately repay to the Agent for the account of
the Lenders the outstanding principal amount of, and accrued interest on, the
Loan related to such Acquired Eligible Portfolio.
(d) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Loan to be prepaid. All prepayments under this
Section on other than Base Rate Borrowings shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment.
(e) No payment on account of principal or interest shall be due in
connection with, or as a condition to, the sale or transfer by Borrower in the
ordinary course of its business of any Receivables which are not part of an
Acquired Eligible Portfolio, or any other Collateral sold or disposed of by
Borrower in the ordinary course of business for fair consideration in accordance
with the provisions of the Loan Documents.
2.10. Illegality. Notwithstanding any other provision herein, if any
----------
change after the date of this Agreement in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert or refinance Base Rate Loans to Eurodollar
Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding
as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 2.13.
2.11. Requirements of Law. (a) In the event that any change after the date
-------------------
of this Agreement in any Requirement of Law or in the interpretation, or
application thereof or
18
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made
by it, or change the basis of taxation of payments to such Lender in
respect thereof (except for taxes covered by Section 2.12 and taxes on
the overall net income, gross receipts or revenue of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of
funds by, any office of such Lender which is not otherwise included in
the determination of the interest rate on such Eurodollar Loan
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender reasonably deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or to reduce any
amount receivable hereunder in respect thereof then, in any such case, the
Borrower shall as promptly as practicable pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable. If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall as promptly as
practicable notify the Borrower, through the Agent, of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the Agent,
to the Borrower shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder. If any amount is refunded to such
Lender, such Lender will promptly reimburse Borrower for amounts paid in respect
of the refunded amount.
(b) In the event that any Lender shall have determined that any
change after the date of this Agreement in any Requirement of Law regarding
capital adequacy or in the interpretation or application thereof or compliance
by such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made subsequent to the date hereof does or shall
have the effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for
such change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount reasonably
deemed by such Lender to be material, then from time to time, after submission
as promptly as practicable by such Lender to the Borrower (with a copy to the
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
19
(c) Each Lender agrees that it will use reasonable efforts in order
to avoid or to minimize, as the case may be, the payment by the Borrower of any
additional amount under subsections 2.11(a) and (b); provided, however, that no
-------- -------
Lender shall be obligated to incur any expense, cost or other amount in
connection with utilizing such reasonable efforts.
2.12. Taxes. (a) All payments made by the Borrower under this Agreement
-----
and the Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding, in the case of the Agent and each Lender, net
income taxes and franchise or gross receipts taxes (imposed in lieu of net
income taxes) imposed on the Agent or such Lender, as the case may be, as a
result of a present or former connection between the jurisdiction of the
government or taxing authority imposing such tax and the Agent or such Lender or
any political subdivision or taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). Except as provided in Section
2.12(c) and the penultimate sentence of this Section 2.12(a), if any Taxes are
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under the Notes, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Notes. Whenever any Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by the Agent or
any Lender as a result of any such failure. If as a result of a payment by the
Borrower of Taxes pursuant to this subsection a Lender receives a tax benefit or
tax savings such as by receiving a credit against, refund of, or reduction in
Taxes which such Lender would not have received but for the payment by the
Borrower of Taxes pursuant to this subsection, then such Lender shall promptly
pay to the Borrower the amount of such credit, refund, reduction or any other
similar item. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver to the Borrower
and the Agent (i) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable form, as the case may be, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form.
Each such Lender also agrees to deliver to the Borrower and the Agent two
further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Agent, unless in any such case an
event (including, without limitation, any change in treaty, law or regulation)
has
20
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
Lender from duly completing and delivering any such form with respect to it and
such Lender so advises the Borrower and the Agent. Such Lender shall certify (i)
in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States backup withholding tax. Each Lender
shall deliver to the Borrower and the Agent, with respect to Taxes imposed by
any Governmental Authority other than the United States of America, similar
forms, if available (or the information that would be contained in similar forms
if such forms were available), to the forms which are required to be provided
under this subsection with respect to Taxes of the United States of America.
(c) The Borrower shall not be required to pay any additional amounts
to the Agent or any Lender in respect of payments of United States withholding
tax or other Taxes made by the Borrower which are consistent with the forms and
information delivered to the Borrower and the Agent or if the payment of such
amounts would not have arisen but for a failure by the Agent or such Lender to
comply with the requirements of subsection 2.12(b) or the Agent or such Lender
did not timely deliver to the Borrower the forms listed or described in
subsection 2.12(b) or did not take such other steps as reasonably may be
available to it under applicable tax laws and any applicable tax treaty or
convention to obtain an exemption from, or reduction (to the lowest applicable
rate) of, such United States withholding tax and other Taxes or, if such steps
were taken, the information was not timely and duly delivered to the Borrower.
2.13. Indemnity. (a) The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (i) default by the Borrower in payment when due of
the principal amount of or interest on any Eurodollar Loan or Base Rate Loan,
(ii) default by the Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Loans or Base Rate Loans after the Borrower has given
a notice requesting the same in accordance with the provisions of this
Agreement, (iii) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (iv) the making of a prepayment of Eurodollar Loans or Base Rate
Loans on a day which is not the last day of an Interest Period with respect
thereto, including, without limitation, in each case, any such loss or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate the deposits from which such funds were obtained. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) For the purpose of calculation of all amounts payable to a Lender
under subsection 2.13(a), each Lender shall be deemed to have actually funded
its relevant Eurodollar Loan through the purchase of a deposit bearing interest
at the Eurodollar Base Rate in an amount equal to the amount of the Eurodollar
Loan and having a maturity comparable to the relevant Interest Period; provided,
--------
however, that each Lender may fund each of its Eurodollar Loans in any manner it
-------
sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section.
21
2.14. Pro Rata Treatment, etc. Except as required under Section 2.10 and
-----------------------
subject to the provisions of the Fee Letter, each Borrowing, each payment or
prepayment of principal of any Borrowing, each conversion of Loans, each payment
of interest on the Loans and each payment of Commitment Fees and other fees
payable for the benefit of the Lenders shall be made pro rata among the Lenders
in accordance with their respective Commitment Percentages. Each Lender agrees
that in computing such Lender's portion of any Borrowing to be made hereunder,
the Agent may, in its discretion, round each Lender's percentage of such
Borrowing to the next higher or lower whole dollar amount.
2.15. Payments; Loan Account. (a) The Borrower shall make each payment
----------------------
(including principal of or interest on any Loan or any fees or other amounts)
hereunder not later than 2:00 p.m., Philadelphia time, on the date when due in
Dollars to the Agent at its offices at 11 Penn Center, 1835 Market Street,
Philadelphia, Pennsylvania, or at such other place as may be designated by the
Agent, in immediately available funds.
(b) Whenever any payment (including principal of or interest on any
Loan or any Commitment Fees or other amounts) hereunder shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Commitment Fees, if
applicable.
(c) Any and all payments on account of the Loans will be applied to
accrued and unpaid interest, outstanding principal and other sums due hereunder
or under the Loan Documents, either as expressly provided in this Agreement or
if not so expressly provided, and in any event after the occurrence and during
the continuance of an Event of Default, then in such order as the Agent, in its
discretion, elects. If the Borrower makes a payment or payments and such payment
or payments, or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside or are required to be repaid to a trustee,
receiver, or any other person under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment or payments,
the obligations or part thereof hereunder intended to be satisfied shall be
revived and continued in full force and effect as if said payment or payments
had not been made.
(d) The Agent will maintain on its books on behalf of the Lenders a
loan account (the "Loan Account") to which shall be charged all advances of
Loans when made to the Borrower and all accrued interest and fees, expenses,
charges and other amounts due and payable hereunder and under the Notes on the
date when due and to which shall be credited all payments, repayments and
prepayments made by the Borrower pursuant to this Agreement and the Notes on the
date when received by the Agent. All outstanding amounts shown on the Loan
Account shall constitute Loans hereunder and shall be evidenced by the Notes and
secured by the Collateral. Except in the case of manifest error in computation,
the Loan Account will be conclusive and binding on the Borrower as to the amount
at any time due to the Lenders from the Borrower under this Agreement and the
Notes.
