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REVOLVING CREDIT AGREEMENT AND ASSIGNMENT
Dated as of June 11, 2002
by and between
LEAF FINANCIAL CORPORATION
and
NATIONAL CITY BANK
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TABLE OF CONTENTS
1. The Loans............................................... 1
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2. Security Interest and Assignment........................ 3
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3. Indebtedness Secured.................................... 5
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4. Representations and Warranties of Debtor................ 5
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5. Eligibility Requirements................................ 7
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6. Covenants of Debtor..................................... 9
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7. Agreement to Indemnify.................................. 13
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8. Agreements Regarding Collections........................ 14
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9. Prepayments; Mandatory Prepayments...................... 16
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10. Default................................................. 18
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11. Certain Defined Terms................................... 20
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12. Miscellaneous........................................... 21
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REVOLVING CREDIT AGREEMENT AND ASSIGNMENT
THIS REVOLVING CREDIT AGREEMENT AND ASSIGNMENT (this "Agreement") dated
as of June 11, 2002, is made, by and between LEAF FINANCIAL CORPORATION ("Leaf
Financial"), a Delaware corporation with offices at 0000 Xxxxxx Xxxxxx, 00xx
Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Debtor") and NATIONAL CITY BANK, a
national banking association with offices at Xxx Xxxxx Xxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Secured Party").
RECITALS
A. Until the Commitment Termination Date, Debtor and Secured Party
contemplate that Secured Party will from time to time make loans to Debtor
(each, a "Loan" and collectively the "Loans") evidenced by Debtor's Master Note
(the "Note").
B. In exchange for each Loan, Debtor will assign to Secured Party one
or more leases or equipment finance agreements and will grant to Secured Party a
security interest in the equipment, the payments and all collateral covering and
proceeds arising under said leases and agreements pursuant to a Security
Agreement dated as of June 11, 2002 between Debtor and Secured Party.
C. Debtor may repay such Loans with the proceeds of fundings to be made
under permanent financing to be undertaken in the near future, which permanent
financing may require a transfer and release of the Collateral hereunder.
D. All of the requirements of law have been fully complied with and all
other acts and things necessary to make this Agreement a valid, binding and
legal instrument have been done and performed.
ACCORDINGLY, the parties agree as follows:
1. The Loans.
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(a) Loan. Subject to the terms and conditions of this Agreement,
Secured Party agrees to make Loans to the Debtor up to an aggregate principal
amount of $10,000,000 (the "Commitment"), during the period commencing the date
hereof and ending on the 364th day following the date hereof unless earlier
terminated pursuant to the terms of this Agreement (the "Commitment Termination
Date"). On or before 2:00 p.m. (Cleveland, Ohio time) at least one (1) Business
Day prior to its intention to obtain a Loan from the Secured Party pursuant to
the terms hereof, Debtor shall have delivered to the Secured Party a notice
specifying the requested borrowing date and the principal amount of such Loan
accompanied by (x) a borrowing computation in the form satisfactory to the
Debtor specifying the Borrowing Limit for such requested Loan and the aggregate
Borrowing Base outstanding on such date, and (y) a report in the form attached
as Exhibit F hereto. No Loan shall be made if, after giving effect thereto, the
aggregate outstanding principal amount of all Loans would exceed the lesser of
(x) the Borrowing Base or (y) the Commitment (the "Borrowing Limit"). Each
Contract offered to Secured Party in connection with a Loan request shall
(i) satisfy all of the conditions attributable to an Eligible Contract (as
defined below), (ii) be in form and substance satisfactory to the Secured Party
and otherwise comply with the conditions set forth in this Agreement. Each Loan
shall be in the amount equal to or greater than Two Hundred Fifty Thousand
Dollars ($250,000.00). Amounts borrowed and repaid may be reborrowed.
(b) Note. The Loans shall be evidenced by the Note as set forth on
Exhibit A.
(c) Term of the Loan, Payments of Principal and Interest. Principal
on Loans advanced under the Commitment shall be due, in full, on the Commitment
Termination Date; provided that at no time shall the aggregate principal of
outstandings exceed the Borrowing Base. If at any time such excess exists,
Debtor will promptly, and in any event within two Business Days, reduce the
outstanding aggregate principal balance of the Loans to an amount no greater
than the lesser of (x) Borrowing Base or (y) the Commitment. Unless interest
shall be determined pursuant to a LIBOR Contract Period longer than one (1)
month, accrued interest on Loans advanced under the Commitment shall be paid
monthly on the first day of each month and on the Commitment Termination Date.
Loans may be voluntarily prepaid as provided in Section 9(h) hereof. No Loan may
be prepaid while interest is being accrued at a Fixed Rate except at the end of
a Contract Period except with the prior written consent of the Bank and the
payment of a pre-payment premium with regard to such Loan.
(d) Interest Rate. (i) The interest rate applicable to the Loans will
be determined and adjusted using either (A) the "Prime Rate" (as defined below)
plus one percent (1%) per annum and interest on such Loans shall be the Prime
Rate of the Secured Party announced in Cleveland, Ohio or (B) LIBOR plus three
percent (3%) per annum. "Prime Rate" shall mean that rate of interest quoted by
Secured Party as its Prime Rate, as it may change from time to time, which Prime
Rate is not Secured Party's lowest or best rate of interest. The "Prime Rate"
shall change effective on the date of the publication of any change in such
Prime Rate. "LIBOR" means, with respect to a Unit, the rate per annum (rounded
upwards, if necessary, to the next higher 1/16 of 1%) determined by Secured
Party by dividing (a) the rate per annum determined by Secured Party to equal
the average rate per annum at which deposits (denominated in United States
dollars) in an amount similar to that Unit and with a maturity similar to the
Contract Period for that Unit are offered to Secured Party at 11:00 A.M. London
time (or as soon thereafter as practicable) 2 Eurodollar Banking Day s prior to
the first day of that Contract Period by banking institutions in any Eurodollar
market selected by Secured Party by (b) the difference of one (1) less the
Reserve Percentage. "LIBOR Unit" means a Unit for which the Contract Rate is
based on LIBOR or a fluctuating rate of interest based on a Daily LIBOR Index.
"Contract Period" means, relative to a LIBOR Unit, a period that shall commence
on a Eurodollar Banking Day and end one (1) day, one (1) month, two (2) months
or three (3) months thereafter, provided, that (a) if any Contract Period
otherwise would end on a day that is not a Eurodollar Banking Day, it shall end
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instead on the next following Eurodollar Banking Day unless that day falls in
another calendar month, in which latter case the Contract Period shall end
instead on the next preceding Eurodollar Banking Day and (b) if any Contract
Period commences on a day for which there is no numerical equivalent in the
calendar month in which that Contract Period is to end, it shall end on the last
Eurodollar Banking Day of that calendar month. "Eurodollar Banking Day" means
any Banking Day on which banks in the London Interbank Market deal in United
States dollar deposits and on which banking institutions are generally open for
domestic and international business at the place where Secured Party's office is
located and in New York City. "Fixed Rate" means a rate of interest based upon a
LIBOR Contract Period of one (1) month, two (2) months or three (3) months;
"Reinvestment Rate" means, when used with respect to any period, a per annum
rate of interest equal to the "bond equivalent yield" for the most actively
traded issues of U. S. Treasury Bills, U. S. Treasury Notes, or U. S. Treasury
Bonds for a term similar to the period in question. "Reserve Percentage" means
the percentage (expressed as a decimal) which Secured Party determines to be the
maximum (but in any case less than 1.00) reserve requirement (including, without
limitation, any emergency, marginal, special, or supplemental reserve
requirement) prescribed for so-called "Eurocurrency liabilities" (or any other
category of liabilities that includes deposits by reference to which the
interest rate applicable to LIBOR Units is determined) under Regulation D (as
amended from time to time) of the Board of Governors of the Federal Reserve
System or under any successor regulation which Secured Party determines to be
applicable, with each change in such maximum reserve requirement automatically,
immediately, and without notice changing the interest rate thereafter applicable
to each LIBOR Unit, it being agreed that LIBOR Units shall be deemed
Eurocurrency liabilities subject to such reserve requirements without the
benefit of any credit for proration, exceptions, or offsets.
