Exhibit 10.17
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THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of May 11, 2004
By and among
ASTA FUNDING ACQUISITION II, LLC, PALISADES COLLECTION, L.L.C., ASTA
FUNDING ACQUISITION I, LLC, PALISADES ACQUISITION IV, LLC, PALISADES ACQUISITION
I, LLC, PALISADES ACQUISITION II, LLC, and CLIFFS PORTFOLIO ACQUISITION I, LLC
as Borrowers,
THE OTHER CREDIT PARTIES SIGNATORY HERETO
FROM TIME TO TIME,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
ISRAEL DISCOUNT BANK OF NEW YORK
as Agent and Lender
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TABLE OF CONTENTS
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1. AMOUNT AND TERMS OF CREDIT..............................................................................3
1.1 Credit Facilities..............................................................................3
1.2 Prepayments....................................................................................6
1.3 Use of Proceeds................................................................................7
1.4 Interest and Applicable Margins................................................................8
1.5 Cash Management Systems.......................................................................10
1.6 Fees..........................................................................................10
1.7 Receipt of Payments...........................................................................11
1.8 Application and Allocation of Payments........................................................11
1.9 Loan Account and Accounting...................................................................12
1.10 Indemnity.....................................................................................12
1.11 Access........................................................................................14
1.12 Taxes.........................................................................................14
1.13 Capital Adequacy; Increased Costs; Illegality.................................................16
1.14 Single Loan...................................................................................18
1.15 Security Interest.............................................................................18
1.16 No Obligations Outstanding....................................................................19
2. CONDITIONS PRECEDENT...................................................................................19
2.1 Conditions to the Initial Revolving Loan......................................................19
2.2 Further Conditions to Each Loan...............................................................21
3. REPRESENTATIONS AND WARRANTIES.........................................................................22
3.1 Corporate Existence; Compliance with Law......................................................22
3.2 Executive Offices, Collateral Locations, FEIN.................................................22
3.3 Corporate Power, Authorization, Enforceable Obligations.......................................22
3.4 Financial Statements and Projections..........................................................23
3.5 Material Adverse Effect.......................................................................23
3.6 Ownership of Property; Liens..................................................................24
3.7 Labor Matters.................................................................................24
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.....................24
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3.9 Government Regulation.........................................................................25
3.10 Margin Regulations............................................................................25
3.11 Taxes.........................................................................................25
3.12 ERISA.........................................................................................26
3.13 No Litigation.................................................................................27
3.14 Brokers.......................................................................................27
3.15 Intellectual Property.........................................................................27
3.16 Full Disclosure...............................................................................28
3.17 Environmental Matters.........................................................................28
3.18 Insurance.....................................................................................29
3.19 Deposit and Disbursement Accounts.............................................................29
3.20 Government Contracts..........................................................................29
3.21 Customer and Trade Relations..................................................................29
3.22 Agreements and Other Documents................................................................29
3.23 Solvency......................................................................................30
3.24 Restrictions on or Relating to Subsidiaries...................................................30
3.25 Disaster Recovery Plan........................................................................31
4. FINANCIAL STATEMENTS AND INFORMATION...................................................................31
4.1 Reports and Notices...........................................................................31
4.2 Communication with Accountants................................................................31
5. AFFIRMATIVE COVENANTS..................................................................................31
5.1 Maintenance of Existence and Conduct of Business..............................................31
5.2 Payment of Charges............................................................................31
5.3 Books and Records.............................................................................31
5.4 Insurance; Damage to or Destruction of Collateral.............................................31
5.5 Compliance with Laws..........................................................................34
5.6 Supplemental Disclosure.......................................................................34
5.7 Intellectual Property.........................................................................34
5.8 Environmental Matters.........................................................................34
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5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases.........35
5.10 ERISA.........................................................................................36
5.11 Servicing Agreements..........................................................................36
5.12 Inactive Subsidiaries.........................................................................39
5.13 Further Assurances............................................................................39
6. NEGATIVE COVENANTS.....................................................................................39
6.1 Mergers, Subsidiaries, Etc....................................................................39
6.2 Investments; Loans and Advances...............................................................40
6.3 Indebtedness..................................................................................40
6.4 Employee Loans and Affiliate Transactions.....................................................41
6.5 Capital Structure and Business................................................................42
6.6 Guaranteed Indebtedness.......................................................................43
6.7 Liens; Lien Release...........................................................................43
6.8 Sale of Stock and Assets......................................................................46
6.9 ERISA.........................................................................................47
6.10 Financial Covenants...........................................................................47
6.11 Hazardous Materials...........................................................................47
6.12 Sale-Leasebacks...............................................................................47
6.13 Cancellation of Indebtedness..................................................................47
6.14 Restricted Payments...........................................................................47
6.15 Change of Corporate Name or Location; Change of Fiscal Year...................................47
6.16 No Impairment of Intercompany Transfers.......................................................48
6.17 No Speculative Transactions...................................................................48
6.18 Leases; Real Estate Purchases.................................................................48
6.19 Changes Relating to Subordinated Debt; Material Contracts.....................................48
6.20 Credit Parties Other than Borrowers...........................................................49
6.21 Adverse Transactions..........................................................................49
6.22 Disaster Recovery Plan........................................................................49
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6.23 Limitation on Collection Fees.................................................................49
6.24 No Amendment to Servicing Agreements..........................................................49
7. TERM...................................................................................................49
7.1 Termination...................................................................................50
7.2 Survival of Obligations Upon Termination of Financing Arrangements............................50
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.................................................................50
8.1 Events of Default.............................................................................50
8.2 Remedies......................................................................................52
8.3 Waivers by Credit Parties.....................................................................53
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT....................................................53
9.1 Assignment and Participations.................................................................53
9.2 Appointment of Agent..........................................................................55
9.3 Agent's Reliance, Etc.........................................................................56
9.4 IDB and Affiliates............................................................................57
9.5 [Omitted].....................................................................................57
9.6 Indemnification...............................................................................57
9.7 Successor Agent...............................................................................57
9.8 Setoff and Sharing of Payments................................................................58
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert......................59
10. SUCCESSORS AND ASSIGNS.................................................................................61
10.1 Successors and Assigns........................................................................62
11. MISCELLANEOUS..........................................................................................62
11.1 Complete Agreement; Modification of Agreement.................................................62
11.2 Amendments and Waivers........................................................................62
11.3 Fees and Expenses.............................................................................65
11.4 No Waiver.....................................................................................66
11.5 Remedies......................................................................................67
11.6 Severability..................................................................................67
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11.7 Conflict of Terms.............................................................................67
11.8 Confidentiality...............................................................................67
11.9 GOVERNING LAW.................................................................................68
11.10 Notices.......................................................................................68
11.11 Section Titles................................................................................69
11.12 Counterparts..................................................................................69
11.13 WAIVER OF JURY TRIAL..........................................................................69
11.14 Press Releases and Related Matters............................................................69
11.15 Reinstatement.................................................................................70
11.16 Advice of Counsel.............................................................................70
11.17 No Strict Construction........................................................................70
11.18 Agent for Service.............................................................................70
12. CROSS-GUARANTY; SUBORDINATION..........................................................................70
12.1 Cross-Guaranty................................................................................70
12.2 Waivers by Borrowers..........................................................................71
12.3 Benefit of Guaranty...........................................................................71
12.4 Subordination of Subrogation, Etc.............................................................71
12.5 Election of Remedies..........................................................................72
12.6 Limitation....................................................................................72
12.7 Contribution with Respect to Guaranty Obligations.............................................72
12.8 Liability Cumulative..........................................................................73
12.9 Subordination.................................................................................73
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BASE OF APPENDICES
15.1 Annex A (Recitals) - Definitions
15.2 Annex C (Section 1.8) - Cash Management System
15.3 Annex D (Section 2.1(a)) - Closing Checklist
15.4 Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
15.5 Annex F (Section 4.1(b)) - Collateral Reports
15.6 Annex G (Section 6.10) - Financial Covenants
15.7 Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
15.8 Annex I (Section 11.10) - Notice Addresses
15.9 Annex J (from Annex A
15.10 Commitments definition)- Commitments as of Closing Date
15.11 Annex L (Section 11.2(b)(ii)) - Counterpart to Third Amended and Restated Loan and
Security Agreement
15.12 Schedule 1.1 - Agent's Representatives
15.13 Schedule 1.1(b) - Ratable Shares of each Borrower
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") is executed and entered into as of May 11, 2004 (and shall be
effective as of the Effective Date) by and among ASTA FUNDING ACQUISITION II,
LLC, a Delaware limited liability company, PALISADES COLLECTION, L.L.C., a
Delaware limited liability company, ASTA FUNDING ACQUISITION I, LLC, a Delaware
limited liability company, PALISADES ACQUISITION I, LLC, a Delaware limited
liability company, PALISADES ACQUISITION II, LLC, a Delaware limited liability
company, PALISADES ACQUISITION IV, LLC, a Delaware limited liability company,
and CLIFFS PORTFOLIO ACQUISITION I, LLC, a Delaware limited liability company,
(sometimes collectively referred to herein as "Borrowers" and individually as a
"Borrower"); ASTA FUNDING, INC., a Delaware corporation ("Asta Funding"); and
COMPUTER FINANCE, LLC, a Delaware limited liability company ("Computer Finance")
and ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC ("▇▇▇▇▇▇▇▇▇▇▇.▇▇▇"), and ASTA COMMERCIAL, LLC ("Asta
Commercial")(Asta Funding, Computer Finance, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, and Asta
Commercial shall be referred to collectively as "Guarantor"); and ISRAEL
DISCOUNT BANK OF NEW YORK, a New York banking corporation (individually, "IDB"
or "Agent") for itself, as a lender, and as agent for the other lenders
signatory hereto (collectively referred to herein as "Lenders") from time to
time.
BACKGROUND
A. Asta Funding Acquisition II, LLC and Palisades Collection, L.L.C.,
Asta Funding and IDB are parties to a Second Amended and Restated Loan and
Security Agreement dated as of January 28, 2003, as amended (the "Original
Restated Agreement") pursuant to which Lender established a $35,000,000 Line of
Credit (the "Original Line of Credit") for the purpose of financing the
acquisition of portfolios of consumer loans and/or receivables, which Original
Line of Credit was secured by certain assets of the Original Borrowers and the
Original Guarantors. As of the date of this Agreement the outstanding principal
obligations of the Original Borrowers under the Original Line of Credit are
$12,151,147.73 (the "Existing Debt").
B. The Original Borrowers have requested that Lenders amend and restate
the Original Restated Agreement and Original Line of Credit so as to have
available a revolving line of credit on the terms and conditions set forth
herein, in an amount not to exceed $60,000,000 at any one time outstanding, but
in no event shall the outstanding Advances (including, any Advance then being
requested) exceed the then effective Borrowing Base (the "New Line of Credit").
This Agreement is an amendment and restatement of the terms and conditions of
the lending relationship between the parties as previously set forth in the
Original Restated Agreement and any amendments or supplements thereto, and is
not a new loan agreement. The execution and delivery of this Agreement and the
Loan Documents shall not in any circumstances be deemed to have terminated,
released, extinguished or discharged the Existing Debt, the Obligations of any
Guarantor or the Collateral therefor, all of which Existing Debt, Obligations
and Collateral shall continue under and be governed by this Agreement and the
Loan Documents.
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C. Lenders have agreed to establish the New Line of Credit for the
purpose of making Advances to permit the Borrowers and any Affiliate to acquire
Portfolios on the terms and conditions of this Agreement, as amended from time
to time.
D. This Background is incorporated and made a part of this Agreement.
NOW THEREFORE, in consideration of Lenders' financing of the
acquisition of Portfolios, and in further consideration of the inducement to
Lenders to make Advances to, and to otherwise extend credit to the Borrowers,
the parties hereto agree to amend and restate the Original Restated Loan
Agreement in its entirety as follows:
RECITALS
WHEREAS, Borrowers have requested that Lenders extend a revolving credit
facility to Borrowers of Sixty Million Dollars ($60,000,000) in the aggregate
for the purpose of refinancing certain indebtedness of Borrowers and to provide
(a) from Tranche A for the acquisition of Portfolios, and (b) from Tranche B for
working capital financing for Borrowers and funds for other general corporate
purposes of Borrowers; and for these purposes, Lenders are willing to make
certain loans and other extensions of credit to Borrowers of up to such amount
upon the terms and conditions set forth herein; and
WHEREAS, Borrowers have agreed to secure all of their obligations under the Loan
Documents by granting to Agent, for the benefit of Agent and Lenders, a security
interest in and lien upon all of their existing and after-acquired personal and
real property and Palisades will pledge to Agent, for the benefit of Agent and
Lenders, all of the Stock of Cliffs; and
WHEREAS, Asta Funding is willing to guarantee all of the obligations of
Borrowers to Agent and Lenders under the Loan Documents and have agreed to
secure all of its obligations by granting to Agent, for the benefit of Agent and
Lenders, a security interest in and lien upon substantially all of its existing
and after-acquired personal property and to pledge to Agent, for the benefit of
Agent and Lenders, all of the Stock of the Borrowers, except Cliffs; and
WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A and, for purposes of this Agreement and the other
Loan Documents, the rules of construction set forth in Annex A shall govern. All
Annexes and other attachments (collectively, "Appendices") hereto, or expressly
identified to this Agreement, are incorporated herein by reference, and taken
together with this Agreement, shall constitute but a single agreement. These
Recitals shall be construed as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
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(a) Revolving Credit Facility.
(i) Tranche A.
(A) Subject to the terms and conditions hereof, each
Revolving Lender agrees to make available to Borrowers from time to time until
the Commitment Termination Date its Pro Rata Share of advances for the purchase
of Portfolios (each, a "Tranche A Advance"). The Pro Rata Share of the Revolving
Loan of any Revolving Lender shall not at any time exceed its separate Revolving
Loan Commitment. The obligations of each Revolving Lender hereunder shall be
several and not joint. Until the Commitment Termination Date, Borrowers may
borrow, repay and reborrow under this Section 1.1(a); provided that the amount
of any Tranche A Advance to be made at any time shall not exceed Tranche A
Borrowing Availability at such time. Each Tranche A Advance shall be made on
notice by Borrower Representative on behalf of the applicable Borrower to one of
the representatives of Agent identified in Schedule 1.1 at the address specified
therein. Any such notice must be given no later than (1) 1:00 p.m. (New York
time) on the Business Day of the proposed Tranche A Advance, in the case of an
Base Rate Loan, or (2) 1:00 p.m. (New York time) on the date which is 3 Business
Days prior to the proposed Tranche A Advance, in the case of a LIBOR Loan. Each
such notice (a "Notice of Tranche A Advance") must be given in writing (by
telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i)
attached to the Disclosure Document, and shall include the information required
in such Exhibit and such other information as may be reasonably required by
Agent. If any Borrower desires to have the Tranche A Advances bear interest by
reference to a LIBOR Rate, Borrower Representative must comply with Section
1.5(e).
(B) Use of Tranche A Advances to finance Portfolio
purchases in excess of $10,000,000 shall require the consent of the Agent and
use of Tranche A Advances to finance Portfolio purchases in excess of
$15,000,000 shall require the consent of the Requisite Lenders. In connection
with such purchases, Borrowers shall deliver to Agent and Requisite Lenders, if
applicable, the Portfolio Proposal relating to such purchases. For purposes of
this Section 1.1(a)(i)(B) only, any Requisite Lenders that have not responded
within 4 Business Days of receipt of a request for their consent for the
purchase of a Portfolio in excess of $15,000,000 shall be deemed to have
consented to such purchase. Borrowers agree not to intentionally propose, modify
or structure (or permit to be structured) any Portfolio purchases from any
seller or its affiliates, whether as a single transaction or a series of
transactions that could reasonably be deemed to be part of the same transaction,
for the purpose of evading the requirements of this Section 1.1(a)(i)(B) to
obtain the consent of Agent or Requisite Lenders, as the case may be.
Notwithstanding anything in this Section to the contrary, a Borrower may acquire
a Rejected Portfolio having a purchase price in excess of the amount set forth
in this clause without the consent of the Agent or the Requisite Lenders if the
purchase is made with Borrowers' own cash or borrowings that are made without
including the Rejected Portfolio as an Eligible New Portfolio in the Applicable
Borrower Base, and if the Rejected Portfolio is subject to a security interest
or Lien in favor of Agent, on behalf of itself and Lenders, to secure the
Obligations. Without conferring approval rights upon Agent (except as otherwise
provided in this Section 1.1(a)(i)(B)), the applicable Borrower shall deliver to
Agent, upon Agent's request, such information (as is reasonably available to the
applicable Borrower) relating to the purchase of a Portfolio as Agent may
reasonably request (including any available Portfolio Acquisition Documents)
within a reasonable period of time following the applicable Borrower's purchase
of such Portfolio.
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(C) Anything in this Agreement to the contrary
notwithstanding, at the request of Borrower Representative, in its discretion
Agent may (but shall have absolutely no obligation to), make Tranche A Advances
to Borrowers on behalf of Revolving Lenders in amounts that cause the
outstanding balance of the aggregate Revolving Loan to exceed the Borrowing Base
(an "Overadvance"), provided that: (i) the amount of any or all Overadvances
shall not exceed an amount equal to the lesser of (A) Three Million Dollars
($3,000,000) or five percent (5%) of the Maximum Amount, (ii) the outstanding
balance of the aggregate Revolving Loan (after taking into consideration such
Overadvance) shall not exceed an amount equal to one hundred five percent (105%)
of the Borrowing Base, (iii) the outstanding balance of the aggregate Revolving
Loan shall not exceed the Maximum Amount at any time, (iv) any Overadvance must
be repaid, together with applicable interest thereon, in full to Agent, on
behalf of Lenders, within 7 calendar days of such Overadvance; and (v) not more
than three (3) Overadvances shall be made in any calendar year.
(ii) Tranche B.
(A) Subject to the terms and conditions hereof, each
Revolving Lender agrees to make available to Borrowers from time to time until
the Commitment Termination Date its Pro Rata Share of advances for general
corporate purposes (each, a "Tranche B Advance"). The Pro Rata Share of the
Revolving Loan of any Revolving Lender shall not at any time exceed its separate
Revolving Loan Commitment. The obligations of each Revolving Lender hereunder
shall be several and not joint. Until the Commitment Termination Date, Borrowers
may borrow, repay and reborrow under this Section 1.1(a); provided that the
amount of any Tranche B Advance to be made at any time shall not exceed Tranche
B Borrowing Availability at such time. Each Tranche B Advance shall be made on
notice by Borrower Representative on behalf of the applicable Borrower to one of
the representatives of Agent identified in Schedule 1.1 at the address specified
therein. Any such notice must be given no later than (1) 1:00 p.m. (New York
time) on the Business Day of the proposed Tranche B Advance, in the case of an
Base Rate Loan, or (2) 1:00 p.m. (New York time) on the date which is 3 Business
Days prior to the proposed Tranche B Advance, in the case of a LIBOR Loan. Each
such notice (a "Notice of Tranche B Advance") must be given in writing (by
telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i)
attached to the Disclosure Document, and shall include the information required
in such Exhibit and such other information as may be required by Agent. If any
Borrower desires to have the Tranche B Advances bear interest by reference to a
LIBOR Rate, Borrower Representative must comply with Section 1.5(e).
(B) Anything in this Agreement to the contrary
notwithstanding, at the request of Borrower Representative, in its discretion
Agent may (but shall have absolutely no obligation to), make an Overadvance with
respect to Tranche B Advances to Borrowers on behalf of Revolving Lenders in
amounts that cause the outstanding balance of the aggregate Revolving Loan to
exceed the Borrowing Base, provided that (i) the amount of any or all
Overadvances shall not exceed an amount equal to the lesser of (A) Three Million
Dollars ($3,000,000) or five percent (5%) of the Maximum Amount, (ii) the
outstanding balance of the aggregate Revolving Loan (after taking into
consideration such Overadvance) shall not exceed an amount equal to one hundred
five percent (105%) of the Borrowing Base, (iii) the outstanding balance of the
aggregate Revolving Loan shall not exceed the Maximum Amount at any time, (iv)
any Overadvance must be repaid, together with applicable interest thereon, in
full to Agent, on behalf of Lenders, within 7 calendar days of such Overadvance;
and (v) not more than three (3) Overadvances shall be made in any calendar year.
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(iii) Agent shall not be required to advise Borrowers or
any Credit Party for the reason for Lenders' failure to approve any Portfolio.
Notwithstanding anything in this Section 1.1(a) to the contrary, a Rejected
Portfolio may be acquired by any Credit Party in the event that such acquisition
is made pursuant to the use of its own cash or borrowings that are made without
including the Rejected Portfolio as an Eligible New Portfolio in the Borrowing
Base, and if the Rejected Portfolio is subject to a security interest or Lien in
favor of Agent, on behalf of itself and Lenders, to secure the Obligations. A
Non-Credit Party Affiliate may finance the acquisition of a Rejected Portfolio,
provided, such indebtedness is not guaranteed directly or indirectly by any
Credit Party. In no event shall a Non-Recourse Non-Credit Party Loan be
guaranteed directly or indirectly by any Credit Party. Provided that any
Non-Recourse Non-Credit Party Loan shall have been assigned and transferred to a
Non-Credit Party Affiliate, Agent will provide releases reasonably requested by
any other lender with respect to Lender's liens in any Rejected Portfolio and
the proceeds and other rights related thereto.
(iv) Except as provided in Section 1.12, Borrowers shall
execute and deliver to each Revolving Lender a note to evidence the Revolving
Loan Commitment of that Revolving Lender. Each note shall be in the principal
amount of the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(a)(ii)
attached to the Disclosure Document (each a "Revolving Note" and, collectively,
the "Revolving Notes"). Each Revolving Note shall represent the obligation of
the Borrowers to pay the amount of the applicable Revolving Lender's Revolving
Loan Commitment or, if less, such Revolving Lender's Pro Rata Share of the
aggregate unpaid principal amount of all Revolving Credit Advances to Borrowers
together with interest thereon as prescribed in Section 1.5. The entire unpaid
balance of the aggregate Revolving Loan and all other non-contingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date.
(b) Reliance on Notices; Appointment of Borrower
Representative. Agent shall be entitled to rely upon, and shall be fully
protected in relying upon, any Notice of Tranche A Advance or Notice of Tranche
B Advance, as the case may be, Notice of Conversion/Continuation or similar
notice purporting to be executed by an officer of the Borrower's Representative
and believed by Agent to be genuine. Agent may assume that each Person executing
and delivering any notice in accordance herewith who purports to be a person on
the list of authorized signatories provided from time to time by Borrower's
Representative to Agent was duly authorized, unless the responsible individual
acting thereon for Agent has actual knowledge to the contrary. Each Borrower
hereby designates Palisades as its representative and agent on its behalf for
the purposes of issuing Notices of Revolving Credit Advances and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement of
the proceeds of the Revolving Loan, selecting interest rate options, and
effecting repayment of the Revolving Loan, giving and receiving all other
notices and consents hereunder or under any of the other Loan Documents and
taking all other actions (including in respect of compliance with covenants) on
behalf of any Borrower or Borrowers under the Loan Documents. Borrower
Representative hereby accepts such appointment. Agent and each Lender may regard
any notice or other communication pursuant to any Loan Document from Borrower
Representative as a notice or communication from all Borrowers, and shall give
any notice or communication required or permitted to be given to any Borrower or
Borrowers hereunder to Borrower Representative on behalf of such Borrower or
Borrowers. Each Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.
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1.2 Prepayments.
(a) Voluntary Reductions in Revolving Loan Commitments.
Borrowers may at any time on at least 5 days' prior written notice by Borrower
Representative to Agent permanently reduce (but not terminate) the Revolving
Loan Commitment; provided that (i) any such prepayments or reductions shall be
in a minimum amount of $1,000,000 and integral multiples of $500,000 in excess
of such amount (and shall be applied to reduce, on a pro rata basis between the
Tranche A Revolving Loan and the Tranche B Revolving Loan, the Revolving Loan
Commitments of the Lenders based on their Pro Rata Share of the reduction), (ii)
the Revolving Loan Commitment shall not be reduced to an amount less than the
amount of the Revolving Loan then outstanding, and (iii) after giving effect to
such reductions, Borrowers shall comply with Section 1.2(b)(i). In addition,
Borrowers may at any time on at least 10 days' prior written notice by Borrower
Representative to Agent terminate the Revolving Loan Commitment; provided that
upon such termination, the Revolving Loan and other Obligations shall be
immediately due and payable in full. Any voluntary reduction or termination of
the Revolving Loan Commitment must be accompanied by payment of the Fee required
by Section 1.6(c), plus the payment of any LIBOR funding breakage costs in
accordance with Section 1.10(b). Upon the effective date of any such reduction
or termination of the Revolving Loan Commitment, each Borrower's right to
request Revolving Credit Advances shall simultaneously be permanently reduced or
terminated, as the case may be.
(b) Mandatory Prepayments.
(i) If at any time the aggregate outstanding balance of
the Revolving Loan exceeds the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, Borrowers shall immediately repay the aggregate outstanding
Revolving Credit Advances to the extent required to eliminate such excess.
Furthermore, if, at any time, the outstanding balance of the (a) Tranche A
Advances exceeds the Tranche A Borrowing Availability, or (b) the Tranche B
Advances exceeds the Tranche B Borrowing Availability, the Borrowers shall
immediately repay their Revolving Credit Advances in the amount of such excess.
(ii) Immediately upon receipt by any Credit Party of
proceeds of any asset disposition (excluding proceeds of asset dispositions
permitted by Sections 6.8 (a), (d), and (e)) or any sale of Stock of any
Subsidiary of any Credit Party, Borrowers shall prepay the Revolving Loan in an
amount equal to all such cash proceeds net of (A) underwriting discounts,
commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by Borrowers in
connection therewith (in each case, paid to non-Affiliates), (B) sales,
transfer, and similar taxes, (C) amounts payable to holders of senior Liens (to
the extent such Liens constitute Permitted Encumbrances hereunder), if any, (D)
amounts required to be placed in escrow in connection with such transaction;
provided that such amounts and terms of escrow are customary for transactions of
such nature and are reasonably satisfactory to Agent, and provided, further,
that upon the release of any such escrowed funds such funds are applied in
accordance with this Section 1.2 and (E) amounts that Agent reasonably
determines are appropriate to meet indemnity and similar obligations, including
post-closing purchase price adjustments in connection with such transaction,
provided, that upon such obligations terminating, any such amounts not used for
such purposes shall be applied in accordance with this Section 1.2. Any such
prepayment shall be applied in accordance with Section 1.2(c).
9
(iii) Subject to the provisions set forth in Section 6.5
of this Agreement, if Credit Party issues Stock or any debt securities, no later
than the Business Day following the date of receipt of the cash proceeds
thereof, Borrowers shall prepay the Revolving Loan in an amount equal to all
such cash proceeds, net of underwriting discounts and commissions and other
reasonable and customary transaction costs paid to non-Affiliates in connection
therewith. Any such prepayment shall be applied in accordance with Section
1.2(c).
(c) Application of Certain Mandatory Prepayments. Any
prepayments made by any Borrower pursuant to Sections 1.2(b)(ii) and (b)(iii)
above shall be applied as follows: first, to the Tranche B Revolving Loan and
then to the Tranche A Revolving Loan.
(d) No Implied Consent. Nothing in this Section 1.2 shall be
construed to constitute Agent's or any Lender's consent to any transaction that
is not permitted by other provisions of this Agreement or the other Loan
Documents.
1.3 Use of Proceeds. Borrowers shall utilize the proceeds of the
Tranche A Revolving Loan solely for the Refinancing and the purchase of
Portfolios. Borrowers shall utilize the proceeds of the Tranche B Revolving Loan
solely for the Refinancing, ordinary working capital and general corporate
needs, including, without limitation, the purchase of Rejected Portfolios and to
capitalize or fund a Non-Recourse Non-Credit Party Affiliate, subject to the
terms, conditions and limitations set forth in this Agreement. The Disclosure
Document contains a description of Borrowers' sources and uses of funds as of
the Closing Date, including the Revolving Loan to be made or incurred on that
date.
1.4 Interest and Applicable Margins.
(a) Borrowers shall pay interest to Agent, for the ratable
benefit of Lenders in accordance with the Revolving Loan being made by each
Lender, in arrears on each applicable Interest Payment Date, at the following
rates: (i) with respect to the Revolving Credit Advances, the Base Rate plus the
Applicable Revolver Base Margin per annum or, at the election of Borrower
Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR
Margin per annum, based on the aggregate Revolving Credit Advances outstanding
from time to time;
10
The Applicable Margins are as follows:
IF LEVERAGE RATIO IS: APPLICABLE APPLICABLE
BASE RATE LIBOR MARGIN
MARGIN
Less than 1.0 to 1.0 Minus 1/2% Plus 2%
Greater than or equal to 1.0 to 1.0 but less
than 1.75 to 1.0 0% Plus 2 1/2%
Greater than or equal to 1.75 to 1.0 Plus 1/2% Plus 3%
The Applicable Margins shall be adjusted (up or down) prospectively on a
quarterly basis as determined by Borrowers' consolidated financial condition for
the Fiscal Quarter then ended, commencing with the delivery of Borrowers'
quarterly unaudited Financial Statements to Lenders for the Fiscal Quarter
ending March 31, 2004 (the "First Adjustment Date"). All adjustments in the
Applicable Margins after the First Adjustment Date shall be implemented
quarterly on a prospective basis, commencing at least 5 days after the date of
delivery to Lenders of the quarterly unaudited or annual audited (as applicable)
Financial Statements evidencing the need for an adjustment. Concurrently with
the delivery of those Financial Statements, Borrower Representative shall
deliver to Agent and Lenders a certificate, signed by its chief financial
officer, setting forth in reasonable detail the basis for the continuance of, or
any change in, the Applicable Margins. Failure to timely deliver such Financial
Statements shall, in addition to any other remedy provided for in this
Agreement, result in an increase in the Applicable Margins to the highest level
set forth in the foregoing grid, until the fifth day following the delivery of
those Financial Statements demonstrating that such an increase is not required.
If a Default, which is not reasonably capable of being cured, or Event of
Default has occurred and is continuing at the time any reduction in the
Applicable Margins is to be implemented, that reduction shall be deferred until
the first day of the first calendar month following the date on which such
Default, which is not reasonably capable of being cured, or Event of Default is
waived or cured.
(b) If any payment on any Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis
and interest shall be made by Agent on the basis of a 360-day year, in each case
for the actual number of days occurring in the period for which such interest
and Fees are payable. The Base Rate is a floating rate determined for each day.
Each determination by Agent of an interest rate and Fees hereunder shall be
final, binding and conclusive on Borrowers, absent manifest error.
(d) So long as an Event of Default has occurred and is
continuing under Section 8.1(a), (h) or (i) or so long as any other Default,
which is not reasonably capable of being cured, or Event of Default has occurred
and is continuing and at the election of Agent (or upon the written request of
Requisite Lenders) confirmed by written notice from Agent to Borrower
Representative, the interest rates applicable to the Revolving Loan shall be
increased to Base Rate plus three percentage points (3%) per annum ("Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate.
Interest at the Default Rate shall accrue from the initial date of such Default,
which is not reasonably capable of being cured, or Event of Default until that
Default, which is not reasonably capable of being cured, or Event of Default is
cured or waived and shall be payable upon demand.