2.16. Conversion and Continuation Options. The Borrower shall have the
-----------------------------------
right at any time upon prior irrevocable notice to the Agent (i) not later than
11:00 a.m., Philadelphia
22
time, on the Business Day of conversion, to convert any Eurodollar Loan to a
Base Rate Loan, (ii) not later than 2:00 p.m., Philadelphia time, three Business
Days prior to conversion or continuation, to (y) convert any Base Rate Loan into
a Eurodollar Loan, or (z) to continue any Eurodollar Loan as a Eurodollar Loan
for any additional Interest Period and (iii) not later than 2:00 p.m.,
Philadelphia time, three Business Days prior to conversion, to convert the
Interest Period with respect to any Eurodollar Loan to another permissible
Interest Period, subject in each case to the following:
(a) a Eurodollar Loan may not be converted at a time other than the
last day of the Interest Period applicable thereto;
(b) any portion of a Loan maturing or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar Loan;
(c) no Eurodollar Loan may be continued as such and no Base Rate Loan
may be converted to a Eurodollar Loan when any Default or Event of Default has
occurred and is continuing;
(d) any portion of a Eurodollar Loan that cannot be converted into or
continued as a Eurodollar Loan by reason of paragraph 2.16(b) or 2.16(c)
automatically shall be converted at the end of the Interest Period in effect for
such Loan to a Base Rate Loan;
(e) on the last day of any Interest Period for Eurodollar Loans, if
the Borrower has failed to give notice of conversion or continuation as
described in this subsection, such Loans shall be automatically converted to
Base Rate Loans on the last day of such then expiring Interest Period; and
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement, and to make the Loans,
the Borrower hereby represents and warrants to the Agent and each Lender that:
3.1. Financial Condition. (a) The audited consolidated balance sheets of
-------------------
the Borrower and its consolidated Subsidiaries as at December 31, 1997 and the
related statements of income and of cash flows for the fiscal year ended on such
date, copies of which have heretofore been furnished to each Lender, present
fairly the financial condition of the Borrower and its consolidated Subsidiaries
as at such date, and the results of its operations and its consolidated cash
flows for the fiscal year then ended. All such financial statements, including
the related schedules and the notes thereto, have been prepared in accordance
with GAAP applied consistently throughout the periods involved. Neither the
Borrower nor any of its consolidated Subsidiaries has, at the date of the most
recent balance sheet referred to above, any material Contingent Obligation,
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction, which is required by GAAP to be but is not
reflected in the foregoing statements or in the notes thereto.
23
(b) (i) As of the Closing Date and after giving effect to this
Agreement and any Loans to be made on the Closing Date, the Borrower is Solvent.
(ii) The Borrower does not intend to incur debts beyond its
ability to pay such debts as they mature, taking into account the timing of and
amounts of cash to be received by it and the timing of the amounts of cash to be
payable on or in respect of its Debt.
3.2. No Adverse Change. Since June 30, 1998 to the Closing Date, there has
-----------------
been no change in the business, Properties, operations or financial condition of
the Borrower or any other development or event which has had a Material Adverse
Effect.
3.3. Existence; Compliance with Law. The Borrower (a) is duly organized,
------------------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign entity and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to be so
qualified would not, in the aggregate, have a Material Adverse Effect and (d) is
in compliance with all Requirements of Law the non-compliance with which would
have a Material Adverse Effect.
3.4. Power; Authorization; Enforceable Obligations. The Borrower has the
---------------------------------------------
power (corporate or otherwise), authority, and legal right, to make, deliver and
perform this Agreement, the Notes and the other Loan Documents to which it is a
party and to borrow hereunder and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this Agreement and the
Notes and to authorize the execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents to which it is a party. No
consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person (including stockholders and creditors
of the Borrower) is required in connection with the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of this
Agreement, the Notes or the other Loan Documents. This Agreement has been, and
each Note and other Loan Document will be, duly executed and delivered on behalf
of the Borrower. This Agreement constitutes, and each Note and other Loan
Document when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
3.5. No Legal Bar. The execution, delivery and performance of this
------------
Agreement, the Notes and the other Loan Documents by the Borrower, the
borrowings hereunder and the use of the proceeds thereof will (i) not violate
any Requirement of Law, (ii) not violate any Contractual Obligation of the
Borrower, and (iii) not result in, or require, the creation or imposition of any
Lien on any of its properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation other than pursuant to the Security Agreement.
24
3.6. No Material Litigation. Except as set forth on Schedule 3.6, no
----------------------
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened against the Borrower or against any of the respective properties or
revenues or against any Plan (a) with respect to this Agreement, the Notes or
the other Loan Documents or any of the transactions contemplated hereby, or (b)
as to which there is a reasonable likelihood of an adverse determination and
which, if adversely determined, would have a Material Adverse Effect.
3.7. No Default. The Borrower is not in default under or with respect to
----------
any of its Contractual Obligations in any respect which would have a Material
Adverse Effect. No Event of Default has occurred and is continuing.
3.8. Taxes. The Borrower has filed or caused to be filed all tax returns
-----
which, to the knowledge of the Borrower, are required to be filed (or has
obtained authorized extensions for such filings) and has paid all taxes shown to
be due and payable on said returns or on any assessments made against it or any
of its property and all other taxes, fees or other charges imposed on it or any
of its property by any Governmental Authority (other than any amount the
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower, as the case may be); no material tax Lien
has been filed against the Borrower and, to the knowledge of the Borrower, no
claim is being asserted, with respect to any such material tax, fee or other
charges.
3.9. Federal Regulations. No part of the proceeds of any Loans will be
-------------------
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U or for any purpose which
violates the provisions of Regulation U. If requested by any Lender or the
Agent, the Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 referred to
in said Regulation U. No part of the proceeds of the loans hereunder will be
used for any purpose which violates, or which is inconsistent with, the
provisions of Regulation X.
3.10. ERISA. (a) Each Plan has complied in all respects with the
-----
applicable provisions of ERISA and the Code, except to the extent that failure
to so comply would not have a Material Adverse Effect. No prohibited transaction
or accumulated funding deficiency (each as defined in subsection 7.1(h)) or
Reportable Event has occurred with respect to any Single Employer Plan which
would have a Material Adverse Effect, except as disclosed on Schedule 3.10.
(b) The present value of all accrued benefits under each Single
Employer Plan maintained by the Borrower or a Commonly Controlled Entity (based
on those assumptions used to fund the Plans), as calculated on a termination
basis, did not, as of the last annual valuation date, exceed the value of the
assets of the Plans allocable to such benefits by an amount which exceeds
$500,000 or which would have a Material Adverse Effect.
25
(c) Neither the Borrower nor any Commonly Controlled Entity has
had a complete or partial withdrawal from any Multiemployer Plan for which any
liability remains unsatisfied which would exceed $500,000 or which, together
with liabilities referred in subsections (b) and (d) hereof, would exceed
$500,000 or which in either event would have a Material Adverse Effect, and
neither the Borrower nor any Commonly Controlled Entity would become subject
under ERISA to any liability which would exceed $500,000 or which, together with
other liabilities referred in subsections (b) and (d) hereof or this subsection
(c), would exceed $500,000 or which in either event would have a Material
Adverse Effect if any of the Borrower or such Commonly Controlled Entity were to
withdraw completely from any Multiemployer Plan as of the valuation date most
closely preceding the date this representation is made or deemed made. To the
best of the Borrower's knowledge, such Multiemployer Plans are neither in
Reorganization as defined in Section 4241 of ERISA nor Insolvent.
(d) The present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the liability of the Borrower and each Commonly
Controlled Entity for post-retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits by an amount which exceeds $500,000 or
which, together with liabilities referred in subsections (b) and (c) hereof,
exceeds $500,000 or which in either event would have a Material Adverse Effect.
3.11. Investment Company Act; Public Utility Holding Company Act. The
----------------------------------------------------------
Borrower is not (a) an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended; (b) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (c) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
3.12. Purpose of Loans. The proceeds of the Loans shall be used by the
----------------
Borrower to acquire Eligible Portfolios from Originating Institutions pursuant
to Asset Purchase Agreements.
3.13. Environmental Matters. Except as set forth in Schedule 3.13, to the
---------------------
knowledge of the Borrower, each of the representations and warranties set forth
in paragraphs (a) through (e) of this subsection is true and correct with
respect to each parcel of real property owned or operated by the Borrower (the
"Properties"), except to the extent that the facts and circumstances giving rise
to any such failure to be so true and correct would not have a Material Adverse
Effect:
(a) The Properties do not contain, and have not previously
contained, in, on, or under, including, without limitation, the soil and
groundwater thereunder, any Materials of Environmental Concern in concentrations
which violate Environmental Laws.
26
(b) The Properties and all operations and facilities at the
Properties are in compliance with Environmental Laws, and there is no Materials
of Environmental Concern contamination or violation of any Environmental Law
which would materially interfere with the continued operation of any of the
Properties or materially impair the fair saleable value of any thereof.
(c) As of the Closing Date, the Borrower has not received any
written complaint, notice of violation, alleged violation, investigation or
advisory action or of potential liability or of potential responsibility
regarding a violation of Environmental Law or permit compliance with regard to
the Properties, nor is the Borrower aware that any Governmental Authority is
contemplating delivering to the Borrower any such notice.
(d) Materials of Environmental Concern have not been generated,
treated, stored, disposed of, at, on or under any of the Properties, nor have
any Materials of Environmental Concern been transferred from the Properties to
any other location except in either case in the ordinary course of business of
the Borrower and in material compliance with all Environmental Laws.
(e) There are no governmental, administrative actions or judicial
proceedings pending or contemplated under any Environmental Laws to which the
Borrower is or will be named as a party with respect to the Properties, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to any of the Properties.