(ii) LIBOR Unavailable. Notwithstanding any provision or
inference to the contrary, the Contract Rate shall not be based on LIBOR if
Secured Party shall determine in good faith that (a) any governmental authority
has asserted that it is unlawful for Secured Party to fund, make, or maintain
loans bearing interest based on LIBOR, or (b) circumstances affecting the market
selected by Secured Party for the purpose of funding the Subject Loans make it
impracticable for Secured Party to determine LIBOR. Secured Party's books and
records shall be conclusive (absent manifest error) as to whether Secured Party
shall have determined that the Contract Rate is prohibited from being based on
LIBOR. If the Contract Rate is prohibited from being based on LIBOR as a result
of the occurrence of one of the events referenced in this section 1(d), then,
and in each such case, notwithstanding any provision or inference to the
contrary, the then outstanding principal balance shall, upon Secured Party
giving Leaf Financial notice of Secured Party's determination of the occurrence
of such an event, bear interest at the Prime Rate as contemplated in section
1(d)(i).
(e) Interest on Overdue Amounts. If Debtor shall fail to timely pay
any amount due to Secured Party under any Loan, Debtor shall continue to pay
Secured Party interest on such unpaid amount at the per annum rate of interest
applicable to that Loan prior to such late payment, provided, however, that if
such payment is not made to Secured Party within five (5) Business Days after
the applicable due date, then interest upon such unpaid amount shall be paid at
a per annum rate equal to three percent (3%) above the Prime Rate (the "Default
Rate").
(f) Method of Payment. All Loan payments shall, unless otherwise
specified by Secured Party in writing, be debited from any account maintained by
Debtor at the Secured Party. The authorization to debit any account at the
Secured Party for all amounts due under the Agreement and the Loans shall
continue, and is irrevocable, so long as any Loans are outstanding. In the event
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the funds in such accounts are insufficient to pay in full the required
payments, Debtor shall immediately pay such deficiency by wire transfer of
immediately available funds. If Secured Party permits payment to be made to
Secured Party by wire transfer it shall be to an account designated in writing
by Secured Party.
(g) Direct and Continuing Liability. Notwithstanding any other\
provision of the Note or this Agreement, Debtor shall be directly and personally
liable for the full and prompt payment of each Loan. Liability for each Loan
will be fully recourse to all of Debtor's assets.
(h) Loans as Debt. The parties intend the Loans to be treated as debt
for tax and all other purposes.
(i) Conditions Precedent. The Secured Party shall not be obligated to
make any loan to the Debtor hereunder until the following conditions have been
satisfied, in addition to any of the other conditions set forth herein:
(i) No Event of Default or event which upon notice, lapse of
time or both would constitute an Event of Default on the date of the proposed
borrowing shall have occurred and be continuing;
(ii) on the date hereof, the Secured Party shall have received a
favorable opinion of counsel from the Debtor substantially in the form attached
hereto as Exhibit E;
(iii) on the date hereof, the Secured Party shall have received
(x) evidence of the legal existence and good standing of the Debtor dated as a
recent date issued by the Secretary of State of the State of Delaware, (y)
copies of the corporate charter of the Debtor as certified by the Secretary of
State of the State of Delaware, (z) a certificate of the secretary or assistant
secretary of Debtor certifying as to the by-laws of the Debtor, the incumbency
and signatures of the officer of the Debtor who have executed this Agreement and
the other documents to be executed in connection herewith and the resolutions of
the Board of Directors authorizing the execution, delivery and performance of
this Agreement and the making of the loans hereunder;
(iv) the Secured Party shall have received on the date of the
proposed borrowing a list of the Contracts or Master Contracts with counterpart
schedules or notes endorsed to the Secured Party, delivery and acceptance
certificates, UCC financing statements with respect to Collateral with a value
in excess of $15,000 if any, and other documents, certificates and filings as
required by the Secured Party in its discretion in connection with the funding
of such Contracts, the originals of which documents shall be held by Debtor in
its capacity as Collateral Agent; and
(v) on the date of the proposed borrowing the Secured Party
shall have received the Assignment referred to in Section 2(b) duly executed by
the Debtor.
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2. Security Interest and Assignment.
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(a) Security Interest. For value received, Debtor hereby assigns over
to and grants to Secured Party a security interest (the "Security Interest") in
and to all of the Debtor's right, title and interest in and to the following
properties, rights, interests and privileges, whether now owned or hereafter
acquired, and in all products thereof and cash and non-cash proceeds of
insurance policies from the loss thereof (all of which properties, rights,
interests, privileges and proceeds are hereinafter called the "Collateral").
(i) Contracts. All lease agreements, conditional sale contracts,
pay-per-use agreements, notes, security agreements and/or financing documents
and agreements of any kind arising out of a lease, rental or provision of, or
financing of Equipment entered into between Debtor as lessor, seller, provider
or lender and the entity named therein as lessee, purchaser, user or borrower
(together with any guarantors or other parties obligated in respect of the
Contracts, an "Obligor" or the "Obligors"), together with any master lease
agreements or other documents which relate to the above described documents, all
of which are in each case covered by or identified in any Assignment
(collectively the "Contracts");
(ii) Goods. All goods and other property and rights covered by
any Contract assigned to Secured Party, together with all accessories,
accessions, attachments and appurtenances appertaining or attached to or used in
connection with any of such property, whether now owned or hereafter acquired
(the "Equipment");
(iii) Obligor Guaranties. All Guaranties given to Debtor, or
under which Debtor has rights, by any person or entity guaranteeing the payment
and/or performance of any Contract assigned to Secured Party (an "Obligor
Guaranty");
(iv) Rights and Payments. All right, title and interest of
Debtor in, under and to the Contracts, and all rents and other sums due and to
become due thereunder, including any and all extensions or renewals thereof
("Payments");
(v) Software. All software products and license agreements or
rights covered under any Contract assigned to Secured Party (to the extent
Debtor has transferable rights in such software);
(vi) Other Security. All instruments, documents of title,
accounts, general intangibles, or money in each case related to, or property of
any kind securing the payment of, any Contract assigned to Secured Party;
(vii) Substitutions, Renewals, Replacements, Improvements. All
enhancements to and substitutions, renewals and replacements of, and
improvements to, any of the foregoing;
(viii) Proceeds. All cash and noncash proceeds of any of the
foregoing including, but not limited to, insurance proceeds and casualty loss
payments ("Proceeds");
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(ix) General Corporate Assets. (i) all of Debtor's inventory
now owned or hereafter acquired; (ii) all of the Debtor's documents of title now
owned or hereafter acquired; (iii) all of the Debtor's accounts now existing or
hereafter arising; (iv) all of the Debtor's general intangibles, chattel paper
and instruments now existing or hereafter acquired or arising; (v) all
guaranties of the Debtor's existing and future accounts and general intangibles
and all other security held by the Debtor for the payment or satisfaction
thereof; (vi) the goods or the services, the sale or lease or performance of
which gave rise to any account or general intangible of the Debtor, including
any returned goods; (vii) all of the Debtor's Equipment now owned or hereafter
acquired; (viii) any balance or share belonging to the Debtor of any deposit,
agency or other account with any Secured Party and any other amounts which may
be owing from to time by any Secured Party to the Debtor; (ix) all property of
any nature whatsoever of the Debtor now or hereafter in the possession of or
assigned or hypothecated to the Secured Party for any purpose; (x) all Proceeds
of all of the foregoing, including all Proceeds of other Proceeds and all rights
of Debtor, or any subsidiary of Debtor, as servicer and/or administrator for any
chattel paper and equipment of third parties.
(b) Assignment. In connection with each Loan, Debtor shall execute
and deliver to Secured Party an assignment (the "Assignment") in the form
attached hereto as Exhibit B which shall identify the Borrowing Limit of the
Contracts assigned pursuant thereto.
(c) No Assumption by Secured Party. Secured Party shall not be deemed
by reason of any Assignment to have assumed any of Debtor's, or any lessor's or
vendor's, obligations under any Contract.
3. Indebtedness Secured.
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(a) Security for Loan Related to Assignment and Other Indebtedness.