11
(e) Subject to the conditions precedent set forth in Section
2.2, Borrower Representative shall have the option to (i) request that any
Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all
or any part of outstanding Revolving Loan from Base Rate Loans to LIBOR Loans,
(iii) convert any LIBOR Loan to a Base Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.10(b) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue
all or any portion of any Loan as a LIBOR Loan upon the expiration of the
applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan
shall commence on the first day after the last day of the LIBOR Period of the
Loan to be continued. Any Revolving Loan or group of Revolving Loans having the
same proposed LIBOR Period to be made or continued as, or converted into, a
LIBOR Loan must be in a minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of such amount. Any such election must be made by 12:00 noon
(New York time) on the 3rd Business Day prior to (1) the date of any proposed
Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR
Period with respect to any LIBOR Loans to be continued as such, or (3) the date
on which Borrower Representative wishes to convert any Base Rate Loan to a LIBOR
Loan for a LIBOR Period designated by Borrower Representative in such election.
If no election is received with respect to a LIBOR Loan by 12:00 noon (New York
time) on the 3rd Business Day prior to the end of the LIBOR Period with respect
thereto (or if a Default, which is not reasonably capable of being cured, or an
Event of Default has occurred and is continuing or if the additional conditions
precedent set forth in Section 2.2 shall not have been satisfied), that LIBOR
Loan shall be converted to an Base Rate Loan at the end of its LIBOR Period.
Borrower Representative must make such election by notice to Agent in writing,
by telecopy or overnight courier. In the case of any conversion or continuation,
such election must be made pursuant to a written notice (a "Notice of
Conversion/Continuation") in the form of Exhibit 1.4(e) attached to the
Disclosure Document.
(f) Notwithstanding anything to the contrary set forth in this
Section 1.4, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had the
interest rate payable hereunder been (but for the operation of this paragraph)
the interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of
interest and in the manner provided in Sections 1.4(a) through (e), unless and
until the rate of interest again exceeds the Maximum Lawful Rate, and at that
time this paragraph shall again apply. In no event shall the total interest
received by any Lender pursuant to the terms hereof exceed the amount that such
Lender could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this Section 1.4(f), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.10 and thereafter shall refund any excess to Borrowers or as a
court of competent jurisdiction may otherwise order.
12
1.5 Cash Management Systems. On or prior to the Closing Date,
Borrowers will establish and will maintain until the Termination Date, the cash
management systems described in Annex C (the "Cash Management Systems").
1.6 Fees.
(a) On or prior to the Closing Date, Borrowers shall execute
and deliver to IDB the IDB Fee Letter and pay to IDB the fees described therein
at the times specified for payment therein.
(b) At the times specified in the Lenders' Fee Letter,
Borrowers shall pay the Fees described in the Lenders' Fee Letter.
(c) If Borrowers pay after acceleration or prepay the
Revolving Loan and reduce or terminate the Revolving Loan Commitment, whether
voluntarily or involuntarily and whether before or after acceleration of the
Obligations, or if any of the Commitments are otherwise terminated, Borrowers
shall pay to Agent, for the benefit of Lenders, as liquidated damages and
compensation for the costs of being prepared to make funds available hereunder
an amount equal to the Applicable Percentage (as defined below) multiplied the
amount of the reduction of the Revolving Loan Commitment. As used herein, the
term "Applicable Percentage" shall mean (y) two percent (2%), in the case of a
prepayment on or prior to the first anniversary of the Closing Date and (z) one
percent (1%), in the case of a prepayment after the first anniversary of the
Closing Date but on or prior to the second anniversary thereof. The Credit
Parties agree that the Applicable Percentages are a reasonable calculation of
Lenders' lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early termination of the
Commitments. Notwithstanding the foregoing, no prepayment fee shall be payable
by Borrowers upon a prepayment; provided that Borrowers do not permanently
reduce or terminate the Revolving Loan Commitment upon any such prepayment.
1.7 Receipt of Payments. Borrowers shall make each payment under
this Agreement not later than 3:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefor are received in the Collection Account
prior to 3:00 p.m. New York time. Payments received after 3:00 p.m. New York
time on any Business Day or on a day that is not a Business Day shall be deemed
to have been received on the following Business Day.
13
1.8 Application and Allocation of Payments.
(a) So long as no Default, which is not reasonably capable of
being cured, or Event of Default has occurred and is continuing, (i) payments
consisting of proceeds of Accounts received in the ordinary course of business
shall be applied to the Revolving Loan, first to the outstanding balances under
the Tranche B Advances until fully paid, and second to the outstanding balances
under the Tranche A Advances; (ii) voluntary prepayments shall be applied as
determined by Borrower Representative, subject to the applicable provisions of
Section 1.2(a); and (iii) mandatory prepayments shall be applied as set forth in
Sections 1.2(b) and 1.2(c). All payments shall be applied ratably to the portion
thereof held by each Lender as determined by its Pro Rata Share. Subject to this
Section 1.8, as to any other payment, and as to all payments made when a
Default, which is not reasonably capable of being cured, or Event of Default has
occurred and is continuing or following the Commitment Termination Date, each
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of such Borrower, and each Borrower
hereby irrevocably agrees that Agent shall have the continuing exclusive right
to apply any and all such payments against the Obligations of Borrowers as Agent
may deem advisable notwithstanding any previous entry by Agent in the Loan
Account or any other books and records. Subject to this Section 1.8, in the
absence of a specific determination by Agent with respect thereto, payments
shall be applied to amounts then due and payable in the following order: (1) to
Fees and Agent's expenses reimbursable hereunder; (2) to interest on the
Revolving Loan, ratably in proportion to the interest accrued as to each
Revolving Loan; (3) to principal payments on the Revolving Loan, first to the
outstanding balances under the Tranche B Advances until fully paid, and second
to the outstanding balances under the Tranche A Advances; and (4) to all other
Obligations, including expenses of Lenders to the extent reimbursable under
Section 11.3.
(b) Agent is authorized to, and at its sole election may,
charge to the Revolving Loan balance on behalf of each Borrower and cause to be
paid all Fees, expenses, Charges, costs (including insurance premiums in
accordance with Section 5.4(a)) and interest, owing by Borrowers under this
Agreement or any of the other Loan Documents if and to the extent Borrowers fail
to pay promptly any such amounts as and when due, even if the amount of such
charges would exceed Borrowing Availability at such time or would cause the
aggregate balance of the Revolving Loan to exceed the Borrowing Base after
giving effect to such charges. At Agent's option and to the extent permitted by
law, any charges so made shall constitute part of the Revolving Loan hereunder.
1.9 Loan Account and Accounting. Agent shall maintain loan
accounts (the "Loan Account") on its books to record: all Advances, all payments
made by Borrowers, and all other debits and credits as provided in this
Agreement with respect to the Revolving Loan or any other Obligations. All
entries in the Loan Account shall be made in accordance with Agent's customary
accounting practices as in effect from time to time. Subject to the Borrowers'
right to object in accordance with the terms and conditions set forth below, the
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement (which printout or statement shall be delivered to
Borrower Representative upon its reasonable request), shall, absent manifest
error, be presumptive evidence of the amounts due and owing to Agent and Lenders
by each Borrower; provided that any failure to so record or any error in so
recording shall not limit or otherwise affect any Borrower's duty to pay the
Obligations. Agent shall render to Borrower Representative a monthly accounting
of transactions with respect to the Revolving Loan setting forth the balance of
the Loan Account as to each Borrower for the immediately preceding month. Unless
Borrower Representative notifies Agent in writing of any objection to any such
accounting (specifically describing the basis for such objection), within 30
days after the date thereof, each and every such accounting shall (absent
manifest error) be deemed final, binding and conclusive on Borrowers in all
respects as to all matters reflected therein. Only those items expressly
objected to in such notice shall be deemed to be disputed by Borrowers.
Notwithstanding any provision herein contained to the contrary, any Lender may
elect (which election may be revoked) to dispense with the issuance of Notes to
that Lender and may rely on the Loan Account as evidence of the amount of
Obligations from time to time owing to it.
14
1.10 Indemnity.
(a) Each Credit Party that is a signatory hereto shall jointly
and severally indemnify and hold harmless each of Agent, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "Indemnified
Person"), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) that may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit having been extended,
suspended or terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities,
and any and all reasonable legal costs and expenses arising out of or incurred
in connection with disputes between or among any parties to any of the Loan
Documents (collectively, "Indemnified Liabilities"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from (i) that Indemnified Person's gross negligence
or willful misconduct (as finally determined by a court of competent
jurisdiction), or (ii) the failure of such Indemnified Person to act in a
commercially reasonable manner (as finally determined by a court of competent
jurisdiction) such that such Indemnified Person's action is determined by a
court of competent jurisdiction to be egregious, unconscionable and beyond the
standards of experienced commercial lenders in similar circumstances. NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR
ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR
AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER,
EXCEPT TO THE EXTENT OF SUCH INDEMNIFIED PERSON'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
(b) To induce Lenders to provide the LIBOR Rate option on the
terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part
prior to the last day of any applicable LIBOR Period (whether that repayment is
made pursuant to any provision of this Agreement or any other Loan Document or
occurs as a result of acceleration, by operation of law or otherwise); (ii) any
Borrower shall default in payment when due of the principal amount of or
interest on any LIBOR Loan; (iii) any Borrower shall refuse to accept any
borrowing of, or shall request a termination of, any borrowing of, conversion
into or continuation of, LIBOR Loans after Borrower Representative has given
notice requesting the same in accordance herewith; or (iv) any Borrower shall
fail to make any prepayment of a LIBOR Loan after Borrower Representative has
given a notice thereof in accordance herewith, then Borrowers shall jointly and
severally indemnify and hold harmless each Lender from and against all losses,
costs and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender shall
be deemed to have actually funded its relevant LIBOR Loan through the purchase
of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount
of that LIBOR Loan and having a maturity comparable to the relevant LIBOR
Period; provided, that each Lender may fund each of its LIBOR Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.10(b), and
such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within 10 Business Days of receipt
thereof, specifying the basis for such objection in detail.
15
1.11 Access. Each Credit Party that is a party hereto shall, during
normal business hours, from time to time upon three Business Days' prior notice
as frequently as Agent reasonably determines to be appropriate: (a) provide
Agent and any of its officers, employees and agents access to its properties,
facilities, advisors and employees (including officers) of each Credit Party and
to the Collateral, (b) permit Agent, and any of its officers, employees and
agents, to inspect, examine and make extracts from any Credit Party's books and
records, and (c) permit Agent, and its officers, employees and agent, (including
third party appraisers selected by Agent) to appraise, inspect, review, evaluate
and make test verifications and counts of the Accounts, Inventory and other
Collateral of any Credit Party. Notwithstanding other provisions of this
Agreement to the contrary, Borrowers shall pay all reasonable costs and expenses
incurred or paid by Agent in conducting no more than two (2) field examinations
per year; provided, however, that after the occurrence of a Default, which is
not reasonably capable of being cured, or Event of Default, there shall be no
such limitation on Borrowers' payment obligations, and Borrowers shall pay all
costs and expenses of conducting any and all field examinations made by Agent.
Notwithstanding the preceding limitation on Borrowers' payment obligations,
nothing in this Section shall limit or impair the rights of Agent to conduct
such number of field examinations as Agent may determine. If a Default, which is
not reasonably capable of being cured, or Event of Default has occurred and is
continuing, or if access is necessary to preserve or protect the Collateral as
reasonably determined by Agent, each such Credit Party shall provide such access
to Agent and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default has occurred and is continuing,
Borrowers shall provide Agent and each Lender with access to their servicers.
Each Credit Party shall make available to Agent and its counsel, as quickly as
is reasonably possible under the circumstances, originals or copies of all books
and records that Agent may reasonably request. Each Credit Party shall deliver
any document or instrument necessary for Agent, as it may from time to time
reasonably request, to obtain records from any service bureau or other Person
that maintains records for such Credit Party, and shall maintain duplicate
records or supporting documentation on traditional or electronic media,
including, at such Credit Party's option, computer tapes and discs owned by such
Credit Party. Such duplicate records shall be kept at an owned location or a
location with respect to which Agent has received a satisfactory landlord
waiver. In the event Palisades is unable to obtain a landlord's agreement for
the Bethlehem, Pennsylvania location within sixty (60) days of the Closing Date,
Palisades and the Agent shall agree upon a mutually acceptable method to provide
the Agent with daily copies of the books and records stored at such facility or
make such other satisfactory arrangements. Agent will give Borrowers at least
three Business Days' prior notice (written or oral) of regularly scheduled field
exams. Representatives of other Lenders may accompany Agent's representatives on
regularly scheduled field exams at no charge to Borrowers. Notwithstanding the
foregoing, Agent and Lenders will use commercially reasonable efforts to conduct
all activities described in this Section in a manner that does not interfere in
any material respect with the business operations of any Credit Party or any
servicer.
16
1.12 Taxes.
(a) Any and all payments by each Borrower hereunder (including
any payments made pursuant to Section 12) or under the Notes shall be made, in
accordance with this Section 1.12 and subject to clause (d) of this Section
1.12, free and clear of and without deduction for any and all present or future
Taxes. If any Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder (including any sum payable pursuant to
Section 12) or under the Notes, (i) subject to clause (d) of this Section 1.12,
the sum payable shall be increased as much as shall be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 1.12) Agent or Lenders, as applicable, receive
an amount equal to the sum they would have received had no such deductions been
made, (ii) such Borrower shall make such deductions, and (iii) such Borrower
shall pay the full amount deducted to the relevant taxing or other authority in
accordance with applicable law. Promptly upon written request, but not later
than 30 days after the date of any payment of Taxes, Borrower Representative
shall furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof.
(b) Subject to clause (d) of this Section 1.12, each Credit
Party that is a signatory hereto shall jointly and severally indemnify and,
within 15 days of demand therefor, pay Agent and each Lender for the full amount
of Taxes (including any Taxes imposed by any jurisdiction on amounts payable
under this Section 1.12) paid by Agent or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally asserted.
(c) Each Lender organized under the laws of a jurisdiction
outside the United States (a "Foreign Lender") as to which payments to be made
under this Agreement or under the Notes are exempt from United States
withholding tax under an applicable statute or tax treaty shall provide to
Borrower Representative and Agent two copies of a properly completed and
executed IRS Form W-8ECI or Form W-8BEN or other applicable form, certificate or
document prescribed by the IRS or the United States certifying as to such
Foreign Lender's entitlement to such exemption (a "Certificate of Exemption").
Any Person organized under the laws of a jurisdiction outside the United States
(a "Foreign Person") that seeks to become a Lender under this Agreement
including any Foreign Person who seeks to become an assignee or participant
pursuant to Section 9.1 shall provide a Certificate of Exemption to Borrower
Representative and Agent prior to becoming a Lender hereunder. No Foreign Person
may become a Lender hereunder if such Person fails to deliver a Certificate of
Exemption in advance of becoming a Lender. Each Foreign Lender shall promptly
deliver further copies of any forms or certificates required to be delivered
pursuant to this clause (c ) if the most recently delivered form or
certification expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recently delivered form. Notwithstanding any
other provision of this Section 1.12(c), a Foreign Lender shall not be required
to deliver any form pursuant to this Section 1.12(c) that such Foreign Lender is
not legally able to deliver.
17
(d) Neither the Borrowers nor the Credit Parties shall be
required to pay any additional amounts to any Lender pursuant to clause (a)(i)
of this Section 1.12, or to indemnify any Lender pursuant to clause (b) of this
▇▇▇▇▇▇▇ ▇.▇▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ withholding taxes to the extent
imposed as a result of (i) the failure of such Lender to deliver to Borrower
Representative and Agent a Certificate of Exemption pursuant to clause (c), (ii)
such Certificate of Exemption not establishing a complete exemption from United
States withholding taxes or the information or certifications made therein by
the Lender being untrue or inaccurate on the date delivered in any material
respect, (iii) the Lender designating a successor lending office which has the
effect of causing the Borrowers or the Credit Parties to become obligated to
make a payment pursuant to clause (a)(i) of this Section 1.12 or clause (b) of
this Section 1.12 in excess of its payment obligation immediately prior to such
designation, or (iv) such Lender being treated as a "conduit entity" within the
meaning of U.S. Treasury Regulations Section 1.881-3 or any successor provision;
provided, however, that Borrowers and the Credit Parties shall be required to
pay additional amounts to any Lender pursuant to clause (a)(i) of this Section
1.12, or to indemnify any Lender pursuant to clause (b) of this ▇▇▇▇▇▇▇ ▇.▇▇, ▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ withholding taxes if (x) any such failure to deliver a
Certificate of Exemption or the failure of such Certificate of Exemption to
establish a complete exemption from United States withholding taxes or
inaccuracy or untruth contain therein resulted from a change in any applicable
statute, treaty, regulation or other applicable law or any interpretation of any
of the foregoing occurring after the date hereof, which change rendered such
Lender no longer legally entitled to deliver such Certificate of Exemption or
otherwise ineligible for a complete exemption from United States withholding
taxes or render the information or certifications made in such Certificate of
Exemption untrue or inaccurate in any material respect, (y) the re-designation
of the Lender's lending office was made at the request of a Borrower or (z) the
obligation to pay any additional amounts to any such Lender pursuant to clause
(a)(i) of this Section 1.12, or to indemnify any such Lender pursuant to clause
(d) of this Section 1.12, is with respect to an assignee Lender that becomes an
assignee Lender pursuant to Section 9.1 as a result of an assignment made at the
request of a Borrower.
(e) If, solely as a result of an event described in
subparagraph (x) of clause (d) of this Section 1.12 (i) a Lender is unable to
provide to Borrower Representative a Certificate of Exemption or such
Certificate of Exemption is unable to establish a complete exemption from United
States withholding taxes or (ii) the Borrowers become liable to make to pay
additional amounts to a Lender pursuant to clause (a)(i) of this Section 1.12,
or to indemnify a Lender pursuant to clause (b), of this Section 1.12, Borrowers
may exercise the remedies available to it under Section 1.13(d).
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(f) If Agent or any Lender receives a refund in respect of any
Taxes as to which it has been paid additional amounts by a Borrower pursuant to
clause (a) of this Section 1.12 or indemnified by a Borrower or Credit Party
pursuant to clause (b) of this Section 1.12, such Agent or Lender shall promptly
notify Borrower Representative of such refund and shall, within 30 days, remit
to Borrower Representative an amount as such Agent or Lender reasonably
determines to be the proportion of the refunded amount as will leave it, after
such remittance, in no better or worse position than it would have been if the
Taxes had not be imposed and the corresponding additional amounts or
indemnification payment not been made, provided that Borrower Representative,
upon the request of such Lender or Agent, agrees to return such refund and any
amounts which after such return, will leave such Lender in no better or worse
position than it would have been had Borrower not be required to return such
refund to such Lender or Agent in the event such Lender or Agent is required to
repay such refund.
1.13 Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have reasonably determined that any
law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrowers
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A reasonably detailed
certificate as to the amount of that reduction and showing the basis of the
computation thereof submitted by such Lender to Borrower Representative and to
Agent shall, absent manifest error, be final, conclusive and binding for all
purposes.
(b) If, due to either (i) the introduction of or any change in
any law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrowers shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower
Representative and to Agent by such Lender, shall be conclusive and binding on
Borrowers for all purposes, absent manifest error. Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances referred to
in clause (a) above or in this clause (b), which would result in any such
increased cost, the affected Lender shall, to the extent not inconsistent with
such Lender's internal policies of general application, use reasonable
commercial efforts to minimize costs and expenses incurred by it and payable to
it by Borrowers pursuant to Section 1.13(a) and (b).
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(c) Notwithstanding anything to the contrary contained herein,
if the introduction of or any change in any law or regulation (or any change in
the interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Revolving Loan or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Borrower
Representative through Agent, (i) the obligation of such Lender to agree to make
or to make or to continue to fund or maintain LIBOR Loans shall terminate and
(ii) each Borrower shall forthwith prepay in full all outstanding LIBOR Loans
owing by such Borrower to such Lender, together with interest accrued thereon,
unless Borrower Representative on behalf of such Borrower, within 5 Business
Days after the delivery of such notice and demand, converts all LIBOR Loans into
Base Rate Loans.
(d) Within 15 days after receipt by Borrower Representative of
written notice and demand from any Lender (an "Affected Lender") for payment of
additional amounts or increased costs as provided in Sections 1.12(a), 1.13(a)
or 1.13(b), Borrower Representative may, at its option, notify Agent and such
Affected Lender of its intention to replace the Affected Lender. So long as no
Default, which is not reasonably capable of being cured, or Event of Default has
occurred and is continuing, Borrower Representative, with the consent of Agent,
may obtain, at Borrowers' expense, a replacement Lender ("Replacement Lender")
for the Affected Lender, which Replacement Lender must be reasonably
satisfactory to Agent. If Borrowers obtain a Replacement Lender within 90 days
following notice of their intention to do so, the Affected Lender must sell and
assign its Revolving Loan and Commitments to such Replacement Lender for an
amount equal to the principal balance of the Revolving Loan held by the Affected
Lender and all accrued interest and Fees with respect thereto through the date
of such sale; provided, that Borrowers shall have reimbursed such Affected
Lender for the additional amounts or increased costs that it is entitled to
receive under this Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrowers shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within 15 days following its receipt of Borrowers'
notice of intention to replace such Affected Lender. Furthermore, if Borrowers
give a notice of intention to replace and do not so replace such Affected Lender
within 90 days thereafter, Borrowers' rights under this Section 1.13(d) shall
terminate as to such costs or additional amounts demanded by such Affected
Lender and Borrowers shall promptly pay all increased costs or additional
amounts demanded by such Affected Lender pursuant to Sections 1.12(a), 1.13(a)
and 1.13(b).
1.14 Single Loan. The Revolving Loan to each Borrower and all of
the other Obligations of each Borrower arising under this Agreement and the
other Loan Documents shall constitute one general obligation of that Borrower
secured, until the Termination Date, by all of the Collateral.
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1.15 Security Interest.
(a) Security Interest. Credit Parties, hereby, as more fully
set forth in the Collateral Documents, grant to the Agent for the benefit of the
Lenders a first priority lien on the Collateral to secure the Obligations,
subject to Permitted Encumbrances.
(b) Proceeds of Collateral. Upon the exercise of any rights
and remedies by the Agent under the Loan Documents (including, the exercise of
rights and remedies with respect to the Collateral) all proceeds of the
Collateral shall be applied first, to the Fees and reimbursable expenses of the
Agent then due and payable pursuant to any of the Loan Documents, second, to the
interest and principal of the Revolving Loan (applied to the Lenders based on
their Pro Rata Share). Agent shall provide Borrowers with a reasonably detailed
list of any expenses and costs for which Agent seeks reimbursement and payment
from Borrowers at the time Agent requests payment.
(c) Lenders Benefit. The provisions of this Section 1.15 and
the rights and benefits hereof shall inure solely to the benefit of the Lenders
and their respective successors and permitted assigns and no other Person
(including the Credit Parties) shall have or be entitled to assert rights or
benefits under this Section 1.15.
1.16 No Outstanding Obligations. Provided no Obligations remain
outstanding under the Revolving Loan and the Loan Documents, upon request of
Borrowers, Agent shall make available to Borrowers any Collections, Proceeds and
other funds received by Agent in connection with any Accounts for such uses that
do not violate the terms of this Agreement and, until so used, shall be
deposited into the Blocked Account or invested in Cash Equivalent Investments,
which Cash Equivalent Investments shall be pledged to Agent and perfected in a
manner reasonably acceptable to Agent.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Revolving Loan. No Lender shall be
obligated to make any Revolving Loan on the Closing Date, or to take, fulfill,
or perform any other action hereunder, until the following conditions have been
satisfied or provided for in a manner reasonably satisfactory to Agent, or
waived in writing by Agent and Lenders:
(a) Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrowers, each other
Credit Party, Agent and Lenders; and Agent shall have received such documents,
instruments, agreements and legal opinions as Agent shall reasonably request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all those listed in the Closing Checklist attached
hereto as Annex D, each in form and substance reasonably satisfactory to Agent.
(b) Prior Lender Obligations. (i) Agent shall have confirmed
that all of the Prior Lender Obligations will be replaced in full from the
proceeds of the initial Revolving Credit Advances and all Liens upon any of the
property of Borrowers or any of their Subsidiaries in favor of any Prior Lender
shall be amended and restated to be in favor of the Agent for the benefit of the
Lenders. This Agreement is not intended to create a new lending relationship
between the Agent and the Borrowers, but rather to restate and supplement the
terms, conditions, and provisions of an existing relationship.
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(c) Approvals. Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions or (ii) an officer's
or manager's certificate in form and substance reasonably satisfactory to Agent
affirming that no such consents or approvals are required.
(d) Payment of Fees. Borrowers shall have executed and
delivered to Agent the IDB Fee Letter and the Lenders' Fee Letter and shall have
paid the Fees required to be paid on the Closing Date in the respective amounts
specified in Section 1.6 (including the Fees specified in the IDB Fee Letter and
the Fees specified in the Lenders' Fee Letter), and shall have reimbursed Agent
for all attorneys' fees and reasonable costs and expenses of closing presented
as of the Closing Date.
(e) Approval of the Disclosure Document. Borrowers and each of
the other Credit Parties shall have prepared, executed and delivered to Agent
the Disclosure Document and Agent shall have approved the disclosures contained
therein.
(f) Capital Structure; Other Indebtedness. The capital
structure of each Credit Party and the terms and conditions of all Indebtedness
of each Credit Party shall be acceptable to Agent in its sole discretion.
(g) Due Diligence. Agent shall have completed its business and
legal due diligence and background checks on individuals as it deems
appropriate, with results of all reasonably satisfactory to Agent.
(h) Dissolution of Subsidiaries and other Entities. The Credit
Parties shall have caused the dissolution, winding up, and liquidation, in
accordance with all applicable laws, of Asta Funding Acquisition III, LLC, ER
Receivables, LLC, Asta Business Credit, LLC, Asta Auto Receivables Company, RAC
Acceptance Corp., LLC and Topps Promotion, LLC, and shall have delivered to
Agent evidence reasonably satisfactory to Agent of such dissolution, winding up
and liquidation.
(i) Amendment of Unifund Master Servicing Agreement. Palisades
shall have amended and caused to be amended the UNIFUND Master Servicing
Agreement dated May 28, 2003 (the "Unifund Master Servicing Agreement"), in a
manner reasonably acceptable to Agent, and shall have delivered to Agent a
fully-executed copy of such amendment.
(j) Letter of Direction to Servicing Agents. The applicable
Credit Parties who are parties to any servicing agreement with any Servicing
Agents shall have executed and delivered to Agent a letter of direction to its
Servicing Agents: (aa) notifying such Servicing Agents of the Liens of Agent and
Lenders in and to the Collateral and the grant of a lien and security interest
by such Credit Party to Agent in the servicing agreement with Servicing Agent,
and (bb) instructing such Servicing Agents to make all payments owing to the
applicable Credit Party directly to Agent upon receipt by Servicing Agent of
written demand to do so, all in form and substance reasonably acceptable to
Agent. Agent shall hold such letters in Agent's possession and only release them
in connection with the exercise of its remedies after the occurrence of a
Default, which is not reasonably capable of being cured, or Event of Default.
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(k) Servicing Agreements. The Credit Parties shall have
delivered to Agent true and complete fully-executed copies of all servicing
agreements entered into by or between any Credit Party and any Servicing Agent,
other than agreements with Servicing Agents who remit Collections to any Credit
Party that, on average, total less than $25,000 in any Fiscal Quarter.
(l) Insurance Certificates. The Credit Parties shall have
delivered to Agent such certificates of insurance as Agent shall reasonably
require in form and content acceptable to Agent evidencing the insurance
coverages required by the terms of this Agreement to be maintained by the Credit
Parties, including, without limitation, "All Risk" and business interruption
insurance and general liability and other liability policies.
(m) Consummation of Related Transactions. Agent shall have
received fully executed copies of the Related Transactions Documents, each of
which shall be in form and substance reasonably satisfactory to Agent and its
counsel.
(n) Note Receivable. Palisades shall have delivered to Agent
evidence reasonably acceptable to Agent that the promissory note dated on or
about December 31, 2003, made by Unifund and payable to Palisades in the
original principal amount of $2,138,553.66 (the "Note Receivable") bears the
following written indication: "This promissory note has been assigned as
collateral to ISRAEL DISCOUNT BANK OF NEW YORK, a New York banking corporation,
as Agent,". Palisades shall have instructed Unifund in writing (with a copy
thereof to Agent) that all payments to be made under the Note Receivable must be
made to the Blocked Account established by Palisades with Agent. Palisades shall
have assigned to Agent (in a commercially reasonably manner) any Lien or
security interest granted to Palisades to secure payment of the Note Receivable.
2.2 Further Conditions to Each Loan. No Lender shall be obligated
to fund any Advance, convert or continue any Loan as a LIBOR Loan, if, as of the
date thereof:
(a) any representation or warranty by any Credit Party
contained herein or in any other Loan Document is (subject to any materiality or
other qualifiers contained in such representation or warranty) untrue or
incorrect as of such date, except to the extent that such representation or
warranty expressly relates to an earlier date and except for changes therein
expressly permitted or expressly contemplated by this Agreement (including to
the extent a supplement to a disclosure contained in the Disclosure Document is
to be supplied to Agent when and as required under the Loan Documents and
Requisite Lenders under Section 5.6(a)), and Agent or Requisite Lenders have
determined not to make such Advance or convert or continue any Loan as LIBOR
Loan as a result of the fact that such warranty or representation is untrue or
incorrect;
(b) any event or circumstance having a Material Adverse Effect
has occurred and is continuing since the date hereof as reasonably determined by
the Requisite Lenders, and Requisite Lenders have determined not to make such
Advance or convert or continue any Loan as a LIBOR Loan as a result of the fact
that such event or circumstance has occurred;
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(c) any Default, which is not reasonably capable of being
cured, or Event of Default has occurred and is continuing or would result after
giving effect to any Advance and Agent or Requisite Lenders shall have
determined not to make any Advance or convert or continue any Loan as a LIBOR
Loan as a result of that Default, which is not reasonably capable of being
cured, or Event of Default; or
(d) after giving effect to any Advance, (i) the outstanding
principal amount of the aggregate Revolving Loan would exceed the lesser of the
Borrowing Base and the Maximum Amount, (ii) the outstanding principal amount of
the Tranche A Revolving Loan of the Borrowers would exceed the Borrowers'
Tranche A Borrowing Availability, or (iii) the outstanding principal amount of
the Tranche B Revolving Loan of the Borrowers would exceed the Borrowers'
Tranche B Borrowing Availability.
The request and acceptance by any Borrower of the proceeds of any Advance or the
conversion or continuation of any Loan into, or as, a LIBOR Loan shall be deemed
to constitute, as of the date thereof, (i) a representation and warranty by
Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a
reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section
12 and of the granting and continuance of Agent's Liens, on behalf of itself and
Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Revolving Loan the Credit Parties
executing this Agreement, jointly and severally, make the following
representations and warranties to Agent and each Lender with respect to all
Credit Parties, each and all of which shall survive the execution and delivery
of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each Credit Party
(a) is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization set forth in the Disclosure Document; (b) is duly
qualified to conduct business and is in good standing in each other jurisdiction
where its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not
reasonably be expected to result in exposure to losses, damages or liabilities
in excess of $500,000; (c) has the requisite corporate or limited liability
company power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease and to conduct its business as now, heretofore and proposed to be
conducted; (d) subject to specific representations regarding Environmental Laws,
has all material licenses, permits, consents or approvals from or by, and has
made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter and
bylaws or operating agreement, as applicable; and (f) to the best of each Credit
Party's actual knowledge, is in compliance with and has all licenses required
under all laws applicable consumer credit and collection laws, except where the
failure to be in compliance or have such licenses could not be reasonably
expected to have a Material Adverse Effect; and (g) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, except where
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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3.2 Executive Offices, Collateral Locations, FEIN. As of the
Closing Date, the current location of each Credit Party's chief executive office
and premises at which any Collateral is located are set forth in the Disclosure
Document, and none of such locations has changed within the 12 months preceding
the Closing Date. In addition, the Disclosure Document lists the federal
employer identification number of each Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's power; (b) have been duly authorized by all necessary
corporate or limited liability company action; (c) do not contravene any
provision of such Person's charter, bylaws or operating agreement as applicable;
(d) do not violate any law or regulation, or any order or decree of any court or
Governmental Authority applicable to such Person; (e) do not conflict with or
result in the breach or termination of, constitute a default under or accelerate
or permit the acceleration of any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which such
Person is a party or by which such Person or any of its property is bound; (f)
do not result in the creation or imposition of any Lien upon any of the property
of such Person other than those in favor of Agent, on behalf of itself and
Lenders, pursuant to the Loan Documents; and (g) do not require the consent or
approval of any Governmental Authority or any other Person, except those
referred to in Section 2.1(c), all of which will have been duly obtained, made
or complied with prior to the Closing Date. Each of the Loan Documents shall be
duly executed and delivered by each Credit Party that is a party thereto and
each such Loan Document shall constitute a legal, valid and binding obligation
of such Credit Party enforceable against it in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating or affecting
creditors' rights (whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealings.