3.14. Patents, Trademarks, etc. The Borrower has obtained and holds in full
------------------------
force and effects all patents, trademarks, servicemarks, trade names, copyrights
or licenses therefor and other such rights, free from burdensome restrictions,
which are necessary for the operation of its business as presently conducted. To
the Borrower's' best knowledge, no material product, process, method, substance,
part or other material presently sold by or employed by the Borrower in
connection with such business infringes any patent, trademark, service xxxx,
trade name, copyright, license or other right owned by any other Person so as to
have a Material Adverse Effect. There is not pending or, to Borrower's
knowledge, threatened any claim or litigation against or affecting any of the
Borrower contesting its right to sell or use any such product, process, method,
substance, part or other material which would have a Material Adverse Effect.
3.15. Ownership of Property. The Borrower has good and marketable fee
---------------------
simple title to or valid leasehold interests in all real property owned or
leased by the Borrower, and good title to all of the Collateral subject to no
Lien of any kind except Liens permitted hereby. The Borrower enjoys peaceful and
undisturbed possession under all of its respective leases except to the extent
the lack thereof would not have a Material Adverse Effect.
3.16. Licenses, etc. The Borrower has obtained and holds in full force and
-------------
effect, all franchises, licenses, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights, consents and
approvals which are necessary for the operation of its
27
business as presently conducted except any the absence of which would not
reasonably be expected to have a Material Adverse Effect.
3.17. No Burdensome Restrictions. The Borrower is not a party to any
--------------------------
agreement or instrument or subject to any other Contractual Obligation or any
charter or corporate restriction or any provision of any applicable law, rule or
regulation which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
3.18. Labor Matters. There are no collective bargaining agreements or
-------------
Multiemployer Plans covering the employees of the Borrower, and the Borrower has
not suffered any strikes, walkouts, work stoppages or other material labor
difficulty within the last five years and to the best knowledge of the Borrower,
there are none now threatened.
3.19. No Material Misstatements. No information, report, financial
-------------------------
statement, exhibit or schedule furnished by or on behalf of the Borrower to the
Agent or any Lender in connection with the negotiation of this Agreement or any
Note or other Loan Document or included therein contains any misstatement of
fact, or omitted or omits to state any fact necessary to make the statements
therein not misleading, where such misstatement or omission would in Borrower's
judgment be material to the interests of the Lenders with respect to the
Borrower's ability (taken as a whole) to perform its obligations hereunder.
3.20. Asset Purchase Agreements and Receivables. The representations and
-----------------------------------------
warranties of the Borrower regarding the Asset Purchase Agreements and the
Receivables contained in Section 4 of the Security Agreement are true and
correct in all material respects and, to the Borrower's knowledge, the
representations and warranties of each Originating Institution under its Asset
Purchase Agreement shall be true and correct in all material respects as of the
closing of the sale under such Asset Purchase Agreement.
3.21. Title to Collateral; Perfected Security Interest. With respect to
------------------------------------------------
each item of Collateral, including, without limitation, the Receivables, the
Borrower owns good and marketable title thereto, free and clear of all Liens,
charges or claims except Liens permitted hereby or Liens which would not have a
material adverse effect on the value of the Collateral or the collectibility of
the Receivables. Upon the funding of any Loan, the Agent, for the ratable
benefit of the Lenders, shall have a perfected security interest of first
priority under applicable law in the related Collateral subject to no other
Liens.
3.22. Year 2000. The Borrower has reviewed the areas within its business
---------
and operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the risk that certain
computer applications used by the Borrower may be unable to recognize and
perform properly date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not
result in any Material Adverse Effect.
All of the foregoing representations and warranties shall survive the
execution and delivery of the Notes and the making by the Lenders of the Loans
hereunder.
28
SECTION 4. CONDITIONS PRECEDENT; CLOSING
4.1. Conditions to Closing. The agreement of each Lender to enter into
---------------------
this Agreement and make its initial Loan is subject to the satisfaction,
immediately prior to or concurrently with such Loans, of the following
conditions precedent:
(a) Loan Documents. The Agent shall have received (i) this Agreement
--------------
executed by the Borrower, with a counterpart for each Lender, (ii) for the
account of each Lender, a Note conforming to the requirements hereof and
executed by the Borrower, (iii) the Support Agreement executed by Xxxxxx X.
Xxxxxx and (iv) the Security Agreement executed by the Borrower.
(b) Corporate Proceedings. The Agent shall have received a copy of
---------------------
the resolutions or other proceedings or action, in form and substance
satisfactory to the Agent, taken on behalf of the Borrower authorizing (i) the
execution, delivery and performance of this Agreement, the Notes and the other
Loan Documents to which it is a party, and (ii) the borrowings contemplated
hereunder, as of the Closing Date, which certificates shall state that such
resolutions, or other proceedings or action thereby certified have not been
amended, modified, revoked or rescinded and shall be in form and substance
satisfactory to the Agent.
(c) Representations and Warranties True; No Default. The
-----------------------------------------------
representations and warranties of the Borrower contained in Section 3 hereof
shall be true and accurate on and as of the Closing Date in all material
respects with the same effect as though such representations and warranties had
been made on and as of such date (except representations and warranties which
relate solely to an earlier date or time, which representations and warranties
shall be true and correct on and as of the specific dates or times referred to
therein), and the Borrower shall have performed and complied with all covenants
and conditions hereof; and no Event of Default or Default under this Agreement
shall have occurred and be continuing or shall exist.
(d) Corporate Documents. The Agent shall have received, with a
-------------------
counterpart for each Lender, true and complete copies of the certificate of
incorporation and bylaws of the Borrower certified as of the Closing Date as
complete and correct copies thereof by a duly authorized officer of the Borrower
and any good standing certificate recently issued by the Secretaries of State
(or the equivalent thereof) of each state in which the Borrower has been
incorporated or is required to be qualified to transact business.
(e) Incumbency. The Agent shall have received a written certificate
----------
dated the Closing Date by a Responsible Officer of the Borrower as to the names
and signatures of the officers of the Borrower authorized to sign this Agreement
and the other Loan Documents. The Agent may conclusively rely on such
certificate until it shall receive a further certificate by a Responsible
Officer of such Borrower amending such prior certificate.
(f) Fees. The Borrower shall have paid (i) the closing fee in the
----
amount of $100,000 and (ii) all other fees and expenses due and payable
hereunder on or before
29
the Closing Date (if then invoiced), including without limitation the reasonable
fees and expenses of counsel to the Agent.
(g) Legal Opinions. The Agent shall have received, with a counterpart
--------------
for each Lender, the executed legal opinion of Piper & Marbury, L.L.P., counsel
to the Borrower and to Xxxxxx X. Xxxxxx, addressed to the Lenders and
satisfactory in form and substance to the Agent and its counsel covering such
matters incident to the transactions contemplated by this Agreement and the
other Loan Documents as the Agent may reasonably require. The Borrower hereby
directs such counsel to deliver such opinion, upon which the Lenders and the
Agent may rely.
(h) No Material Adverse Change. There shall be no material adverse
--------------------------
change in the business, operations, Property, or financial or other condition of
the Borrower nor any material change in the management of the Borrower or an
event which would cause or constitute a Material Adverse Effect; and there shall
be delivered to the Agent for the benefit of each Lender a certificate dated the
Closing Date and signed on behalf of the Borrower by a Responsible Officer to
each such effect.
(i) No Litigation. No action, proceeding, investigation,
-------------
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of this Agreement or the consummation
of the transactions contemplated hereby or which, in the Agent's sole
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement.
(j) Evidence of Insurance. The Borrower shall have provided to
---------------------
each of the Lenders copies of the evidence of insurance required by subsection
5.5(b) and evidence of the life insurance required by subsection 5.5(c).
(k) UCC Searches. The Agent shall have received financing
------------
statement searches and such other evidence as the Agent reasonably deems
necessary to show that the Borrower has good, marketable and unencumbered title
to its assets, free and clear of any Liens except for Liens permitted hereby.
(l) Consents. Certified copies of all documents evidencing any
--------
necessary corporate action, consents and governmental approvals (if any) with
respect to this Agreement shall have been delivered to the Agent.
(m) Financing Statements. Evidence (which may be telephonic) of
--------------------
the filing of proper financing statements on Form UCC-1 naming the Borrower as
debtor and the Agent as secured party, or other similar instruments or
documents, as may be necessary or, in the reasonable opinion of the Agent,
desirable under the UCC of all applicable jurisdictions to perfect the interest
of the Agent in the Collateral; and
30
(n) Additional Documents. The Agent shall have received such
--------------------
additional documents, certificates and information as the Agent may require
pursuant to the terms hereof or as the Agent may otherwise reasonably request.