All Collateral covered under an Assignment shall secure the full and prompt
payment of all Loans made pursuant to this Agreement and other amounts due to
Secured Party under this Agreement, whether now existing or hereafter incurred,
direct or indirect, absolute or contingent, and including any sums advanced and
any costs and expenses incurred by Secured Party pursuant to this Agreement (all
of which is herein sometimes referred to as the "Indebtedness").
(b) Periodic Releases. Provided no Event of Default shall have
occurred and be continuing, at such time as Secured Party has received the
payment in full of the Prepayment Amount (as hereinafter defined) with respect
to any Contract covered by such Loan under this Agreement, Secured Party shall
release its security interest in the Contract and directly related Collateral
within 1 business day of such payment of the Prepayment Amount, without recourse
to, and without representations or warranties by, Secured Party of any kind
whatsoever. Upon Secured Party's release of Collateral as provided above, the
released Collateral shall no longer constitute security for the payment of any
Indebtedness.
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4. Representations and Warranties of Debtor.
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Debtor represents and warrants (each representation and warranty shall
be considered as having been made and restated concurrently with the making of
any Loan as an inducement to Secured Party to make such Loan) that:
(a) Organization and Qualification. Debtor is a corporation
organized, validly existing and in good standing under the laws the State of
Delaware; and Debtor is duly qualified and in good standing as a foreign
business entity authorized to do business in each state or jurisdiction where
such qualification is necessary, where lack of qualification would have a
materially adverse affect on Secured Party's rights and remedies with respect to
the Collateral.
(b) Authorization. Debtor is duly authorized to execute and deliver
this Agreement, and is and will (as long as this Agreement is in effect and
thereafter until payment in full of all amounts due and owing Secured Party
pursuant to any Note or this Agreement) continue to be, duly authorized to
perform all of Debtor's obligations to Secured Party under this Agreement and
under each Note, instrument and document delivered in connection with this
Agreement.
(c) No Conflict. The execution and delivery of this Agreement by
Debtor does not, and the performance by Debtor of its obligations under this
Agreement will not, conflict with any provision of law, rule or regulation or of
its charter or by-laws or of any agreement or court or administrative order,
judgment or decree binding upon Debtor.
(d) Financial Statements. Debtor has delivered to Secured Party
copies of (i) Debtor's most recent annual audited financial statements, prepared
and certified by an independent firm of certified public accountants
satisfactory to Secured Party, in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding fiscal year
and presenting fairly Debtor's financial condition as at such date, and the
results of Debtor's operations for the twelve (12) month period then ended and
(ii) Debtor's most recent quarterly financial statements, prepared in conformity
with generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal quarter and presenting fairly Debtor's financial
condition as at such date and the results of its operations for the quarter then
ended, certified as true and correct by Debtor's president, executive vice
president, controller or chief financial officer, and since the date of the
above described financial statements there has been no material adverse change
in Debtor's financial condition.
(e) Litigation and Contingent Liabilities. If the Secured Party has
so requested, Debtor has delivered to Secured Party a schedule of material
litigation or governmental proceedings pending or threatened against Debtor
(including estimates of the dollar amounts involved). Other than any liability
incident to the litigation or proceedings disclosed in such schedule, Debtor has
no contingent liabilities not provided for or disclosed in the financial
statements referred to in Section 4(d).
(f) Addresses. Debtor's records concerning that part of the
Collateral constituting accounts or chattel paper are kept at the address
specified on the first page hereof, which is Debtor's chief executive office and
principal place of business.
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(g) Tradenames. Debtor has not conducted and does not conduct
business under any tradename or assumed name other than those set forth on
Schedule 4(g) attached hereto.
(h) Taxes. The Debtor has filed all tax returns (federal, state, and
local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
(i) No Default. The Debtor has satisfied all judgments and the Debtor
is not in default with respect to any judgment, writ, injunction, decree,
material rule, or material regulation of any court, arbitrator, or federal,
state, municipal, or other governmental authority, commission, board, bureau,
agency, or instrumentality, domestic or foreign.
5. Eligibility Requirements.
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Each of the Loans made pursuant to this Agreement will be made on the
basis that the Contracts assigned to Secured Party with respect to each Loan
are, at the time that the Loan is made, and will be at all times thereafter
until payment in full of such Loans continue to be, Eligible Contracts. In order
for a Contract to be an "Eligible Contract", all of the following conditions
must be true, correct and satisfied with respect to the Contract, the Payments
due under the Contract and the related Collateral:
(a) Waiver of Defenses. The Contract provides that the Obligor under
the Contract waives all defenses, set-offs, counterclaims, deductions or
allowance or adjustment against the assignee of the lessor, vendor or financier.
(b) Bona Fide Transaction; Fixtures. The Contract arises from a
bonafide lease or sale of the Equipment, in the ordinary course of business,
described in the Contract and the Equipment is in all respects in accord with
the requirements of the Contract and has been delivered to and unqualifiedly
accepted by the lessee, vendee or borrower thereunder, none of the Equipment
covered by the Contract, after its delivery and acceptance by such lessee or
vendee, is a fixture under the applicable laws of any state where the Equipment
is or may be located.
(c) Compliance with Laws; Validity, Enforceability; No Liens. The
Contract and the related Equipment comply in all material respects with all
applicable laws and regulations (including, without limitation, interest/usury
laws); the Contract is genuine, valid, enforceable in accordance with its terms,
accurately describes the related Equipment and Collateral and the Payments due
under the Contract, and is in all respects what it purports to be; the Contract,
the Payments due under the Contract, the related Equipment and Collateral and
all proceeds thereof are not subject to any lien, claim or security interest
except the interest of the Obligor and Debtor under the Contract and the lien in
Secured Party's favor.
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(d) Good Title. At the time of the Loan made with respect to the
Contract, Debtor had (i) good title to the Contract and either good title or a
first priority interest in Collateral, free of all liens, claims or security
interests; and (ii) all legal power, right and authority to assign the Contract
to Secured Party.
(e) Interest Transferred. A first priority perfected security
interest in the Contract, the Payments due under the Contract, and each Obligor
Guaranty related to the Contract, free of all liens, claims or security
interests, and valid security interest superior to the rights of all others in
the Collateral, and all proceeds thereof, shall be vested in Secured Party by
the Assignment executed by Debtor relating to the Contract.
(f) Counterparts of Contract. All counterparts of the Contract have
been clearly marked to indicate that only one counterpart is the "Original" and
assignable, and that counterpart will be delivered to Secured Party or its
designees at the time the Loan is made with respect to the Contract.
(g) Entire Agreement. The Contract represents the total and complete
agreement between Debtor and Obligor with respect to the Collateral and Debtor
has entered into no other agreements, whether written or oral, with the Obligor
in respect of the Collateral.
(h) Written Agreements. At the time a Loan is made with respect to a
Contract, Debtor has informed Secured Party in writing of all agreements entered
into in connection with the Contract and fully executed copies (all original
copies if requested by Secured Party) of all those agreements will be delivered
to Secured Party simultaneously with delivery of the Contract.
(i) Capacity and Authority. Each party to the Contract or any Obligor
Guaranty has all the legal capacity, power and right required for it to enter
into the Contract or Obligor Guaranty and any supplemental agreements, and to
perform its obligations thereunder; all such actions have received all corporate
or governmental authorization required by any applicable charter, by-law,
constitution, law rule or regulation.
(j) No Obligor Default. No Obligor Default (as defined below in
Section 9(c)), or event which with the passage of time or giving of notice, or
both, would become an Obligor Default, exists and Debtor had no knowledge of any
fact that may impair the Contract's validity. No Obligor is in bankruptcy,
receivership, reorganization or is insolvent. No material change has occurred
with respect to the Contract or the Obligor.
(k) No Setoffs of Claims. There exist no setoffs, counterclaims or
defenses on the part of any Obligor under the Contract or any Obligor Guaranty
to any claims against or obligations of any obligor thereunder.
(l) No Impairment of Value. Debtor has not done anything that might
impair the value of the Contract or any related Obligor Guaranty or any of
Secured Party's rights under the Contract, any related Obligor Guaranty, or to
the Equipment covered by the Contract or Payments due under the Contract.
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(m) Insurance. The Contract requires that the Equipment covered by or
the subject of the Contract be insured to such extent and against such hazards
and liabilities as is commonly maintained by companies similarly situated and as
Debtor or its assigns may reasonably request from time to time.