3.4 Financial Statements. All Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for normal year-end audit adjustments) and present fairly
in all material respects the financial position of the Persons covered thereby
as at the dates thereof and the results of their operations and cash flows for
the periods then ended. The following Financial Statements have been delivered
on the date hereof:
(a) The audited consolidated balance sheets at September 30,
2002 and 2003 and the related statements of income and cash flows and
consolidating schedules of Asta Funding and its Subsidiaries for the Fiscal
Years then ended, certified by ▇▇▇▇▇▇, LLP.
(b) The unaudited balance sheet(s) at December 31, 2003 and
the related statement(s) of income of Asta Funding and its Subsidiaries, for the
Fiscal Period then ended, as prepared by Asta Funding on behalf of the Credit
Parties.
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3.5 Material Adverse Effect. Between September 30, 2003 and the
Closing Date: (a) no Credit Party has incurred any obligations, contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that are outstanding as of the Closing Date and
that, alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, (b) no contract, lease or other agreement or instrument has been
entered into by any Credit Party or has become binding upon any Credit Party's
assets and no law or regulation applicable to any Credit Party has been adopted
that has had or could reasonably be expected to have a Material Adverse Effect,
and (c) no Credit Party is in default and to the best of Borrowers' knowledge no
third party is in default under any material contract, lease or other agreement
or instrument, that alone or in the aggregate could reasonably be expected to
have a Material Adverse Effect. Between September 30, 2003 and the Closing Date
no event has occurred, that alone or together with other events, could
reasonably be expected to have a Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real
estate ("Real Estate") listed in the Disclosure Document constitutes all of the
real property owned, leased or subleased, or used by any Credit Party as
warehouse, storage or office space or where assets may otherwise be located, and
identifies any such real property leased from an Affiliate of any Credit Party.
No Credit Party owns any Real Estate, and all leased Real Estate of any Credit
Parties is described on the Disclosure Document. The Disclosure Document further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Closing Date. Each Credit Party also has good
and marketable title to, or valid leasehold interests in, all of its material
personal property and assets. As of the Closing Date, none of the properties and
assets of any Credit Party are subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions known to any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances. The Disclosure Document
also describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate. As of the Closing Date, no
portion of any Credit Party's Real Estate has suffered any material damage by
fire or other casualty loss that has not heretofore been repaired and restored
in all material respects to its pre-casualty condition or otherwise remedied. As
of the Closing Date, all material permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and used for all
of the purposes for which it is currently occupied and used have been lawfully
issued and are in full force and effect, except where the failure to have any
permit will not have a Material Adverse Effect.
3.7 Labor Matters. All of the Credit Parties' employees are leased
from ▇▇▇▇▇ Staff Services, a professional employment organization. As of the
Closing Date (a) no strikes or other material labor disputes against any Credit
Party are pending or, to any Credit Party's knowledge, threatened; (b) hours
worked by and payment made to employees of each Credit Party comply in all
material respects with the Fair Labor Standards Act and each other federal,
state, local or foreign law applicable to such matters; (c) all payments due
from any Credit Party for employee health and welfare insurance have been paid
or accrued as a liability on the books of such Credit Party; (d) except as set
forth in the Disclosure Document, no Credit Party is a party to or bound by any
collective bargaining agreement, management agreement, consulting agreement,
employment agreement, bonus, restricted stock, stock option, or stock
appreciation plan or agreement or any similar plan, agreement or arrangement
(and true and complete copies of any agreements described on the Disclosure
Document have been delivered to Agent); (e) there is no organizing activity
involving any Credit Party pending or, to any Credit Party's knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in the Disclosure Document, there are
no material complaints or charges against any Credit Party pending or, to the
knowledge of any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any Credit
Party of any individual.
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3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in the Disclosure Document, as of the Closing
Date, no Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. All
of the issued and outstanding Stock of each Credit Party is owned by each of the
Stockholders and in the amounts set forth in the Disclosure Document. Except as
set forth in the Disclosure Document, there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Credit Party may be required to issue, sell, repurchase or redeem any of its
Stock or other equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of each
Credit Party as of the Closing Date (except for the Obligations) is described in
Section 6.3 (including the Disclosure Document).
3.9 Government Regulation. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940. No Credit Party is subject to regulation under any federal
or state statute that restricts or limits its ability to incur Indebtedness or
to perform its obligations hereunder. The making of the Revolving Loan by
Lenders to Borrowers, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.
3.10 Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Revolving Loan or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Revolving Loan or other
extensions of credit under this Agreement to be considered a "purpose credit"
within the meaning of Regulations T, U or X of the Federal Reserve Board. No
Credit Party will take or permit to be taken any action that might cause any
Loan Document to violate any regulation of the Federal Reserve Board.
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3.11 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority ("Tax Returns") to
be filed by any Credit Party have been filed with the appropriate Governmental
Authority except Tax Returns relating to state and local taxes which do not
exceed $100,000 in the aggregate; but, even then, only if the failure to do so
would not result in material fines, interests, penalties or other Charges; all
such Tax Returns are true, correct and complete in all material respects; and
all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof (or any such
fine, penalty, interest, late charge or loss has been paid), excluding Charges
or other amounts being contested in accordance with Section 5.2(b). There are no
Liens for Charges (other than for current Charges not yet due and payable) upon
the assets of any Credit Party. No adjustment relating to such Tax Returns has
been proposed formally (whether verbally or in writing) or informally (in
writing) by any Governmental Authority and, to the knowledge of each Credit
Party, no basis exists for any such adjustment. Proper and accurate amounts have
been withheld by each Credit Party from its respective employees, independent
contractors, creditors, members, partners and other third parties for all
periods in compliance in all material respects with all applicable federal,
state, local and foreign laws and such withholdings have been timely paid to the
respective Governmental Authorities. The Disclosure Document sets forth as of
the Closing Date those taxable years for which any Credit Party's Tax Returns
are currently being audited by the IRS or any other applicable Governmental
Authority, and any assessments or to the knowledge of any Credit Party, any
threatened assessments in connection with such audit, or otherwise currently
outstanding. Except as described in the Disclosure Document, no Credit Party has
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Credit Parties nor their
respective predecessors are liable to any Governmental Authority for any
Charges: (a) under any agreement (including any tax sharing agreements) or (b)
to each Credit Party's knowledge, as a transferee. As of the Closing Date, no
Credit Party has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would have a Material Adverse Effect.
3.12 ERISA.
(a) The Disclosure Document lists (i) all ERISA Affiliates,
(ii) all material Plans and separately identifies each such Plan as a Title IV
Plan, ESOP or other Pension Plan or as a Welfare Plan, including Retiree Welfare
Plans and (iii) each Multiemployer Plan. Copies of all such listed Plans (other
than Multiemployer Plans), together with a copy of the latest IRS/DOL
5500-series form for each such Plan, have been delivered or made available to
Agent. Except as disclosed on Schedule 3.12(a), each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC, the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would
reasonably be expected to cause the loss of such qualification or tax-exempt
status. Each Plan is in material compliance with its provisions and the
applicable provisions of ERISA and the IRC, including the timely filing of all
reports required under the IRC or ERISA, including the statement required by 29
CFR Section 2520.104-23. Neither any Credit Party nor ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either Section 412
of the IRC or Section 302 of ERISA. Neither any Credit Party nor ERISA Affiliate
has engaged in a "prohibited transaction," as defined in Section 406 of ERISA
and Section 4975 of the IRC, in connection with any Plan, that would subject any
Credit Party to a material tax on prohibited transactions imposed by Section
502(i) of ERISA or Section 4975 of the IRC.
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(b) Except as set forth in the Disclosure Document: (i) no
Title IV Plan has any Unfunded Pension Liability, no assets of any Credit Party
or ERISA Affiliate are subject to any Lien under Section 412 of the IRC or
Section 302 or 4068 of ERISA, and no event has occurred that could reasonably be
expected to result in the imposition of such Lien; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or ERISA Affiliate has been terminated, whether or not in a
"standard termination" as that term is used in Section 4041(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at
any time within the last five years) with Unfunded Pension Liabilities been
transferred outside of the "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at such
time) with respect to which termination or transfer a Credit Party has a
material unsatisfied liability; (vi) except in the case of any ESOP, Stock of
all Credit Parties and their ERISA Affiliates makes up, in the aggregate, no
more than 10% of fair market value of the assets of any Plan measured on the
basis of fair market value as of the latest valuation date of any Plan; and
(vii) no liability under any Title IV Plan has been satisfied with the purchase
of a contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or an equivalent rating by another nationally recognized
rating agency.
3.13 No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a)
that challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) that would reasonably be expected to be determined adversely to any
Credit Party and that, if so determined, would reasonably be expected to have a
Material Adverse Effect. Except as set forth on the Disclosure Document, as of
the Closing Date there is no Litigation pending or, to any Credit Party's
knowledge, threatened, that seeks damages in excess of $250,000.00 with respect
to claims for which the applicable Credit Party has no right of indemnification
from the originator or seller of that Account, or that seeks damages in excess
of $1,000,000 with respect to claims for which the applicable Credit Party has a
right of indemnification from the originator or seller of that Account, or
injunctive relief against, or alleges criminal misconduct of, any Credit Party.
3.14 Brokers. No broker or finder brought about the obtaining,
making or closing of the Revolving Loan or the Related Transactions, and no
Credit Party or Affiliate thereof has any obligation to any Person in respect of
any finder's or brokerage fees in connection therewith.
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3.15 Intellectual Property. As of the Closing Date, each Credit
Party owns or has rights to use all Intellectual Property necessary to continue
to conduct its business as now or heretofore conducted by it or proposed to be
conducted by it. Each Trademark and Copyright registered with or that is the
subject of an application with the United States Patent and Trademark Office, or
its foreign equivalents, or the United States Copyright Office or its foreign
equivalents, as applicable, each Patent and each License is listed, together
with application or registration numbers, as applicable, in the Disclosure
Document. Except as set forth in the Disclosure Document, each Credit Party,
jointly and severally, represents and warrants that all Patents, Trademarks and
Copyrights which are necessary or material to the operations of such Credit
Party have been registered with the United States Patent and Trademark Office or
its foreign equivalents or the United States Copyright Office or its foreign
equivalents, as applicable. Each Credit Party conducts its business and affairs
without infringement of or interference with any Intellectual Property of any
other Person in any material respect. Except as set forth in the Disclosure
Document, no Credit Party is aware of any infringement claim by any other Person
with respect to any Intellectual Property.
3.16 Full Disclosure. No information contained in this Agreement,
any of the other Loan Documents, Financial Statements or Collateral Reports or
other written reports from time to time delivered hereunder and no written
statement furnished by or on behalf of any Credit Party to Agent or any Lender
pursuant to the terms of this Agreement contains or will contain when delivered
or furnished any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the
Collateral Documents will at all times be fully perfected first priority Liens
in and to the Collateral described therein, subject, as to priority, only to
Permitted Encumbrances. The projections included in such information are or will
be based on assumptions and estimates developed by management of the Credit
Parties in good faith and considered by the preparer to be reasonable as of the
date such projections are prepared and are delivered to Agent and/or Lenders.
3.17 Environmental Matters.
(a) Except as set forth in the Disclosure Document, as of the
Closing Date: (i) the Real Estate is free of contamination from any Hazardous
Material except for such contamination that would not result in material
Environmental Liabilities; (ii) no Credit Party has caused or suffered to occur
any Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate; (iii) the Credit Parties are and have been in compliance
with all Environmental Laws, except for such noncompliance that would not result
in material Environmental Liabilities; (iv) the Credit Parties have obtained,
and are in compliance with, all Environmental Permits required by Environmental
Laws for the operations of their respective businesses as presently conducted or
as proposed to be conducted, except where the failure to so obtain or comply
with such Environmental Permits would not result in material Environmental
Liabilities, and all such Environmental Permits are valid, uncontested and in
good standing; (v) no Credit Party is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any material Environmental Liabilities;
and no Credit Party has permitted any current or former tenant or occupant of
the Real Estate to engage in any such operations; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material that seeks damages, penalties, fines, costs or expenses in
excess of $100,000 or injunctive relief against, or that alleges criminal
misconduct by, any Credit Party; and (vii) no notice has been received by any
Credit Party identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Credit Parties, there are no facts, circumstances or conditions that may
result in any Credit Party being identified as a "potentially responsible party"
under CERCLA or analogous state statutes.
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(b) The Credit Parties have provided to Agent copies of all
existing environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities performed at the
request of any Credit Party or otherwise received by any Credit Party, in each
case relating to any Credit Party.
(c) Each Credit Party hereby acknowledges and agrees that
Agent (i) is not now, and has not ever been, in control of any of the Real
Estate or any Credit Party's affairs, and (ii) is not authorized by the Loan
Documents or otherwise to influence any Credit Party's conduct with respect to
the ownership, operation or management of any of its Real Estate or compliance
with Environmental Laws or Environmental Permits.
3.18 Insurance. The Disclosure Document lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19 Deposit and Disbursement Accounts. The Disclosure Document
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.
3.20 Government Contracts. Except as set forth in the Disclosure
Document, as of the Closing Date, no Credit Party is a party to any contract or
agreement with any Governmental Authority and no Credit Party's Accounts are
subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any
similar state or local law.
3.21 Customer and Trade Relations. As of the Closing Date, there
exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the ten largest customers of such Credit Party; or the business
relationship of any Credit Party with any supplier material to its operations.
3.22 Agreements and Other Documents.
(a) As of the Closing Date, each Credit Party has provided to
Agent or its counsel, on behalf of Lenders, accurate and complete copies (or
summaries) of all of the following agreements or documents to which it is
subject and each of which is listed in the Disclosure Document: servicing
agreements not terminable by such Credit Party within 60 days following written
notice issued by such Credit Party involving the collections of Accounts and
other Collateral and/or the receipt of any Payments or Collections during the
previous Fiscal Quarter of an amount equal to the Servicing Threshold (as
determined on an aggregate basis for all Credit Parties); leases of Equipment
having a remaining term of one year or longer and requiring aggregate rental and
other payments in excess of $500,000 per annum; licenses and permits held by the
Credit Parties, the absence of which could reasonably be expected to have a
Material Adverse Effect; instruments and documents evidencing any Indebtedness
or Guaranteed Indebtedness of such Credit Party (other than as to the
Obligations) and any Lien granted by such Credit Party with respect thereto; and
instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party.
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(b) Except as disclosed in the Disclosure Document, as of the
Closing Date, no significant servicer (or group of related servicers which in
the aggregate is significant) of the Credit Parties, taken as a whole, has given
them notice or, to the knowledge of the Credit Parties, has taken any other
action which has given any Credit Party any reason to believe that such servicer
(or group of related servicers) will materially reduce the amount of its
services to the Borrowers or materially adversely change the price or terms of
such services. For such purposes, a servicer (or group of related servicers)
shall be deemed "significant" if Collections of such servicer (or group of
related servicers) meet or exceed the Servicing Threshold during the past Fiscal
Quarter.
(c) Except as disclosed in the Disclosure Document, as of the
Closing Date, no significant servicer, supplier or vendor (or group of related
servicers, suppliers or vendors which in the aggregate is significant) of the
Credit Parties, taken as a whole, has given them notice or, to the knowledge of
the Credit Parties, has taken any other action which has given any Credit Party
any reason to believe that such servicer, supplier or vendor (or group of
related servicers, suppliers or vendors) will cease to supply or materially
restrict the amount supplied or materially adversely change its services, price
or terms to any Credit Party of any services, products or services. For such
purposes, a servicer, supplier or vendor (or group of related servicers,
suppliers or vendors) shall be deemed "significant" if Collections of such
servicer, supplier or vendor (or group of related servicers, suppliers or
vendors) meet or exceed the Servicing Threshold during the past Fiscal Quarter.
(d) The Disclosure Document reasonably identifies, as of the
Closing Date, all Servicing Agents involved in the collection of any Payments,
Accounts and Portfolios, except for any Servicing Agent whose collection of
Payments, Accounts and Portfolios, in the aggregate for all Credit Parties,
during any Fiscal Quarter, did not exceed $25,000.00, or whose collection of
Payments, Accounts and Portfolios are not reasonably expected by Borrowers to
exceed $25,000.00 during any Fiscal Quarter (hereinafter called a "Diminimus
Servicing Agent"); provided, however that the collection of Payments, Accounts
and Portfolios, in the aggregate for all Diminimus Servicing Agents, during any
Fiscal Quarter, shall not exceed $250,000.00.
3.23 Solvency. Both before and after giving effect to (a) the
Revolving Loan to be made or incurred on the Closing Date or such other date as
the Revolving Loan requested hereunder are made or incurred, (b) the
disbursement of the proceeds of the Revolving Loan pursuant to the instructions
of Borrower Representative; (c) the consummation of the other Related
Transactions; and (d) the payment and accrual of all transaction costs in
connection with the foregoing, each Borrower is and will be Solvent.
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3.24 Restrictions on or Relating to Subsidiaries. There does not
exist any encumbrance or restriction on the ability of (a) any Borrower or any
Subsidiary of any Borrower to pay dividends or make any other distributions on
its Stock or any other interest or participation in its profits owned by any
Borrower or any Subsidiary of any Borrower, or to pay any Indebtedness owed to
any Borrower or any Subsidiary of any Borrower, (b) any Borrower or any
Subsidiary of any Borrower to make loans or advances to any Borrower or any
Subsidiary of any Borrower or (c) any Borrower or any Subsidiary of any Borrower
to transfer any of its properties or assets to any Borrower or any Subsidiary of
any Borrower, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, or (ii) the Loan Documents.
3.25 Disaster Recovery Plan. A brief description of the Disaster
Recovery Plan is set forth in the definition of Disaster Recovery Plan in Annex
A attached hereto. The Borrowers represents and warrant that the Disaster
Recovery Plan is sufficient to protect the Borrowers in the event of a disaster.
To the extent applicable, the Borrowers hereby collaterally assign to the Agent,
for the benefit of the Lenders, all of the Borrowers' right, title and interest
in the Disaster Recovery Plan and all agreements related thereto. The Disaster
Recovery Plan shall not be amended, changed, modified or altered in any material
respect without the prior written consent of Agent, which consent shall not be
unreasonably withheld or delayed. Agent and its designees shall have a
reasonable right of access to all Critical Information generated by the business
operations of the Credit Parties, including the Critical Information stored at
the New Jersey and Pennsylvania physical facilities, and to the key employee(s)
of the Credit Parties who may be responsible for maintaining, storing and
safeguarding the Critical Information.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination Date, it shall
deliver to Agent or to Agent and Lenders, as required, the Financial Statements,
notices and other information at the times, to the Persons and in the manner set
forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees
that, from and after the Closing Date and until the Termination Date, it shall
deliver to Agent or to Agent and Lenders, as required, the various Collateral
Reports (including Borrowing Base Certificate in the form of Exhibit 4.1(b)
attached to the Disclosure Document) at the times, to the Persons and in the
manner set forth in Annex F.
4.2 Communication with Accountants. Each Credit Party executing
this Agreement authorizes (a) Agent, with consent of Borrower Representative,
and (b) so long as an Event of Default has occurred and is continuing, Agent and
each Lender, to communicate directly with its independent certified public
accountants, including ▇▇▇▇▇▇, LLP, and authorizes and, at Agent's request,
shall request those accountants to disclose and make available to Agent and each
Lender any and all Financial Statements and other supporting financial
documents, schedules and information relating to any Credit Party (including
copies of any issued management letters) with respect to the business, financial
condition and other affairs of any Credit Party.
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5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as to
all Credit Parties that from and after the date hereof and until the Termination
Date:
5.1 Maintenance of Existence and Conduct of Business. Each Credit
Party (other than Inactive Subsidiaries) shall: do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises; continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; at all times
maintain, preserve and protect all of its assets and properties useful in the
conduct of its business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration ordinary wear and
tear) and from time to time make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices; and except as permitted by Section 6.15, transact business
only in such corporate and trade names as are set forth in the Disclosure
Document.
5.2 Payment of Charges.
(a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it
(other than Charges that it does not have knowledge of and which do not exceed
$250,000 in the aggregate), including (i) Charges imposed upon it, its income
and profits, or any of its property (real, personal or mixed) and all Charges
with respect to tax, social security and unemployment withholding with respect
to its employees, (ii) lawful claims for labor, materials, supplies and services
or otherwise, and (iii) all storage or rental charges payable to warehousemen or
bailees, in each case, before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by
appropriate proceedings, the validity or amount of any Charges, Taxes or claims
described in Section 5.2(a); provided, that (i) adequate reserves with respect
to such contest are maintained on the books of such Credit Party, in accordance
with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges
(other than payments to warehousemen and/or bailees) that is superior to any of
the Liens securing the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges; (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest; and (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no longer
met.
5.3 Books and Records. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements described in or attached to the
Disclosure Document.
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5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described on the Disclosure Document as in
effect on the date hereof or otherwise in form and amounts and with insurers
reasonably acceptable to Agent. Copies of all such policies of insurance shall
be delivered to Agent within 30 days of the Closing Date. Such policies of
insurance (or the loss payable and additional insured endorsements delivered to
Agent) shall contain provisions pursuant to which the insurer agrees to provide
30 days prior written notice to Agent in the event of any non-renewal,
cancellation or amendment of any such insurance policy. If any Credit Party at
any time or times hereafter shall fail to obtain or maintain any of the policies
of insurance required above, or to pay all premiums relating thereto, Agent may
at any time or times thereafter that such insurance is not in effect obtain and
maintain such policies of insurance and pay such premiums. Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default,
which is not reasonably capable of being cured, or Event of Default arising from
any Credit Party's failure to maintain such insurance or pay any premiums
therefor. All sums so disbursed, including reasonable attorneys' fees, court
costs and other charges related thereto, shall be payable on demand by Borrowers
to Agent and shall be additional Obligations hereunder secured by the
Collateral.
(b) [Intentionally Omitted].
(c) Each Credit Party shall deliver to Agent, in form and
substance reasonably satisfactory to Agent, endorsements to (i) all "All Risk"
and business interruption insurance naming Agent, on behalf of itself and
Lenders, as loss payee, and (ii) all general liability and other liability
policies naming Agent, on behalf of itself and Lenders, as additional insured.
Each Credit Party irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as any Default,
which is not reasonably capable of being cured, or Event of Default has occurred
and is continuing, as such Credit Party's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such "All Risk" policies of insurance, endorsing the name of such Credit Party
on any check or other item of payment for the proceeds of such "All Risk"
policies of insurance and for making all determinations and decisions with
respect to such "All Risk" policies of insurance. Agent shall have no duty to
exercise any rights or powers granted to it pursuant to the foregoing
power-of-attorney. Borrower Representative shall promptly notify Agent of any
loss, damage, or destruction to the Collateral in the amount of $150,000 or
more, whether or not covered by insurance or reimbursable under condemnation
provisions. After deducting from such proceeds the expenses, if any, incurred by
Agent in the collection or handling thereof, Agent may, at its option, either
(i) apply such insurance or condemnation proceeds to the reduction of the
Obligations in accordance with Section 1.3(d) or (ii) permit the Credit Parties
to replace, restore, repair or rebuild the property on terms acceptable to Agent
in its sole discretion; provided that in the case of insurance or condemnation
proceeds pertaining to any Credit Party that is not a Borrower, (i) such
insurance or condemnation proceeds shall be applied ratably to all of the
Revolving Loan owing by each Borrower, or (ii) permit or require the applicable
Credit Party to use such money, or any part thereof, to replace, repair, restore
or rebuild the Collateral in a diligent and expeditious manner with materials
and workmanship of substantially the same quality as existed before the loss,
damage or destruction.
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5.5 Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to consumer credit, collection laws, licensing
requirements, ERISA and labor matters and Environmental Laws and Environmental
Permits, except to the extent that the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.6 Supplemental Disclosure. From time to time as may be
reasonably requested by Agent (which request will not be made more frequently
than once each year absent the occurrence and continuance of a Default, which is
not reasonably capable of being cured, or an Event of Default), the Credit
Parties shall supplement each disclosure contained in the Disclosure Document,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Document or as an exception to such representation or that is
necessary to correct any information in the Disclosure Document or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to the Disclosure Document, such Disclosure Document shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to the Disclosure Document or representation shall amend,
supplement or otherwise modify the term "Disclosure Document" as used herein or
any representation with respect thereto, or be or be deemed a waiver of any
Default or Event of Default resulting from the matters disclosed therein, except
as consented to by Agent and Requisite Lenders in writing, which consent will
not be unreasonably withheld or delayed, (b) no supplement shall be required or
permitted as to representations and warranties that relate solely to the Closing
Date and (c) the requirement to supplement the Disclosure Document hereto shall
be subject to any materiality and other qualifiers set forth in any
representation and warranty.
5.7 Intellectual Property. Each Credit Party will continue to own
or have rights to use all Intellectual Property necessary to continue to conduct
its business as now or heretofore conducted by it or proposed to be conducted by
it, and shall conduct its business and affairs without knowingly infringing or
interfering with any Intellectual Property of any other Person in any material
respect.
5.8 Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Agent promptly after such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any Real Estate that
could reasonably be expected to result in any material Environmental
Liabilities; and (d) promptly forward to Agent a copy of any order, notice,
request for information or any communication or report received by such Credit
Party in connection with any such violation or Release or any other matter
relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in material Environmental Liabilities, in each
case whether or not the Environmental Protection Agency or any Governmental
Authority has taken or threatened any action in connection with any such
violation, Release or other matter. If Agent at any time has a reasonable basis
to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Credit Party or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party shall, upon
Agent's written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrowers' expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for
the costs of such audit and tests and the same will constitute a part of the
Obligations secured hereunder.
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5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters
and Real Estate Purchases. No later than sixty (60) days after the Closing Date,
each Credit Party shall obtain a landlord's agreement or bailee letter, as
applicable, from the lessor of each leased or rented real property, mortgagee of
owned real property or bailee with respect to any warehouse facility or other
location where Collateral (or evidence of Collateral) having a value of
$250,000.00 or more is stored or located as of the Closing Date (provided that
the Credit Party who leases the facility in the State of New Jersey shall not be
required to obtain a landlord's agreement from its New Jersey landlord until
such time as such Credit Party shall renew or modify such existing lease or
shall relocate its facility, in which event such Credit Party shall be obligated
to provide Agent with such landlord agreement), which agreement or letter shall
contain a waiver or subordination of all Liens or claims that the landlord,
mortgagee or bailee may assert against the Collateral at that location, and
shall expressly permit Agent or its designees to enter upon the premises for
purposes of inspecting, monitoring, examining, removing and rendering inoperable
any such Collateral, and shall otherwise be reasonably satisfactory in form and
substance to Agent. Each Credit Party shall notify Agent in writing of any
warehouse facility or other location where Collateral (or evidence of
Collateral) having a value of less than $250,000.00 is stored or located as of
the Closing Date. Each Credit Party shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased or
rented location or public warehouse where any Collateral is or may be located.
To the extent otherwise permitted hereunder, if any Credit Party proposes to
acquire a fee ownership interest in Real Estate after the Closing Date, it shall
first provide to Agent a mortgage or deed of trust granting Agent, for the
benefit of Lenders, a first priority Lien on such Real Estate, subject to
Permitted Encumbrances, together with environmental audits, mortgage title
insurance commitment, real property survey, local counsel opinion(s), and, if
required by Agent, supplemental casualty insurance and flood insurance, and such
other documents, instruments or agreements reasonably requested by Agent, in
each case, in form and substance reasonably satisfactory to Agent.
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5.10 ERISA. With respect to each Plan, each Credit Party shall
comply in all material respects with the applicable provisions of ERISA and the
IRC, except to the extent such failure to comply, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Credit Parties shall furnish to the Agent written notice within 30 Business
Days after any Credit Party knows or has reason to know, of: (a) a plan
amendment that materially increases the benefits of any existing Plan, the
establishment of any new Plan providing material additional benefits, or the
commencement of material contributions to any Multiemployer Plan; or (b) an
ERISA Event or any event, whether an ERISA Event or not, that could reasonably
be expected to result in the imposition of a Lien against a Credit Party or an
ERISA Affiliate under Code Section 412 or ERISA Section 302 or 4068, together
with a statement of an officer setting forth the details of such Event and
action which the Credit Parties propose to take with respect thereto. Upon
Agents' written request, each Credit Party shall furnish to the Agent, within 30
Business Days after the filing thereof with the Department of Labor, IRS or
PBGC, copies of each annual report (From 5500 series) filed for each Plan and
the most recent actuarial report for each Title IV Plan.
5.11 Servicing Agreements.
(a) No later than the date that is ten (10) days after the Closing Date,
Borrowers and the other Credit Parties shall deliver irrevocable written
instructions (the "Written Instructions") to any and all Servicing Agents or
other Persons (including any collection agent, agency or attorney, but excluding
account debtors of Consumer Loans) having responsibility for Payments or
Collections of Accounts and other Collateral and who transfer, send, make
payments or disburse any Payments, Collections or Proceeds or other funds, sums
or amounts (which Payments, Collections, Proceeds, other funds, sums and amounts
will be net of any collection costs and other fees permitted to be deducted by
the express terms of the servicing agreement that corresponds to such Payments,
Collections, Proceeds and other funds) to any Credit Party by wire transfer of
cash credit (whether on a regular or infrequent basis) to make all payments
owing to Credit Parties by wire transfer of cash credit directly into a Blocked
Account established and maintained by a Credit Party with Agent. A copy of the
Written Instructions shall be delivered to Agent within a reasonable period of
time after such Written Instructions are given. Borrowers and the other Credit
Parties shall provide such Servicing Agents and other Persons with information
relative to such Blocked Account as is sufficient to permit such Servicing
Agents and other Persons to comply with the Written Instructions. None of the
Credit Parties shall amend, modify or terminate any of the Written Instructions
without the prior written consent of Agent.
(b) Each Borrower shall and shall cause its Affiliates, officers, employees,
agents (other than third party Servicing Agents), directors or other Persons
acting for or in concert with such Borrower (each a "Related Person") to (i)
hold in trust for Agent, for the benefit of itself and Lenders, all checks, cash
and other items of payment received by such Borrower or any such Related Person,
and (ii) within 2 Business Days after receipt by such Borrower or any such
Related Person (or in the event such deposit is not practicable due to an Act of
God, terrorism or other city-wide catastrophe, the next day on which businesses
generally are open)of any checks, cash or other items of payment, deposit the
same into a Blocked Account of such Borrower or other blocked account with a
Blocked Account Third-Party Bank (as that term is defined in Annex "C"). Each
Borrower and each Related Person thereof acknowledges and agrees that all cash,
checks or other items of payment constituting proceeds of Collateral are part of
the Collateral. All proceeds of the sale or other disposition of any Collateral,
shall be deposited directly into the applicable Blocked Accounts or other
blocked account with a Blocked Account Third-Party Bank.