4.2. Conditions to Each Loan. The agreement of each Lender to make any
-----------------------
Loan requested to be made by it on any date (including, without limitation, the
first such Loan hereunder) is subject to the satisfaction of the following
conditions precedent:
(a) Action as to Collateral. As to each Eligible Portfolio which
-----------------------
is to be acquired with the proceeds of such Loan, the Asset Purchase Agreement
pursuant to which such Eligible Portfolio has been (or will from the proceeds of
such Loan be) purchased by the Borrower shall have been executed and delivered
by the Borrower and the applicable Originating Institution, shall have been
delivered to the Agent and be in form and substance satisfactory to the Agent,
shall be in full force and effect with all conditions precedent to the purchase
of the Eligible Portfolio thereunder having been satisfied with no defaults in
existence, and such Originating Institution shall have performed all its
obligations thereunder which, pursuant to the terms of the applicable Asset
Purchase Agreement, are required to be performed prior to the purchase of the
Eligible Portfolio thereunder.
(b) Representations and Warranties. Each of the representations
------------------------------
and warranties made by the Borrower herein or which are contained in any other
Loan Document or any certificate, document or financial or other statement
furnished at any time under or in connection herewith or therewith shall be true
and correct in all material respects on and as of such date as if made on and as
of such date (except representations and warranties which expressly relate
solely to an earlier date or time, which representations and warranties shall be
true and correct on and as of the specific dates or times referred to therein);
(c) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the Loans requested to
be made on such date; and
(d) No Contravention of Law. The making of the Loans shall not
-----------------------
contravene any Requirement of Law applicable to the Borrower or any of the
Lenders.
(e) Net Worth Requirement. The Net Worth of the Borrower shall be
---------------------
at least the amount set forth opposite each period during which the requested
Loans are to be made:
Period Required Net Worth
------ ------------------
Closing Date - 12/30/98 $30,000,000
12/31/98 - 12/30/99 $33,000,000
12/31/99 - 12/30/00 $36,000,000
12/31/00 and thereafter $39,000,000
31
Each Borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Borrowing that the conditions
contained in this Section 4.2 have been satisfied.
4.3. Conditions to Release of Collateral. (a) The Borrower shall be
-----------------------------------
entitled to the release of the Agent's security interest in the Receivables in
an Acquired Eligible Portfolio and all the Related Collateral upon satisfaction
of the following conditions precedent:
(i) The Agent shall have received from the Borrower the certificate
of a Responsible Officer specifying that all, or any portion of, the Acquired
Eligible Portfolio which is the subject of the release will be sold and
transferred by the Borrower in connection with a Securitized Offering;
(ii) No Default or Event of Default shall have occurred and be
continuing on the date of such release or after giving effect to the release
requested to be made on such date; and
(iii) The Borrower shall prepay the outstanding principal balance of
the Borrowing made with respect to such Acquired Eligible Portfolio.
(b) The Borrower shall be entitled to a release of the Agent's security
interest in (i) Receivables other than those in an Acquired Eligible Portfolio
(and the Related Collateral) upon their sale by the Borrower to a Special
Purpose Entity, and (ii) all other Collateral upon its sale by the Borrower in
the ordinary course of business for fair consideration provided that at the time
of such sale no Default or Event of Default shall have occurred and be
continuing. The Agent shall provide such evidence of such release as the
Borrower may request, but the release of the Collateral described in this clause
(b) shall occur automatically and without any further action by the Agent upon
the sale described above.
4.4. Closing. The closing (the "Closing") of the transactions contemplated
-------
hereby shall take place at the offices of Xxxxxxx Xxxxx Xxxxxxx & Ingersoll,
LLP, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, commencing at 11:00 A.M.,
Philadelphia time, on October 28, 1998 or such other place or date as to which
the Agent, the Lenders and the Borrower shall agree. The date on which the
Closing shall be completed is referred to herein as the "Closing Date".
------------
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note remains outstanding and unpaid, or any other amount is owing to
any Lender or the Agent hereunder, the Borrower shall:
5.1. Financial Statements. Furnish to each Lender:
--------------------
(a) as soon as available, but in any event not later than 90 days
after the close of each fiscal year of the Borrower, a copy of the annual audit
report for such year for
32
the Borrower, including therein consolidated (and as to any Material Subsidiary
consolidating) balance sheets of the Borrower and its consolidated Subsidiaries
as at the end of such fiscal year, and related consolidated (and as to any
Material Subsidiary consolidating) statements of income, retained earnings and
cash flow of the Borrower and its consolidated Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, all in reasonable detail, prepared in accordance
with GAAP applied on a basis consistently maintained throughout the period
involved and with the prior year with such changes therein as shall be approved
by the Borrower's independent certified public accountants, such consolidated
financial statements to be certified by Xxxxx Xxxxxxxx LLP or other independent
certified public accountants selected by the Borrower reasonably acceptable to
the Required Lenders, without any exception or qualification;
(b) as soon as available, but in any event not later than 30 days
after each month end, an unaudited balance sheet of the Borrower on a
consolidated (and as to any Material Subsidiary consolidating) basis and
unaudited statement of income and stockholder's equity and cash flow of the
Borrower on a consolidated (and as to any Material Subsidiary consolidating)
basis reflecting results of operations from the beginning of the fiscal year to
the end of such month and for such month prepared on a basis consistent with
prior past practices and complete and correct in all material respects, subject
to normal year end adjustments; and
(c) as soon as available, but in any event not later than 60 days
prior to the beginning of the Borrower's fiscal year, commencing with fiscal
year 1999, month by month projected operating budget and cash flow of the
Borrower on a consolidated (and as to any Material Subsidiary consolidating)
basis for such fiscal year (including an income statement for each month and a
balance sheet as at the end of the last month in each fiscal quarter.)
5.2. Certificates; Other Information. Furnish to each Lender:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in subsections 5.1(a) and (b), (i) a certificate on behalf of the
Borrower executed by a Responsible Officer, showing in detail the calculations
demonstrating compliance with the financial covenants set forth in Section 6.1,
stating that, to the best of his or her knowledge, the Borrower during such
period has kept, observed, performed and fulfilled each and every covenant and
condition contained in this Agreement and in the Notes and the other Loan
Documents applicable to it and that he or she obtained no knowledge of any
Default or Event of Default except as specifically indicated;
(b) with respect to each Acquired Eligible Portfolio, beginning on the
six-month anniversary of the acquisition of such Acquired Eligible Portfolio and
continuing thereafter until such Acquired Eligible Portfolio is transferred to
or otherwise becomes subject to a Securitized Offering or the Borrowing made to
purchase such Acquired Eligible Portfolio is otherwise paid, not later than
thirty (30) days after the end of each fiscal quarter of the Borrower, a
collections performance report for such Acquired Eligible Portfolios in
reasonable detail and certified on behalf of the Borrower by a Responsible
Officer;
33
(c) with respect to each Portfolio owned or acquired by the Borrower
(whether or not transferred to or otherwise subject to a Securitized Offering),
not later than thirty (30) days after the end of each month, a collections
performance report for such Portfolios in reasonable detail and certified on
behalf of the Borrower by a Responsible Officer;
(d) any reports, notices or proxy statements generally distributed by
the Borrower to its stockholders on a date no later than the date supplied to
the stockholders;
(e) promptly after the Borrower's receipt thereof, a copy of any
"management letter" or other material report received by the Borrower from its
certified public accountants; and
(f) promptly, such additional financial and other information as any
Lender or the Agent may from time to time reasonably request.
5.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or
----------------------
before maturity or before they become delinquent, as the case may be, all its
Debt obligations of whatever nature, except (x) in the case of Debt other than
that described in subsection 7.1(f), when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower, as the case may be, or (y) where the failure so to pay such Debt
is in the normal course of the Borrower's business as now conducted and would
not have a Material Adverse Effect.
5.4. Conduct of Business and Maintenance of Existence. Subject to Section
------------------------------------------------
6.10 hereof, continue to engage in all material respects in business of the same
general type as now conducted by it and, except to the extent that failure to do
so would not have a Material Adverse Effect, preserve, renew and keep in full
force and effect its corporate existence and take all reasonable action to
maintain all rights, privileges, trademarks, trade names, licenses, franchises
and other authorizations necessary in the normal conduct of its business; comply
with all Contractual Obligations (other than those which evidence Debt) and
Requirements of Law except to the extent that failure to comply therewith would
not reasonably be expected to have, in the aggregate, a Material Adverse Effect.
5.5. Maintenance of Property; Insurance. (a) Maintain in good repair,
----------------------------------
working order and condition (ordinary wear and tear excepted) in accordance with
the general practice of other businesses of similar character and size, all
Property material or necessary to its business, and from time to time make or
cause to be made all appropriate repairs, renewals or replacements thereof.