(n) Taxes, Inc. All taxes, assessments, fines, fees and other
liabilities relating to the Contract, the Payments due under the Contract, the
related Collateral, or any related Obligor Guaranty have been paid when due, and
all filings in respect of any such taxes, assessments, fines, fees and other
liabilities have been timely made, except for taxes being contested in good
faith.
(o) No Debtor Default or Violation. Neither Debtor nor the vendor or
lessor of the Equipment is in default of any of such party's obligations under
the Contract or arising by contract or imposed by applicable law, rule or
regulation with respect to the Contract and the related Equipment.
(p) Perfection. Debtor has taken, at its expense, all steps from time
to time requested by Secured Party to perfect (and continue the perfection of)
Secured Party's security interest in the Contract, the Payments and the
Equipment covered by the Contract. Perfection will be accomplished by Debtor's
perfection of a security interest against the Obligors and Secured Party's
perfection of its security interest against Debtor.
(q) No Amendments. Neither the Contract nor any related Obligor
Guaranty has been, or will be, altered, modified, changed or amended without
Secured Party's prior written consent;
(r) No Prepayments. At the time of the Loan made with respect to the
Contract, no amounts have been prepaid on the Contract except advance payments
and security deposits which are required by the terms of the Contract.
(s) Use of Proceeds. Each Loan shall be used by the Debtor to finance
all or a portion of the cost to the Debtor of the Equipment, which shall be
leased to unaffiliated third persons, and is the subject of an Eligible Contract
securing a Loan or, if such Equipment has already been acquired by the Debtor to
reimburse the Debtor for the cost so incurred and for no other purpose.
(t) Equipment. The Equipment is located in the United States of
America and is used for commercial purposes.
(u) Term. The Contract does not have an initial term greater than 84
months.
(v) Past Due. No Contract payments are, and have not been at any
time, more than 60 days contractually past due.
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(w) Borrowing Base. The Contract has not been a part of the Borrowing
for more than 6 months after the consummation of a commercial paper conduct
facility between Debtor and Secured Party.
(x) Progress Payments. No more than 20% of the Borrowing shall at any
time be secured by Contracts pursuant to which Debtor is entitled to receive
progress payments from the Obligors.
6. Covenants of Debtor.
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Debtor covenants that so long as the Commitment is in effect or
Indebtedness is outstanding, Debtor will:
(a) Financial Statements. Furnish to Secured Party: (i) as soon as
available, but not later than sixty (60) days after the end of each quarter
(except the last) of each fiscal year, quarterly unaudited financial statements
concerning Debtor's business, prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of the preceding
fiscal quarter, presenting fairly Debtor's financial condition as at the end of
that quarter and containing such data as may be reasonably requested by Secured
Party, and certified as true and correct by Debtor's president, executive vice
president, controller or chief financial officer; (ii) as soon as available, but
not later than one hundred-twenty (120) days after the end of each fiscal year,
a copy of Debtor's annual audit report for that year, prepared in conformity
with generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal year and presenting fairly Debtor's financial
condition as at the end of that fiscal year and the results of its operations
for the twelve (12) month period then ended and signed by independent certified
public accountants of recognized standing or otherwise satisfactory to Secured
Party; (iii) at the time that any financial statements furnished under clause
(i) or (ii) above, a certificate in substantially the same form as Exhibit C
hereto or such other form as shall be satisfactory to Secured Party, signed by
Debtor's president, executive vice president, controller or chief financial
officer setting forth Debtor's compliance or noncompliance with the covenants
and obligations under this Agreement and providing details as to such matters,
and if Debtor is not in compliance with any such covenant or obligation, setting
forth a statement indicating the measures taken and proposed, and the time for
Debtor's return to compliance, and (iv) from time to time any other information
as Secured Party may reasonably request.
(b) Notice of Adverse Events. Notify Secured Party promptly upon
Debtor's learning of (i) any default by any Obligor, and/or (ii) any and all
litigation or other matters or events concerning Debtor which might reasonably
be construed to affect adversely Secured Party's interest in any Collateral or
any of Secured Party's rights under this Agreement.
(c) Access to Books and Records. Permit a representative of Secured
Party (including any field examiner or auditor retained by Secured Party), upon
at least 2 business days' written notice, to inspect and make copies of Debtor's
books and records at Debtor's offices, and to conduct field audits, with
expenses (including reasonable travel expenses) to be paid by Debtor not to
exceed the lesser of actual reasonable costs or $7,500. So long as no default or
event of Default shall have occurred or be continuing, the Secured Party shall
not conduct more than one (1) field audit in any fiscal year of the Debtor.
11
(d) Taxes, Etc. Make or cause to be made all filings in respect of,
and pay or cause to be paid when due, all taxes, assessments, fines, fees and
other liabilities (including all taxes and other claims in respect to the
Contracts and the related Equipment), except for taxes being contested in good
faith.
(e) Continuity of Business. Not (i) cease to engage in substantially
the same line of business in which Debtor is engaged on the date of this
Agreement, (ii) cease to engage in the sale, lease and remarketing of goods
comparable to the Equipment, or (iii) without Secured Party's prior written
consent, sell, transfer or convey a substantial part of Debtor's assets outside
of the ordinary course of business which shall include non-recourse financing or
effect or be a party to any merger or consolidation.
(f) Performance of Obligations. Perform all Debtor's obligations
arising by contract or imposed by applicable law, rule or regulation with
respect to the Contracts and the related Equipment.
(g) Changed Locations. Notify Secured Party at least thirty (30) days
prior to Debtor's (i) changing the location of Debtor's principal place of
business or chief executive office or (ii) opening or closing any places of
business in any jurisdictions where such openings or closings might affect the
place where a UCC financing statement or similar document would need to be filed
in order to perfect or protect Secured Party's security interest or other
interest in any of the Collateral.
(h) Further Assurances. From time to time execute and deliver such
further documents and do such further acts and things as Secured Party may
reasonably request in order to fully effect the purposes of this Agreement and
to protect Secured Party's interest in the Collateral.
(i) Defense Against Claims. Defend the Collateral against the claims
and demands of all other parties, including without limitation defenses,
set-offs, claims, cross claims and counterclaims asserted by any obligor against
Debtor or Secured Party and claims, cross claims and counterclaims asserted by
any other creditor claiming an interest in the Collateral.
(j) Delivery of Additional Documents. Upon Secured Party's reasonable
request will deliver to Secured Party or its designees any relevant instruments,
documents of title and chattel paper representing or relating to the Collateral
or any part thereof, and all schedules, invoices, shipping, or delivery
receipts, together with any necessary endorsement or assignment and all purchase
orders, contracts, or other documents representing or relating to purchases or
other acquisitions or sales, leases or other dispositions of the Collateral and
the proceeds thereof and any and all other schedules, documents, and statements
relating to the Collateral which Secured Party may from time to time reasonably
request.
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(k) Limits. Not permit more than twenty percent (20%) of the
Commitment to be secured by Contracts with the same lessee.
(l) UCC Financing Statements. Deliver to Secured Party such Uniform
Commercial Code ("UCC") financing statements against Debtor as shall be
reasonably required by Secured Party to perfect its interest in the Collateral.
(m) Searches. Deliver and pay for such UCC and tax lien searches at
the Secretary of State of Delaware on Debtor as Secured Party may from time to
time require, but not more frequently than annually in the absence of an Event
of Default.
(n) Monthly Reports. Debtor shall by the twenty-fifth day of each
month, provide to Secured Party, in form and detail satisfactory to Secured
Party, an aging report on all assigned Contracts and a calculation showing that
the Borrowing Limit under Eligible Contracts does not exceed the Borrowing Base.
Such monthly aging reports shall be certified by Debtor's president, or its
executive Vice President, or controller or chief financial officer.
(o) Deposit Account. Maintain a demand deposit account at the Secured
Party in which funds will be maintained sufficient to satisfy, in any given
month, the interest payment due on the Indebtedness.
(p) Financial Covenants.
(i) maintain a minimum Adjusted Net Worth of $800,000 from the
date hereof and hereafter through and including the termination of the
agreement, plus 50% of consolidated quarterly net income (without any reduction
for losses) commencing with the quarter ending 9/30/02.