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(c) Any and all servicing agreements entered into from and after the Closing
Date (and any modification of any servicing agreement in effect as of the
Closing Date) for the administration and/or collection of Payments made by an
Account Debtor with respect to Accounts and other Collateral (a "New Servicing
Agreement"), shall require the Servicing Agents and other Persons (including any
collection agent, agency or attorney) to pay Collections (net of any collection
costs and other fees permitted to be deducted from Collections by the express
terms of the corresponding New Servicing Agreement) to the Credit Parties (or
their designees) no later than 15 days after the last day of each calendar
month. Contemporaneously with the execution and delivery of any New Servicing
Agreement, the applicable Credit Party shall deliver to the Servicing Agent
under such New Servicing Agreement Written Instructions directed to the
Servicing Agent duly acknowledged by the Servicing Agent. Within a reasonable
period of time of entering into a new Servicing Agreement, the Credit Party
shall deliver to Agent a copy of the Written Instructions duly executed by the
corresponding Servicing Agent.
(d) Borrowers and the other Credit Parties shall cause any Servicing Agent and
other Person (including any collection agent, agency or attorney) involved in
the collection of Accounts and other Collateral and/or the receipt of any
Payments or Collections as of the Closing Date whose Collections (net of any
collection costs and other fees permitted to be deducted from Collections by the
express terms of the corresponding servicing agreement) in the aggregate for all
Credit Parties during the past Fiscal Quarter meet or exceed the Servicing
Threshold to deposit, transfer, and disburse all Payments, Collections and other
sums and amounts directly into a Blocked Account established and maintained by a
Credit Party with Agent promptly after receipt thereof by Servicing Agent or
other Person, but in no event later than the date that is fifteen (15) calendar
days after receipt thereof.
(e) Without limiting any provision, agreement, appointment or power of attorney
granted in any of the Collateral Documents, the Credit Parties hereby
irrevocably constitutes and appoints Agent with full power of substitution, as
Credit Parties' true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Credit Parties and in the name of Credit
Parties or in its own name, from time to time in Agent's discretion, to take any
and all appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to notify and instruct all
Servicing Agents and other Persons (including any collection agent, agency or
attorney) involved in the collections of Accounts and other Collateral and/or
the receipt of any Payments or Collections to deposit, transfer, and disburse
all Payments, Collections and other sums and amounts directly into an account
established and maintained by Agent promptly after receipt thereof by Servicing
Agent or other Person, but in no event later than the date that is fifteen (15)
calendar days after receipt thereof. Agent agrees to exercise such
power-of-attorney only upon the occurrence and during the continuance of a
Default which is not reasonably capable of being cured, or an Event of Default.
Agent shall have no duty to exercise any rights or powers granted to it pursuant
to the foregoing power-of-attorney.
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(f) Borrowers and the other Credit Parties shall deliver to Agent true and
correct fully-executed copies of any servicing agreement or agreements by or
between any Credit Party and any Servicing Agent, pursuant to which such
Servicing Agent is responsible for or involved in the collections of Accounts
and other Collateral and/or the receipt of any Payments or Collections (net of
any collection costs and other fees permitted to be deducted from Collections by
the express terms of the corresponding servicing agreement) in the aggregate for
all Credit Parties during any Fiscal Quarter that meet or exceed the Servicing
Threshold. At Agent's request, upon the occurrence of a Default, which is not
reasonably capable of being cured, or an Event of Default, the applicable Credit
Party shall give irrevocable written instructions to such Servicing Agent to
make all payments owing to the Credit Party under the servicing agreement
directly to Agent upon receipt of written demand to do so, and shall assign to
Agent, as collateral, all of such Credit Party's right, title and interest in
and to such servicing agreements.
(g) Within 30 days of any acquisition of any Portfolio having a purchase price
greater than $5,000,000.00 by any Credit Party, such acquiring Credit Party
shall provide Agent with evidence (including a ▇▇▇▇ of sale or assignment, if
any) of such Credit Party's acquisition and ownership of such Portfolio, free
and clear of all Liens, except Permitted Encumbrances. At any time (and from
time to time) from and after the Closing Date, any Credit Party owning any
Portfolio having a purchase price greater than $5,000,000.00 shall, upon request
of Agent, provide Agent with evidence of such Credit Party's acquisition and
ownership of such Portfolio, free and clear of all Liens, except Permitted
Encumbrances.
(h) Borrowers shall notify Agent in writing promptly after any Servicing Agent
or other Person (including any collection agent, agency or attorney) under any
servicing agreement with any Credit Party, including, without limitation, the
Servicing Agent under the Unifund Master Servicing Agreement, is entitled (or
claims to be entitled) to receive payment, fees, premiums or other compensation
(however characterized) in excess of 51% of the Collections obtained by such
Servicing Agent or other Person relating to any Portfolio under any servicing
agreement.
(i) In the event a deposit account control agreement or other similar document
is entered into by a Servicing Agent for the benefit of any Credit Party with
respect to any deposit account into which any Payments, Collections or other
Collateral will be deposited, the applicable Credit Party shall cause Agent to
be added (as co-beneficiary with such Credit Party) to such deposit account
control agreement or other similar document in a manner reasonably acceptable to
Agent. In the event the applicable Credit Party is unable to add Agent as a
co-beneficiary, after using such Credit Party's best efforts to do so, the
applicable Credit Party shall make arrangements to protect and preserve Agent's
liens and security interests in the Collateral, including, without limitation,
such Credit Party's right, title and interest under such deposit account control
agreement in a manner reasonably acceptable to Agent.
(j) With respect to each set of Written Instructions given to a Servicing Agent
whose Collections (net of any collection costs and other fees permitted to be
deducted from Collections by the express terms of the servicing agreement that
corresponds to such Servicing Agent) in the aggregate for all Credit Parties
during any Fiscal Quarter meet or exceed the Servicing Threshold, the Credit
Parties shall use best efforts (including, without limitation, commencement of
appropriate legal action) to enforce the terms of such Written Instructions,
including, without limitation, such Servicing Agent's duties to make all
payments owing to Credit Parties by wire transfer of cash credit directly into a
Blocked Account established and maintained by a Credit Party with Agent and to
deposit, transfer, and disburse all Payments, Collections (net of any collection
costs and other fees permitted to be deducted from Collections by the express
terms of the corresponding servicing agreement) and other sums and amounts
directly into a Blocked Account established and maintained by a Credit Party
with Agent promptly after receipt thereof by Servicing Agent.
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(k) The Credit Parties shall, on a Fiscal Quarter basis, notify Agent in writing
of any changes to the information contained on the Disclosure Document that
identifies the Servicing Agents involved in the collection of any Payments,
Accounts and Portfolios.
5.12 Inactive Subsidiaries. None of the Inactive Subsidiaries will
perform or conduct or attempt to perform or conduct any business activities
whatsoever, other than the collection or liquidation of currently owned assets,
the proceeds of which such Inactive Subsidiary shall promptly deliver to Agent.
5.13 Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as to
all Credit Parties that from and after the date hereof until the Termination
Date:
6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, except that the Borrowers may form Non-Credit Party Affiliates, and
Palisades and Asta Funding may form Subsidiaries that will become Credit
Parties, and Palisades and Asta Funding may form Subsidiaries for acquisitions
or investments made to the extent permitted by this Section 6, or (b) merge
with, consolidate with, acquire all or substantially all of the assets or Stock
of, or otherwise combine with or acquire, any Person, or all or substantially
all of the assets constituting the business of a division, branch or other unit
of operation of any Person, except that (i) any Borrower may merge with another
Borrower, provided that prior written notice of such merger shall be given to
Agent and further provided that Borrower Representative shall be the survivor of
any such merger to which it is a party, (ii) and any Inactive Subsidiary may
merge into a Credit Party, provided that such Credit Party shall be the survivor
of any such merger, (iii) any Borrower may acquire all or substantially all of
the assets of another Credit Party, and (iv) any Borrower may form a
wholly-owned Subsidiary to effectuate a change in its capital structure as
permitted under and in accordance with Section 6.5.
6.2 Investments; Revolving Loan and Advances. Except as otherwise
expressly permitted by this Section 6, no Credit Party shall make or permit to
exist any investment in, or make, accrue or permit to exist loans or advances of
money to, any Person, through the direct or indirect lending of money, holding
of securities or otherwise, except that: (a) Borrowers may hold investments
comprised of notes payable or other evidences of indebtedness, (b) in addition
to intercompany loans and advances permitted under Section 6.3, Borrowers may
make investments in Non-Credit Party Affiliates that are otherwise permitted
hereunder, (c) sales of Accounts on deferred payment terms in the ordinary
course of business that could not reasonably be expected to have a Material
Adverse Effect and, to the extent applicable, in compliance with Section 6.8
hereof, (d) investments in consumer financial services companies of up to
$1,000,000 each (but in no event more than $5,000,000.00 in the aggregate for
all Credit Parties during the term of the Revolving Loan), (e) $1,000,000 in the
aggregate at any time outstanding for all Credit Parties during the term of the
Revolving Loan of other loans or credits, (f) investments in, or acquisitions
of, consumer financial services companies funded by stock of ASTA Funding in
accordance with the terms and provisions of Section 6.5 hereof, (g) investments
of proceeds from the issuance or sale of stock, warrants or other securities
pursuant to Section 6.5 in Cash Equivalent Investments and pledged to Agent as
additional Collateral until used in accordance with Section 6.5, which pledge
shall be perfected in a manner reasonably acceptable to Agent.
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6.3 Indebtedness.
(a) No Credit Party shall create, incur, assume or permit to
exist any Indebtedness (including Subordinated Debt), except (without
duplication) (i) Indebtedness secured by purchase money security interests and
Capital Leases permitted in Section 6.7(c), (ii) the Revolving Loan and the
other Obligations, (iii) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law, (iv) existing Indebtedness described in the Disclosure
Document and refinancings thereof or amendments or modifications thereto that do
not have the effect of increasing the principal amount thereof or changing the
amortization thereof (other than to extend the same) and that are otherwise on
terms and conditions no less favorable to any Credit Party, Agent or any Lender,
as determined by Agent, than the terms of the Indebtedness being refinanced,
amended or modified, (v) Indebtedness specifically permitted under Sections 6.6
and, 6.17; (vi) Indebtedness consisting of intercompany loans and advances made
by any Credit Party to any other Credit Party; provided, that: (A) each Credit
Party shall have executed and delivered to each other Credit Party, on the
Closing Date, a demand note (collectively, the "Intercompany Notes") to evidence
any such intercompany Indebtedness owing at any time by such Credit Party to
such other Credit Party, which Intercompany Notes shall be in form and substance
reasonably satisfactory to Agent and shall be pledged to Agent and the originals
of which shall be delivered to Agent pursuant to the applicable Pledge Agreement
or Security Agreement as additional collateral security for the Obligations; (B)
each Credit Party shall record all intercompany transactions on its books and
records in accordance with past practice; (C) the obligations of each Credit
Party under any such Intercompany Notes shall be subordinated to the Obligations
of such Credit Party hereunder as set forth in Section 12.9 of this Agreement;
and (D) at the time any such intercompany loan or advance is made by any Credit
Party to any other Credit Party and after giving effect thereto, each such
Credit Party shall be Solvent; and (E) no Default, which is not reasonably
capable of being cured, or Event of Default would occur and be continuing after
giving effect to any such proposed intercompany loan; (vii) interest rate cap,
swap or collar agreements, or similar agreements or arrangements to provide
protection against fluctuations in interest rates or foreign currencies, on
terms and in form reasonably acceptable to Agent; (viii) the obligations of each
Credit Party for the deferred portion of the purchase price of a Portfolio; (ix)
Subordinated Debt, provided that (A) no Default, which is not reasonably capable
of being cured, or Event of Default would occur and be continuing after giving
effect to any such proposed Subordinated Debt, and (B) the Credit Parties shall
have obtained the prior written consent of Agent and the Requisite Lenders with
respect to such Subordinated Debt, which consent shall not be unreasonably
withheld or delayed; and (x) an amount not to exceed $2,500,000.00 in the
aggregate at any time outstanding for all Credit Parties during the term of the
Revolving Loan in unsecured Indebtedness owing to non-Affiliates.
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(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any material Indebtedness or in respect of
any Indebtedness, the result of which could reasonably be expected to have a
Material Adverse Effect, other than (i) the Obligations; (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such Indebtedness has
been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c);
(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof
in accordance with Section 6.3(a)(iv); and (iv) as otherwise permitted in
Section 6.14.
6.4 Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6
with respect to Affiliates, no Credit Party shall enter into or be a party to
any transaction with any other Credit Party or any Affiliate thereof except in
the ordinary course of and pursuant to the reasonable requirements of such
Credit Party's business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate of such Credit Party. In
addition, if any such transaction or series of related transactions (other than
the transactions permitted under clause (b) below) involves payments in excess
of $500,000 in the aggregate, the terms of these transactions must be disclosed
in advance to Agent and Lenders. All such transactions existing as of the date
hereof are described in the Disclosure Document.
(b) In the event any Advance relates to a Portfolio to be
acquired by an Affiliate, irrespective of the Portfolio Acquisition Cost of such
Portfolio, prior to Lenders making such Advance, such Affiliate shall execute
and deliver Agent's form of joinder agreement relative to this Agreement and the
Collateral Documents, Affiliate Guaranty, Affiliate Security Agreement,
Affiliate Confirmation, UCC-1 Financing Statements and all such other documents
as Agent shall reasonably request, pursuant to which such Affiliate shall become
a Credit Party hereunder, including, evidence of the good standing of such
Affiliate and UCC Searches, all in form acceptable to Lender.
(c) No Credit Party shall enter into any lending or borrowing
transaction with any employees or consultants of any Credit Party, except loans
to its respective employees and consultants in the ordinary course of business
up to a maximum, in the aggregate for all employees and consultants, at any one
time of $500,000.00.
6.5 Capital Structure and Business. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations that could
reasonably be expected to materially adversely affect the repayment of the
Revolving Loan or any of the other Obligations or could reasonably be expected
to have or result in a Material Adverse Effect, (b) make any change in its
capital structure as described in the Disclosure Document, including the
issuance or sale of any shares of Stock, warrants or other securities
convertible into Stock or any revision of the terms of its outstanding Stock.
43
Notwithstanding the foregoing, and provided that no Default,
which is not reasonably capable of being cured, or Event of Default has occurred
and is continuing, a Credit Party may, upon prior written notice thereof to
Agent, issue or sell shares of Stock of such Credit Party, warrants or other
securities convertible into Stock of such Credit Party, provided that the
proceeds from the issuance or sale of such Stock, warrants or other securities
shall be applied to reduce the Revolving Loan or used by such Credit Party only
for the following additional purposes and subject to the following additional
requirements and conditions: (x) the proceeds from the issuance or sale of such
Stock, warrants or other securities may be used by such Credit Party to acquire
Eligible New Portfolios or Rejected Portfolios as to which the Agent, on behalf
of the Lenders has a first priority, perfected Lien on the Accounts comprising
such acquired Eligible New Portfolio or Rejected Portfolio, as the case may be,
subject only to Permitted Encumbrances; or (y) the proceeds from the issuance or
sale of such Stock, warrants or other securities may be used by such Credit
Party (subject to the further limitations and prohibitions set forth in Section
6.1 hereof) to acquire the assets of one or more existing consumer financial
services businesses so long as: (i) no more than Twenty Million Dollars
($20,000,000.00), taken as a whole, in the aggregate for all Credit Parties for
all issuances or sales of Stock, warrants or other securities during the term of
the Revolving Loan is used to acquire the assets of existing consumer financial
services businesses, and (ii) no more than forty percent (40%) of the proceeds
from all issuances or sales of Stock, warrants or other securities, taken as a
whole, in the aggregate for all Credit Parties during the term of the Revolving
Loan is used to acquire the assets of existing consumer financial services
businesses, and (iii) such acquisitions are limited solely to the assets of one
or more existing consumer financial services businesses and no Credit Party
acquires any Stock of any Person, and (iv) Borrowers shall have notified Agent
in writing in each instance of any such acquisition on the earlier of: (aa)
three (3) days of the date on which any Credit Party executes any agreement,
pursuant to which such Credit Party agrees to such acquisition, and (bb) fifteen
(15) calendar days prior to such acquisition, and (v) prior to such Credit
Party's acquisition of the assets of any such business, Borrowers shall have
provided Agent with a written statement to Agent and Lenders (certified to be
true, correct and complete in all respects by Borrower Representative's Chief
Financial Officer or President) that no Default or Event of Default has occurred
under the Revolving Loan or any of the Loan Documents and that no Default or
Event of Default is anticipated, projected or contemplated to occur as a result
of such Credit Party's acquisition of the assets of any such business. Until the
proceeds from the issuance or sale of stock, warrants or other securities
pursuant to this Section 6.5 are used in accordance with this Section 6.5, the
applicable Credit Party may invest such proceeds in Cash Equivalent Investments
which are pledged to Agent as additional Collateral and perfected in a manner
reasonably acceptable to Agent.
Notwithstanding anything set forth herein to the contrary, a Credit Party may
change its capital structure from a corporation to a limited liability company
or from a limited liability company to a corporation provided that (i) Agent
shall have consented to such transaction, (ii) the Credit Parties have executed
any documentation and taken any steps reasonably requested by Agent, including,
any documentation required by Agent to ensure Agent has a first priority lien on
the Stock and assets of such Credit Party after giving effect to any such change
and (iii) Agent shall have on or prior to such change received consolidated and
consolidating income statements, statements of cash flows and balance sheets of
the Borrowers which shall provide all required information both before and after
giving effect to such change and otherwise in form and substance satisfactory to
Agent to ensure that such change does not affect any of the obligations of the
Credit Parties under any Loan Document or any rights of Agent or Lenders with
respect to the Credit Parties. No Credit Party shall engage in any business
other than the businesses currently engaged in by it or businesses reasonably
related thereto.
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6.6 Guaranteed Indebtedness. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement.
6.7 Liens; Lien Release. No Credit Party shall create, incur,
assume or permit to exist any Lien on or with respect to its Portfolios,
Accounts or any of its other properties or assets (whether now owned or
hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in
existence on the date hereof and summarized on the Disclosure Document securing
the Indebtedness described on the Disclosure Document and permitted
refinancings, extensions and renewals thereof, including extensions or renewals
of any such Liens; provided that the principal amount of the Indebtedness so
secured is not increased and the Lien does not attach to any other property; (c)
Liens created after the date hereof by conditional sale or other title retention
agreements (including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures and other capital assets
acquired by any Credit Party in the ordinary course of business, involving the
incurrence of an aggregate amount of purchase money Indebtedness and Capital
Lease Obligations of not more than $1,000,000 outstanding at any one time for
all such Liens (provided that such Liens attach only to the assets subject to
such purchase money debt and such Indebtedness is incurred within 20 days
following such purchase and does not exceed 100% of the purchase price of the
subject assets), (d) Liens securing Indebtedness permitted under Section
6.3(a)(i) as provided for therein, (e) Liens arising from precautionary UCC-1
financing statements with respect to Equipment or Real Estate which is the
subject of an operating lease, (f) Liens against the assets of Non-Credit Party
Affiliates to secure loans in connection with the acquisition of Portfolios by
Non-Credit Party Affiliates which have been declined by the Lenders. In
addition, no Credit Party shall become a party to any agreement, note, indenture
or instrument, or take any other action, that would prohibit the creation of a
Lien on any of its properties or other assets in favor of Agent, on behalf of
itself and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto, and (g) claims and other Liens of attorneys and
servicers in the ordinary course of business relating to Portfolios and Accounts
(and the Proceeds thereof) that they are collecting or servicing.
45
In connection with any disposition of Accounts, and subject to the terms of this
paragraph, Agent, on behalf of Lenders, hereby authorizes Borrower or its
designees to file a partial release of those (and only those) liens and security
interests of Agent that are necessary to permit the applicable Credit Party to
effect such disposition in the ordinary course of business and in accordance
with this Agreement, which authorization shall become effective upon, and only
upon, satisfaction and performance of all of the following additional conditions
precedent: (i) at the time of such disposition and after giving effect thereto,
no Default, which is not reasonably capable of being cured, has occurred, and no
Event of Default shall have occurred and is continuing, (ii) the Net Sales
Proceeds generated from such disposition (whether in a single transaction or a
series of transactions that could reasonably be deemed to be part of the same
transaction) shall not exceed an amount equal to $5,000,000.00, (iii) the
applicable Credit Party proposing to dispose of such portion of a Portfolio
shall have notified Agent in writing of such proposed disposition
contemporaneously with such Credit Party's disposition, which notification shall
be in form and content reasonably acceptable to Agent, (iv) Agent shall be
entitled to immediately make appropriate adjustments to the Collateral, the
Borrowing Base and Borrowing Availability based on the effect of such
disposition, (v) the partial release of Agent's liens and security interests
shall relate solely and exclusively to the Accounts that are the subject of such
disposition, and (vi) all cash proceeds from the disposition of such portion of
a Portfolio shall be deposited directly into a Blocked Account established and
maintained by Agent, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by such Credit Party in connection therewith (in each case, paid to
non-Affiliates), and (B) sales, transfer, and similar taxes payable by such
Credit Party in connection therewith.
In connection with any disposition of Accounts in which the Net Sales Proceeds
generated from the disposition of such Accounts, whether in a single transaction
or a series of transactions that could reasonably be deemed to be part of the
same transaction, exceeds an amount equal to $5,000,000.00, Agent shall (in a
separate writing made by Agent at the time of each such disposition) either
authorize Borrowers and the applicable Credit Parties (and their designees) to
file such partial releases of Agent's liens and security interests or confirm in
writing Agent's partial release of its liens and security interests, as
requested by the applicable Credit Party, as are necessary to permit the
applicable Credit Party to effect such disposition, provided that: (i) at the
time of such disposition and after giving effect thereto, no Default, which is
not reasonably capable of being cured, has occurred, and no Event of Default has
occurred and is continuing, (ii) the applicable Credit Party proposing to
dispose of such Portfolio shall have notified Agent in writing of such proposed
disposition at least two (2) Business Days prior to the scheduled disposition of
such Accounts and shall have delivered to Agent the form of partial release to
be filed in connection with such disposition, (iii) Borrowers shall have
provided Agent with a proforma statement showing the effect of such disposition
on the Collateral, the Borrowing Base and Borrowing Availability, (iv) Agent
shall be entitled to immediately make appropriate adjustments to the Collateral,
the Borrowing Base and Borrowing Availability based on the effect of such
disposition, (v) the partial release of Agent's liens and security interests
shall relate solely and exclusively to the Accounts that are the subject of such
disposition, and (vi) all cash proceeds from the disposition of such Portfolio
or portion thereof shall be deposited directly into a Blocked Account
established and maintained by Agent, net of (A) commissions and other reasonable
and customary transaction costs, fees and expenses properly attributable to such
transaction and payable by such Credit Party in connection therewith (in each
case, paid to non Affiliates), and (B) sales, transfer, and similar taxes
payable by such Credit Party in connection therewith.
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The Credit Parties shall have the right to transfer or dispose of Accounts in
which one or more Credit Parties agree to extend credit to such Credit Party's
purchaser or transferee for the acquisition of such Accounts, provided such
credit is secured by such Accounts and such Credit Party is given a promissory
note or Chattel Paper to evidence all or a portion of the sales proceeds
(hereinafter individually called a "Disposition on Credit" or collectively,
"Dispositions on Credit"), provided that the following conditions precedent are
satisfied and performed: (a) the outstanding obligations owed to one or more
Credit Parties under all Dispositions on Credit (whether or not evidenced by
such promissory notes, Chattel Paper or other similar instruments), in the
aggregate for all Credit Parties at any given time, shall not exceed an amount
equal to $20,000,000.00 and (b) no Default, which is not reasonably capable of
being cured, or Event of Default has occurred and is continuing.
In the event of any disposition of any Accounts, pursuant to which the
applicable Credit Party proposing to dispose of such Accounts is given a
promissory note, Chattel Paper or similar instrument to evidence all or a
portion of the sales proceeds, the applicable Credit Party disposing of such
Accounts shall perform the following: (A) in the case of a promissory note, (i)
the original promissory note or similar instrument delivered in connection with
such disposition shall be assigned and endorsed (on the face of such promissory
note in a conspicuous manner) to the order of Agent, as agent for the Lenders,
together with the following written indication: "This promissory note has been
assigned as collateral to ISRAEL DISCOUNT BANK OF NEW YORK, a New York banking
corporation, as Agent," (ii) at the reasonable request of Agent, the original
promissory note shall be delivered to Agent, (iii) the applicable Credit Party
shall be granted a first-priority Lien and security interest in the Accounts
which is the subject of such disposition (and such security interest shall be
perfected by filing a UCC-1 Financing Statement in the appropriate office), (iv)
the Lien and security interest granted in favor of such applicable Credit Party
in connection with the disposition of such Accounts (together with the UCC-1
Financing Statement) shall, if requested by Agent, be assigned to Agent for the
benefit of the Lenders in a manner reasonably acceptable to Agent, and (v) the
applicable Credit Party shall give written instructions to the maker of such
promissory note (with a copy thereof to Agent) to make all payments under such
promissory note to the Blocked Account established and maintained by such Credit
Party with Agent; and (B) in the case of any tangible Chattel Paper, (i) such
Credit Party shall place or cause to be placed on the face of each individual
item of tangible Chattel Paper, in a conspicuous manner, the following written
indication or legend: "This document has been assigned as collateral to ISRAEL
DISCOUNT BANK OF NEW YORK, a New York banking corporation, as Agent, and is
subject to a lien and security interest granted in favor of Agent," (ii) the
applicable Credit Party shall be granted a first-priority Lien and security
interest in the Accounts which is the subject of such disposition (and such
security interest shall be perfected by filing a UCC-1 Financing Statement in
the appropriate office) and the Lien and security interest granted in favor of
such applicable Credit Party in connection with such Chattel Paper (along with
the UCC-1 Financing Statement) shall, if requested by Agent, be assigned to
Agent for the benefit of the Lenders in a manner reasonably acceptable to Agent,
(iii) the applicable Credit Party shall give written instructions to the obligor
under such item of Chattel Paper (with a copy thereof to Agent) to make all
payments under such Chattel Paper to the Blocked Account established and
maintained by such Credit Party with Agent, and (iv) if reasonably requested by
Agent, such tangible Chattel Paper shall be delivered to Agent; and (C) in the
case of electronic Chattel Paper, (i) such Credit Party shall indicate or cause
to be indicated on each individual electronic or intangible item constituting
Chattel Paper, in a conspicuous manner, the following electronic indication or
legend: "This entry, information and material and the rights arising thereunder
have been assigned as collateral to ISRAEL DISCOUNT BANK OF NEW YORK, a New York
banking corporation, as Agent, and is subject to a lien and security interest
granted in favor of Agent" (ii) the applicable Credit Party shall be granted a
first-priority Lien and security interest in the Accounts which is the subject
of such disposition (and such security interest shall be perfected by filing a
UCC-1 Financing Statement in the appropriate office) and the Lien and security
interest granted in favor of such applicable Credit Party in connection with
such Chattel Paper (along with the UCC-1 Financing Statement) shall, if
requested by Agent, be assigned to Agent for the benefit of the Lenders in a
manner reasonably acceptable to Agent, (iii) the applicable Credit Party shall
give written instructions to the obligor under such item of Chattel Paper (with
a copy thereof to Agent) to make all payments under such Chattel Paper to the
Blocked Account established and maintained by such Credit Party with Agent, and
(iv) if reasonably requested by Agent, the applicable Credit Parties shall enter
into such agreements (in form reasonably acceptable to Agent), such that Agent
shall have control of the electronic Chattel Paper. The applicable Credit Party
agrees not to change any payment instructions given to the maker of any
promissory note or the obligor under any Chattel Paper, without the prior
written consent of Agent, which consent shall not be unreasonably withheld.
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6.8 Sale of Stock and Assets. No Credit Party shall sell,
transfer, convey, lease, assign or otherwise dispose of any of its properties or
other assets, including the Stock of any of its Subsidiaries (whether in a
public or a private offering or otherwise) or any of its Accounts, other than
(a) the sale of Portfolios and Accounts in the ordinary course of business in
accordance with the terms of this Agreement, (b) the sale, transfer, conveyance
or other disposition by a Credit Party of Equipment, Fixtures or Real Estate
that are obsolete or no longer used or useful in such Credit Party's business
and having an appraised value not exceeding $250,000 in any single transaction
or $500,000 in the aggregate in any Fiscal Year, (c) the sale, transfer,
conveyance or other disposition by a Credit Party of other Equipment and
Fixtures having a value not exceeding $250,000 in any single transaction or
$1,000,000 in the aggregate in any Fiscal Year, (d) the lease, sublease or
license of real property, provided that such real property is not necessary for
the operations of Borrowers' business, at the time thereof and after giving
effect thereto, no Default, which is not reasonably capable of being cured, or
Event of Default has occurred and is continuing, and (e) the transfer of assets
permitted under clause (iii) of Section 6.1. With respect to any disposition of
assets or other properties permitted pursuant to clauses (b), (c) and (e) above,
subject to Section 1.2(b), Agent agrees on reasonable prior written notice to
release its Lien on such assets or other properties in order to permit the
applicable Credit Party to effect such disposition and shall execute and deliver
to Borrowers, at Borrowers' expense, appropriate UCC-3 termination statements or
authorizations to file appropriate UCC-3 termination statements and other
releases as reasonably requested by Borrowers.
6.9 ERISA. No Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
6.10 Financial Covenants. Borrowers shall not breach or fail to
comply with any of the Financial Covenants.
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6.11 Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any material
respect, or form the basis for any material Environmental Liabilities under, any
Environmental Laws or Environmental Permits or (b) otherwise adversely impact
the value or marketability of any of the Real Estate or any of the Collateral,
other than such violations or Environmental Liabilities that could not
reasonably be expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13 Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except (a) with respect to Accounts in the ordinary
course of the Credit Party's business, (b) for debt owing by employees or
consultants permitted under Section 6.4(b) which is cancelled and treated as
compensation expense and (c) for reasonable consideration negotiated on an arm's
length basis and in the ordinary course of its business consistent with past
practices.
6.14 Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) payments of principal and interest on intercompany loans and
advances between Borrowers to the extent permitted by Sections 6.2 and 6.3, (b)
so long as there is no unwaived or uncured Default, which is not reasonably
capable of being cured, or Event of Default, the Credit Parties shall be
permitted to pay dividends, and upon the occurrence of a Default, which is not
reasonably capable of being cured, or an Event of Default, only dividends and
distributions by Subsidiaries of any Borrower paid to such Borrower, and (c)
employee or consultant loans permitted under Section 6.4.
6.15 Change of Corporate Name or Location; Change of Fiscal Year.
Except as expressly permitted under Section 6.5, no Credit Party shall (a)
change its name as it appears in official filings in the state of its
incorporation or other organization (b) change its chief executive office,
principal place of business, corporate offices or warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
the Collateral, (c) change the type of entity that it is, (d) change its
organization identification number, if any, issued by its state of incorporation
or other organization, or (e) change its state of incorporation or organization,
in each case without at least 14 days prior written notice to Agent and after
Agent's written acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens in favor
of Agent, on behalf of Lenders, in any Collateral, has been completed or taken,
and provided that any such new location shall be in the continental United
States. No Credit Party shall change its Fiscal Year without Agent's prior
written consent, which consent will not be unreasonably withheld.
6.16 No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that directly or indirectly restricts, prohibits or requires the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of any Borrower
to any Borrower or between Borrowers.
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6.17 No Speculative Transactions. No Credit Party may engage in any
material transaction involving interest swaps, caps or collars, subject to the
Agent's prior written consent.