(b) Insure its properties, assets and operations against loss or
damage by fire and such other insurable hazards as such assets are commonly
insured (including fire, extended coverage, property damage, worker's
compensation, public liability and business interruption insurance) and against
other risks (including fidelity, theft of documents, forgery and errors and
omissions) in such amounts as similar properties, assets and risks are insured
by prudent companies in similar circumstances carrying on similar businesses,
and with reputable
34
and financially sound insurers, including self-insurance to the extent
customary. The Borrower shall deliver (i) on the Closing Date and annually
thereafter an original certificate of insurance signed by the Borrower's
independent insurance broker describing and certifying as to the existence of
the insurance on the Borrower's properties, assets and risks required to be
maintained by this Agreement and (ii) at the request of the Agent from time to
time a summary schedule indicating all insurance then in force with respect to
the Borrower. The Borrower shall notify the Lenders promptly of any occurrence
causing a material loss or decline in value of the properties, assets and
operations and the estimated (or actual, if available) amount of such loss or
decline. Following the occurrence and continuance of an Event of Default, any
monies constituting insurance proceeds shall, if received by the Borrower, be
held in trust for the benefit of the Lenders and promptly paid over to the
Agent, on behalf of the Lenders, and all such proceeds may, at the option of the
Agent, either (i) be applied by the Lenders to the payment of the Loans in such
manner as the Lenders may reasonably determine, or (ii) be disbursed to the
Borrower on such terms as are deemed appropriate by the Lenders for the repair,
restoration and/or replacement of property in respect of which such proceeds
were paid. Otherwise, so long as no Event of Default has occurred, any monies
constituting insurance proceeds received by the Borrower shall be applied by the
Borrower to the repair, restoration and/or replacement of property in respect of
which such proceeds were paid, all as the Borrower reasonably deems appropriate.
(c) Maintain at all times in effect free and clear of any Lien or
assignment a key man life insurance policy on the life of Xxxxxx X. Xxxxxx in a
face amount of not less than $4,000,000, the proceeds of which shall be payable
to the Borrower.
5.6. Inspection of Property; Books and Records; Discussions. (a) Upon
------------------------------------------------------
reasonable notice, permit any of the officers or authorized employees or
representatives of the Agent or any of the Lenders to visit and inspect during
normal business hours any of its properties and to examine and make excerpts
from its books and records and discuss its business affairs, finances and
accounts (including those of its Affiliates) with its officers, all in such
detail and at such times and as often as any of the Lenders may reasonably
request.
(b) Maintain and keep proper books of record and account which enable
the Borrower to issue financial statements in accordance with GAAP and as
otherwise required by applicable Requirements of Law, and in which full, true
and correct entries shall be made in all material respects of all its dealings
and business and financial affairs.
(c) Permit an audit by the Agent, or a Person selected by the Agent,
of the Collateral to be conducted four (4) times in any calendar year, the costs
of which audits shall be paid by the Borrower in an amount up to $750 per diem
plus out-of-pocket expenses; provided that, if an Event of Default shall occur,
the Lender may request additional audits of the Collateral, the expense of which
additional audits shall also be paid for by the Borrower.
5.7. Notices. Promptly, upon Borrower becoming aware, give notice to the
-------
Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
35
(b) any (i) default or event of default under any Debt of the Borrower
(ii) litigation, investigation or proceeding which may exist at any time between
the Borrower and any Governmental Authority which, if not cured or if adversely
determined, as the case may be, would have a Material Adverse Effect;
(c) any litigation or proceeding which, if adversely determined, would
have a Material Adverse Effect on the Borrower;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Single Employer Plan, or
any withdrawal from, or the termination, Reorganization or Insolvency of any
Multiemployer Plan which may, individually or in the aggregate, result in a
liability which would have a Material Adverse Effect or (ii) the institution of
proceedings or the taking of any other action by the PBGC or the Borrower or any
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any Single
Employer Plan in a distress termination under Section 4041(c) of ERISA or
Multiemployer Plan; and
(e) an event which has had a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
the Borrower, executed on its behalf by a Responsible Officer, setting forth
details of the occurrence referred to therein and stating what action the
Borrower proposes to take with respect thereto.
5.8. Environmental Laws. (a) Comply with, and require compliance by all
------------------
tenants and to the extent possible, all subtenants, if any, with, all
Environmental Laws and obtain and comply with and maintain, and require that all
tenants and to the extent possible, all subtenants obtain and comply with and
maintain, any and all licenses, approvals, registrations or permits required by
Environmental Laws except to the extent that failure to so comply or obtain or
maintain such documents would not have a Material Adverse Effect.
(b) Except as set forth in Schedule 3.13, comply with all lawful and
binding orders and directives of all Governmental Authorities respecting
Environmental Laws except to the extent that failure to so comply would not have
a Material Adverse Effect.
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, officers and directors, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature known or unknown, contingent or otherwise, arising
out of, or in any way relating to the violation of or noncompliance with any
Environmental Laws applicable to the real property owned or operated by the
Borrower, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, attorneys' and consultants'
fees, investigation and laboratory fees, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the negligence or
willful misconduct of any of the foregoing enumerated parties.
36
5.9. Compliance with Security Documents. The Borrower will at all times
----------------------------------
comply with all of the provisions of, and perform all of its obligations under,
the Security Agreement.
5.10. Establishment of Borrower Collection Accounts. The Borrower agrees
---------------------------------------------
that within thirty (30) days from the Closing Date, it will establish one or
more Borrower Collection Accounts to which all collections of Receivables will
be transferred and the right to control such Borrower Collection Accounts upon
the occurrence of an Event of Default shall have been assigned to the Agent for
the benefit of each Lender.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note remains outstanding and unpaid, or any other amount is owing to
any Lender or the Agent hereunder, the Borrower shall not, directly or
indirectly:
6.1. Net Worth Covenant.
------------------
Permit at any time its Net Worth to be less than the sum of (i)
$30,000,000 plus (ii) an amount equal to 50% of the consolidated net income (but
not loss) of the Borrower determined in accordance with Section 1.3(b) of this
Agreement for each fiscal year of the Borrower commencing with the Borrower's
fiscal year ending December 31, 1998, each increase to be effective as of the
last day of each fiscal year.
6.2. Limitation on Debt. At any time incur, create, assume, or suffer to
------------------
exist any Debt except:
(a) Debt in respect of the Loans and other obligations of the Borrower
under this Agreement and the Notes;
(b) Current accounts payable incurred in the ordinary course of the
Borrower's business, accrued expenses and other current items arising out of
transactions (other than borrowings) in the ordinary course of the Borrower's
business;
(c) Existing Debt for borrowed money and obligations in respect of
Capital Leases, in each case as described on Schedule 6.2;
(d) Future purchase money Debt and obligations in respect of Capital
Leases provided that such Debt and obligations (i) do not exceed one hundred
percent (100%) of the purchase price of the assets purchased and/or leased and
(ii) do not exceed an additional $2,000,000 in such Debt and Capital Leases in
the aggregate in any fiscal year, measured by the principal amount of the
purchase money Debt or the capitalized cost to the Borrower of the equipment
subject to the Capital Lease;
37
(e) Letter of credit in the face amount of $250,000 issued by First
Union National Bank in favor of A and E Partners L.P.; and
(f) Debt of any corporation or other entity acquired by Borrower in an
acquisition permitted under Section 6.6, and not created in contemplation of
such acquisition.
Any of such future or existing permitted Debt may not be refinanced or
replaced for an amount greater than the then outstanding principal balance
thereof without the consent of the Lender.
6.3. Limitation on Liens. Create, incur, assume or suffer to exist any
-------------------
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) The following, (i) if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (ii) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry, and in either case they do not materially
impair the ability of the Borrower to perform its obligations hereunder or under
the other Loan Documents:
(A) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the Borrower
maintains such reserves or other appropriate provisions as shall be required
by GAAP and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;
(B) Claims, Liens or encumbrances upon, and defects of title to,
real or personal property including any attachment of personal or real
property or other legal process prior to adjudication of a dispute on the
merits; and
(C) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, landlords, or other statutory nonconsensual Liens;
(b) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(c) liens incurred or deposits made to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business of the Borrower;
(d) easements, rights-of-way, restrictions, leases, subleases and
other similar encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount and which do not interfere with the
ordinary conduct of the business of the Borrower;
38
(e) other Liens not otherwise encumbering any of the Collateral which
are incurred in the ordinary course of business and secure Debt of the Borrower
permitted under Section 6.2; and
(f) Any lien existing on any asset of any corporation or other entity
at the time such corporation or other entity is acquired by Borrower in an
acquisition permitted under Section 6.6, and not created in contemplation of
such event, or any lien existing on any asset prior to the acquisition thereof
by the Borrower and not created in contemplation of such acquisition.
6.4. Prohibitions on Fundamental Changes. Enter into any merger or
-----------------------------------
consolidation, unless the Borrower is the surviving entity, or unless such event
occurs in connection with an acquisition permitted under Section 6.6, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, except that the
Borrower may sell substantially all of its Receivables from time to time in
Securitized Offerings. 6.5. Limitation on Sale of Assets . Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, accounts receivables and leasehold interests),
whether now owned or hereafter acquired, except if such conveyance, sale,
transfer, lease or disposition is made in the ordinary course of business, in
compliance with all existing applicable Contractual Obligations (including the
other applicable provisions of this Agreement) and Requirements of Law and the
proceeds, if any, of any such transaction are used for the Borrower's corporate
purposes.