(ii) maintain an Interest Coverage Ratio of at least 1.10:1 to be
measured quarterly from the quarter ending March 31, 2003 until termination of
this Agreement. As used herein Interest Coverage Ratio shall mean earnings
before interest expense and taxes (EBIT) divided by interest expense.
(iii) maintain a Senior Leverage Ratio no greater than 4:1.
As used herein, "Adjusted Net Worth" means Net Worth, minus intangible
assets, plus the non-current portion of Subordinated Debt. "Net Worth" means the
sum of capital stock, plus retained earnings, plus paid-in-surplus, minus
treasury stock. "Net Proceeds" means the sum of any capital stock or other
equity invested in Debtor. "Subordinated Debt" means all Debtor's debt which is
specifically junior and subordinated to the Indebtedness on terms satisfactory
to Secured Party. The "Senior Leverage Ratio" shall be calculated by dividing
the Borrower's Consolidated Recourse Debt by the Borrower's Adjusted Net Worth.
"Consolidated Recourse Debt" means all Debtor's debts, liabilities and
obligations including, but not limited to, all accounts payable, income taxes
payable and accrued liabilities and all contingent liabilities of Debtor,
including guaranties computed as the maximum liability guaranteed, and any
partially recourse debt to the maximum extent of such recourse, but excluding
non-recourse debt.
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Debtor will provide quarterly a compliance certificate in form
satisfactory to Secured Party, for each of the financial covenants above
certified as true and correct by Debtor's president or chief financial officer
on the first Business Day of each calendar quarter so long as the Commitment is
in effect.
(q) Fees. Pay the following fees: (i) closing fees and expenses
(including, without limitation, reimbursement of audit fees and legal expenses)
(not to exceed $2,500 with respect to legal fees), upon execution of this
Agreement and (ii) a commitment fee equal to .50% of the average daily unused
balance of the Commitment during each calendar quarter payable quarterly in
arrears at the end of each calendar quarter commencing with the calendar quarter
ending September 30, 2002 and on the date of termination of the Commitment. For
clarity, the commitment fee shall accrue from the date of closing but will not
be payable until the 9/30/02 calculation in arrears.
Debtor covenants that so long as any Indebtedness remains outstanding Debtor
will not:
(a) Restricted Payments. Declare or pay any dividends; purchase,
redeem, retire, or otherwise acquire for value any of its capital stock, now or
hereafter outstanding; make any distribution of assets to its stockholders as
such whether in cash, assets, or in obligations of the Debtor; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
stock; make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock. Except that Debtor may declare and
pay cash dividends to its stockholders of fifty percent (50%) of the positive
net income of the Debtor arising after the date hereof and computed on a
cumulative basis so long as no Event of Default or event which upon notice,
lapse of time or both would constitute an Event of Default has occurred and is
continuing or would occur or would occur after giving effect thereto.
(b) Negative Pledge. Other than with respect to Secured Party,
create, incur, assume, or suffer to exist on the Collateral, any mortgage, deed
of trust, pledge, lien security interest, assignment, charge, or encumbrance
(including without limitation, any conditional sale, or other title retention
agreement, or finance lease, except the Contracts themselves), of any nature,
upon or with respect to any of the Collateral now owned or hereafter acquired,
or sign or file under the Uniform Commercial Code of any jurisdiction a
financing statement which names the Debtor or as a debtor, and any Collateral as
the property covered by such financing statement or sign, any security agreement
authorizing any secured party thereunder to file such financing statement.
(c) Mergers. Merge or consolidate with, or sell, assign, lease, or
otherwise dispose of (whether in one transaction or in a series of transactions)
more than ten percent (10%) of its total assets (whether now owned or hereafter
acquired) to any person during any twelve (12) month period, or acquire all or
substantially all of the assets or the business of any person, unless (a) such
person is in the same line of business as Debtor, (b) Debtor is the surviving
entity and (c) no Event of Default exists prior to or after such restructuring.
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(d) Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of more than ten percent (10%) of its, now owned or hereafter acquired,
assets (including, without limitation receivables and leasehold interests)
during any twelve (12) month period provided, however, that Debtor may (a) lease
equipment in the ordinary course of business, (b) enter into securitization of
its assets in the ordinary course of business, (c) sell equipment at the
expiration or termination of any Contract, and (d) create liens in contracts and
specific assets and related equipment not constituting collateral financed on a
non recourse basis.
(e) Intercompany Investments. Any subsidiary of Debtor shall be in
substantially the same line of business and Debtor will make no loan to,
guaranty the obligations of, or purchase assets of, any subsidiary of Debtor,
affiliate of Debtor, or person under common control with Debtor, any person
shall include any entity in whatever form.
7. Agreement to Indemnify.
-----------------------
(a) Indemnification. Secured Party assumes no obligation or liability
to the Obligor under any Contract and no assignment of any Contract shall impose
any such obligation or liability on Secured Party. Debtor agrees to indemnify
and save Secured Party harmless of, from and against any losses, damages,
penalties, forfeitures, claims, costs, expenses (including court costs and
reasonable attorney's fees) or liabilities which may at any time be brought,
incurred, assessed or adjudged against Secured Party, related to or arising from
the Contracts and the related Collateral excluding (except as provided in 12(m)
hereof) any of the foregoing relating to any action by any regulatory agency
with jurisdiction over Secured Party, but, including, without limitation, those
arising or resulting from: any alleged failure of any Contract or the related
Equipment to comply with any applicable law, rule, regulation or contractual
specification; any alleged failure on Debtor's part to keep or perform any of
its obligations, express or implied, with respect to any Contract or the related
Equipment; any alleged injury to persons or property or any violation or
invasion of any patent or invention rights; any governmental fees, charges,
taxes or penalties (other than from relating to the revenue or income of Secured
Party) levied or imposed in respect to any Contract or any related Equipment;
any breach by Debtor of any of its representations, warranties, covenants or
other obligations or agreements contained in this Agreement, in any Contract or
in any agreement related hereto or thereto; or any inaccuracy in any information
provided to Secured Party by Debtor. The provisions of this Section 7 shall
survive termination of the Commitment.
(b) Indemnity Notices; Control of Proceedings. Debtor will give
Secured Party notice of any event or condition that requires indemnification by
Debtor hereunder, or any allegation that such event or condition exists,
promptly upon obtaining knowledge thereof. Debtor may, at its option assume the
defense of any claim or lawsuit for which Secured Party seeks indemnification
hereunder, and after any such assumption Secured Party shall no longer defend
15
such claim or lawsuit, provided that counsel shall be reasonably satisfactory to
Secured Party. Debtor agrees to pay all amounts due hereunder promptly on notice
thereof from Secured Party. To the extent that Debtor may make or provide to
Secured Party's satisfaction for payment under this indemnity provision, and if
Debtor is otherwise in compliance with the terms of this Agreement, Debtor shall
be subrogated to Secured Party's rights with respect to such event or condition
and shall have the right to control litigation related thereto and to determine
the settlement of claims thereon. All of the indemnities and agreements
contained in this Section shall survive and continue in full force and effect
notwithstanding termination of this Agreement or of any Contract.
8. Agreements Regarding Collections.
---------------------------------
(a) Collections. Debtor agrees to collect Payments under all
Contracts which are the subject of Loans. Debtor will undertake such collections
as owner or servicer and not as Secured Party's agent, and in connection
therewith will, at its sole cost and expense, diligently perform all billing and
collecting for amounts due and to become due with respect to such Contracts.
Debtor shall xxxx obligors in accordance with its standard billing procedures.
(b) Collection Reports. So long as Debtor shall administer Contracts,
Debtor shall maintain books and records pertaining to all such Contracts. Debtor
will provide to Secured Party, on or before the 15th day of each month, a report
in the form attached hereto as Exhibit F, as of the preceding month, concerning
Contracts assigned to Secured Party under this Agreement, and Equipment related
thereto. Subject to the limitations in Section 6(c) hereinabove, Debtor shall
give Secured Party and its representatives during normal business hours and upon
reasonable notice, access to all records, files, books of account, databases and
information pertaining to all Contracts and Payments which are the subject of
Loans made pursuant to this Agreement and shall permit such representatives to
inspect, audit, and to make extracts there from.