6.18 Leases; Real Estate Purchases. No Credit Party shall enter
into or be a party to any operating lease for Equipment or Real Estate, if the
aggregate of all such operating lease payments payable in any year for all
Credit Parties on a consolidated basis would exceed $3,000,000.00. No Credit
Party shall purchase a fee simple ownership interest in Real Estate unless (i)
Agent receives 10 days prior written notice of such purchase, (ii) at its
request, Agent shall have received a mortgage or other similar instrument on
such Real Estate, in form and substance satisfactory to Agent, and (iii) the
purchase of any Real Estate shall be on terms reasonably satisfactory to Agent.
6.19 Changes Relating to Subordinated Debt; Material Contracts. No
Credit Party shall change or amend the terms of any Subordinated Debt (or any
indenture or agreement in connection therewith) if the effect of such amendment
is to: (i) increase the interest rate on, or fees in respect of, such
Subordinated Debt; (ii) change the dates upon which payments of principal or
interest are due on such Subordinated Debt other than to extend such dates;
(iii) change any covenant, default or event of default other than to delete or
make less restrictive any covenant, default or event of default provision
therein, or add any covenant, default or event of default with respect to such
Subordinated Debt; (iv) change the redemption or prepayment provisions of such
Subordinated Debt other than to extend the dates therefor or to reduce the
premiums payable in connection therewith; (v) grant any security or collateral
to secure payment of such Subordinated Debt; (vi) change any subordination or
intercreditor provisions of such Subordinated Debt; (vii) change any provisions
providing that payments of interest, principal or other obligations in respect
of such Subordinated Debt may not be made in cash or must be paid in a form
other than cash; or (viii) change or amend any other term if such change or
amendment would materially increase the obligations of the Credit Party
thereunder or confer additional material rights on the holder of such
Subordinated Debt in a manner adverse to any Credit Party, Agent or any Lender.
6.20 Credit Parties Other than Borrowers. From and after the
Closing Date, none of the Credit Parties other than Borrowers shall engage in
any trade or business, or own any assets (other than Stock of their
Subsidiaries) or incur any Indebtedness or Guaranteed Indebtedness (other than
the Obligations), except that Asta Funding may acquire tangible assets in its
own name for use and operation by its Subsidiaries, and may acquire Portfolios
in its own name for purposes of promptly transferring and assigning such
Portfolios to a Borrower or other Credit Party. Notwithstanding the foregoing,
nothing herein shall limit any Credit Party from engaging in activities
incidental to (a) the maintenance of its corporate existence in compliance with
applicable law, and (b) legal, tax and accounting matters in connection with any
of the foregoing activities.
6.21 Adverse Transactions. No Credit Party shall enter into or be a
party to, or permit any of its Subsidiaries to enter into or be a party to, any
transaction the performance of which in the future does or could reasonably be
expected to result in a breach of any covenant contained herein or giving rise
to a Default, which is not reasonably capable of being cured, or Event of
Default.
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6.22 Disaster Recovery Plan. The Borrowers agree that they will not
make any amendments, modifications or other changes to the Disaster Recovery
Plan or any agreements related thereto without the prior written consent of the
Agent, which consent will not be unreasonably withheld or delayed.
6.23 Limitation on Collection Fees. No Credit Party shall enter
into any agreement to pay (and no Credit Party shall pay or permit to be paid)
any sums or amounts to any Servicing Agent or other Person (including any
collection agent, agency or attorney) as collection fees, collection charges,
contingent fees, premiums, compensation for services rendered or excess fees
(however characterized) in excess of an amount equal to fifty-one percent (51%)
of the Collections obtained by such Servicing Agent or other Person relating to
Portfolios, except after prior written notice to Agent.
6.24 No Amendment to Servicing Agreements. No Credit Party shall
amend, change, modify or alter (or permit to be amended, changed, modified or
altered) any agreement, including any servicing agreement, relating to the
collection or receipt of Payments, Collections or Proceeds of any Accounts of
any of the Credit Parties in any material respect in which the Collections (net
of any collection costs and other fees permitted to be deducted from Collections
by the express terms of the corresponding servicing agreement) in the aggregate
for all Credit Parties during any Fiscal Quarter meet or exceed the Servicing
Threshold, except if that Credit Party promptly provides a copy thereof to Agent
and the Lenders.
7. TERM
7.1 Termination. The financing arrangements contemplated hereby
shall be in effect until the Commitment Termination Date, and the Revolving Loan
and all other Obligations shall be automatically due and payable in full on such
date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Revolving Loan or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections 1.12 and 1.13,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
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8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Any Borrower (i) fails to make any payment of principal
of, or interest on, or Fees owing in respect of, the Revolving Loan or any of
the other Obligations when due and payable, or (ii) fails to pay or reimburse
Agent or Lenders for any expense reimbursable hereunder or under any other Loan
Document within 10 days following Agent's demand for such reimbursement or
payment of expenses.
(b) Any Credit Party fails or neglects to perform, keep or
observe any of the provisions of Sections 1.3, 1.5, 5.4(a) or 6, or any of the
provisions set forth in Annexes C or G, respectively, and the same shall remain
unremedied for 5 days or more, without any duty on the part of Agent or Lenders
to give notice to Borrowers of such failure or neglect.
(c) Any Borrower fails or neglects to perform, keep or observe
any of the provisions of Section 4 or any provisions set forth in Annexes E or
F, respectively, and the same shall remain unremedied for 10 days or more after
written notice of such failure or neglect.
(d) Any Credit Party fails or neglects to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any other clause
of this Section 8.1) and the same shall remain unremedied for 5 days or more
after written notice of such failure or neglect; provided, however, that with
respect to the provisions of Section 5.2(a), unless such failure or neglect to
perform could reasonably be expected to result in a Material Adverse Effect, the
Credit Parties shall in any event have 3 Business Days, commencing on the date a
Senior Executive or other Person with managerial responsibility has knowledge of
such failure or neglect, within which to cure or remedy such failure or neglect.
(e) A default or breach occurs under any other agreement,
document or instrument to which any Credit Party is a party that is not cured
within any applicable grace period therefor, and such default or breach (i)
involves the failure to make any payment when due in respect of any Indebtedness
or Guaranteed Indebtedness (other than the Obligations) of any Credit Party in
excess of $1,000,000 in the aggregate (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $100,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral in respect thereof to be
demanded, in each case, regardless of whether such default is waived, or such
right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base
Certificate is untrue or incorrect in any respect, or any representation or
warranty herein or in any Loan Document is untrue or incorrect in any material
respect or any representation or warranty in any written statement, report,
financial statement or certificate (other than a Borrowing Base Certificate)
made or delivered to Agent or any Lender by any Credit Party is untrue or
incorrect in any material respect as of the date when made or deemed made.
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(g) Assets of any Credit Party, the aggregate fair market
value of which is $250,000 or more for all Credit Parties, are attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of any Credit Party and such condition continues for 30 days or more
(unless in the case of any attachment with respect to which the applicable
creditor does not have [and no person for the benefit of such creditor has] or
obtains physical possession of any assets of any Credit Party, and such claim is
being contested in good faith by such Credit Party or is fully bonded).
(h) A case or proceeding is commenced against any Credit Party
seeking a decree or order in respect of such Credit Party (i) under the
Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) for such Credit Party or for any
substantial part of any such Credit Party's assets, or (iii) ordering the
winding-up or liquidation of the affairs of such Credit Party, and such case or
proceeding shall remain undismissed or unstayed for 30 days or more or a decree
or order granting the relief sought in such case or proceeding shall be entered
by a court of competent jurisdiction.
(i) Any Credit Party (i) files a petition seeking relief under
the Bankruptcy Code, or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) consents to or fails to contest in a
timely and appropriate manner the institution of proceedings thereunder or the
filing of any such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of any such Credit
Party's assets, (iii) makes an assignment for the benefit of creditors, (iv)
takes any action in furtherance of any of the foregoing; or (v) admits in
writing its inability to, or is generally unable to, pay its debts as such debts
become due.
(j) A final judgment or judgments for the payment of an amount
in excess of $500,000 in the aggregate at any time is or are outstanding against
one or more of the Credit Parties and the same are not, within 30 days after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay;
provided however, in the event such judgment relates to Accounts for which such
Credit Party has a right of indemnification from the originator or seller of
that Account, then a final judgment or judgments for the payment of an amount in
excess of $1,000,000 in the aggregate at any time is or are outstanding against
one or more of the Credit Parties and the same are not, within 30 days after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay,
provided such judgment relates to Accounts for which such Credit Party is fully
indemnified by the originator or seller of that Account.
(k) Any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any Lien on any material assets created under any Loan Document ceases to be
a valid and perfected first priority Lien (except as otherwise permitted herein
or therein) in any of the Collateral purported to be covered thereby.
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(l) Any Change of Control occurs.
(m) Any default or breach by any Credit Party or any other
guarantor, grantor or pledgor in the observance or performance of any covenant
or agreement contained or incorporated by reference in any Collateral Document
and such default shall continue beyond the grace period, if any, provided in
such Collateral Document.
8.2 Remedies.
(a) If any Default, which is not reasonably capable of being
cured, or Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice, suspend the
Revolving Loan facility with respect to additional Advances, whereupon any
additional Advances shall be made or incurred in the sole discretion of the
Requisite Lenders so long as such Default, which is not reasonably capable of
being cured, or Event of Default is continuing. If any Default, which is not
reasonably capable of being cured, or Event of Default has occurred and is
continuing, Agent may (and at the written request of Requisite Lenders shall),
without notice except as otherwise expressly provided herein, increase the rate
of interest applicable to the Revolving Loan to the Default Rate.
(b) If any Event of Default has occurred and is continuing,
Agent may, and at the written request of the Requisite Lenders, shall, without
notice: (i) terminate the Revolving Loan facility with respect to further
Advances; (ii) declare all or any portion of the Obligations, including all or
any portion of any Revolving Loan to be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrowers and each other Credit Party; or (iii) exercise any
rights and remedies provided to Agent under the Loan Documents or at law or
equity, including all remedies provided under the Code; provided, that upon the
occurrence of an Event of Default specified in Sections 8.1(h) or (i), the
Revolving Loan facility shall be immediately terminated and all of the
Obligations, including the aggregate Revolving Loan, shall become immediately
due and payable without declaration, notice or demand by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives (including for
purposes of Section 12), to the extent permitted by law: (a) presentment, demand
and protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent on which any Credit Party may in any way be liable,
and hereby ratifies and confirms whatever Agent may do in this regard, (b) all
rights to notice and a hearing prior to Agent's taking possession or control of,
or to Agent's replevin, attachment or levy upon, the Collateral or any bond or
security that might be required by any court prior to allowing Agent to exercise
any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling
and exemption laws.
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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.
(a) Subject to the terms of this Section 9.1, any Lender may
make an assignment to a Qualified Assignee of, or sell participations in, at any
time or times, the Loan Documents, Revolving Loan and any Commitment or any
portion thereof or interest therein, including any Lender's rights, title,
interests, remedies, powers or duties thereunder. Any assignment by a Lender
shall: (i) require the consent of Agent (which consent shall not be unreasonably
withheld or delayed with respect to a Qualified Assignee) and the execution of
an assignment agreement (an "Assignment Agreement") substantially in the form
attached hereto as Exhibit 9.1(a) attached to the Disclosure Document and
otherwise in form and substance reasonably satisfactory to, and acknowledged by,
Agent; (ii) be conditioned on such assignee Lender representing to the assigning
Lender and Agent that it is purchasing the applicable Revolving Loan to be
assigned to it for its own account, for investment purposes and not with a view
to the distribution thereof; (iii) after giving effect to any such partial
assignment, the assignee Lender shall have Commitments in an amount at least
equal to $5,000,000 and the assigning Lender shall have retained Commitments in
an amount at least equal to $5,000,000, except that the limitations contained in
this clause 9.1(a)(iii) shall not apply to any assigning Lender having
Commitments of less than $10,000,000, so long as such assigning Lender, in
connection with such assignment, shall have assigned all, and not less than all,
of such assigning Lender's Commitments; (iv) with respect to any assignment of
the Revolving Loan Commitment or the Revolving Loan, be for a ratable portion of
the assigning Lender's interest in the Revolving Loan Commitment and the
Revolving Loan; (v) include a payment to Agent of an assignment fee of $3,500 by
either assignee Lender or assignor Lender; (vi) so long as no Event of Default
has occurred and is continuing, require the consent of Borrower Representative,
which shall not be unreasonably withheld or delayed; provided that no such
consent shall be required for an assignment to a Qualified Assignee and (vii)
unless such an assignment is to an Affiliate of such Lender, Lender shall give
notice to the other Lenders of any intent to assign. Such Lenders shall be
permitted to purchase such assignment on terms agreed to by assignor Lender and
assignee Lender. If more than one Lender wishes to purchase the Revolving Loan
or Commitments from the assigning Lender, such assignments to Lenders will be
allocated on a pro-rata basis. In the case of an assignment by a Lender under
this Section 9.1, the assignee shall have, to the extent of such assignment, the
same rights, benefits and obligations as all other Lenders hereunder. The
assigning Lender shall be relieved of its obligations hereunder with respect to
its Commitments or assigned portion thereof from and after the date of such
assignment. Each Borrower hereby acknowledges and agrees that any assignment
shall give rise to a direct obligation of Borrowers to the assignee and that the
assignee shall be considered to be a "Lender". In all instances, each Lender's
liability to make the Revolving Loan hereunder shall be several and not joint
and shall be limited to such Lender's Pro Rata Share of the applicable
Commitment. In the event Agent or any Lender assigns or otherwise transfers all
or any part of the Obligations, Agent or any such Lender shall so notify
Borrowers and Borrowers shall, upon the request of Agent or such Lender, execute
new Notes in exchange for the Notes, if any, being assigned. Notwithstanding the
foregoing provisions of this Section 9.1(a), any Lender may at any time pledge
the Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank, and any Lender that is an
investment fund may assign the Obligations held by it and such Lender's rights
under this Agreement and the other Loan Documents to another investment fund
managed by the same investment advisor; provided, that no such pledge to a
Federal Reserve Bank shall release such Lender from such Lender's obligations
hereunder or under any other Loan Document. The Agent shall maintain at its
address referred to in Section 11.10 a copy of each Assignment Agreement
delivered to and accepted by it and a register of the recordation of the names
and addresses of the Lenders and the Commitments, and principal amounts
thereunder owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrowers, the Agent and the Lenders shall treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
any Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
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(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrowers hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.10,
1.12, 1.13 and 9.8, each Borrower acknowledges and agrees that a participation
shall give rise to a direct obligation of Borrowers to the participant and the
participant shall be considered to be a "Lender". Except as set forth in the
preceding sentence no Borrower or Credit Party shall have any obligation or duty
to any participant. Neither Agent nor any Lender (other than the Lender selling
a participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.
(c) Except as expressly provided in this Section 9.1, no
Lender shall, as between Borrowers and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Revolving Loan, the Notes or other Obligations owed to such
Lender.
(d) Each Credit Party executing this Agreement shall assist
any Lender permitted to sell assignments or participations under this Section
9.1 as reasonably required to enable the assigning or selling Lender to effect
any such assignment or participation, including the execution and delivery of
any and all agreements, notes and other documents and instruments as shall be
requested and, if requested by Agent, the preparation of informational materials
for, and the participation of management in meetings with, potential assignees
or participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their respective affairs contained in any selling materials provided by them
and all other information provided by them and included in such materials.
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(e) Any Lender may furnish any information concerning Credit
Parties in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants); provided that
such Lender shall obtain from assignees or participants confidentiality
covenants substantially equivalent to those contained in Section 11.8.
(f) So long as no Event of Default has occurred and is
continuing, no Lender shall assign or sell participations in any portion of its
Revolving Loan or Commitments to a potential Lender or participant, if, as of
the date of the proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements under Section
1.13(a), increased costs under Section 1.13(b), an inability to fund LIBOR Loans
under Section 1.13(c), or withholding taxes in accordance with Section 1.12(a).
9.2 Appointment of Agent. IDB is hereby appointed to act on behalf
of all Lenders as Agent under this Agreement and the other Loan Documents. The
provisions of this Section 9.2 are solely for the benefit of Agent and Lenders
and no Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement and the other Loan Documents, Agent shall act solely
as an agent of 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 any
Credit Party or any other Person. Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the other Loan
Documents. The duties of Agent shall be mechanical and administrative in nature
and Agent shall not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in respect of any
Lender. Except as expressly set forth in this Agreement and the other Loan
Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to any Credit Party or any of
their respective Subsidiaries or any Account Debtor that is communicated to or
obtained by IDB or any of its Affiliates in any capacity. Neither Agent nor any
of its Affiliates nor any of their respective officers, directors, employees,
agents or representatives shall be liable to any Lender for any action taken or
omitted to be taken by it hereunder or under any other Loan Document, or in
connection herewith or therewith, except for damages caused by its or their own
gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders or all affected
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Loan Document, then Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from Requisite Lenders or all affected Lenders,
as the case may be, and Agent shall not incur liability to any Person by reason
of so refraining. Agent shall be fully justified in failing or refusing to take
any action hereunder or under any other Loan Document (a) if such action would,
in the opinion of Agent, be contrary to law or the terms of this Agreement or
any other Loan Document, (b) if such action would, in the opinion of Agent,
expose Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders or all affected Lenders, as applicable.
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9.3 Agent's Reliance, Etc. Neither Agent nor any of its Affiliates
nor any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent: (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form reasonably satisfactory to
Agent; (b) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due 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; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
9.4 IDB and Affiliates. With respect to its Commitments hereunder,
IDB shall have the same rights and powers under this Agreement and the other
Loan Documents as any other Lender and may exercise the same as though it were
not Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include IDB in its individual capacity. IDB and its Affiliates may
lend money to, invest in, and generally engage in any kind of business with, any
Credit Party, any of their Affiliates and any Person who may do business with or
own securities of any Credit Party or any such Affiliate, all as if IDB were not
Agent and without any duty to account therefor to Lenders. IDB and its
Affiliates may accept fees and other consideration from any Credit Party for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders. Each Lender acknowledges the potential conflict
of interest between IDB as a Lender holding disproportionate interests in the
Revolving Loan and IDB as Agent. None of the Lenders identified on the facing
page or signature pages of this Agreement as a "syndication agent" or
"documentation agent", if any, shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, none of the
Lenders so identified as a "syndication agent" or "documentation agent", if any,
shall have or be deemed to have any fiduciary relationship with any Lender. Each
Lender acknowledges that it has not relied, and will not rely, on any of the
Lenders so identified in deciding to enter into this Agreement or in taking or
not taking action hereunder.
9.5 Intentionally Omitted.
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9.6 Indemnification. Lenders agree to indemnify Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Borrowers hereunder), ratably according to their respective Pro Rata Shares,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted to be taken by Agent in
connection therewith; provided, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Credit Parties.
9.7 Successor Agent. Agent may resign at any time by giving not
less than 30 days' prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within 30 days after the resigning Agent's giving notice of resignation, then
the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank, commercial finance company or financial
institution or a subsidiary of a commercial bank, commercial finance company or
financial institution if such commercial bank, commercial finance company or
financial institution is organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus of at
least $300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, within 30 days after the date such notice of resignation was given by
the resigning Agent, such resignation shall become effective and the Requisite
Lenders shall thereafter perform all the duties of Agent hereunder until such
time, if any, as the Requisite Lenders appoint a successor Agent as provided
above. Any successor Agent appointed by Requisite Lenders hereunder shall be
subject to the approval of Borrower Representative, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default, which is not reasonably capable of being cured, or an
Event of Default has occurred and is continuing. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent. Upon the earlier of the acceptance of any appointment as
Agent hereunder by a successor Agent or the effective date of the resigning
Agent's resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue. After any resigning Agent's resignation hereunder, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was acting as Agent under this Agreement and the other
Loan Documents.
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9.8 Setoff and Sharing of Payments. In addition to any rights now
or hereafter granted under applicable law and not by way of limitation of any
such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 9.9(f), each Lender is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Borrower or Guarantor (regardless of whether such
balances are then due to such Borrower or Guarantor) and any other properties or
assets at any time held or owing by that Lender or that holder to or for the
credit or for the account of any Borrower or Guarantor against and on account of
any of the Obligations that are not paid when due. Subject to the application of
any amounts received as a result of this Section 9.8 in accordance with Section
1.15(b), any Lender exercising a right of setoff or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance with
their respective Pro Rata Shares (other than offset rights exercised by any
Lender with respect to Sections 1.10, 1.12 or 1.13). Each Credit Party that is a
Borrower or Guarantor agrees, to the fullest extent permitted by law, that (a)
any Lender may exercise its right to offset with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such
amounts so offset to other Lenders and holders and (b) any Lender so purchasing
a participation in the Revolving Loan made or other Obligations held by other
Lenders or holders may exercise all rights of offset, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender or holder were a direct holder of the Revolving Loan and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the offset amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of offset, the
purchase of participations by that Lender shall be rescinded and the purchase
price restored together with interest at such rate, if any, as such Lender is
required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions
in Concert.
(a) Advances; Payments.
(i) Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Tranche A Advance or Notice of Tranche B Advance, as the
case may be, and in any event prior to 2:00 p.m. (New York time) on the date
such notice is received, by telecopy, telephone or other similar form of
transmission. Each Revolving Lender shall make the amount of such Lender's Pro
Rata Share of such Revolving Credit Advance available to Agent in same day funds
by wire transfer to Agent's account as set forth in Annex H not later than 3:00
p.m. (New York time) on the requested funding date, in the case of an Base Rate
Loan, and not later than 1:00 p.m. (New York time) on the requested funding
date, in the case of a LIBOR Loan. After receipt of such wire transfers (or, in
the Agent's sole discretion, before receipt of such wire transfers), subject to
the terms hereof, Agent shall make the requested Revolving Credit Advance to the
Borrower designated by Borrower Representative in the Notice of Tranche A
Advance or Notice of Tranche B Advance, as the case may be. All payments by each
Revolving Lender shall be made without setoff, counterclaim or deduction of any
kind. In the event Agent makes any Advance (in accordance with Section 2.2
hereof) available to Borrowers after 1:00 p.m. (New York time) on the requested
funding date, on behalf of any Lender who is unable to make the amount of such
Lender's Pro Rata Share of such Advance available to Agent in a timely manner in
accordance with this Agreement, then the Lender or Lenders on whose behalf Agent
makes such Advance shall repay the amount of such Advance to Agent (prior to any
other repayment or reimbursement obligations arising under this Agreement) in
full no later than the next Business Day on the terms set forth in this
Agreement, regardless of the occurrence of any subsequent Default or Event of
Default, and in such event Agent shall be entitled to retain for its account all
interest accrued on such Advance until reimbursed by the applicable Revolving
Lender.
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(ii) On the 2nd Business Day of each calendar week or
more frequently at Agent's election (each, a "Settlement Date"), Agent shall
advise each Lender by telephone, or telecopy of the amount of such Lender's Pro
Rata Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. Provided that each Lender has funded all
payments or Advances required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the other
Loan Documents as of such Settlement Date, Agent shall pay to each Lender such
Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since
the previous Settlement Date for the benefit of such Lender on the Revolving
Loan held by it (promptly upon receipt by Agent of such Borrowers' payments),
except that with respect to a LIBOR Loan, such principal and interest shall be
paid on the last day of the relevant LIBOR Period. To the extent that any Lender
(a "Non-Funding Lender") has failed to fund all such payments and Advances or
failed to fund the purchase of all such participations, Agent shall be entitled
to set off the funding shortfall against that Non-Funding Lender's Pro Rata
Share of all payments received from Borrowers. Such payments shall be made by
wire transfer to such Lender's account (as specified by such Lender in Annex H
or the applicable Assignment Agreement) not later than 2:00 p.m. (New York time)
on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume
that each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to Agent on each funding date. If such Pro Rata Share is not,
in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled
to recover such amount on demand from such Revolving Lender without setoff,
counterclaim or deduction of any kind. If any Revolving Lender fails to pay the
amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly
notify Borrower Representative and Borrowers shall immediately repay such amount
to Agent. Nothing in this Section 9.9(b) or elsewhere in this Agreement or the
other Loan Documents shall be deemed to require Agent to advance funds on behalf
of any Revolving Lender or to relieve any Revolving Lender from its obligation
to fulfill its Commitments hereunder or to prejudice any rights that Borrowers
may have against any Revolving Lender as a result of any default by such
Revolving Lender hereunder. To the extent that Agent advances funds to any
Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the
same Business Day as such Advance is made, Agent shall be entitled to retain for
its account all interest accrued on such Advance until reimbursed by the
applicable Revolving Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrowers and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind.
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(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to any Borrower or paid
to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender. In addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together with interest at
such rate, if any, as Agent is required to pay to any Borrower or such other
Person, without setoff, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender
to make any Revolving Credit Advance or any payment required by it hereunder on
the date specified therefor shall not relieve any other Lender (each such other
Revolving Lender, an "Other Lender") of its obligations to make such Advance or
purchase such participation on such date, but neither any Other Lender nor Agent
shall be responsible for the failure of any Non-Funding Lender to make an
Advance, purchase a participation or make any other payment required hereunder.
Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender
shall not have any voting or consent rights under or with respect to any Loan
Document or constitute a "Lender" or a "Revolving Lender" (or be included in the
calculation of "Requisite Lenders" hereunder) for any voting or consent rights
under or with respect to any Loan Document. At Borrower Representative's
request, Agent or a Person reasonably acceptable to Agent shall have the right
with Agent's consent and in Agent's sole discretion (but shall have no
obligation) to purchase from any Non-Funding Lender, and each Non-Funding Lender
agrees that it shall, at Agent's request, sell and assign to Agent or such
Person, all of the Commitments of that Non-Funding Lender for an amount equal to
the principal balance of the Revolving Loan held by such Non-Funding Lender and
all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Dissemination of Information. Agent shall provide Lenders
with any notice of Default or Event of Default received by Agent from, or
delivered by Agent to, any Credit Party, with notice of any Event of Default of
which Agent has actually become aware and with notice of any action taken by
Agent following any Event of Default. Lenders acknowledge that Borrowers are
required to provide Financial Statements and Collateral Reports to Lenders in
accordance with Annexes E and F hereto and agree that Agent shall have no duty
to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each other Lender that
no Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including exercising any rights of setoff) without
first obtaining the prior written consent of Agent and Requisite Lenders (except
as otherwise provided below), it being the intent of Lenders that any such
action to protect or enforce rights under this Agreement and the Notes shall be
taken in concert and at the direction or with the consent of Agent or Requisite
Lenders, as applicable, in accordance with the terms hereof; provided, however,
that each Lender may, upon 15 Business Days' prior written demand on Agent and
Agent's failure or refusal to commence to take commercially reasonable
enforcement actions within such 15-day period, commence an action against any
Borrower or any Guarantor and obtain a judgment against any such Person, but in
no event shall any Lender take any action to execute on such judgment or to
enforce such judgment in any manner, whether against any Borrower, any Guarantor
or any Collateral, without the prior written consent of Agent.
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(g) Notice of Field Exams. Agent will give Lenders at least 2
days' prior written notice of regularly scheduled field exams of Borrowers'
books, records and Accounts.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2. Any letter of interest, commitment letter or fee
letter (other than the IDB Fee Letter and Lenders' Fee Letters) or
confidentiality agreement, if any, between any Credit Party and Agent or any
Lender or any of their respective Affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect shall
be superseded by this Agreement.
11.2 Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by
Agent, no amendment, modification, termination or waiver of any provision of
this Agreement or any other Loan Document, or any consent to any departure by
any Credit Party therefrom, shall in any event be effective unless the same
shall be in writing and signed by Agent and Borrowers, and by Requisite Lenders
or all affected Lenders, as applicable. Except as set forth in clause (b) below,
all such amendments, modifications, terminations or waivers requiring the
consent of any Lenders shall only require the written consent of Requisite
Lenders, Agent and Borrowers.
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(b) (i) No modification, amendment or waiver of any provision
of this Agreement, the other Loan Documents or any other documents executed in
connection herewith or therewith and no consent by the Lenders or the Agent to
any departure therefrom by Borrowers or Guarantors shall be effective unless
such modification, amendment, waiver or consent shall be in writing and signed
by the Agent and all Requisite Lenders, and, in the case of a modification or
amendment other than those described in clause (z) of this Section 11.2(b)(i),
by a duly authorized officer of the Borrower Representative, and the same shall
then be effective only for the period and on the conditions and for the specific
instances and purposes specified in such writing; provided, however, that (x) no
provision hereof which expressly requires the consent, approval or waiver by all
Lenders may be amended, modified or waived except by all Lenders; (y) none of
the following may be amended, modified or waived except with the written consent
of all Lenders and the Agent: (i) the definition of "Collateral," (ii) the
definitions of "Revolving Loan Commitment" and "Borrowing Base" as set forth
herein, provided, however, that the foregoing shall not limit the discretion of
the Agent to the extent set forth in this Agreement or in the definition of
"Borrowing Base," (iii) the definitions of "Commitment Termination Date" and
"Requisite Lenders" and "Tranche A Borrowing Availability" and "Tranche B
Borrowing Availability" and "Loan Value of Eligible Existing Portfolio" and
"Loan Value of Eligible New Portfolio" and "Eligible Existing Portfolio" and
"Eligible New Portfolio," (iv) the provisions of this Section 11.2(b)(i), and
(v) any provision governing or providing for (A) the rate of interest payable on
the Revolving Credit Advances, (B) mandatory prepayments of principal thereof,
(C) fees or other amounts payable to any of the Lenders or (D) the due date for
payment of any principal, interest or fees hereunder; and (z) none of the
following shall require the consent, authorization or approval of Borrowers:
amendment or modification of any agreement to which Borrowers are not a party.
None of the provisions governing or providing for fees or other amounts payable
to the Agent may be amended, modified or waived except with the written consent
of the Agent. No notice to or demand on Borrowers in any case shall entitle
Borrowers to any other or further notice or demand in similar or other
circumstances. No failure or delay by the Agent to exercise any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude the exercise of any other right, power or
privilege.