6.6. Prohibitions on Acquisitions. From and after the date hereof, acquire
----------------------------
by purchase or through merger or consolidation any stock or securities of or any
partnership interest in or all or substantially all of the assets of any other
Person, except Special Purpose Entities, and except for such other acquisitions
the consummation of which would not result in a Default or otherwise cause the
Borrower to breach any covenant in this Agreement.
6.7. Prohibition on Distributions. At any time make (or incur any
----------------------------
liability to make) or pay any Distribution in respect of the Borrower, except
for such Distributions as would not cause the Borrower to breach the covenant in
Section 6.1.
6.8. Limitation on Contingent Obligations. Create, incur, assume or suffer
------------------------------------
to exist any Contingent Obligation except guarantees made in the ordinary course
of its business by the Borrower of obligations of any of its Subsidiaries or
Affiliates, provided those obligations are otherwise permitted under this
Agreement.
6.9. Transactions with Affiliates. Except as expressly permitted in this
----------------------------
Agreement, directly or indirectly enter into any transaction or arrangement
whatsoever or make any payment to or otherwise deal with any Affiliate, except,
as to all of the foregoing in the ordinary course of and pursuant to the
reasonable requirements of the Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than would be obtained in a
39
comparable arm's length transaction with a Person not an Affiliate of the
Borrower. This covenant shall not apply to transactions between the Borrower and
a Special Purpose Entity.
6.10. Continuation of or Change in Business . Engage in any business either
-------------------------------------
directly or through any Subsidiary except for businesses of the same general
type in which the Borrower is engaged on the date of this Agreement and any
business directly related to such existing business, except with the prior
written consent of the Required Lenders, which consent shall not be unreasonably
withheld.
6.11. Preservation of Status of Collateral . Except as expressly permitted
------------------------------------
by this Agreement or the Security Agreement, (a) sell, transfer, exchange or
otherwise dispose of any portion of the Collateral, or (b) grant any Lien,
charge, security interest, mortgage or other encumbrance on the Collateral or
any part thereof or any interest therein or the proceeds thereof other than the
Lien of the Security Agreement, or (c) permit the Lien of the Security Agreement
not to constitute a valid first priority perfected security interest in the
Collateral, except as and to the extent otherwise permitted under the terms of
the Security Agreement.
SECTION 7. EVENTS OF DEFAULT
7.1. Events of Default . If any of the following events shall occur and be
-----------------
continuing:
(a) The Borrower shall fail to pay any principal of any Note
when due in accordance with the terms thereof or hereof; or the Borrower shall
fail to pay any interest on the Note, or any other amount payable hereunder,
within five (5) days after such payment is due; or
(b) Any representation or warranty made or deemed made by the
Borrower herein or which is contained in any certificate, document or financial
or other statement furnished at any time under or in connection with this
Agreement shall prove to have been incorrect in any material respect on or as of
the date made or deemed made; or
(c) The Borrower shall default in the observance or performance
of any agreement contained in Sections 6.1 or 6.7; or
(d) The Borrower shall default in the observance or performance
of any other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this Section 7.1) or any other Loan Document, and
such default shall continue unremedied for a period of thirty (30) days after
the earlier of (i) the Borrower has knowledge of such default or (ii) the giving
of written notice of such default to the Borrower by the Agent or by any of the
Lenders;
(e) One or more judgments or decrees shall be entered against
the Borrower involving in the aggregate a liability (not paid or fully covered
by insurance) of $500,000 or more and all such judgments or decrees shall not
have been vacated, discharged,
40
settled, satisfied or paid, or stayed or bonded pending appeal, within sixty
(60) days from the entry thereof; or
(f) The Borrower shall (i) default in the payment of any amount
due under any Debt of the Borrower in excess of $500,000 in the aggregate (other
than the Notes), beyond the period of grace, if any, provided in the instrument
or agreement under which such Debt was created; or (ii) default in the
observance or performance of any other agreement contained in any such Debt or
in any instrument or agreement evidencing, securing or relating thereto beyond
any applicable notice and grace period, or any other event shall occur the
effect of which default or other event is to cause, or to permit the holder or
holders or beneficiary or beneficiaries of such Debt (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause such
Debt to become due and payable prior to its stated maturity or any such Debt is
declared to be due and payable prior to its stated maturity unless such default,
event or declaration referred to in this subparagraph (ii) is waived or cured to
the satisfaction of such other party as demonstrated to the satisfaction of the
Agent by the Borrower prior to the Agent taking any action under Section 7.2 in
respect of such occurrence; or
(g) (i) The Borrower shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Borrower shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against the
Borrower any case, proceeding or other action of a nature referred to in clause
(i) above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or unbonded
for a period of sixty (60) days; or (iii) there shall be commenced against the
Borrower any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process on a claim in excess of
$500,000 against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) the Borrower shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) the Borrower shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(h) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Required Lenders, likely to
result in the termination by action of the PBGC or any court of such Plan for
purposes of Title IV of ERISA, or (iv) any Single Employer Plan shall terminate
for purposes of Title IV of ERISA; and in each
41
case in clauses (i) through (iv) above, such event or condition, together with
all other such events or conditions, if any would have a Material Adverse
Effect; or
(i) Any Change of Control shall occur; or
(j) Any of the Loan Documents shall cease to be a legal, valid
and binding agreement enforceable against each party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged and thereby deprive or deny the
Lenders and the Agent the intended benefits thereof or they shall thereby cease
substantially to have the rights, titles, interests, remedies, powers or
privileges intended to be created thereby; or
(k) A notice of lien or assessment in excess of $500,000 is
filed of record with respect to all or any part of the Borrower's assets having
a value of at least that amount by the United States, or any department, agency
or instrumentality thereof, or by any state, county, municipal, or other
governmental agency, including, without limitation, the PBGC, becomes payable
and the same is not paid, vacated, bonded or stayed pending appeal within thirty
(30) days after the same becomes payable; or
(l) The Borrower ceases to be Solvent; or
(m) Except as otherwise permitted in this Agreement, the
Borrower ceases to conduct its business as contemplated or the Borrower is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business and such injunction, restraint or other
preventive order is not dismissed within sixty (60) days after the entry
thereof.
7.2. Remedies . (a) If an Event of Default specified under subsections 7.1
--------
(a) through (f) or (h) through (m) shall occur and be continuing, the Lenders
shall be under no further obligation to make Loans hereunder, and the Agent,
upon the request of the Required Lenders, shall by written notice to the
Borrower, terminate the Commitments and/or declare the unpaid principal amount
of the Notes then outstanding and all interest accrued thereon, any unpaid fees
and all other Debt of the Borrower to the Lenders hereunder and thereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to the Agent for the benefit of each Lender
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived.
(b) If an Event of Default specified under subsections 7.1(g)
hereof shall occur, the Commitments shall immediately terminate and the Lenders
shall be under no further obligation to make Loans hereunder, and the unpaid
principal amount of the Notes then outstanding and all interest accrued thereon,
any unpaid fees and all other obligations of the Borrower to the Lenders
hereunder and thereunder shall be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived.
42
(c) If an Event of Default shall occur and be continuing, any
Lender to whom any obligation is owed by the Borrower hereunder or under any
other Loan Document or any Participant of such Lender which has agreed in
writing to be bound by the provisions of Section 9.6 hereof and any branch,
subsidiary or Affiliate of such Lender or Participant shall have the right, in
addition to all other rights and remedies available to it, without notice to the
Borrower, to set-off against and apply to the then unpaid balance of all the
Loans and all other obligations of the Borrower hereunder or under any other
Loan Document any debt owing to, and any other funds held in any manner for the
account of, the Borrower by such Lender or Participant or by such branch,
Subsidiary or Affiliate, including, without limitation, all funds in all deposit
accounts (whether time or demand, general or special, provisionally credited or
finally credited, or otherwise) now or hereafter maintained by the Borrower for
its own account (but not including funds held in custodian or trust accounts or
other accounts established solely for the benefit of parties other than the
Borrower) with such Lender or Participant or such branch, Subsidiary or
Affiliate. Such right shall exist whether or not any Lender or the Agent shall
have made any demand under this Agreement or any other Loan Document, whether or
not such debt owing to or funds held for the account of the Borrower is or are
matured or unmatured and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to the any
Lender or the Agent.
(d) Notwithstanding any provision herein to the contrary or in
the other Loan Documents, any proceeds received by the Agent from any payment
made by the Borrower under this Agreement or the other Loan Documents after the
Commitments have been terminated, or received by the Agent from the foreclosure,
sale, lease, collection upon, realization of or other disposition of any
Collateral or any other collateral which may have been provided to the Agent
after the Commitments have been terminated (including without limitation
insurance proceeds), shall be applied by the Agent as follows, unless otherwise
agreed by all the Lenders:
(i) first, to reimburse the Agent for out-of-pocket costs,
expenses and disbursements, including without limitation reasonable attorneys'
fees and legal expenses, incurred by the Agent in connection with collection of
any obligations of the Borrower under any of the Loan Documents;
(ii) second, to accrued and unpaid interest on the Loans;
(iii) third, to the principal amount of the Loans then
outstanding;
(iv) fourth, to fees payable under this Agreement and the other
Loan Documents (ratably according to the respective amounts then outstanding);
(v) fifth, to the repayment of all other indebtedness then due
and unpaid of the Borrower to the Lenders incurred under this Agreement or any
of the other Loan Documents, whether of principal, interest, fees, expenses or
otherwise (ratably according to the respective amounts then outstanding); and
(vi) the balance, if any, as required by law.