(c) Taxes. Debtor will make or cause the Obligor to make all filings
in respect of, and file or cause the Obligor to file for and remit payments
received on account of, any and all personal property taxes, license, permit and
registration fees, sales, use, excise, or similar taxes, together with any
penalties or interest in connection therewith, now or hereafter imposed by any
state, Federal or other government or agency on any Equipment covered or
Payments due under any Contracts, whether the same shall be payable by or billed
or assessed to the Obligor, Debtor or Secured Party.
(d) Notice Letters and Billing Information, Contracts with Obligors.
Debtor agrees to provide to Secured Party (i) an original notice in the form of
Exhibit D hereto, which shall be issued on plain paper and executed by Debtor's
duly authorized officer, but be blank as to the addressee and contract
information as shown on the Exhibit, and (ii) a supply of Debtor's letterhead
upon which copies of the foregoing letter may be reproduced. Debtor irrevocably
authorizes Secured Party or its designee, after the occurrence and during the
continuation of any uncured Event of Default to mechanically reproduce the
executed letter (with completed information as to the Obligor, etc.) and/or to
reproduce such letters and execute them on Debtor's behalf and to deliver the
same as an original to each Obligor to whom notice under this Section is to be
given. Debtor also agrees to provide to Secured Party as reasonably requested,
with information stating the names and current addresses of, and to the extent
known by Debtor the names of the contact persons for, each Obligor under any
Contract then subject to any Loan.
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(e) Power of Attorney. Debtor hereby irrevocably constitutes and
appoints Secured Party after the occurrence and during the continuation of any
uncured Event of Default, as Debtor's true and lawful attorney with full power
of substitution, for Debtor and in its name, place and stead, to ask, demand,
collect, receive, receipt for, xxx for, compound and give acquittance for any
and all Payments and other sums due under Contracts assigned hereunder, to
endorse, in writing or by stamp, Debtor's name or otherwise on all checks,
collections, receipts or instruments given in payment or part payment thereof.
Secured Party's authority may be delegated by Secured Party to any qualified
entity with which Secured Party has arranged for the performance of any billing,
collection or administration of Contracts.
(f) Secured Party's Discretion. After the occurrence and during the
continuation of any uncured Event of Default Secured Party and its designee may
take or fail to take whatever action with respect to the collection of such
Payments and receipt of such funds as Secured Party or such designee, in their
reasonable but sole discretion, shall deem proper. Regardless of any such action
Secured Party may or may not take, the provisions of Section 9 which govern
prepayment will remain in force and shall be unaffected by any such action or
failure to act on Secured Party's part.
(g) Reimbursement of Collection Expenses. Debtor agrees to reimburse
Secured Party, within ten (10) days after Secured Party's request therefor, for
all reasonable and customary out-of-pocket expenses and costs which have been
incurred in connection with Secured Party's billing and collection of such
Contracts, including but not limited to the costs and expenses incurred or
charged in connection with the delegation of such responsibilities to a
designee.
(h) Application of Payments; Excess Payments to Reserve. Following
any Event of Default and during the continuation thereof, Secured Party may
receive all Payments under the Contracts and apply such Payments against any
amounts due from Debtor on account of the Loans or otherwise. The amount of
Payments received in excess of amounts shall be allocated by Secured Party to an
interest bearing reserve account for the benefit of Debtor ("Reserve") and held
for later application against amounts due from Debtor or release to Debtor as
provided below.
9. Prepayments; Mandatory Prepayments.
-----------------------------------
(a) Contract Prepayments. If a Contract is prepaid in full for any
reason, Debtor shall forthwith prepay in full the Prepayment Amount related to
such Contract, subject to provisions of Section 3 hereof.
(b) Mandatory Partial Prepayment of Loans (Lack of Eligibility). In
the event that (i) the Contract related to any Loan at any time is not an
Eligible Contract or ceases to be an Eligible Contract, and (ii) Secured Party
in its sole discretion requests or demands that the Loan be paid with respect to
such Contract, then Debtor shall make a mandatory prepayment of the Loan within
three Business Days of Secured Party's request or demand, by paying to Secured
Party the Prepayment Amount with respect to the Contract, determined as of the
date of prepayment.
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(c) Mandatory Partial Prepayment of Loans (Obligor Default). Upon any
(i) failure of an obligor under any Contract to make a Payment within sixty (60)
days of the due date of that payment; (ii) failure of any Obligor to perform any
of its material obligations under any Contract which failure is not cured within
30 days of notice; (iii) insolvency of any Obligor, inability of any Obligor to
pay its debts as they mature, the making by any Obligor of an Assignment for the
benefit of creditors, or institution of any proceeding by or against any Obligor
alleging that the obligor is insolvent or unable to pay its debts as they mature
if such proceeding is not withdrawn or dismissed within sixty (60) days after
its institution; (iv) entry of any final judgment against any Obligor remaining
unsatisfied for a period of thirty (30) days if such judgment is deemed by
Secured Party to be a material factor in the creditworthiness of the Obligor,
(v) death of any Obligor who is a natural person, (vi) dissolution, merger,
consolidation or transfer of a substantial part of the property of any obligor
which is a corporation or a partnership, if such dissolution, merger,
consolidation or transfer is deemed by Secured Party to be a material factor in
determining the creditworthiness of such obligor, or (vii) falsity as of the
date made in any material statement, representation or warranty of any Obligor
in connection with any Contract, then and in any of such events, Debtor shall
make a mandatory prepayment of the Loan, by paying to Secured Party the
Prepayment Amount with respect to the Contract within three Business Days of any
such event, determined as of the date of prepayment.
(d) Mandatory Partial Prepayment of Loans (Payment Shortfall). In the
event that the aggregate principal balance on the Loans exceeds the Borrowing
Base, then Debtor shall immediately make a mandatory partial prepayment of the
Loans equal to the amount of such excess.
(e) Substitution of Contracts. In lieu of payment of the Prepayment
Amount with respect to the Contract, as provided in Section 9(b), (c) and (d)
above, Debtor may offer Secured Party as a substitute a Contract ("Qualifying
Contract") which has the same (or longer) term and the same or more favorable
Payment requirements as the Contract to be prepaid, all as determined by Secured
Party in Secured Party's sole and reasonable discretion. If Secured Party
determines, in its discretion that such Contract is a Qualifying Contract and
that the Obligor under the Qualifying Contract has an acceptable credit quality
and Secured Party accepts such Qualifying Contract in substitution for the
Contract to be prepaid (it being acknowledged that Secured Party shall have no
obligation to accept such Qualifying Contract), then the substitution shall
occur upon Debtor's execution and delivery to Secured Party of such documents as
Secured Party shall reasonably request, including an Assignment, to collaterally
assign to Secured Party all of Debtor's right, title and interest in the
Qualifying Contract, the Payments arising thereunder and all related Obligor
Guaranties, and a first priority perfected security interest in the Equipment
related Collateral, and all proceeds thereof. All the terms and conditions of
this Agreement, including the eligibility requirements of Section 6 shall apply
with respect to the substituted Qualifying Contract. The term of the Qualifying
Contract, the amortization schedule for such Qualifying Contract and the
Borrowing Limit and monthly payment for such Qualifying Contract shall all be
deemed equal to the term, amortization schedule, Borrowing Limit and monthly
payment of the Contract to be prepaid as of the date of substitution. Upon
Debtor's assignment and Secured Party's acceptance of the Qualifying Contract as
soon as practicable Secured Party will release to Debtor all of Secured Party's
right, title and interest in the Contract which was to prepaid, any unpaid
Payments due thereunder and the Equipment and Collateral securing the same. Upon
the substitution of Qualifying Contract for a Contract subject to prepayment
under this Section, Debtor shall be relieved of any further prepayment
obligation with respect to the Contract originally subject to prepayment.
18
(f) Mandatory Prepayment of All Loans. If an Event of Default occurs
and is continuing, then upon demand by Secured Party Debtor shall immediately
make a mandatory prepayment of all of the Loans by paying to Secured Party the
aggregate Prepayment Amount of each of the Loans, determined as of the date of
prepayment.