(ii) Notwithstanding any term, condition, provision, prohibition, limitation,
agreement, understanding, or requirement contained in this Agreement or in any
of the other Loan Documents to the contrary: (i) IDB shall have the right
(without the approval or consent of any of the Lenders), but not the duty or
obligation, to increase the Revolving Loan Commitment of IDB hereunder from the
commitment amount set forth on Annex J attached hereto to a maximum commitment
amount of $35,000,000.00 (which increases may be made by IDB from time to time
in such increments as IDB may determine in its sole and absolute discretion), in
which event the Revolving Loan Commitment of IDB shall be the previous Revolving
Loan Commitment plus any increases thereto made by IDB, and IDB's Pro Rata Share
shall be adjusted to reflect IDB's increased Revolving Loan Commitment, and (ii)
at the written request of Borrower Representative, and upon approval by Agent
(which approval may be withheld in the sole and absolute discretion of Agent),
from time to time subsequent to the date hereof, additional Lenders may become
parties to this Agreement and to the other Loan Documents as additional Lenders
(each, an "Additional Lender") in order to increase the total Revolving Loan
Commitment hereunder, by executing a counterpart of this Agreement substantially
in the form of Annex L attached hereto. Agent shall notify the Lenders of
Agent's intention to add Additional Lenders to this Agreement and the other Loan
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Documents. Each Lender shall have a reasonable period of time after notice by
Agent to notify Agent of such Lender's desire and commitment to increase its
Revolving Loan Commitment, as may be increased from time to time in accordance
with this Section. In the event a Lender determines not to increase its
Revolving Loan Commitment, Agent shall be free to solicit third-party Additional
Lenders. Additional Lender shall execute and deliver to Agent such additional
agreements, confirmations and documents as Agent may require in order to
effectuate the addition of such Additional Lender and to confirm Additional
Lender's duties, obligations and liabilities under this Agreement and the other
Loan Documents. One or more Additional Lenders may become parties to this
Agreement and to the other Loan Documents from time to time without the approval
or consent of any of the Lenders, and each Lender hereby waives any right to
approve adding one or more Additional Lenders; provided, however, that the
aggregate commitment of all Lenders, including Additional Lenders, to make
Revolving Credit Advances shall not exceed an amount equal to Eighty Million
Dollars ($80,000,000.00). Upon delivery of any such counterpart to Agent, each
Additional Lender shall be a Lender and shall be as fully a party hereto as if
such Additional Lender were an original signatory hereto. Each Borrower hereby
acknowledges and agrees that any addition of any Additional Lender to this
Agreement shall give rise to a direct obligation of Borrowers to such Additional
Lender and that the Additional Lender shall be considered to be a "Lender" and
shall be entitled to all of the rights, remedies, as applicable, benefits and
privileges afforded all other Lenders hereunder. Each Borrower and other Credit
Party shall execute and deliver to Agent and Lenders such agreements and
documentation relative to the increase in the Revolving Loan Commitment of IDB
and relative to the adding of such Additional Lender and increase in the
aggregate Revolving Loan Commitment as Agent may reasonably require, including,
without limitation, a Revolving Note for IDB in the amount of the increase in
IDB's Revolving Loan Commitment (or, at IDB's election, an amended and restated
Revolving Note in the total amount of IDB's Revolving Loan Commitment) and a
Revolving Note for each Additional Lender in the amount of such Additional
Lender's Revolving Loan Commitment, such amendments or additions to the other
Loan Documents, including the Collateral Documents, as Agent may reasonably
require to reflect the addition of the Additional Lender and the increase in the
aggregate Revolving Loan Commitment, and such other documents as Agent may
require to confirm all Credit Parties' duties and obligations under this Section
11.2(b)(ii). Each Borrower and other Credit Party expressly agrees that its
obligations arising hereunder shall not be modified, affected or diminished by
the addition of any Additional Lender hereunder nor by any election of Agent not
to permit any Person to become an Additional Lender hereunder. Upon the
effective date of any increase in the total Revolving Loan Commitments of all of
the Lenders as a result of adding Additional Lenders, each Lender's Pro Rata
Share shall be adjusted to reflect such Lender's Revolving Loan Commitment
relative to the aggregate Revolving Loan Commitment of all Lenders.
Notwithstanding the foregoing, no increase in the Maximum Amount or in any
Revolving Loan Commitment shall be effective until such time as there are no
outstanding LIBOR Loans and in connection with any increase in the Maximum
Amount or any Revolving Loan Commitment, Borrowers' duties under Section 1.10(b)
of this Agreement shall apply.
(c) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
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(i) requiring the consent of all affected Lenders, the
consent of Requisite Lenders is obtained, but the consent of other Lenders whose
consent is required is not obtained (any such Lender whose consent is not
obtained as described in this clause (i) and in clause (ii) below being referred
to as a "Non-Consenting Lender"),
(ii) requiring the consent of Requisite Lenders, but the
consent of Requisite Lenders is not obtained,
then, so long as IDB is not a Non-Consenting Lender, at Borrower
Representative's request, Agent or a Person reasonably acceptable to Agent shall
have the right with Agent's consent and in Agent's sole discretion (but shall
have no obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent's request, sell and
assign to Agent or such Person, all of the Commitments of such Non-Consenting
Lenders for an amount equal to the principal balance of the Revolving Loan held
by the Non-Consenting Lenders and all accrued interest and Fees with respect
thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.
(d) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Agent and Lenders, and so long
as no suits, actions, proceedings or claims are pending or threatened against
any Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Credit Parties termination
statements, mortgage releases and other documents necessary or appropriate to
evidence the termination of the Liens securing payment of the Obligations
including without limitation documents reasonably requested by any Credit Party
to terminate or release its rights under any blocked account agreement, control
account or agreements with, or direction letters to, Servicing Agents.
11.3 Fees and Expenses. Borrowers shall reimburse Agent (and, with
respect to clauses (c) and (d) and (e) below, all Lenders) for all reasonable
out-of-pocket fees, costs and expenses, including the reasonable fees, costs and
expenses of counsel, consultants, field examiners or other advisors (including
environmental and management consultants and appraisers), incurred in connection
with the negotiation and preparation of the Loan Documents and incurred in
connection with:
(a) the forwarding to Borrowers or any other Person on behalf
of Borrowers by Agent of the proceeds of any Loan (including a wire transfer
fee, per wire transfer, at Agent's then prevailing wire transfer fee rate);
(b) any amendment, modification or waiver of, consent with
respect to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the syndication and administration of the
Revolving Loan made pursuant hereto or its rights hereunder or thereunder;
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(c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, any Lender, any Borrower or any other
Person and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Borrowers or any other Person that may be obligated to Agent or the Lenders by
virtue of the Loan Documents; including any such litigation, contest, dispute,
suit, proceeding or action arising in connection with any work-out or
restructuring of the Revolving Loan during the pendency of one or more Events of
Default; provided that no Person shall be entitled to reimbursement under this
clause (c) in respect of any litigation, contest, dispute, suit, proceeding or
action to the extent any of the foregoing results from such Person's gross
negligence or willful misconduct (as finally determined by a court of competent
jurisdiction);
(d) any attempt to enforce any remedies of Agent or Lenders
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Revolving Loan during the pendency of one or
more Events of Default;
(e) any workout or restructuring of the Revolving Loan during
the pendency of one or more Events of Default; and
(f) subject to the provisions and terms contained in Section
1.11 hereof relative to the payment of costs incurred in conducting field
examinations, efforts to (i) monitor the Revolving Loan or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral, provided
that the costs relating to activities undertaken pursuant to the preceding items
(i), (ii) and (iii) shall not exceed an amount equal to $25,000.00 in any Fiscal
Year, except in the event of a Default, which is not reasonably capable of being
cured, or Event of Default, in which event the costs relating to activities
undertaken pursuant to the preceding items (i), (ii) and (iii) shall not be
limited in any manner;
including, as to each of clauses (a) through (f) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrowers to Agent or such Lender. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and paralegals;
court costs and expenses; photocopying and duplication expenses; court reporter
fees, costs and expenses; long distance telephone charges; air express charges;
telegram or telecopy charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal or other advisory services.
11.4 No Waiver. Agent's or any Lender's failure, at any time or
times, to require strict performance by the Credit Parties of any provision of
this Agreement or any other Loan Document shall not waive, affect or diminish
any right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the Requisite Lenders, and directed to Borrowers specifying such
suspension or waiver.
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11.5 Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
11.6 Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.
11.7 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.8 Confidentiality. Agent, for itself and on behalf of IDB, and
each Lender agree to use commercially reasonable efforts (equivalent to the
efforts Agent or such Lender applies to maintaining the confidentiality of its
own confidential information) to maintain as confidential all confidential
information provided to them by the Credit Parties for a period of 2 years
following receipt thereof, except that Agent and any Lender may disclose such
information on a confidential "need to know" basis (a) to Persons employed or
engaged by Agent or such Lender; (b) to any bona fide assignee or participant or
potential assignee or participant that has agreed to comply with the covenant
contained in this Section 11.8 (and any such bona fide assignee or participant
or potential assignee or participant may disclose such information to Persons
employed or engaged by it as described in clause (a) above); (c) as required or
requested by any Governmental Authority or reasonably believed by Agent or such
Lender to be compelled by any court decree, subpoena or legal or administrative
order or process; (d) as, on the advice of Agent's or such Lender's counsel, is
required by law; (e) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any Litigation to which Agent or
such Lender is a party; or (f) that ceases to be confidential through no fault
of Agent or any Lender.
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Notwithstanding anything to the contrary set forth herein or in any other
agreement to which the parties hereto are parties or by which they are bound,
the obligations of confidentiality contained herein and therein, as they relate
to the transactions contemplated by the Agreement and the other loan documents
(the "Transaction"), shall not apply to the federal tax structure or federal tax
treatment of the Transaction, and each party hereto (and any employee,
representative, agent of any party hereto) may disclose to any and all persons,
without limitation of any kind, the federal tax structure and federal tax
treatment of the Transaction. The preceding sentence is intended to cause the
Transaction to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
Internal Revenue Code of 1986, as amended, and shall be construed in a manner
consistent with such purpose. In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the federal tax structure of the
Transaction or any federal tax matter or federal tax idea related to the
Transaction.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE CITY
OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY
WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN
ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR 5 DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
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11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and 5 days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid; (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 11.10); (c) 1 Business
Day after deposit with a reputable overnight courier with all charges prepaid or
(d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in Annex I or to such other address (or facsimile number) as
may be substituted by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to any Person
(other than Borrower Representative or Agent) designated in Annex I to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.
11.14 Press Releases and Related Matters. Each Credit Party
executing this Agreement agrees that neither it nor its Affiliates will in the
future issue any press releases or other public disclosure (i) using the name of
IDB or its affiliates or, (ii) other than standard disclosures associated with
its financial reporting or other similar, ordinary course of business
disclosures, referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least 2 Business Days' prior notice to
IDB and without obtaining IDB's prior written consent unless (and only to the
extent that) such Credit Party or Affiliate is required to do so under law and
then, in any event, such Credit Party or Affiliate will consult with IDB before
issuing such press release or other public disclosure. Each Credit Party
consents to the publication by Agent or any Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by this
Agreement. Agent reserves the right to provide to industry trade organizations
information necessary and customary for inclusion in league table measurements.
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11.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Borrower for liquidation or reorganization, should any Borrower become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Borrower's assets, and shall continue to be effective or to be reinstated, as
the case may be, if at any time payment and performance of the Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each
other party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
11.18 Agent for Service. Each Credit Party hereby appoints, and
Borrower Representative hereby accepts the appointment of, Borrower
Representative, located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
as the Agent for service of process for the Agent and Lenders solely in
connection with the Loan Documents Such appointment shall not be terminated by
Borrower Representative or any Credit Party without the prior written consent of
Agent.
12. CROSS-GUARANTY; SUBORDINATION
12.1 Cross-Guaranty. Each Borrower hereby agrees that such Borrower
is jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to Agent and Lenders and their respective successors and assigns, the
full and prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of, all Obligations owed or hereafter owing to Agent
and Lenders by each other Borrower. Each Borrower agrees that its guaranty
obligation hereunder is a continuing guaranty of payment and performance and not
of collection, that its obligations under this Section 12 shall not be
discharged until payment and performance, in full, of the Obligations has
occurred, and that its obligations under this Section 12 shall be absolute and
unconditional, irrespective of, and unaffected by,
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(a) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in, this Agreement, any other Loan Document
or any other agreement, document or instrument to which any Borrower is or may
become a party;
(b) the absence of any action to enforce this Agreement
(including this Section 12) or any other Loan Document or the waiver or consent
by Agent and Lenders with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to
perfect its Lien against, any security for the Obligations or any action, or the
absence of any action, by Agent and Lenders in respect thereof (including the
release of any such security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Each Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations guaranteed hereunder.
12.2 Waivers by Borrowers. Each Borrower expressly waives all
rights it may have now or in the future under any statute, or at common law, or
at law or in equity, or otherwise, to compel Agent or Lenders to marshal assets
or to proceed in respect of the Obligations guaranteed hereunder against any
other Credit Party, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Borrower. It is agreed among each Borrower, Agent and
Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for
the provisions of this Section 12 and such waivers, Agent and Lenders would
decline to enter into this Agreement.
12.3 Benefit of Guaranty. Each Borrower agrees that the provisions
of this Section 12 are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any other Borrower and Agent or Lenders, the
obligations of such other Borrower under the Loan Documents.
12.4 Subordination of Subrogation, Etc. Notwithstanding anything to
the contrary in this Agreement or in any other Loan Document, and except as set
forth in Section 12.7, each Borrower hereby expressly and irrevocably
subordinates to payment of the Obligations any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution, indemnification
or set off and any and all defenses available to a surety, guarantor or
accommodation co-obligor until the Obligations are indefeasibly paid in full in
cash. Each Borrower acknowledges and agrees that this subordination is intended
to benefit Agent and Lenders and shall not limit or otherwise affect such
Borrower's liability hereunder or the enforceability of this Section 12, and
that Agent, Lenders and their respective successors and assigns are intended
third party beneficiaries of the waivers and agreements set forth in this
Section 12.4.
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12.5 Election of Remedies. If Agent or any Lender may, under
applicable law, proceed to realize its benefits under any of the Loan Documents
giving Agent or such Lender a Lien upon any Collateral, whether owned by any
Borrower or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this Section 12. If, in the exercise of any of its
rights and remedies, Agent or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, each Borrower hereby consents to such
action by Agent or such Lender and waives any claim based upon such action, even
if such action by Agent or such Lender shall result in a full or partial loss of
any rights of subrogation that each Borrower might otherwise have had but for
such action by Agent or such Lender. Any election of remedies that results in
the denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower's
obligation to pay the full amount of the Obligations. In the event Agent or any
Lender shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or the Loan Documents, Agent or such Lender may bid all or less
than the amount of the Obligations and the amount of such bid need not be paid
by Agent or such Lender but shall be credited against the Obligations owing to
it. The amount of the successful bid at any such sale, whether Agent, Lender or
any other party is the successful bidder, shall be conclusively deemed to be the
fair market value of the Collateral and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be
the amount of the Obligations guaranteed under this Section 12, notwithstanding
that any present or future law or court decision or ruling may have the effect
of reducing the amount of any deficiency claim to which Agent or any Lender
might otherwise be entitled but for such bidding at any such sale.
12.6 Limitation. Notwithstanding any provision herein contained to
the contrary, each Borrower's liability under this Section 12 (which liability
is in any event in addition to amounts for which such Borrower is primarily
liable under Section 1) shall be limited to an amount not to exceed as of any
date of determination the amount that could be claimed by Agent and Lenders from
such Borrower under this Section 12 without rendering such claim void or
voidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from each
other Borrower under Section 12.7.
12.7 Contribution with Respect to Guaranty Obligations.
(a) To the extent that any Borrower shall make a payment under
this Section 12 of all or any of the Obligations (other than the Revolving Loan
made to that Borrower for which it is primarily liable) (a "Guarantor Payment")
that, taking into account all other Guarantor Payments then previously or
concurrently made by any other Borrower, exceeds the amount that such Borrower
would otherwise have paid if each Borrower had paid the aggregate Obligations
satisfied by such Guarantor Payment in the same proportion that such Borrower's
"Allocable Amount" (as defined below) (as determined immediately prior to such
Guarantor Payment) bore to the aggregate Allocable Amounts of each of the
Borrowers as determined immediately prior to the making of such Guarantor
Payment, then, following indefeasible payment in full in cash of the Obligations
and termination of the Commitments, such Borrower shall be entitled to receive
contribution and indemnification payments from, and be reimbursed by, each other
Borrower for the amount of such excess, pro rata based upon their respective
Allocable Amounts in effect immediately prior to such Guarantor Payment.
73
(b) As of any date of determination, the "Allocable Amount" of
any Borrower shall be equal to the maximum amount of the claim that could then
be recovered from such Borrower under this Section 12 without rendering such
claim void or voidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(c) This Section 12.7 is intended only to define the relative
rights of Borrowers and nothing set forth in this Section 12.7 is intended to or
shall impair the obligations of Borrowers, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Agreement, including Section 12.1. Nothing contained in this
Section 12.7 shall limit the liability of any Borrower to pay the Revolving Loan
made directly or indirectly to that Borrower and accrued interest, Fees and
expenses with respect thereto for which such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Borrower to which such contribution and indemnification is owing.
(e) The rights of the indemnifying Borrowers against other
Credit Parties under this Section 12.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Commitments.
12.8 Liability Cumulative. The liability of Borrowers under this
Section 12 is in addition to and shall be cumulative with all liabilities of
each Borrower to Agent and Lenders under this Agreement and the other Loan
Documents to which such Borrower is a party or in respect of any Obligations or
obligation of the other Borrower, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
12.9 Subordination.
(a) Each Credit Party executing this Agreement covenants and
agrees that the payment of all indebtedness, principal, interest (including
interest which accrues after the commencement of any case or proceeding in
bankruptcy, or for the reorganization of any Credit Party), fees, charges,
expenses, attorneys' fees and any other sum, obligation or liability owing by
any other Credit Party to such Credit Party, including any intercompany trade
payables or royalty or licensing fees (collectively, the "Intercompany
Obligations"), is subordinated, to the extent and in the manner provided in this
Section 12.9, to the prior payment in full of all Obligations (herein, the
"Senior Obligations") and that the subordination is for the benefit of the Agent
and Lenders, and Agent may enforce such provisions directly, provided that
regularly scheduled payments under Intercompany Obligations may be made so long
as no Default, which is not reasonably capable of being cured, or Event of
Default has occurred and is continuing.
74
(b) Each Credit Party executing this Agreement hereby (i)
authorizes Agent to demand specific performance of the terms of this Section
12.9, whether or not any other Credit Party shall have complied with any of the
provisions hereof applicable to it, at any time when such Credit Party shall
have failed to comply with any provisions of this Section 12.9 which are
applicable to it and (ii) irrevocably waives any defense based on the adequacy
of a remedy at law, which might be asserted as a bar to such remedy of specific
performance.
(c) Upon any distribution of assets of any Credit Party in any
dissolution, winding up, liquidation or reorganization (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):
(i) The Agent and Lenders shall first be entitled to
receive payment in full in cash of the Senior Obligations before any Credit
Party is entitled to receive any payment on account of the Intercompany
Obligations.
(ii) Any payment or distribution of assets of any Credit
Party of any kind or character, whether in cash, property or securities, to
which any other Credit Party would be entitled except for the provisions of this
Section 12.9(c), shall be paid by the liquidating trustee or agent or other
Person making such payment or distribution directly to the Agent, to the extent
necessary to make payment in full of all Senior Obligations remaining unpaid
after giving effect to any concurrent payment or distribution or provisions
therefor to the Agent and Lenders.
(iii) In the event that notwithstanding the foregoing
provisions of this Section 12.9(c), any payment or distribution of assets of any
Credit Party of any kind or character, whether in cash, property or securities,
shall be received by any other Credit Party on account of the Intercompany
Obligations before all Senior Obligations are paid in full, such payment or
distribution shall be received and held in trust for and shall be paid over to
the Agent for application to the payment of the Senior Obligations until all of
the Senior Obligations shall have been paid in full, after giving effect to any
concurrent payment or distribution or provision therefor to the Agent and
Lenders.
(d) No right of the Agent and Lenders or any other present or
future holders of any Senior Obligations to enforce the subordination provisions
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of any Credit Party or by any act or failure to act,
in good faith, by any such holder, or by any noncompliance by any Credit Party
with the terms hereof, regardless of any knowledge thereof which any such holder
may have or be otherwise charged with.
[Signature Pages to Follow]
75
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.
13. BORROWERS:
ASTA FUNDING ACQUISITION II, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
PALISADES COLLECTION, L.L.C.
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
ASTA FUNDING ACQUISITION I, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
PALISADES ACQUISITION IV, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
PALISADES ACQUISITION I, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
PALISADES ACQUISITION II, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
CLIFFS PORTFOLIO ACQUISITION I, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
GUARANTOR:
ASTA FUNDING, INC.
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: President
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
COMPUTER FINANCE, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
ASTA COMMERCIAL, LLC
By: /S/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
14. LENDERS:
15. ISRAEL DISCOUNT BANK OF NEW YORK,
as Agent and Lender
By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Its Duly Authorized Signatory
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Its Duly Authorized Signatory
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL
SERVICES INC., as Lender
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, as Lender
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
BANK LEUMI USA, as Lender
By: /S/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
ANNEX A (RECITALS)
TO
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings, and
all references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the
Agreement:
"Account Debtor" means any Person who may become obligated to any Credit Party
under, with respect to, or on account of, an Account, Chattel Paper, Instruments
or General Intangibles (including a payment intangible).
"Accounting Changes" has the meaning ascribed thereto in Annex G.
"Accounts" means all "accounts," as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts, consumer accounts and other forms of
obligations (including any such obligations that may be characterized as an
account or contract right under the Code), (b) all of each Credit Party's rights
in, to and under all services, (c) all rights to payment due to any Credit Party
for property sold, leased, licensed, assigned or otherwise disposed of, for a
policy of insurance issued or to be issued, for a secondary obligation incurred
or to be incurred, for energy provided or to be provided, for the use or hire of
a vessel under a charter or other contract, arising out of the use of a credit
card or charge card, or for services rendered or to be rendered by such Credit
Party or in connection with any other transaction (whether or not yet earned by
performance on the part of such Credit Party), (d) all health care insurance
receivables and (e) all collateral security of any kind, given by any Account
Debtor or any other Person with respect to any of the foregoing. The term
Accounts shall also include forms of obligations evidenced by Chattel Paper or
Instruments and Accounts relating to Auto Loans and Consumer Loans.
"Advance" or "Advances" means any Revolving Credit Advance.
"Affected Lender" has the meaning ascribed to it in Section 1.13(d).
"Affiliate" means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or
other fiduciary, 10% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each of such
Person's officers, directors, joint venturers (except with respect to the joint
venturer, EMCC, Inc., and any other joint venture approved by Agent, which
approval shall not be unreasonably withheld) and partners (d) in the case of
Borrowers, the immediate family members, spouses and lineal descendants of
individuals who are Affiliates of any Borrower, and (e) an entity that is wholly
owned by Asta Funding and is engaged in the business of acquiring and/or
managing Portfolios and executes and delivers to Lender an Affiliate Guaranty,
an Affiliate Security Agreement and an Affiliate Confirmation. For the purposes
of this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term "Affiliate" shall specifically
exclude Agent and each Lender.
A-1
"Affiliate Confirmation" means the agreement executed by each Affiliate in form
of Exhibit C annexed to the Disclosure Document.
"Affiliate Guaranty" means a guaranty, in form acceptable to Agent at the time
of execution, executed by an Affiliate of all of the Obligations.
"Affiliate Security Agreement" means a security agreement, in form acceptable to
Agent at the time of execution, executed by an Affiliate granting to Agent a
security interest in and lien on its Collateral.
"Agent" means IDB in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 9.7.
"Aging Report" means an aged summary report and a non-aged listing report for
each Portfolio, each in detail reasonably satisfactory to Lender with respect to
the outstanding Portfolios as of the last day of each month, and setting forth
the name of each Portfolio, the original amount and date of each Portfolio and
aggregate Payments with respect to each Portfolio.
"Agreement" means this Third Amended and Restated Loan and Security Agreement by
and among Borrowers, the other Credit Parties party hereto, IDB, as Agent and
Lender, and the other Lenders from time to time party thereto, as the same may
be amended, supplemented, restated or otherwise modified from time to time.
"Allocable Amount" has the meaning ascribed to it in Section 12.7(a).
"Appendices" has the meaning ascribed to it in the recitals to the Agreement.
"Applicable Margins" means collectively the Applicable Unused Line Fee Margin,
the Applicable Revolver Base Margin and the Applicable Revolver LIBOR Margin.
"Applicable Percentage" has the meaning ascribed to it in Section 1.6(c).
"Applicable Revolver Base Margin" means the per annum interest rate margin from
time to time in effect and payable in addition to the Base Rate applicable to
the Revolving Loan, as determined by reference to Section 1.4(a).
"Applicable Revolver LIBOR Margin" means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Revolving Loan, as determined by reference to Section 1.4(a).
"Applicable Unused Line Fee Margin" shall have the meaning set forth in the
Lenders' Fee Letter.
"Assignment Agreement" has the meaning ascribed to it in Section 9.1(a).
"Asta I" means Asta Funding Acquisition I, LLC.
"Asta Funding" means Asta Funding, Inc.
"Auto Contract" means any agreement or contract or other evidence of debt
executed by an Account Debtor in connection with an Auto Loan and any amendments
thereto.
A-2
"Auto Loan" means all automobile loans or leases presently and hereafter owned,
set forth in a written report or in computer discs, from time to time, delivered
to Agent, which computer discs shall be in the current format or any other
format acceptable to Agent, together with each Auto Contract, chattel paper,
instrument, document, general intangible, guarantee and all collateral security
held with respect to such loans.
"Average Collections" shall mean (i) the average monthly amount of the actual
Collections (net of any collection costs and other fees permitted to be deducted
from Collections by the express terms of the servicing agreement that
corresponds to such Collections) with respect to an Eligible Portfolio in the
three (3) full calendar months immediately preceding the date of computation or
determination, multiplied by (ii) fifteen (15). Average Collections shall
exclude Proceeds from the sale of Portfolios.
"Bankruptcy Code" means the provisions of Title 11 of the United States Code, 11
U.S.C.ss.ss.101 et seq.
"Base Rate" means, for any day, a floating rate equal to the rate established
from time to time by IDB its "Prime Rate". Each change in any interest rate
provided for in the Agreement based upon the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loan" means a Revolving Loan or portion thereof bearing interest by
reference to the Base Rate.
"Blocked Accounts" has the meaning ascribed to it in Annex C.
"Books and Records" means all records, in any format whatsoever and the computer
software, programs and access codes, relating to each Consumer Loan and the
Collateral.
"Borrower Representative" means Palisades in its capacity as Borrower
Representative pursuant to the provisions of Section 1.1(b).
"Borrowers" and "Borrower" have the respective meanings ascribed thereto in the
preamble to the Agreement.
"Borrowing Availability" means as of any date of determination (a) as to all
Borrowers, the lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in
each case, less the Revolving Loan then outstanding, (b) as to Tranche A, the
lesser of (i) the Maximum Amount less the Revolving Loan outstanding to Tranche
B and (ii) the Tranche A Borrowing Availability, less the Revolving Loan
outstanding to Tranche A Advances; or (c) as to Tranche B, the lesser of (i) the
Maximum Amount less the Revolving Loan outstanding to Tranche A and (ii) the
Tranche B Borrowing Availability, less the Revolving Loan outstanding to Tranche
B Advances.
"Borrowing Base" means, as of any date of determination by Agent, from time to
time, an amount equal to the sum at such time of:
(a) 75% of the Loan Value of the Eligible Existing Portfolios;
plus
(b) 50% of the Loan Value of the Eligible New Portfolios;
in each case, less any Reserves established by Agent at such time.
A-3
"Borrowing Base Certificate" means a certificate to be executed and delivered
from time to time by Borrower Representative with respect to the Borrowing Base
in the form attached to the Disclosure Document as Exhibit 4.1(b)- 2.
"Business Day" means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York and in
reference to LIBOR Loans shall mean any such day that is also a LIBOR Business
Day.
"Capital Expenditures" means, with respect to any Person, all expenditures (by
the expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one year
and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.
"Capital Lease Obligation" means, with respect to any Capital Lease of any
Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
"Cash Collateral Account" has the meaning ascribed to it Annex B.
"Cash Flow Leverage Ratio" means, with respect to Borrowers, on a consolidated
basis, the ratio of (a) Funded Debt, to (b) Free Cash Flow for the twelve months
ending on that date of determination.
"Cash Equivalent Investments" means investments deposited with a Lender which
can easily, readily and quickly be converted into cash, including Treasury bills
(T-bills), money market funds, short-term certificates of deposit, U.S.
Government Securities, and savings accounts.
"Cash Management Systems" has the meaning ascribed to it in Section 1.5.
"Certificate of Exemption" has the meaning ascribed to it in Section 1.12(c).
"Change of Control" means any event, transaction or occurrence as a result of
which (a) Asta Funding ceases to own and control all of the economic and voting
rights associated with all of the outstanding capital Stock of the Borrowers,
except Cliffs, (b) Palisades ceases to own and control all of the economic and
voting rights associated with all of the outstanding capital Stock of Cliffs,
(c) during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the board of directors of Asta Funding
(together with any new directors whose election by the board of directors of
Asta Funding or whose nomination for election by the Stockholders of Asta
Funding was approved by a vote of the majority of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason other than death or disability to constitute a majority of the directors
then in office, (d) ▇▇▇▇ ▇▇▇▇▇ shall no longer be acting as the president and
chief executive officer of the Borrowers having substantially the same duties
and responsibilities as on the Closing Date, unless the Borrowers shall have
within a reasonable period of time not to exceed 180 days obtained a successor
of at least comparable background, experience and ability who is reasonably
acceptable to the Requisite Lenders, or (e) any two of the Senior Executives
shall no longer be members of the Borrowers' senior management having
substantially the same duties and responsibilities as on the Closing Date,
unless the Borrowers shall have within a reasonable period of time not to exceed
180 days obtained successors of at least comparable background, experience and
ability who are reasonably acceptable to the Requisite Lenders. For the purposes
of this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
A-4
"Charges" means all federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll,
income or gross receipts of any Credit Party, (d) any Credit Party's ownership
or use of any properties or other assets, or (e) any other aspect of any Credit
Party's business.
"Chattel Paper" means any "chattel paper," as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Credit Party.
"Cliffs" means Cliffs Portfolio Acquisition I, LLC.
"Closing Checklist" means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex D.
"Closing Date" means May 11, 2004.
"Code" means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Articles or Divisions 1 and 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to, Agent's or any Lender's Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term "Code" shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or remedies
and for purposes of definitions related to such provisions.
"Collateral" means the property covered by the Security Agreement and the other
Collateral Documents and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, on behalf of
itself and Lenders, to secure the Obligations.
"Collateral Documents" means the Security Agreement, the Pledge Agreements, the
Guaranties, the Intellectual Property Security Agreement and all similar
agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.
"Collateral Reports" means the reports with respect to the Collateral referred
to in Annex F.
A-5
"Collection Account" means that certain account of Agent, account number
▇▇-▇▇▇▇-▇ in the name of Agent at Agent in New York, New York ABA No. ▇▇▇▇▇▇▇▇▇,
or such other account as may be specified in writing by Agent as the "Collection
Account".
"Collection Report" means a report in detail satisfactory to Agent as to all
Collections received during each month and the Account or Consumer Loan to which
it applies.
"Collections" mean all Payments actually received and collected by or on behalf
of the Borrowers, any Credit Party or any Servicing Agent with respect to any
Consumer Loan, which is included in the Collateral and is remitted to the Lender
as provided in this Agreement.
"Collections Multiple Value" means the Average Collections for an Eligible
Existing Portfolio.
"Commitment Termination Date" means the earliest of (a) May 11, 2006, (b) the
date of termination of Lenders' obligations to make Advances or permit the
existing Revolving Loan to remain outstanding pursuant to Section 8.2(b), and
(c) the date of indefeasible prepayment in full by Borrowers of the Revolving
Loan, and the permanent reduction of all Commitments to zero dollars ($0).
"Commitments" means (a) as to any Lender, the aggregate of such Lender's
Revolving Loan Commitment as set forth on Annex J to the Agreement or in the
most recent Assignment Agreement executed by such Lender and (b) as to all
Lenders, the aggregate of all Lenders' Revolving Loan Commitments, which
aggregate commitment shall be SIXTY MILLION DOLLARS ($60,000,000) on the Closing
Date, as to each of clauses (a) and (b), as such Commitments may be reduced,
amortized or adjusted from time to time in accordance with the Agreement.
"Compliance Certificate" has the meaning ascribed to it in Annex E.
"Concentration Accounts" has the meaning ascribed to it in Annex C.
"Consumer Loans" means all Credit Card Receivables, Auto Loans and any other
type of consumer loan acceptable to Agent now or hereafter owned or held by the
Borrowers.
"Contracts" means all "contracts," as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.
"Copyright License" means any and all rights now owned or hereafter acquired by
any Credit Party under any written agreement granting any right to use any
Copyright or Copyright registration.
"Copyrights" means all of the following now owned or hereafter adopted or
acquired by any Credit Party: (a) all copyrights (whether registered or
unregistered), all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Copyright Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof, and (b) all reissues, extensions or renewals
thereof.