43
(e) Each Lender agrees that (i) if at any time it shall receive
the proceeds of any Collateral or any proceeds thereof or (ii) if after the
Commitments have been terminated it shall receive any payment on account of the
Loans or any other amounts owing hereunder or under the other Loan Documents (in
either case other than through application by the Agent in accordance with
subsection 7.2(d)), it shall promptly turn the same over to the Agent for
application in accordance with the terms of subsection 7.2(d).
(f) In addition to the other rights and remedies contained in
this Agreement or in the other Loan Documents, the Loans shall, at the Required
Lenders' option, bear the interest rates provided in Section 2.7 hereof.
(g) In addition to all of the rights and remedies contained in
this Agreement or in any of the other Loan Documents, the Agent shall have all
of the rights and remedies under applicable Law, all of which rights and
remedies shall be cumulative and non-exclusive, to the extent permitted by Law.
The Agent may, and upon the request of the Required Lenders shall, exercise all
post-default rights granted to them and the Lenders under the Loan Documents or
applicable Law.
SECTION 8. THE AGENT
8.1. Appointment . Each Lender hereby irrevocably designates and appoints
-----------
Sunrock Capital Corp. as the Agent of such Lender under this Agreement. Each
such Lender irrevocably authorizes the Agent as the agent for such Lender to
take such action on its behalf under the provisions of this Agreement and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent. The Agent agrees to act as the
Agent on behalf of the Lenders to the extent provided in this Agreement.
8.2. Delegation of Duties . The Agent may execute any of its duties under
--------------------
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to engage and pay for the advice and services of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible to the Lenders for
the negligence or misconduct of any agents or attorneys in-fact selected by them
with reasonable care.
8.3. Exculpatory Provisions . Neither the Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by them or such
Person under or in connection with this Agreement (except for their or such
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower or any officer thereof contained in this
Agreement or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under
44
or in connection with, this Agreement or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, the Notes or the
other Loan Documents or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or the
other Loan Documents, or to inspect the properties, books or records of the
Borrower.
8.4. Reliance by Agent . The Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by them 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 (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement, the Notes and the other Loan
Documents in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
8.5. 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 it
has received notice from a Lender or the 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 notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as they shall deem advisable in the best interests of the
Lenders.
8.6. Non-Reliance on Agent and Other Lenders . Each Lender expressly
---------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently
45
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
8.7. Indemnification . The Lenders agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to its
respective Commitment Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this Section 8.7 shall survive the payment of the Notes and all
other amounts payable hereunder.
8.8. Agent in its Individual Capacity . The Agent and its Affiliates may
--------------------------------
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower as though it was not the Agent hereunder. With respect to
Loans made or renewed by the Agent and any Note issued to the Agent, the Agent
shall have the same rights and powers under this Agreement as any Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.9. Successor Agent . The Agent may resign as the Agent upon sixty (60)
---------------
days' notice to the Lenders and the Borrowers. If the Agent shall resign under
this Agreement, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which appointment shall be subject to the
approval of the Borrower (which approval shall not be unreasonably withheld and
shall not be required if at the time there shall have occurred and be continuing
a Default or Event of Default), whereupon such successor agent shall succeed to
the rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation as Agent,
the provisions of this Section 8.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
46
8.10. Beneficiaries . Except as expressly provided herein, the provisions
-------------
of this Section 8 are solely for the benefit of the Agent and the Lenders, and
the Borrower shall not have any rights to rely on or enforce any of the
provisions hereof. In performing their functions and duties under this Agreement
the Agent shall act solely as agent of the Lenders and does not assume and shall
not be deemed to have assumed any obligation toward or relationship of agency or
trust with or for the Borrower.
SECTION 9. MISCELLANEOUS
9.1. Amendments and Waivers . Neither this Agreement, any Note or any other
----------------------
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. With the
written consent of the Required Lenders, the Agent and the Borrower may, from
time to time, enter into written amendments, supplements or modifications hereto
and to the Notes and the other Loan Documents for the purpose of adding any
provisions to this Agreement or the Notes or the other Loan Documents or
changing in any manner the rights of the Lenders or of the Borrower hereunder or
thereunder or waiving, on such terms and conditions as the Agent may specify in
such instrument, any of the requirements of this Agreement or the Notes or the
other Loan Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, supplement or
modification shall directly or indirectly (a) reduce the amount or extend the
maturity of any Note or any installment thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any fee payable to any Lender
hereunder, or change the duration or amount of any Lender's Commitment, or
amend, modify or waive any provision of this subsection or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, or release all or
substantially all of the Collateral (other than in accordance with the
provisions of this Agreement or the Security Agreement), in each case without
the consent of the Lender affected thereby or (b) amend, modify or waive any
provision of this Section 9.1 or increase the percentage specified in the first
proviso of subsection 2.1(a) or reduce the percentages specified in the
definition of Required Lenders or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement, the Notes
and the other Loan Documents, in each case without the written consent of all
the Lenders, or (c) amend, modify or waive any provision of Section 8 without
the written consent of the then Agent. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Borrower, the Lenders, the Agent and all future holders of
the Notes. In the case of any waiver, the Borrower, the Lenders and the Agent
shall be restored to their former position and rights hereunder and under the
outstanding Notes, and any Default or Event of Default waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereon.
9.2. Notices . All notices, requests and demands to or upon the respective
-------
parties hereto to be effective shall be in writing, and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or one Business Day after being deposited with a national
overnight delivery service, charges prepaid, or otherwise when
47
received, addressed as follows in the case of the Borrower and the Agent, and as
set forth in Schedule I in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective parties hereto and
any future holders of the Notes:
The Borrower: Creditrust Corporation
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to: Xxxxxx X. Xxxxxxxx
Piper & Marbury LLP
00 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
(provided that failure to send a copy of any notice to said counsel shall in no
way affect, limit or invalidate any notice sent to the Borrower or the exercise
of any of the Lenders' or the Agent's rights or remedies pursuant to a notice
sent to the Borrower.)
The Agent: Sunrock Capital Corp.
11 Penn Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Telecopy: 000-000-0000
with a copy to: Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Marriott, III
Telecopy: 215-864-8236
provided that any notice, request or demand to or upon the Agent or the Lenders
--------
pursuant to Sections 2.2 or 2.8 shall not be effective until received.
9.3. No Waiver; Cumulative Remedies . No failure to exercise and no delay
------------------------------
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.4. Survival of Representations and Warranties . All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant
48
hereto or in connection herewith shall survive the execution and delivery of
this Agreement, the Notes and the other Loan Documents.
9.5. Payment of Expenses and Taxes . The Borrower agrees (a) to pay or
-----------------------------
reimburse the Agent on demand for all of its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement, the Notes, the
other Loan Documents, and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and disbursements of
counsel to the Agent (which counsel may or may not include employees of the
Lender), (b) to pay or reimburse each Lender and the Agent on demand for all of
their costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents, and
any such other documents related to this Agreement or any other Loan Document,
including, without limitation, reasonable fees and disbursements of counsel to
the Agent (which counsel may or may not include employees of the Agent) and the
several Lenders, and (c) to pay on demand, indemnify, and hold each Lender and
the Agent harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any (other than Taxes expressly excluded from
the definition of Taxes in Section 2.12) which may be payable or determined to
be payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents, and any such other documents,
and (d) to pay on demand, indemnify, and hold each Lender and the Agent harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
and, incident to a Default or Event of Default, the performance and
administration of this Agreement, the Notes, the other Loan Documents, and any
such other documents or the transactions contemplated hereby or thereby or any
action taken or omitted under or in connection with any of the foregoing (all
the foregoing, collectively, the "indemnified liabilities"), provided, that the
Borrower shall have no obligation hereunder to the Agent or any Lender with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of the Agent or any such Lender. Borrower shall be given notice of
any claim for indemnified liabilities and shall be afforded a reasonable
opportunity to participate in the defense, compromise or settlement thereof. The
agreements in this subsection shall survive repayment of the Notes and all other
amounts payable hereunder.
9.6. Successors and Assigns . (a) Whenever in this Agreement any of the
----------------------
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, and all covenants, promises and agreements
by or on behalf of the Borrower, the Agent or the Lenders that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns. The Borrower may not assign or transfer any of their
rights or obligations under this Agreement or the other Loan Documents without
the prior written consent of each Lender.