(g) Determining Prepayment Amounts. The "Prepayment Amount"
attributable to any Contract covered by a Loan shall be an amount equal to a pro
rata portion of the unpaid principal and accrued interest on such Loan based on
a ratio in which the Borrowing Limit of the Contract shall be the numerator and
the aggregate Borrowing Limits of all Contracts covered by such Loan shall be
the denominator.
(h) Voluntary Prepayment. Debtor may make optional prepayment of any
one or more of the Loans in all or in part (subject to paragraph a hereof) at
any time without premium or penalty.
10. Default.
--------
(a) Events of Default. Any of the following events or conditions
shall constitute an "Event of Default" under this Agreement with respect to the
affected Note and Collateral:
(i) Non-payment within 5 days of when due, whether by
acceleration or otherwise, of any Indebtedness, time being of the essence, or
failure by Debtor to observe or perform and the continuance thereof for 20 days
after notice from Secured Party, any obligation, covenant, condition or
agreement required to be observed or performed by Debtor under this Agreement,
the Note, Assignment, evidence of Indebtedness, or any Contract or any other
default under this Agreement or any material provision of a Contract.
(ii) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against Debtor provided, however, that if filed against Debtor an Event of
Default will not occur unless such proceedings are not dismissed within sixty
(60) days of filing;
(iii) Making a general assignment by Debtor for the benefit of
creditors; the appointment of a receiver or trustee for Debtor or for any of
their assets; or the institution by or against Debtor of any kind of insolvency
proceedings or any proceeding for the dissolution or liquidation of Debtor;
provided, however, that if filed against Debtor an Event of Default will not
occur unless such proceedings are not dismissed within sixty (60) days of
filing;
19
(iv) (1) Failure to pay any indebtedness to Secured Party for
borrowed money (other than the Loans or any interest or premium thereon), when
due after applicable notice and grace periods (whether by scheduled maturity
required prepayment, acceleration, demand, or otherwise), or (2) failure to
perform or observe any term, covenant, or condition on its part to be performed
or observed under any agreement or instrument relating to any such indebtedness,
when required to be performed or observed after applicable notice and grace
periods, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration of, after the giving of notice or passage of time,
or both, the maturity of such indebtedness whether or not such failure to
perform or observe shall be waived by the holder of such indebtedness, or any
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
(v) Any representation, warranty or statement made herein or in
any other document delivered in connection herewith or any certificate or
statement furnished pursuant to or in connection herewith or therewith, shall
prove to be incorrect, misleading or incomplete in any material respect on the
date as of which made or deemed made; or
(vi) A judgment or judgments for the payment of money in excess
of $250,000 in the aggregate shall be rendered against the Debtor and such
judgment or judgments shall not have been vacated, discharged, stayed or
bothered pending appeal within thirty (30) days from the entry thereof.
(b) Rights and Remedies upon Default. Upon the happening and during
the continuation of any Event of Default Secured Party (i) may declare Debtor to
be in Default hereunder and all or any part of the Indebtedness to be
immediately due and payable without notice or demand; (ii) may, without any
notice whatsoever, demand, collect and xxx for any of the payments, Collateral
or proceeds thereof and any funds represented by the Reserve and retain and
apply such proceeds and funds against the Indebtedness, (iii) take whatever
actions as are legally available to it in enforcing the rights or remedies under
any or all of the Contracts, or to mitigate damages under the Contracts or to
(but Secured Party, shall not be required to) cure any default of Debtor or
provide for the performance of Debtor's obligations under the Contracts; (iv)
terminate the Commitment and discontinue making any Loans pursuant to this
Agreement; (v) shall have all of the rights and remedies of a secured party
under the Uniform Commercial Code as enacted and under any other applicable law
from time to time in effect and (vi) may xxx or take any other legal action to
collect all the Indebtedness from Debtor. Secured Party may also exercise any
additional remedies granted herein, in any other agreement now or hereafter in
effect between Debtor and Secured Party, in any Contract, or otherwise granted
by law or equity. Without limiting the generality of the foregoing, at all times
and for any reason Secured Party shall have the right to make a demand for
payment of any Indebtedness which is payable upon demand. All rights and
remedies of Secured Party under this Agreement, under the Contract, under the
Uniform Commercial Code, or otherwise shall be cumulative and exercisable
concurrently or consecutively or in the alternative, at Secured Party's option.
20
Without limiting the generality of the foregoing, Debtor expressly
agrees that, after an Event of Default and during the continuation thereof,
Secured Party may (i) subject to Obligor's right under the Contract, lawfully
enter any premises where any Collateral (concerning which an Event of Default
has occurred) may be without judicial process and take possession of the
Collateral, (ii) directly xxxx and collect for Payments under the Contracts (and
take such further actions with respect to the Collateral as provided in Section
8 hereof, and (iii) sell, lease or otherwise dispose of any or all of the
Collateral.
(c) Notice. Debtor agrees that any notice by Secured Party of the
sale, lease or other disposition of Collateral or any other intended action
under this Section 10, whether required by the Uniform Commercial Code or
otherwise, shall constitute reasonable notice to Debtor or its successors,
assigns or transferees if the notice is mailed by overnight mail via nationally
recognized overnight carrier, at least ten (10) calendar days before the date of
any public sale, lease or other disposition of the Collateral, or at least ten
(10) calendar days before the date after which any private sale, lease or other
disposition of the Collateral is to take place, to Debtor's address as specified
in this Agreement or to any other address which Debtor has notified Secured
Party in writing as the address to which notices shall be given to Debtor or
Debtor's successors, assigns or transferees.
(d) Effect of Sale of Collateral. Any sale by Secured Party whether
under any power of sale hereby given or by virtue of judicial proceedings shall
operate to divest all right, title, interest, claim and demand whatsoever,
either at law or in equity, of Debtor in and to the Collateral sold and shall be
a perpetual bar, both at law and in equity, against Debtor, its successors and
assigns, and against any all persons claiming the property sold or any part
thereof under, by or through Debtor, its successors and assigns, and against any
and all persons claiming the property sold or any part thereof under, by or
through Debtor, its successors and assigns (subject, however, to the then
existing rights, if any, of the obligor under the applicable Contract and to the
rights and interest of Debtor, its successors and assigns, in the proceeds of
such sale which are in excess of the amount required to satisfy the
Indebtedness).
(e) Application of Proceeds. The proceeds of any sale or collection
of the Collateral or any part thereof, and the proceeds and the avails of any
remedy hereunder shall be paid to and applied as follows:
(i) To the payment of costs and expenses of
foreclosure or suit, if any, and of such sale, and the
reasonable compensation of the agents, attorneys, paralegals
and counsel of Secured Party and of all expenses, liabilities
and advances incurred or made hereunder by Secured Party, or
the holder or holders of the Note, and of all taxes,
assessments or liens superior to the lien of these presents,
except any taxes, assessments or other superior lien subject
to which said sale may have been made;
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(ii) To the payment to the holder of the Note of the
amount then owing or unpaid on the Note for principal, late
charges and interest (first to late charges, then to interest
and then to principal); and in case any such proceeds shall be
insufficient to pay the whole amount so due upon the Note then
to the payment of such principal, late charges and/or interest
then owing on the Note as Secured Party or the holders of such
Notes shall elect;
(iii) To the payment of any other Indebtedness; and
(iv) To the payment to Debtor of all sums remaining.
11. Certain Defined Terms Not Defined Elsewhere in the Agreement.
-------------------------------------------------------------
"Acquisition Costs" shall mean with respect to any item of Equipment
the original cost to the Debtor of acquiring the same.
"Borrowing Base" shall mean the lesser of (i) $10,000,000 or (ii)
Borrowing Base Advances.
"Borrowing Base Advances" mean the lesser of (i) 80% of present value
of the cash flow stream from the underlying leases or (ii) the original
underlying lease amount.
"Business Day" shall mean any day, excluding Saturday and Sunday and
excluding any other day which in the State of Ohio is a legal holiday or a day
on which banking institutions are authorized by law to close.
"Scheduled Payments" shall mean those non-cancelable payments that are
scheduled to become due under an Eligible Contract (as hereinafter defined) on
account of rent or payment of the equipment cost financed under the Contract,
but excluding payments due to taxes, insurance and non-equipment related items.