A-6
"Credit Card Receivables" means each of the performing and non-performing credit
card receivables and/or loans presently owned, and as, from time to time, fully
set forth in a computer disc delivered to Agent, which shall be in a format
acceptable to the Agent, whether such is deemed to consist of accounts or
general intangibles under the Code, together with any chattel paper, instrument,
document, general intangible, guarantee and other collateral security held by
Borrowers with respect to such receivables and/or loans, together with the
proceeds thereof.
"Credit Party Pledge Agreement" means the Pledge Agreement of even date herewith
executed by each of the Credit Parties, except Non-Credit Party Affiliates, in
favor of Agent, on behalf of itself and Lenders, pledging all Stock of its
Subsidiaries, if any, and all Intercompany Notes owing to or held by it.
"Credit Parties" means Asta Funding, Computer Finance, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Asta
Commercial, each Borrower, and each of their respective Subsidiaries, except
Non-Credit Party Affiliate.
"Default" means any event that, with the passage of time or notice or both,
would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning ascribed to it in Section 1.4(d).
"Deposit Accounts" means all "deposit accounts" as such term is defined in the
Code, now or hereafter held in the name of any Credit Party.
"Disaster Recovery Plan" means the plan, pursuant to which all records, books,
accounts, entries, and other information (financial and otherwise) regarding the
business activities and operations of the Credit Parties, including, without
limitation, past and up-to-date information regarding the Collateral, the
Accounts, the Portfolios, the Payments, and the Collections (collectively, the
"Critical Information"), is maintained in electronic format at the physical
facilities of Credit Parties located in the States of New Jersey and
Pennsylvania. All Critical Information generated by the business operations of
the Credit Parties at the New Jersey physical facility is saved and backed up on
a daily basis for safeguarding and safekeeping at the New Jersey physical
facility, and all Critical Information generated by the business operations of
the Credit Parties at the Pennsylvania physical facility is saved and backed up
on a daily basis for safeguarding and safekeeping at the Pennsylvania physical
facility. All Critical Information generated by the business operations of the
Credit Parties at the New Jersey physical facility (including all Critical
Information stored at such physical facility) is saved and backed up on a daily
basis for safeguarding and safekeeping at the Pennsylvania physical facility,
and all Critical Information generated by the business operations of the Credit
Parties at the Pennsylvania physical facility (including all Critical
Information stored at such physical facility) is saved and backed up on a daily
basis for safeguarding and safekeeping at the New Jersey physical facility. All
Critical Information generated by the business operations of the Credit Parties
at the New Jersey and Pennsylvania physical facilities and all Critical
Information saved or backed up at the New Jersey and Pennsylvania physical
facilities (including all Critical Information stored at such physical
facilities) is copied in electronic format in duplicate, and one copy is stored
at the New Jersey facility in a fire-proof safe and the other is removed on a
daily basis from such physical facilities and kept at a safe location, which
location may include the residence of a key employee of the Credit Parties.
"Disbursement Accounts" has the meaning ascribed to it in Annex C.
A-7
"Disclosure Document" means the document dated as of the date hereof by
Borrowers and all other Credit Parties signatory to the Agreement with respect
to certain disclosures made to Agent and Lenders in the Agreement, as may be
modified from time to time as provided in the Agreement. All disclosures,
representations and warranties contained in the Disclosure Document shall be
acceptable to Agent.
"Documents" means all "documents," as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located.
"Dollars" or "$" means lawful currency of the United States of America.
"EBITDA" means, with respect to any Person for any fiscal period, without
duplication, net income minus extraordinary gains plus interest, depreciation,
amortization, income taxes, accrued stock option compensation expense and
extraordinary losses.
"Effective Date" means the date on which the Agreement shall become effective,
which shall be the date on which (i) Borrowers and Guarantor, along with Agent
and Lenders shall have executed and delivered the Agreement and the other Loan
Documents, and (ii) all of the conditions precedent to the effectiveness of the
Agreement, including, without limitation, the conditions precedent set forth in
Section 2 of the Agreement, and the conditions set forth in Annex C attached to
the Agreement, shall have been satisfied and performed in a manner reasonably
acceptable to Agent and Lenders.
"Eligible Existing Portfolio" shall mean an Existing Portfolio as to which (i)
the Agent, on behalf of the Lenders has a first priority, perfected lien on the
Accounts comprising the Portfolio and there are no recorded or unrecorded Liens
against the Accounts for the benefit of any party other than the Agent, and (ii)
the Borrower's rights to Collections or sales proceeds generated by the
Portfolio are not limited by the contract rights of a third party, other than
Liens pursuant to servicing and collection agreements entered into in the
ordinary course of business in accordance with the terms, conditions and
provisions of the Agreement.
"Eligible New Portfolio" shall mean a New Portfolio as to which (i) the Agent,
on behalf of the Lenders has a first priority, perfected lien on the Accounts
comprising the Portfolio and there are no recorded or unrecorded Liens against
the Accounts for the benefit of any party other than the Agent, and (ii) the
Borrower's rights to Collections or sales proceeds generated by the Portfolio
are not limited by the contract rights of a third party, other than Liens
pursuant to servicing and collection agreements entered into in the ordinary
course of business in accordance with the terms, conditions and provisions of
the Agreement, including, without limitation, the provisions of Section 6.23 of
the Agreement.
"Eligible Portfolios" means collectively and individually, Eligible Existing
Portfolios and Eligible New Portfolios.
"Environmental Laws" means all applicable federal, state, local and foreign
laws, statutes, ordinances, codes, rules, and regulations in effect, and any
applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment,
imposing liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws
include the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (42 U.S.C.ss.ss.9601 et seq.) ("CERCLA"); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C.ss.ss.5101 et seq.); the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.ss.ss.136 et seq.);
the Solid Waste Disposal Act (42 ▇.▇.▇.▇▇.▇▇. 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C.ss.ss.2601 et seq.); the Clean Air Act (42
U.S.C.ss.ss.7401 et seq.); the Federal Water Pollution Control Act (33
U.S.C.ss.ss.1251 et seq.); the Occupational Safety and Health Act (29
U.S.C.ss.ss.651 et seq.); and the Safe Drinking Water Act (42 ▇.▇.▇.▇▇.▇▇.
300(f) et seq.), and any and all regulations promulgated thereunder, and all
analogous state, local and foreign counterparts or equivalents and any transfer
of ownership notification or approval statutes.
A-8
"Environmental Liabilities" means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
"Equipment" means all "equipment," as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located and, in any
event, including all such Credit Party's machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to any Credit Party, any trade or business
(whether or not incorporated) that, together with such Credit Party, are treated
as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of
the IRC.
"ERISA Event" means, with respect to any Credit Party or any ERISA Affiliate,
(a) any event described in Section 4043(c) of ERISA with respect to a Title IV
Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other
event or condition that could reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i)
the revocation or threatened revocation of a Qualified Plan's qualification or
tax exempt status; or (j) the termination of a Plan described in Section 4064 of
ERISA; but in each such case, only if and to the extent it could be reasonably
be expected to result (directly or indirectly, individually or in the aggregate)
in a Material Adverse Effect.
A-9
"ESOP" means a Plan that is intended to satisfy the requirements of Section
4975(e)(7) of the IRC.
"Event of Default" has the meaning ascribed to it in Section 8.1.
"Existing Debt" has the meaning ascribed to it in the recitals to the Agreement.
"Existing Portfolio" shall mean a Portfolio that a Borrower has owned for more
than one hundred eighty (180) days as to which such Borrower has all right,
title and interest in the Accounts comprising the Portfolio.
"Fair Labor Standards Act" means the Fair Labor Standards Act, 29 U.S.C.ss.201
et seq.
"Federal Funds Rate" means, for any day, a floating rate equal to the weighted
average of the rates on overnight Federal funds transactions among members of
the Federal Reserve System, as determined by Agent in its sole discretion, which
determination shall be final, binding and conclusive (absent manifest error).
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"Fees" means any and all fees payable to Agent or any Lender pursuant to the
Agreement or any of the other Loan Documents.
"Financial Covenants" means the financial covenants set forth in Annex G.
"Financial Statements" means the consolidated (together with consolidating
worksheets) income statements, statements of cash flows and balance sheets of
Asta Funding delivered in accordance with Section 3.4 and Annex E.
"First Adjustment Date" has the meaning assigned to it in Section 1.4(a).
"Fiscal Month" means any of the monthly accounting periods of Borrowers.
"Fiscal Quarter" means any of the quarterly accounting periods of Borrowers,
ending on March 31, June 30, September 30 and December 31 of each year.
A-10
"Fiscal Year" means any of the annual accounting periods of Borrowers ending on
September 30 of each year, subject to any change in the Fiscal Year permitted
under the Agreement.
"Fixed Charges" means, with respect to any Person for any fiscal period, the sum
of interest, scheduled payments of principal (if any), capital expenditures,
cash taxes and dividends.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any fiscal
period, the ratio of EBITDA to Fixed Charges.
"Fixtures" means all "fixtures" as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party.
"Foreign Lender" has the meaning ascribed to it in Section 1.12(c).
"Foreign Person" has the meaning ascribed to it in Section 1.12(c).
"Free Cash Flow" means as of any date of determination the sum of (a) the amount
of all Collections reported as principal collected on Accounts acquired for
liquidation (as reported in the most recent statement of cash flow in the
financial statements delivered to Agent and Lenders, but excluding Collections
of Accounts relating to Non-Recourse Debt), plus (b) net income (but excluding
net income of all Non-Credit Party Affiliates), less (c) dividends paid, less
(d) Capital Expenditures.
"Funded Debt" means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt, and also including, in the case of Borrowers, the Obligations
and, without duplication, Guaranteed Indebtedness consisting of guaranties of
Funded Debt of other Persons. The term Funded Debt shall not include
Non-Recourse Debt.
"GAAP" means generally accepted accounting principles in the United States of
America consistently applied, as such term is further defined in Annex G to the
Agreement.
"General Intangibles" means all "general intangibles," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, including all
right, title and interest that such Credit Party may now or hereafter have in or
under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, including, without
limitation, Non-Recourse Investments, licenses, permits, copyrights, trade
secrets, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records, goodwill (including the goodwill
associated with any Trademark or Trademark License), all rights and claims in or
under insurance policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax refunds
and other payments, rights to receive dividends, distributions, cash,
Instruments and other property in respect of or in exchange for pledged Stock
and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.
A-11
"Goods" means all "goods" as defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, including embedded software to
the extent included in "goods" as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" means as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease,
dividend, or other obligation ("primary obligation") of any other Person (the
"primary obligor") in any manner, including any obligation or arrangement of
such Person to (a) purchase or repurchase any such primary obligation, (b)
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or (e)
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
incurred and (y) the maximum stated or determinable amount for which such Person
may be liable pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness, or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
"Guaranty" means the guaranty of even date herewith executed by Asta Funding and
each Subsidiary of a Borrower in favor of Agent and Lenders.
"Guaranties" means the Guaranty and any other guaranty executed by any Guarantor
in favor of Agent and Lenders in respect of the Obligations.
"Guarantors" means Asta Funding, Computer Finance, LLC, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Asta
Commercial, each Subsidiary of any Borrower that is not a Borrower, and each
other Person, if any, that executes a guaranty or other similar agreement in
favor of Agent, for itself and the ratable benefit of Lenders, in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.
"Guarantor Payment" has the meaning ascribed to it in Section 12.7(a).
"Hazardous Material" means any substance, material or waste that is regulated
by, or forms the basis of liability now or hereafter under, any Environmental
Laws, including any material or substance that is (a) defined as a "solid
waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
A-12
"IDB" means Israel Discount Bank of New York, a New York banking corporation.
"IDB Fee Letter" means that certain letter dated as of the date hereof, between
IDB and Borrowers with respect to certain Fees to be paid from time to time by
Borrowers to IDB.
"Inactive Subsidiaries" means Asta Auto Receivables Company, E.R. Receivables
Corp., LLC, RAC Acceptance Corp., LLC, Asta Funding Acquisition III, LLC,
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC, Topps Promotion, LLC, and Asta Commercial, LLC.
"Indebtedness" means, with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred 6 months or more, but excluding
obligations to trade creditors incurred in the ordinary course of business that
are unsecured and not overdue by more than 6 months unless being contested in
good faith, (b) all reimbursement and other obligations with respect to letters
of credit, bankers' acceptances and surety bonds, whether or not matured, (c)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Base Rate
as in effect on the Closing Date) of future rental payments under all synthetic
leases, (f) all obligations of such Person under commodity purchase or option
agreements or other commodity price hedging arrangements, in each case whether
contingent or matured, (g) all obligations of such Person under any foreign
exchange contract, currency swap agreement, interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to alter the risks
of that Person arising from fluctuations in currency values or interest rates,
in each case whether contingent or matured, (h) all Indebtedness referred to
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
or other assets (including accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of such
Indebtedness, and (i) the Obligations.
"Indemnified Liabilities" has the meaning ascribed to it in Section 1.10.
"Indemnified Person" has the meaning ascribed to in Section 1.10.
"Instruments" means all "instruments," as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and, in any
event, including all certificated securities, all certificates of deposit, and
all promissory notes and other evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.
"Intellectual Property" means any and all Licenses, Patents, Copyrights,
Trademarks, and the goodwill associated with such Trademarks.
A-13
"Intellectual Property Security Agreement" means the Intellectual Property
Security Agreement made in favor of Agent, on behalf of itself and Lenders, by
each Credit Party that is a signatory thereto.
"Intercompany Notes" has the meaning ascribed to it in Section 6.3.
"Intercompany Obligations" has the meaning ascribed to it in Section 12.9(a).
"Interest Expense" means, with respect to any Person for any fiscal period,
interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including,
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.
"Interest Payment Date" means (a) as to any Base Rate Loan, the first Business
Day of each month to occur while such Loan is outstanding, and (b) as to any
LIBOR Loan, the last day of the applicable LIBOR Period; provided that, in the
case of a LIBOR Loan having a six (6) month Interest Period, also on the three
(3) month anniversary of the first day of such Interest Period, and provided
further that, in addition to the foregoing, each of (x) the date upon which all
of the Commitments have been terminated and the Revolving Loan have been paid in
full and (y) the Commitment Termination Date shall be deemed to be an "Interest
Payment Date" with respect to any interest that has then accrued under the
Agreement.
"Inventory" means all "inventory," as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and in any
event including inventory, merchandise, goods and other personal property that
are held by or on behalf of any Credit Party for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.
"Investment Property" means all "investment property" as such term is defined in
the Code now owned or hereafter acquired by any Credit Party, wherever located,
including (i) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all securities
entitlements of any Credit Party, including the rights of any Credit Party to
any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account; (iii)
all securities accounts of any Credit Party; (iv) all commodity contracts of any
Credit Party; and (v) all commodity accounts held by any Credit Party.
"IRC" means the Internal Revenue Code of 1986 and all regulations promulgated
thereunder.
"IRS" means the Internal Revenue Service.
"Lenders" means IDB, the other Lenders named on the signature pages of the
Agreement, and, if any such Lender shall decide to assign all or any portion of
the Obligations, such term shall include any assignee of such Lender.
A-14
"Lenders' Fee Letter" means that certain letter dated as of the date hereof,
between Agent, for itself and as Agent for the Lenders, and Borrowers with
respect to certain Fees to be paid from time to time by Borrowers to Lenders.
"Leverage Ratio" means, with respect to Asta Funding, on a consolidated basis,
the ratio of (a) Total Liabilities, to (b) Tangible Net Worth on the date of
determination.
"LIBOR Business Day" means a Business Day on which banks in the City of London
are generally open for interbank or foreign exchange transactions.
"LIBOR Loan" means a Loan or any portion thereof bearing interest by reference
to the LIBOR Rate.
"LIBOR Period" means, with respect to any LIBOR Loan, each period commencing on
a LIBOR Business Day selected by Borrower Representative pursuant to the
Agreement and ending one, two, three or six months thereafter, as selected by
Borrower Representative's irrevocable notice to Agent as set forth in Section
1.5(e); provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is
not a LIBOR Business Day, such LIBOR Period shall be extended to the
next succeeding LIBOR Business Day unless the result of such extension
would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding
LIBOR Business Day;
(b) no LIBOR Period may extend beyond the Commitment
Termination Date;
(c) any LIBOR Period that begins on the last LIBOR 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 LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower Representative shall select LIBOR Periods so as
not to require a payment or prepayment of any LIBOR Loan during a LIBOR
Period for such Loan; and
(e) Borrower Representative shall select LIBOR Periods so that
there shall be no more than 5 separate LIBOR Loans in existence at any
one time.
"LIBOR Rate" means for each LIBOR Period, a rate of interest determined by Agent
equal to:
(a) the offered rate for deposits in United States Dollars for the applicable
LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time),
on the second full LIBOR Business Day next preceding the first day of such LIBOR
Period (unless such date is not a Business Day, in which event the next
succeeding Business Day will be used); divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on the
day that is 2 LIBOR Business Days prior to the beginning of such LIBOR Period
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Federal Reserve Board or other Governmental Authority having
jurisdiction with respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Federal Reserve Board that are required to be maintained by
a member bank of the Federal Reserve System.
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If such interest rates shall cease to be available from Telerate News Service,
the LIBOR Rate shall be determined from such financial reporting service or
other information as shall be mutually acceptable to Agent and Borrower
Representative with notice to the Lenders.
"License" means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Credit Party.
"Lien" means any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or comparable
law of any jurisdiction).
"Litigation" has the meaning ascribed to it in Section 3.13.
"Loan" means any Revolving Loan.
"Loan Account" has the meaning ascribed to it in Section 1.9.
"Loan Documents" means the Agreement, the Notes, the Collateral Documents and
all other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, Agent or any
Lenders (including, without limitation, the Disclosure Document and all exhibits
attached thereto or referred to therein) and including all other pledges, powers
of attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of any
Credit Party, or any employee of any Credit Party, and delivered to Agent or any
Lender in connection with the Agreement or the transactions contemplated
thereby. Any reference in the Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to the Agreement or such Loan Document as the same may be in effect at any
and all times such reference becomes operative.
"Loan Value of Eligible Existing Portfolio" means the lower of its Recency Aging
Value or its Collections Multiple Value, provided that in no event shall the
Loan Value of Eligible Existing Portfolio exceed an amount equal to the original
cost of acquiring such Existing Portfolio less the proceeds from the sale of any
Accounts in such Existing Portfolio to third parties.
"Loan Value of Eligible New Portfolio" means the Borrowers' cost basis in the
Eligible New Portfolio after taking into account the original purchase cost of
such Eligible New Portfolio less subsequent sales.
"Lock Boxes" has the meaning ascribed to it in Annex C.
"Margin Stock" has the meaning ascribed to in Section 3.10.
"Material Adverse Effect" means a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Credit
Parties considered as a whole (but not on the Credit Parties' industry
generally, except to the extent of a direct effect on the Credit Parties as
provided above), (b) Borrowers' ability to pay the Revolving Loan or any of the
other Obligations in accordance with the terms of the Agreement, (c) the
Collateral or Agent's Liens, on behalf of itself and Lenders, on the Collateral
or the priority of such Liens, or (d) Agent's or any Lender's rights and
remedies under the Agreement and the other Loan Documents.
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"Maximum Amount" means, as of any date of determination, an amount equal to the
Revolving Loan Commitment of all Lenders as of that date.
"Maximum Lawful Rate" has the meaning ascribed to it in Section 1.4(f).
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making,
is obligated to make or has or could reasonably be expected to have a direct or
indirect liability under Title IV of ERISA or under Section 412 of the IRC.
"Net Sales Proceeds" means the total gross sales proceeds generated from the
disposition of Accounts or a Portfolio or any portion thereof, less (A)
commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by such Credit
Party in connection therewith (in each case, paid to non Affiliates), and (B)
sales, transfer, and similar taxes payable by such Credit Party in connection
therewith.
"Net Worth" means, with respect to any Person as of any date of determination,
the book value of the assets of such Person, minus the sum of (a) reserves
applicable thereto, and (b) all of such Person's liabilities on a consolidated
basis (including accrued and deferred income taxes), all as determined in
accordance with GAAP.
"New Line of Credit" has the meaning ascribed to it in the recitals to the
Agreement.
"New Portfolio" shall mean a Portfolio that any Borrower has owned for one
hundred eighty (180) days or less as to which such Borrower has all right, title
and interest in the Accounts comprising the Portfolio.
"Non-Consenting Lender" has the meaning ascribed to it in Section 11.2(c)(i).
"Non-Credit Party Affiliate" means an entity that is wholly owned by Asta
Funding or another Credit Party that is not required by the Agent and the
Lenders to execute and deliver an Affiliate Guaranty, an Affiliate Security
Agreement and an Affiliate Confirmation pursuant to Section 6.4(b) of this
Agreement and that may incur debt on a non-recourse basis for the purposes of
acquiring portfolios subject to the following conditions:
(a) The Borrower Representative has given the Agent written
notification of the formation of a Non-Credit Party Affiliate prior to
the incurrence of non-recourse financing.
(b) Lenders shall have declined to exercise their right of
first refusal on financing any portfolios being acquired by a
Non-Credit Party Affiliate.
(c) The Non-Credit Party Affiliate is not a Borrower or a
Guarantor.
(d) No Borrower or Guarantor is obligated with respect to such
non-recourse financing in a guarantee, indemnity, put agreement,
participation agreement or other agreement, except for servicing
obligations and customary representations and warranties (and the
indemnities relating to such representations and warranties or
servicing obligations) by Asta Funding or another Borrower or Guarantor
to the non-recourse lender.
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(e) The maximum aggregate amount of Non-Recourse Debt at any
time shall not exceed an amount equal to $200,000,000.00, without the
prior written consent of Required Lenders.
"Non-Recourse Debt" shall mean in the aggregate all Non-Recourse Non-Credit
Party Loans.
"Non-Recourse Investment" means any funds invested or advanced
by any Credit Party or a Subsidiary of any Credit Party in or to a Non-Credit
Party Affiliate in a non-recourse transaction, provided that: (a) the maximum
aggregate amount of Non-Recourse Investments at any time shall not exceed an
amount equal to ten percent (10%) of the consolidated Tangible Net Worth of Asta
Funding at any time, and (b) such Non-Credit Party Affiliate shall be a legally
separate entity created for a limited purpose and with limited activities,
formed, incorporated or organized and maintained as a special purpose entity,
and such Non-Credit Party Affiliate shall take steps to ensure that the
separateness of such Non-Credit Party Affiliate will be recognized by the courts
in the event of a filing or entry of a petition, decree or order seeking relief
under the Bankruptcy Code, or any other applicable federal, state or foreign
bankruptcy or other similar law, of any Affiliate of such Non-Credit Party
Affiliate, and the inclusion of "separateness representations, warranties and
covenants" in the organizational and governing documents of such Non-Credit
Party Affiliate.
"Non-Recourse Non-Credit Party Loan" shall mean a loan or other extension of
credit made by anyone other than the Lenders to a Non-Credit Party Affiliate for
the purpose of acquiring a Rejected Portfolio, provided that such Non-Credit
Party Affiliate delivers to Agent a true and complete copy of all loan
documentation relating to such transaction promptly after the closing thereof
and that any such indebtedness shall comply with Section 1.1(a)(iii) hereof.
"Non-Funding Lender" has the meaning ascribed to it in Section 9.9(a)(ii).
"Notes" means, collectively, the Revolving Notes.
"Notice of Conversion/Continuation" has the meaning ascribed to it in Section
1.4(e).
"Notice of Tranche A Advance" has the meaning ascribed to it in Section
1.1(a)(i)(A).
"Notice of Tranche B Advance" has the meaning ascribed to it in Section
1.1(a)(ii)(A).
"Obligations" means all loans, advances, debts, liabilities and obligations for
the performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such amounts
are liquidated or determinable) owing by any Credit Party to Agent or any
Lender, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement or
other instrument, arising under the Agreement or any of the other Loan
Documents. This term includes all principal, interest (including all interest
that accrues after the commencement of any case or proceeding by or against any
Credit Party in bankruptcy, whether or not allowed in such case or proceeding),
Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any
Credit Party under the Agreement or any of the other Loan Documents and all
interest rate caps, swaps or collar agreements, or similar agreements or
arrangements to provide protection against fluctuations in interest rates.
A-18
"Original Borrowers" shall mean Asta Funding Acquisition II, LLC, and Palisades
Collection, LLC.
"Original Guarantors" shall mean Asta Funding, Asta I, E.R. Receivables Corp.,
L.L.C. and Palisades I.
"Original Line of Credit" has the meaning ascribed to it in the recitals to the
Agreement.
"Original Restated Agreement" has the meaning ascribed to it in the recitals to
the Agreement.
"Other Lender" has the meaning ascribed to it in Section 9.9(d).
"Palisades" means Palisades Collection, L.L.C.
"Palisades I" means Palisades Acquisition I, LLC.
"Palisades II" means Palisades Acquisition II, LLC
"Payment Intangibles" shall have the meaning given such term in the UCC.
"Payments" means the payments of whatsoever nature made by each Account Debtor
with respect to the Accounts relating to such Account Debtor and/or the payments
made by any obligor with respect to any Account.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means a Plan described in Section 3(2) of ERISA.
"Permitted Acquisition" has the meaning ascribed to it in Section 6.1.
"Permitted Encumbrances" means the following encumbrances: (a) Liens for taxes
or assessments or other governmental Charges not yet due and payable or which
are being contested in accordance with Section 5.2(b); (b) pledges or deposits
of money securing statutory obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics',
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of $100,000 at any time, so long as such Liens attach only
to Inventory; (f) inchoate and unperfected bailees' and landlord liens with
respect to locations in which a bailee or landlord waiver is not required, and
which arise in the ordinary course of business, so long as such Liens attach
only to assets located on the applicable Real Estate; (g) deposits securing, or
in lieu of, surety, appeal or customs bonds in proceedings to which any Credit
Party is a party; (h) any attachment or judgment lien not constituting an Event
of Default under Section 8.1(j); (i) with respect to any Real Estate, the
permitted exceptions set forth on an Exhibit of any mortgage granted to Agent,
on behalf of Lenders, applicable to such Real Estate, and zoning restrictions,
easements, licenses, or other restrictions on the use of any Real Estate or
other minor irregularities in title (including leasehold title) thereto, so long
as the same do not materially impair the use, value, or marketability of such
Real Estate; (j) presently existing or hereafter created Liens in favor of
Agent, on behalf of Lenders; and (k) Liens expressly permitted under Section 6.7
(other than clause (a) thereto) of the Agreement.
"Permitted Formation" has the meaning ascribed to it in Section 6.1.
A-19
"Person" means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).
"Plan" means, at any time, an "employee benefit plan", as defined in Section
3(3) of ERISA (other than a Multiemployer Plan), that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to or has
or could reasonably be expected to have a direct or indirect liability under
Title IV of ERISA or under Section 412 of the IRC.
"Pledge Agreement" means the Pledge Agreement of even date herewith executed by
each Credit Party in favor of Agent, on behalf of itself and Lenders, pledging
all of the Stock of the Subsidiaries of each Credit Party.
"Pledge Agreements" means the Pledge Agreement and any pledge agreements entered
into after the Closing Date by any Credit Party (as required by the Agreement or
any other Loan Document).
"Portfolio" means each group or pool of Consumer Loans acquired by any of the
Borrowers from a single Seller (or a single Seller and its affiliates) in a
single purchase transaction, which Consumer Loans are recorded and administered
in the Books and Records of the Borrower acquiring same as a separate group or
pool of Consumer Loans.
"Portfolio Acquisition Cost" means the actual or final amount to be paid to the
Seller of a Portfolio pursuant to the terms of the applicable Portfolio
Acquisition Documents.
"Portfolio Acquisition Documents" means the purchase and other agreements
between a Credit Party and the Seller of each Portfolio, as each may be amended.
"Portfolio Bid" means the specific amount or the maximum of a range of amounts,
which are to be bid to acquire a Portfolio.
"Portfolio Examination Fee" means a fee of $900 per each day as required in
Agent's sole discretion to review, examine and report as to the legal and
financial status of each Portfolio Proposal, together with Agent's actual
out-of-pocket expenses, including travel, meals and hotel expenses.
"Portfolio Loans" means the Consumer Loans, which comprise each Portfolio, as
more specifically detailed in the applicable Portfolio Proposal.
"Portfolio Proposal" means a written proposal presented by Borrowers or any
other Credit Party with respect to a Portfolio that such party intends to submit
to a Seller for the purchase of such Portfolio, which shall set forth in
sufficient detail the (i) Portfolio Bid and the terms of payment thereof, (ii)
nature of the Consumer Loans comprising the Portfolio, (iii) a computer disc or
written report containing a detailed description of the Consumer Loans, and (iv)
name of the Seller.
A-20
"Prior Lender" means IDB.
"Prior Lender Obligations" means the obligations to IDB under the Original
Restated Agreement and related documents.
"Proceeds" means "proceeds," as such term is defined in the Code, including (a)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to any Credit Party from time to time with respect to any of the Collateral, (b)
any and all payments (in any form whatsoever) made or due and payable to any
Credit Party from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of governmental
authority), (c) any claim of any Credit Party against third parties (i) for
past, present or future infringement of any Patent or Patent License, or (ii)
for past, present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any
Credit Party against third parties with respect to any litigation or dispute
concerning any of the Collateral including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights in, or damage to, Collateral, (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
Stock, and (f) any and all other amounts, rights to payment or other property
acquired upon the sale, lease, license, exchange or other disposition of
Collateral and all rights arising out of Collateral.
"Proposed Change" has the meaning ascribed to it in Section 11.2(c).
"Pro Rata Share" means with respect to all matters relating to any Lender, (a)
with respect to the Revolving Loan, the percentage obtained by dividing (i) the
Revolving Loan Commitment of that Lender by (ii) the aggregate Revolving Loan
Commitments of all Lenders, (b) with respect to the Revolving Loan on and after
the Commitment Termination Date, the percentage obtained by dividing (i) the
aggregate outstanding principal balance of the Revolving Loan held by that
Lender, by (ii) the outstanding principal balance of the Revolving Loan held by
all Lenders.
"Qualified Plan" means a Pension Plan that is intended to be tax-qualified under
Section 401(a) of the IRC.
"Qualified Assignee" means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings and
loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from ▇▇▇▇▇'▇ at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to Borrowers
without the imposition of any withholding or similar taxes.
A-21
"Real Estate" has the meaning ascribed to it in Section 3.6.
"Recency Aging Value" means for an Eligible Existing Portfolio the contractual
amount owed on each Account included in such Eligible Existing Portfolio for
which there has been Collections in the previous ninety (90) days.
"Refinancing" means the transaction contemplated by the Agreement by which the
proceeds of the Loan shall be used to refinance, amend and restate the Prior
Lender Obligations.
"Register" has the meaning ascribed to it in Section 9.1(a).
"Rejected Portfolio" means a Portfolio as to which the Agent or Requisite
Lenders, as the case may be, decline to make an Advance to finance its
acquisition by a Credit Party.
"Related Transactions" means the initial borrowing under the Revolving Loan on
the Closing Date and the payment of all fees, costs and expenses associated with
all of the foregoing and the execution and delivery of all of the Related
Transactions Documents.
"Related Transactions Documents" means the Loan Documents and all other
agreements or instruments executed in connection with the Related Transactions.
"Release" means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.
"Replacement Lender" has the meaning ascribed to it in Section 1.13(d).
"Reports" mean the Aging Reports and the Collection Reports, including the
computer discs containing all of the information contained therein.
"Requisite Lenders" means Lenders having (a) more than 66 2/3% of the
Commitments of all Lenders, or (b) if the Commitments have been terminated, more
than 66 2/3% of the aggregate outstanding amount of the Revolving Loan.