49
(b) Each Lender may, in accordance with applicable law, assign all or a
portion of its interests, rights and obligations under this Agreement and the
other Loan Documents (including all or a portion of its Commitment and the Loans
at the time owing to it and the Notes held by it); provided, however, that (i)
each such assignment shall be to a Lender or Affiliate thereof, or, with the
consent of the Agent and, prior to the occurrence of an Event of Default, of the
Borrower (which consent of the Borrower shall not be unreasonably withheld or
delayed) to one or more financial institutions, (ii) so long as the Commitments
are in effect, the amount of each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Agent) shall not be less than $5,000,000 (or the entire amount of its remaining
Commitment if less than $5,000,000 and (iii) the parties to each such assignment
shall execute and deliver to the Agent an Assignment and Acceptance, together
with the Note or Notes subject to such assignment and a processing and
recordation fee of $2,500 (except in the case of an assignment by any Lender to
one of its Affiliates). Upon acceptance and recording pursuant to paragraph (d)
of this Section 9.6, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five Business
Days after the execution thereof, (A) the assignee thereunder shall be a party
hereto and to the Fee Letter and, to the extent of the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a Lender under
this Agreement and the Fee Letter and (B) the assigning Lender thereunder shall,
to the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.11, 2.12, 2.13 and 9.5 (to the extent that such Lender's entitlement to such
benefits arose out of such Lender's position as a Lender prior to the applicable
assignment), as well as to any Commitment Fees and other fees accrued for its
account and not yet paid. Notwithstanding any provision of this subsection 9.6,
after the Commitments have been terminated, any Lender may assign all or any
portion of its interests, rights and obligations under this Agreement and the
other Loan Documents to any Person (whether or not an entity described in clause
(i) above).
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby, free and clear of any adverse claim, and that
its Commitment and/or Commitments and the outstanding balances of its Loans, in
each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the other Loan Documents, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents,
or any other instrument or document furnished pursuant hereto or thereto, or the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under this Agreement or any other instrument
or document furnished pursuant hereto; (iii) such assignee represents and
warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together
50
with copies of the most recent financial statements delivered pursuant to
Section 5.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Agent, such assigning Lender or any other Lender 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
this Agreement; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain at its offices in Philadelphia, Pennsylvania a
copy of each Assignment and Acceptance and the names and addresses of the
Lenders, and the Commitment, and principal amount of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive in the absence of error and the
Borrower, the Agent and the Lenders may treat each person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee together with the Note or Notes subject
to such assignment, the processing and recordation fee referred to in paragraph
(b) above, the Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders. Within five Business Days after receipt of
notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered original Note(s) (x) a new Note to the
order of such assignee in an amount equal to the portion of the Commitment
assumed by it pursuant to such Assignment and Acceptance and, (y) if the
assigning Lender has retained a Commitment, a new Note to the order of such
assigning Lender in a principal amount equal to the applicable Commitment
retained by it. Such new Notes shall be in an aggregate principal amount equal
to the aggregate principal amount of such surrendered Notes; such new Notes
shall be dated the date of the surrendered Notes which they replace and shall
otherwise be in substantially the form of Exhibit B hereto. Canceled Notes shall
be returned to the Borrower.
(f) Each Lender may sell participations to one or more financial
institutions approved by the Borrower (which approval shall not be unreasonably
withheld or delayed, and which approval shall not be required at any time
following the occurrence of an Event of Default) (each a "Participant") in all
-----------
or a portion of its rights and obligations under this Agreement (including all
or a portion of its Commitment and the Loans owing to it and the Note held by
it); provided, however, that (i) such Lender's obligations under this Agreement
-------- -------
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Lender
shall remain the holder of the Note for all purposes under this Agreement, (iv)
the Borrower, the Agent and the other Lenders shall
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continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, (v) in any proceeding
under the Bankruptcy Code such Lender shall be, to the extent permitted by law,
the sole representative with respect to the obligations held in the name of such
Lender whether for its own account or for the account of any Participant and
(vi) such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to the Loans and to approve any amendment, modification or
waiver of any provision of this Agreement or the Note or Notes held by such
Lender or any other Loan Document.
(g) If amounts outstanding under this Agreement and the Notes are due
or unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a lender under this
Agreement or any Note, provided that in purchasing such participation such
--------
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 8.8. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.11, 2.12, 2.13, 8.5
and 8.8 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be entitled
--------
to receive any greater amount pursuant to such Sections than the Lender selling
the participation would have been entitled to receive in respect of the amount
of the participation transferred by such Lender to such Participant had no such
transfer occurred.
(h) If any Participant is organized under the laws of any
jurisdiction other than the United States or any state thereof, the Lender
selling the participation, concurrently with the sale of a participating
interest to such Participant, shall cause such Participant (i) to represent to
the Lender selling the participation (for the benefit of such Lender the other
Lenders, the Agent and the Borrower) that under applicable law and treaties no
taxes will be required to be withheld by the Agent, the Borrower or the Lender
selling the participation with respect to any payments to be made to such
Participant in respect of its participation in the Loans and (ii) to agree (for
the benefit of such Lender the other Lenders, the Agent and Borrower) that it
will deliver the tax forms and other documents required to be delivered in order
to assure that no such withholding taxes need to be paid and comply from time to
time with all applicable U.S. laws and regulations with respect to withholding
tax exemptions.
9.7. Confidentiality. The Lenders agree that they will maintain all
---------------
information and financial statements provided to them or otherwise obtained by
they with respect to the Borrower confidential and that it will not disclose the
same or use it for any purposes; provided that nothing herein shall prevent any
--------
Lenders from disclosing any such information (a) to the Agent or any other
Lender, (b) to any prospective assignee or participant in connection with any
assignment or participation of Loans permitted by this Agreement, (c) to its
employees, directors, lenders, attorneys, accountants and other professional
advisers, provided that any such person is advised by such Lender that such
information is subject to the confidentiality limitations of this Section, (d)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, provided that the Borrower has (unless prohibited by the
terms of any such order or requirement) been advised at least ten (10)
52
days (or if such is not possible or practicable, such lesser number of days as
is possible or practicable under the circumstances) prior to such disclosure of
the existence of such order or requirement, (f) which has been publicly
disclosed other than in breach of this Agreement, or (g) in connection with the
exercise of any remedy hereunder or under the Notes.
9.8. Adjustments; Setoff. (a) If any Lender (a "benefitted Lender") shall
-------------------
at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in subsection 7.1(g), or otherwise), in a greater proportion than
any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans, or interest thereon, being paid in respect
of Loans being repaid simultaneously therewith or Loans required hereby to be
paid proportionately such benefitted Lender shall purchase for cash from the
other Lenders such portion of each such other Lender's Loan, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each of
the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. The Borrower agrees that each
Lender so purchasing a portion of another Lender's Loan may exercise all rights
of payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies, of the Lenders provided by law, upon
the occurrence of an Event of Default, each Lender shall have the right, without
prior notice to the Borrower, any such notice being expressly waived by the
Borrower to the extent permitted by applicable law, upon any amount becoming due
and payable by the Borrower hereunder or under the Notes (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender to or
for the credit or the account of the Borrower. Each Lender agrees promptly to
notify the Borrower and the Agent after any such set-off and application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
9.9. Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and each of the Lenders.
9.10. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
53
9.11. Integration. This Agreement represents the agreement of the
-----------
Borrower, the Agent and the Lenders, with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the Notes or the other Loan Documents.
9.12. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
-------------
DOCUMENTS HAVE BEEN EXECUTED IN THE COMMONWEALTH OF PENNSYLVANIA AND SAID
DOCUMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT, THE
NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA.
9.13. Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably
-----------------------------------
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, the Notes or the other Loan Documents, or
for recognition and enforcement of any judgement in respect thereof, to the non-
exclusive general jurisdiction of the Courts of the Commonwealth of
Pennsylvania, the courts of the United States of America for the Eastern
District of Pennsylvania, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by sending a copy thereof in the manner and to the address set
forth in Section 9.2; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other jurisdiction.
9.14. Acknowledgements. The Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship
to the Borrower, and the relationship between the Agent and the Lenders, on one
hand, and the Borrower, on the other hand, is solely that of debtor and
creditor; and
(c) no joint venture exists among the Lenders or among the Borrower
and the Lenders.
54
9.15. Limitation of Liability. No claim may be made by the Borrower or any
-----------------------
other Person against the Lenders, or the Affiliates, directors, officers,
employees, attorneys or agent of any of the Lenders for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, the other Loan Documents or any other
transactions or any act, omission or event occurring in connection therewith;
and the Borrower hereby waives, releases and agrees not to xxx upon any claim
for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
CREDITRUST CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Title: President and Chief
--------------------------
Executive Officer
--------------------------
SUNROCK CAPITAL CORP.,
as Agent and as a Lender
By: /s/
-----------------------------
Title: Vice President
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
55
SCHEDULE I
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Lender and Commitment Information
---------------------------------
Lender Commitment
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Sunrock Capital Corp. $20,000,000
11 Penn Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