12. Miscellaneous.
--------------
(a) Costs of Enforcement. Debtor agrees to pay all reasonable costs
and expenses, including reasonable attorney's and paralegals' fees, expenses and
court cost incurred by Secured Party in enforcing any of the provisions of this
Agreement or in enforcing any obligations of Debtor contained in the Note or
Assignment.
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(b) Waiver of Notice of Obligor Default. Debtor consents that, after
the occurrence and during the continuation of an Event of Default and without
affecting any of Debtor's liabilities or obligations hereunder or under the Note
or Assignment, Secured Party may agree with any Obligor as to any commercially
reasonable modification, alteration, release, compromise, extension, waiver,
consent, or other similar or dissimilar indulgence of or with respect to any
Contract.
(c) Notices. Any notice under this Agreement shall be in writing and
shall be delivered in person, by Federal Express or by United States first class
mail, postage prepaid, and addressed:
(i) if to Debtor, at Debtor's address set forth on the first
page of this Agreement;
(ii) if to Secured Party, at National City Bank, Xxx Xxxxx Xxxxx
Xxxxxx, 00xx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000,
Attn: Xxxxxxx Xxxxxx;
(iii) to either part at any other address as such party may,
by notice as herein provided, received by the other, designate as its
address for all notices under this Agreement.
(D) VENUE JURISDICTION. THIS AGREEMENT HAS BEEN DELIVERED FOR
ACCEPTANCE BY SECURED PARTY IN PHILADELPHIA, PENNSYLVANIA AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. DEBTOR HEREBY (I) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA OR THE STATE
OF OHIO OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS AGREEMENT; (II) IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT DEBTOR MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (III) AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW AND (IV) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST
SECURED PARTY OR ANY OF ITS DIRECTOR, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OR RELATING TO THIS AGREEMENT IN ANY COURT
OTHER THAN ONE LOCATED IN A COUNTY IN PENNSYLVANIA OR OHIO WHERE SECURED PARTY
MAINTAINS AN OFFICE. NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR SECURED
PARTY'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR SECURED
PARTY'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST DEBTOR OR DEBTORS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. EACH PARTY HERETO WAIVES THE
RIGHT TO A TRIAL BY JURY IN ANY PROCEEDINGS ARISING OUT OF, OR RELATED TO, THIS
AGREEMENT OR THE NOTE.
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(e) Successors and Assigns; Entire Agreement; Assignment by Secured
Party. This Agreement shall be binding on, and inure to the benefit of, Secured
Party and Debtor and their respective successors and assigns and contains the
entire understanding and agreement with respect to the subject matter hereof. It
is understood and agreed that from time to time Secured Party may assign (i) to
one or more of Secured Party's affiliates, subsidiaries or subsidiaries of its
affiliates, all of Secured Party's right, title and interest in any Loan, loan
documents or Collateral; and with Debtor's prior consent (so long as no Event of
Default or event which upon notice, lapse of time or both would constitute an
Event of Default) to any other person or entity, and (ii) assign, transfer or
grant participations (but not assignments) in this Agreement or any Loan, loan
documents or Collateral, of not more than forty-nine percent (49%) interest to
any person or entity.
(f) Assignment of Debtor. This Agreement is not assignable by Debtor,
by operation of law or otherwise, except to a party acquiring substantially all
of Debtor's assets, employees and business and Debtor's obligations may not be
delegated, except in connection therewith.
(g) Secured Party's Reliance. All of the covenants, agreements,
representations and warranties made by Debtor in this Agreement shall,
notwithstanding any investigation by Secured Party, be deemed to be material to
and to have been relied upon by Secured Party with respect to each Loan made by
Secured Party pursuant to this Agreement. Secured Party's knowledge at any time
of any breach of or non-compliance with any of such covenants, agreements,
representations or warranties shall not constitute a waiver of any thereof. None
of Secured Party's rights under this Agreement will be waived except by a
writing signed by Secured Party and any such waiver will be effective only as to
the matters expressly set forth in such writing.
(h) Illegality. Secured Party's obligation to perform under this
Agreement is limited by and subject to any and all applicable laws, rules and
regulations. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement. Notwithstanding anything herein to the contrary,
in no event shall interest, fees or charges payable under this Agreement, the
Note or any Loan Document exceed those permitted by applicable law. Any
provision of this Agreement, the Note or of any Loan Document which would
otherwise charge or require payment of any interest, fee or charge in excess of
the maximum permitted by applicable law shall be hereby amended to charge and
require payment of only the maximum interest, fee or charge permitted by
applicable law.
(i) Perfection of Security Interest. Debtor authorizes Secured Party
to file any financing statement or statements relating to the Collateral (with
or without Debtor's signature thereon), and to take any other action deemed
necessary or appropriate by Secured Party to perfect and to continue perfection
of the Security Interest. Debtor hereby irrevocably appoints Secured Party as
its attorney-in-fact to execute financing statements in Debtor's name and to
perform all other acts which Secured Party deems necessary or appropriate to
24
perfect and protect the Security Interest. Such appointment is binding and
coupled with an interest. Upon request of Secured Party before or after the
occurrence of an Event of Default, Debtor agrees to give Secured Party or its
designees possession of any Collateral in its control or physical possession,
possession of which is, in Secured Party's opinion, necessary or desirable to
perfect or continue perfection of priority of the security Interest. A photocopy
of this Agreement is sufficient as a financing statement and may be filed as
such if Secured Party so elects.
(j) Offset. Without limiting any other right of Secured Party,
whenever any Indebtedness owed to Secured Party is due and unpaid or whenever
Secured Party has the right to declare any Indebtedness to be immediately due an
payable, Secured Party may set off against the Indebtedness all monies then owed
to Debtor by Secured Party in connection with a Loan, whether or not due.
(k) Failure to Perform; Reimbursement. Upon Debtor's failure to
perform any of its duties hereunder or under any Contract, Secured Party may,
but it shall not be obligated to, perform any of such duties and Debtor shall
forthwith upon demand reimburse Secured Party for any expense incurred by
Secured Party in doing so with interest thereon at a rate equal to the lesser of
the Prime Rate plus three percent (3%) or the maximum rate permitted by
applicable law.
(l) Waiver of Notice of Dishonor and Protest, etc. Debtor waives
dishonor, protest, presentment, demand for payment, notice of dishonor and
notice of protest of any instrument at any time held by Secured Party with
respect of which Debtor is any way liable and waives notice of any other action
by Secured Party.
(m) Increased Costs. In the event that any future law:
(a) changes the basis of taxation of any amounts payable to
the Secured Party under this Agreement or the Loans (other than taxes imposed on
the overall net income of the Secured Party) by the United States or the
jurisdiction in which the Lender has its principal offices; or
(b) impose or modify any reserve, Federal Deposit Insurance
Corporation premium or assessment, special deposit, minimum capital, capital
ratio or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or liabilities of, the Secured Party, and the
result of any such event referred to in Subsection (a) or (b) above shall be to
increase the Secured Party's costs of making or maintaining any Loan or to
reduce any amount receivable by the Secured Party from the Debtor in respect of
any Loan, then, upon demand made by the Secured Party as promptly as practicable
after it obtains knowledge that such aforesaid cost exist but in no event later
than ninety (90) days after obtaining such knowledge, the Debtor shall pay to
Secured Party additional fees in an amount which shall be sufficient to
compensate the Secured Party for such costs. In the event that Secured Party
shall make any demand for additional fees as hereinabove set forth, the Debtor
shall be entitled to receive from the Lender documentation reasonably
substantiating the occurrence of any event referred to in Subsection (a) or (b)
above and a determination of how the increased costs to Secured Party and the
amount of additional fees to Secured Party have been determined.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LEAF FINANCIAL CORPORATION
By: Xxxxx Xxxxxx
------------------------
Name: Xxxxx Xxxxxx
Title: President
NATIONAL CITY BANK
By: Xxxxxxx Xxxxxx
------------------------
Name: Xxxxxxx Xxxxxx
Title: Senior Vice President
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SCHEDULE 4(g)
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(Tradenames)
HVAC Capital Corp
Advantage Leasing Corp
Integrity Leasing & Financing
Millennium Leasing & Financial Services
Medstrat Capital
American Equipment Finance