"Reserves" means any reserves that Agent may, in its
reasonable credit judgment, establish or impose from time to time that relate to
a specific Portfolio as a result of the occurrence of a material adverse change
in the performance or value of that Portfolio. For purposes of this definition,
the phrase "material adverse change in the performance or value of any
Portfolio" shall mean any decrease or diminution in value of ten percent (10%)
or more in the performance or value of any Portfolio, including, without
limitation, any decrease or diminution in value of 10% or more of the Loan Value
of Eligible Existing Portfolio or Loan Value of Eligible New Portfolio, as the
case may be, of any Portfolio during any period, all as reasonably determined by
Agent. Without limiting the foregoing, Agent may establish or impose Reserves at
such time as any Servicing Agent for any Portfolio is entitled (or claims to be
entitled) to receive payments, fees, premiums or compensation (however
characterized) for services rendered in excess of the amount set forth in
Section 6.23 of the Agreement relative to such Portfolio. In connection with the
establishment or imposition of Reserves, Agent shall, in advance of establishing
any Reserves, discuss with Borrower's Representative Agent's intention to
establish such Reserves and, upon request of Borrower's Representative, provide
Borrower's Representative with such information and analysis as are reasonably
necessary to explain Agent's reasons for such Reserves, but in no event shall
Credit Parties have any right to approve or withhold approval of Agent's
determination or alter the timing of such Reserves, so long as such
determination is made in accordance with the terms of the Agreement and this
definition.
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"Restricted Payment" means, with respect to any Credit Party (a) the declaration
or payment of any dividend or the incurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of Stock;
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of such Credit Party's Stock or any other payment or
distribution made in respect thereof, either directly or indirectly; (c) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, any Subordinated Debt; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase or
sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party's Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other transfer of
funds or other property to any Stockholder of such Credit Party other than
payment of compensation in the ordinary course of business and in accordance
with past practices, to Stockholders who are employees or consultants of such
Person; and (g) any payment of management fees (or other fees of a similar
nature) by such Credit Party to any Stockholder of such Credit Party or its
Affiliates.
"Retiree Welfare Plan" means, at any time, a Welfare Plan that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC or other
applicable law or coverage through the last day of the month of a participant's
termination of employment.
"Revolving Credit Advance" means, collectively and individually, Tranche A
Advances and Tranche B Advances.
"Revolving Lender" or "Revolving Lenders" means, as of any date of
determination, Lenders having a Revolving Loan Commitment.
"Revolving Loan" means, at any time, the aggregate amount of Revolving Credit
Advances outstanding to Borrower.
"Revolving Loan Commitment" means (a) as to any Lender, the aggregate commitment
of such Lender to make Revolving Credit Advances as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender and
(b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving
Credit Advances which aggregate commitment shall be SIXTY MILLION DOLLARS
($60,000,000) on the Closing Date, as such amount may be adjusted, if at all,
from time to time in accordance with the Agreement.
"Revolving Note" has the meaning ascribed to it in Section 1.1(a)(iv).
A-23
"Security Agreement" means one or more Security Agreements of even date herewith
entered into by and among Agent, on behalf of itself and Lenders, and each
Credit Party that is a signatory thereto.
"Seller" means the party (or parties) which has agreed to sell Portfolio Loans
to a Credit Party.
"Senior Executive" means each of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇.
"Senior Obligations" has the meaning ascribed to it in Section 12.9(a).
"Servicing Agent" shall mean any third-party engaged or utilized by any Credit
Party for the purpose of administrating and/or collecting Payments made by an
Account Debtor with respect to Accounts.
"Servicing Threshold" shall mean an amount equal to ten percent (10%) or more of
Collections, Proceeds and Payments (net of any collection costs and other fees
permitted to be deducted therefrom by the express terms of the servicing
agreement that corresponds to such Collections, Proceeds and Payments), taken as
a whole for the Credit Parties, reported by such Credit Parties during the
Fiscal Quarter prior to the date of determination.
"Settlement Date" has the meaning ascribed to it in Section 9.9(a)(ii).
"Software" means all "software" as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, other than software embedded in any
category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.
"Solvent" means, with respect to any Person on a particular date, that on such
date (a) the fair value of the property of such Person is greater than the total
amount of liabilities, including contingent liabilities, of such Person; (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured; (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person's property would constitute
an unreasonably small capital. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
"Stock" means all shares, options, warrants, general or limited partnership
interests, membership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including common stock, preferred
stock or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934).
"Stockholder" means, with respect to any Person, each holder of Stock of such
Person.
"Subordinated Debt" means any Indebtedness of any Credit Party subordinated to
the Obligations in a manner and form satisfactory to Agent and Lenders in their
sole discretion, as to right and time of payment and as to any other rights and
remedies thereunder.
A-24
"Subsidiary" means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate the vote of
more than 50% of such Stock whether by proxy, agreement, operation of law or
otherwise, and (b) any partnership or limited liability company in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or may exercise the powers of a general partner. Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
a Borrower.
"Supporting Obligations" means all "supporting obligations" as such term is
defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"Tangible Net Worth" means, with respect to any Person at any date, the Net
Worth of such Person at such date, excluding, however, from the determination of
the total assets at such date, (a) all goodwill, capitalized organizational
expenses, capitalized research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, and other intangible items, (b) all unamortized debt discount and
expense, (c) treasury Stock, and (d) any write-up in the book value of any asset
resulting from a revaluation thereof.
"Taxes" means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Agent or a Lender by the jurisdictions under the laws of which
Agent and Lenders are organized or conduct business or maintain a permanent
establishment or any political subdivision thereof.
"Tax Returns" has the meaning ascribed to it in Section 3.11
"Termination Date" means the date on which (a) the Revolving Loan has been
indefeasibly repaid in full, (b) all other Obligations under the Agreement and
the other Loan Documents have been completely discharged and (c) none of
Borrowers shall have any further right to borrow any monies under the Agreement.
"Title IV Plan" means a Pension Plan (other than a Multiemployer Plan), that is
covered by Title IV of ERISA, and that any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Total Liabilities" means, with respect to any Person as of any date of
determination, the total liabilities of such Person as determined as determined
in accordance with GAAP.
"Trademark License" means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right to use any Trademark.
"Trademarks" means all of the following now owned or hereafter existing or
adopted or acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, service marks, logos, all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.
A-25
"Tranche A Advance" has the meaning ascribed to it in Section 1.1(a)(i)(A).
"Tranche A Borrowing Availability" means as of any date of determination, the
lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case, less
the Revolving Loan then outstanding, provided, however, that the Tranche A
Advances shall not exceed $50,000,000 in the aggregate outstanding at any one
time.
"Tranche A Revolving Loan" means at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower minus (ii) the
Tranche B Revolving Loan.
"Tranche B Advance" has the meaning ascribed to it in Section 1.1(a)(ii)(A).
"Tranche B Borrowing Availability" means as of any date of determination, the
lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case, less
the Revolving Loan then outstanding, provided, however, that the Tranche B
Advances shall not exceed $10,000,000 in the aggregate outstanding at any one
time.
"Tranche B Revolving Loan" means at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower minus (ii) the
Tranche A Revolving Loan.
"Transaction" has the meaning ascribed to it in Section 11.8.
"Unfunded Pension Liability" means, at any time, the aggregate amount, if any,
of the sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of 5 years following a transaction which might
reasonably be expected to be covered by Section 4069 of ERISA, the liabilities
(whether or not accrued) that could be avoided by any Credit Party or any ERISA
Affiliate as a result of such transaction.
"Welfare Plan" means a Plan described in Section 3(i) of ERISA.
Rules of construction with respect to accounting terms used in the Agreement or
the other Loan Documents shall be as set forth in Annex G. All other undefined
terms contained in any of the Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code to the extent the same are
used or defined therein; in the event that any term is defined differently in
different Articles or Divisions of the Code, the definition contained in
Articles or Divisions 1 and 9 shall control. Unless otherwise specified,
references in the Agreement or any of the Appendices to a Section, subsection or
clause refer to such Section, subsection or clause as contained in the
Agreement. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.
A-26
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders. The words "including", "includes" and "include"
shall be deemed to be followed by the words "without limitation"; the word "or"
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that such Credit Party has actual knowledge or awareness of a
particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
A-27
ANNEX C (SECTION 1.8)
TO
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
CASH MANAGEMENT SYSTEM
Each Borrower shall, and shall cause its Subsidiaries to, establish and maintain
the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination Date, each Borrower
shall (i) establish blocked accounts ("Blocked Accounts") at Agent, and (ii)
deposit and cause its Subsidiaries to deposit or cause to be deposited promptly,
and in any event no later than the second Business Day after the date of receipt
thereof (or in the event such deposit is not practicable due to an Act of God,
terrorism or other city-wide catastrophe, the next day on which businesses
generally are open), all cash, checks, drafts or other similar items of payment
relating to or constituting payments made in respect of any and all Collateral
into one or more Blocked Accounts in such Borrower's name or any such
Subsidiary's name at Agent, except for items of payment that are not material
that are being held temporarily, or are to be returned, in the ordinary course
of business due to a dispute or irregularity. On or before the Closing Date,
each Borrower shall have established a concentration account in its name (each a
"Concentration Account" and collectively, the "Concentration Accounts") at Agent
and at the bank or banks that shall be designated as the Concentration Account
bank for each such Borrower in the Disclosure Document (each a "Concentration
Account Bank" and collectively, the "Concentration Account Banks"), which banks
shall be reasonably satisfactory to Agent. Borrowers may establish and maintain
a blocked account with such banks as are reasonably satisfactory to Agent (a
"Blocked Account Third-Party Bank"), provided that on or before the Closing
Date, each Blocked Account Third-Party Bank shall have entered into a tri-party
blocked account agreement with Agent, for the benefit of itself and Lenders, and
the applicable Borrower and Subsidiaries thereof, as applicable, in form and
substance reasonably acceptable to Agent, which shall become operative on or
prior to the Closing Date. Each such blocked account agreement with any Blocked
Account Third-Party Bank shall provide, among other things, that (a) all items
of payment deposited in such account and proceeds thereof deposited in the
applicable blocked account are held by such bank as agent or
bailee-in-possession for Agent, on behalf of itself and Lenders, (b) the Blocked
Account Third-Party Bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (c) from and after the Closing Date with respect to each blocked
account, such Blocked Account Third-Party Bank agrees to immediately forward all
amounts received in the applicable blocked account to the Collection Account
through daily sweeps from such blocked account into the Collection Account
(except for amounts which do not exceed $100,000 at any time in the blocked
account established with Fleet Bank Collection Account as account no. 4158012504
(the "Fleet Blocked Account")). Except for the Fleet Blocked Account, no
Borrower shall, or shall cause or permit any Subsidiary thereof to, accumulate
or maintain cash in any blocked account with any Blocked Account Third-Party
Bank in excess of checks outstanding against such accounts as of that date and
amounts necessary to meet minimum balance requirements, except as otherwise
specifically permitted in Section 6.2 of the Agreement.
C-1
(b) Each Borrower may maintain, in its name, an account (each a "Disbursement
Account" and collectively, the "Disbursement Accounts") at Agent into which
Agent shall, from time to time, deposit proceeds of Revolving Credit Advances
made to such Borrower pursuant to Section 1.1 for use by such Borrower solely in
accordance with the provisions of Section 1.2.
(c) On or before the Closing Date (or such later date as Agent shall consent to
in writing), each Concentration Account Bank, shall have entered into tri-party
blocked account agreements with Agent, for the benefit of itself and Lenders,
and the applicable Borrower and Subsidiaries thereof, as applicable, in form and
substance reasonably acceptable to Agent, which shall become operative on or
prior to the Closing Date. Each such blocked account agreement shall provide,
among other things, that (i) all items of payment deposited in such account and
proceeds thereof deposited in the applicable Concentration Account are held by
such bank as agent or bailee-in-possession for Agent, on behalf of itself and
Lenders, (ii) the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) from and after the Closing Date with respect to each
Concentration Account Bank, such bank agrees to immediately forward all amounts
received in the applicable Concentration Account to the Collection Account
through daily sweeps from such Concentration Account into the Collection
Account. Except for amounts which do not exceed $100,000 in any one account and
$250,000 in the aggregate for all Borrowers, no Borrower shall, or shall cause
or permit any Subsidiary thereof to, accumulate or maintain cash in Disbursement
Accounts or payroll accounts as of any date of determination in excess of checks
outstanding against such accounts as of that date and amounts necessary to meet
minimum balance requirements.
(d) So long as no Default, which is not reasonably capable of being cured, or
Event of Default has occurred and is continuing, Borrowers may amend the
Disclosure Document to add or replace a Blocked Account or to replace any
Concentration Account; provided, that (i) Agent shall have consented in writing
in advance to the opening of such account with the relevant bank and (ii) prior
to the time of the opening of such account, the applicable Borrower or its
Subsidiaries, as applicable, and such bank shall have executed and delivered to
Agent a tri-party blocked account agreement, in form and substance reasonably
satisfactory to Agent. Borrowers shall close any of their accounts (and
establish replacement accounts in accordance with the foregoing sentence)
promptly and in any event within 30 days following notice from Agent that the
creditworthiness of any bank holding an account is no longer acceptable in
Agent's reasonable judgment, or as promptly as practicable and in any event
within 60 days following notice from Agent that the operating performance, funds
transfer or availability procedures or performance with respect to accounts of
the bank holding such accounts or Agent's liability under any tri-party blocked
account agreement with such bank is no longer acceptable in Agent's reasonable
judgment.
(e) The Blocked Accounts, Disbursement Accounts and the Concentration Accounts
shall be cash collateral accounts, with all cash, checks and other similar items
of payment in such accounts securing payment of the Revolving Loan and all other
Obligations, and in which each Borrower and each Subsidiary thereof shall have
granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the
Security Agreement.
C-2
(f) All amounts deposited in the Collection Account shall be deemed received by
Agent in accordance with Section 1.7 and shall be applied (and allocated) by
Agent in accordance with Section 1.8. In no event shall any amount be so applied
unless and until such amount shall have been credited in immediately available
funds to the Collection Account.
(g) Each Borrower shall and shall cause its Affiliates, officers, employees,
agents, directors or other Persons acting for or in concert with such Borrower
(each a "Related Person") to (i) hold in trust for Agent, for the benefit of
itself and Lenders, all checks, cash and other items of payment received by such
Borrower or any such Related Person, and (ii) within 1 Business Day after
receipt by such Borrower or any such Related Person (or in the event such
deposit is not practicable due to an Act of God, terrorism or other city-wide
catastrophe, the next day on which businesses generally are open)of any checks,
cash or other items of payment, deposit the same into a Blocked Account of such
Borrower. Each Borrower and each Related Person thereof acknowledges and agrees
that all cash, checks or other items of payment constituting proceeds of
Collateral are part of the Collateral. All proceeds of the sale or other
disposition of any Collateral, shall be deposited directly into the applicable
Blocked Accounts.
C-3
ANNEX D (SECTION 2.1(A))
TO
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
CLOSING CHECKLIST
In addition to, and not in limitation of, the conditions described in Section
2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be
received by Agent in form and substance satisfactory to Agent on or prior to the
Closing Date (each capitalized term used but not otherwise defined herein shall
have the meaning ascribed thereto in Annex A to the Agreement):
A. Appendices. All Appendices to the Agreement, in form and substance
satisfactory to Agent.
B. Revolving Notes. Duly executed originals of the Revolving Notes for each
applicable Lender, dated the Closing Date.
C. Security Agreement. Duly executed originals of the Security Agreement, dated
the Closing Date, and all instruments, documents and agreements executed
pursuant thereto.
D. Insurance. Satisfactory evidence that the insurance policies required by
Section 5.4 are in full force and effect, together with appropriate evidence
showing loss payable and/or additional insured clauses or endorsements, as
requested by Agent, in favor of Agent, on behalf of Lenders.
E. Security Interests and Code Filings.
(a) Evidence satisfactory to Agent that Agent (for the benefit of
itself and Lenders) has a valid and perfected first priority security interest
in the Collateral, including (i) such documents duly executed by each Credit
Party (including financing statements under the Code and other applicable
documents under the laws of any jurisdiction with respect to the perfection of
Liens) as Agent may request in order to perfect its security interests in the
Collateral and (ii) copies of Code search reports listing all effective
financing statements that name any Credit Party as debtor, together with copies
of such financing statements, none of which shall cover the Collateral, except
Liens permitted under Section 6.7(b) and Liens relating to the Prior Lender
Obligations (all of which shall be amended on the Closing Date).
(b) Evidence satisfactory to Agent, including copies, of all UCC-1
and other financing statements filed in favor of any Credit Party.
F. [Intentionally Omitted].
G. Guaranty. Duly executed originals of the Guaranty, dated the Closing Date,
and all documents, instruments and agreements executed pursuant thereto.
H. Initial Borrowing Base Certificates. Duly executed originals of an initial
Borrowing Base Certificates, reflecting information concerning Eligible
Portfolios of Borrowers as of the Closing Date.
D-1
I. Initial Notice of Tranche A Advance or Notice of Tranche B Advance, as the
case may be. Duly executed originals of a Notice of Tranche A Advance or Notice
of Tranche B Advance, as the case may be, dated the Closing Date, with respect
to the initial Revolving Credit Advance to be requested by Borrower
Representative on the Closing Date.
J. Letter of Direction. Duly executed originals of a letter of direction from
Borrower Representative addressed to Agent, on behalf of itself and Lenders,
with respect to the disbursement on the Closing Date of the proceeds of the
initial Revolving Credit Advance.
K. Existing Loan Balance Letter. Copies of duly executed letter, in form and
substance reasonably satisfactory to Agent, by and between all parties to the
Prior Lender loan documents evidencing the amount to be refinanced, amended and
restated under all Prior Lender Obligations.
L. Cash Management System; Blocked Account Agreements. Evidence satisfactory to
Agent that, as of the date that is 30 days after the Closing Date, Cash
Management Systems complying with Annex C to the Agreement have been established
and are currently being maintained in the manner set forth in such Annex C,
together with copies of duly executed tri-party blocked account and lock box
agreements, reasonably satisfactory to Agent, with the banks as required by
Annex C.
M. Charter and Good Standing. For each Credit Party, such Person's (a) charter
and all amendments thereto, (b) good standing certificates in its state of
formation, (c) good standing certificates and certificates of qualification to
conduct business in each jurisdiction where its ownership or lease of property
or the conduct of its business requires such qualification, each dated a recent
date prior to the Closing Date and certified by the applicable Secretary of
State or other authorized Governmental Authority.
N. Bylaws and Resolutions. For each Credit Party, (a) such Person's bylaws,
together with all amendments thereto and (b) resolutions of such Person's Board
of Directors or Members, as applicable, approving and authorizing the execution,
delivery and performance of the Loan Documents to which such Person is a party
and the transactions to be consummated in connection therewith, each certified
as of the Closing Date by such Person's corporate secretary or an assistant
secretary or Members, as applicable, as being in full force and effect without
any modification or amendment.
O. Incumbency Certificates. For each Credit Party, signature and incumbency
certificates of the member, officers or representative of each such Person
executing any of the Loan Documents, certified as of the Closing Date by such
Person's corporate secretary or assistant secretary or other authorized person
as being true, accurate, correct and complete.
P. Opinions of Counsel. Duly executed originals of opinions of ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ PC, counsel for the Credit Parties (including with respect to New York
and New Jersey law and Delaware corporate law matters, together with existing
regulatory counsel opinions rendered in connection with Asta Funding's last
public offering) reasonably requested by Agent, each in form and substance
reasonably satisfactory to Agent and its counsel, dated the Closing Date, and
each accompanied by a letter addressed to such counsel from the Credit Parties,
authorizing and directing such counsel to address its opinion to Agent, on
behalf of Lenders, and to include in the opinion of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC, an
express statement to the effect that Agent and Lenders are authorized to rely on
such opinion.
D-2
R. Pledge Agreements. Duly executed originals of the Pledge Agreement and Credit
Party Pledge Agreements accompanied by (as applicable) (a) share certificates
representing all of the outstanding Stock being pledged pursuant to such Pledge
Agreement and stock powers for such share certificates executed in blank and (b)
the original Intercompany Notes and other instruments evidencing Indebtedness
being pledged pursuant to such Pledge Agreement, duly endorsed in blank.
S. Accountants' Letters. A letter from the Credit Parties to their independent
auditors authorizing the independent certified public accountants of the Credit
Parties to communicate with Agent and Lenders in accordance with Section 4.2.
T. Disclosure Document. The Credit Parties shall execute and deliver to Agent
for the benefit of Agent and Lenders the Disclosure Document and the exhibits
attached thereto, all of which shall be in form and substance acceptable to
Agent.
U. Fee Letter. Duly executed originals of the IDB Fee Letter and Lenders' Fee
Letter.
V. Officer's Certificate. Agent shall have received duly executed originals of a
certificate of the Chief Executive Officer or Chairman of the Board of Borrower
Representative, dated the Closing Date, stating that to such officer's
knowledge, since September 30, 2003 (a) no event or condition has occurred or is
existing which could reasonably be expected to have a Material Adverse Effect;
(b) there has been no material adverse change in the industry in which any
Borrower operates; (c) no Litigation has been commenced which, if successful,
could reasonably be expected to have a Material Adverse Effect or which
challenges any of the transactions contemplated by the Agreement and the other
Loan Documents; (d) there have been no Restricted Payments made by any Credit
Party in violation of the Agreement other than in connection with the Related
Transactions; and (e) there has been no material increase in liabilities,
liquidated or contingent (other than in connection with the Related
Transactions), and no material decrease in assets of any Borrower or any of its
Subsidiaries.
Furthermore, Agent shall have received duly executed originals of a certificate
of the Chief Executive Officer or Chairman of the Board of Borrower
Representative, dated the Closing Date, stating that to such officer's
knowledge, no changes have been made in the business operations or activities or
the licensing requirements of any Credit Party that would reasonably require any
changes to be made to the facts expressed in the existing regulatory counsel
opinions rendered in connection with Asta Funding's last public offering in
order for such existing regulatory counsel opinion and the facts shown therein
to continue to be true, complete and correct in all material respects as of the
Closing Date (or, if such changes would reasonably be required, then setting
forth in reasonable detail such changes) and stating that to the best of his
knowledge and belief, after having made reasonable investigations, Palisades
Collection, L.L.C., is the only Credit Party required by applicable law to be
licensed to conduct the consumer debt collection business operations and
activities of the Borrowers and the other Credit Parties.
W. Waivers. Agent, on behalf of Lenders, shall have received landlord waivers
and consents, bailee letters and mortgagee agreements in form and substance
reasonably satisfactory to Agent, in each case to the extent required pursuant
to Section 5.9.
D-3
X. Intentionally Omitted.
Y. Intentionally Omitted.
Z. Intentionally Omitted.
AA. Intentionally Omitted.
BB. Audited Financials; Financial Condition. Agent shall have received the
Financial Statements and other materials set forth in Section 3.4, including
unaudited Financial Statements for the Fiscal Quarter ending December 31, 2003,
certified by Borrower Representative's Chief Financial Officer or Manager. Agent
shall have further received a certificate of a Manager of Borrower
Representative or with respect to any limited liability company, other
authorized person of each Borrower, to the effect that (a) such Borrower will be
Solvent upon the consummation of the transactions contemplated herein; (b) the
Pro Forma fairly presents the financial condition of such Borrower as of the
date thereof after giving effect to the transactions contemplated by the Loan
Documents; and (c) containing such other statements with respect to the solvency
of such Borrower and matters related thereto as Agent shall reasonably request.
CC. Other Documents. Such other certificates, documents and agreements
respecting any Credit Party as Agent may, in its reasonable discretion, request.
D-4
ANNEX E (SECTION 4.1(A))
TO
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
FINANCIAL STATEMENTS -- REPORTING
Borrowers shall deliver or cause to be delivered to Agent or to Agent and
Lenders, as indicated, the following:
(a) Quarterly Financials. To Agent and Lenders, within 45 days after the end of
each Fiscal Quarter, either the Form 10Q that Asta Funding filed for that Fiscal
Quarter with the Securities and Exchange Commission or, in the event Asta
Funding has not filed its Form 10Q on a timely basis (without taking into
consideration any extensions granted for the filing of such Form 10Q), the
following (hereinafter referred to as the "Alternative Financial Information")
consolidated financial information regarding Asta Funding, its Subsidiaries, and
Borrowers (in each case, together with consolidating worksheets in the event a
Non-Credit Party Affiliate has Indebtedness or owns assets of any material
nature), including (A) unaudited balance sheets as of the close of such Fiscal
Quarter and the related statements of income and cash flow for that portion of
the Fiscal Year ending as of the close of such Fiscal Quarter, and (B) unaudited
statements of income and cash flows for such Fiscal Quarter, in each case
setting forth in comparative form the figures for the corresponding period in
the prior year and the figures contained in the Projections for such Fiscal
Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments). In any event, Borrowers shall deliver to Agent and Lender a copy
of any and all Form 10Q that Asta Funding files with the Securities and Exchange
Commission within 15 days after making any such filing. Such Form 10Q or
Alternative Financial Information, as the case may be, shall be accompanied by
(A) a statement in reasonable detail (each, a "Compliance Certificate") showing
the calculations used in determining compliance with a Compliance Certificate in
respect of each of the Financial Covenants that is tested on a quarterly basis
and (B) the certification of the Chief Financial Officer or other senior officer
of Borrower Representative that (i) such financial information presents fairly
in accordance with GAAP (subject to normal year-end adjustments) the financial
position, results of operations and statements of cash flows of Asta Funding,
Borrowers and their Subsidiaries, on a consolidated basis (together with
consolidating worksheets in the event a Non-Credit Party Affiliate has
Indebtedness or owns assets of any material nature), as at the end of such
Fiscal Quarter and for that portion of the Fiscal Year then ended, (ii) any
other information presented is true, correct and complete in all material
respects and that there was no Default, which is not reasonably capable of being
cured, or Event of Default in existence as of such time or, if a Default, which
is not reasonably capable of being cured, or Event of Default has occurred and
is continuing, describing the nature thereof and all efforts undertaken to cure
such Default, which is not reasonably capable of being cured, or Event of
Default. In addition, Asta Funding and Borrowers shall deliver to Agent and
Lenders, within 45 days after the end of each Fiscal Quarter, a statement of the
intercompany loan balance of all Intercompany Notes as of the end of such Fiscal
Quarter.
E-1
(b) Annual Audited Financials. To Agent and Lenders, within 90 days after the
end of each Fiscal Year, audited Financial Statements for Asta Funding,
Borrowers and their Subsidiaries on a consolidated basis (together with
consolidating worksheets), consisting of balance sheets and statements of income
and retained earnings and cash flows, setting forth in comparative form in each
case the figures for the previous Fiscal Year, which Financial Statements shall
be prepared in accordance with GAAP and certified without qualification, by an
independent certified public accounting firm of national standing or otherwise
reasonably acceptable to Agent. Such Financial Statements shall be accompanied
by (i) a statement prepared in reasonable detail showing the calculations used
in determining compliance with each of the Financial Covenants, (ii) a report
from such accounting firm to the effect that, in connection with their audit
examination, nothing has come to their attention to cause them to believe that
the Asta Funding and/or Borrowers have failed to comply with the terms,
covenants, provisions or conditions of Section 5.3, Section 6.2 through Section
6.8 inclusive, Section 6.10, Section 6.12, through Section 6.16 inclusive, of
this Agreement (or specifying any non-compliance that they became aware of), it
being understood that such audit examination extended only to financial and
accounting matters and that no special investigation was made with respect to
the existence of any such non-compliance, (iii) from Asta Funding and the
Borrowers, the annual letters to such accountants in connection with their audit
examination detailing contingent liabilities and material litigation matters,
and (iv) the certification of the Chief Executive Officer or Chief Financial
Officer of Asta Funding and the Borrowers that all such Financial Statements
present fairly in all material respect in accordance with GAAP the financial
position, results of operations and statements of cash flows of Asta Funding,
Borrowers and their Subsidiaries on a consolidated basis (together with
consolidating worksheets), as at the end of such Fiscal Year and for the period
then ended, and that there was no Default or Event of Default in existence as of
such time or, if a Default, which is not reasonably capable of being cured, or
Event of Default has occurred and is continuing, describing the nature thereof
and all efforts undertaken to cure such Default or Event of Default.
(c) Management Letters. To Agent and Lenders, within 5 Business Days after
receipt thereof by any Credit Party, copies of all management letters, exception
reports or similar letters or reports received by such Credit Party from its
independent certified public accountants.
(d) Default Notices. To Agent and Lenders, as soon as practicable, and in any
event within 2 Business Days after an executive officer of any Borrower has
actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.
(e) SEC Filings and Press Releases. To Agent and Lenders, promptly upon their
becoming available, copies of: (i) all Financial Statements, reports, notices
and proxy statements made publicly available by any Credit Party to its security
holders; (ii) all regular (including, without limitation, all 10Ks and 10Qs) and
periodic reports and all registration statements and prospectuses, if any, filed
by any Credit Party with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority; and
(iii) all press releases and other statements made available by any Credit Party
to the public concerning material changes or developments in the business of any
such Person.
E-2
(f) [Intentionally Omitted].
(g) Supplemental Schedules. To Agent (and upon the request of any Lender, such
Lender), supplemental disclosures, if any, required by Section 5.6.
(h) Litigation. To Agent (and upon the request of any Lender, such Lender) in
writing, promptly upon learning thereof, notice of any Litigation commenced or
threatened against any Credit Party that (i) seeks damages in excess of $250,000
(except that in the case of Litigation relating to Accounts, any Litigation that
seeks damages in excess of $500,000.00 with respect to claims for which the
applicable Credit Party has no right of indemnification from the originator or
seller of any such Account, or Litigation that seeks damages in excess of
$1,000,000 with respect to claims for which the applicable Credit Party has a
right of indemnification from the originator or seller of any such Account),
(ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan,
its fiduciaries or its assets or against any Credit Party or ERISA Affiliate in
connection with any Plan (iv) alleges criminal misconduct by any Credit Party,
(v) alleges the violation of any law regarding, or seeks remedies in connection
with, any Environmental Liabilities or (vi) involves any consumer credit
violations.
(i) Insurance Notices. To Agent (and upon the request of any Lender, such
Lender), disclosure of losses or casualties required by Section 5.4.
(j) Lease Default Notices. To Agent (and upon the request of any Lender, such
Lender), within 2 Business Days after receipt thereof, copies of (i) any and all
default notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may reasonably request.
(k) Lease Amendments. To Agent (and upon the request of any Lender, such
Lender), within 2 Business Days after receipt thereof, copies of all material
amendments to real estate leases.
(l) Other Documents. To Agent and Lenders, such other financial and other
information respecting any Credit Party's business or financial condition as
Agent or any Lender shall from time to time reasonably request.
E-3
ANNEX F (SECTION 4.1(B))
TO
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
COLLATERAL REPORTS
Borrowers shall deliver or cause to be delivered the following:
Monthly Reports. To Agent and Lenders, within 20 days after the end of each
Fiscal Month, a Borrowing Base Certificate as of the last business day of the
previous Fiscal Month, prepared by and certified by the chief financial officer
of each Borrower, together with a payment in reduction of the Obligations of an
amount equal to the Advances, if any, in excess of the Borrowing Base in such
Borrowing Base Certificate, and together with each Borrowing Base Certificate a
reporting package setting forth the following as of the last business day of the
previous Fiscal Month:
Borrowing Base Calculation by Portfolio
Accounts Receivable Roll Forward
Collection History by Portfolio
Schedule of Sales Adjustments to Portfolio Acquisition Cost
Recency Summary Aging by Portfolio
Recency Detail Aging by Portfolio (delivered electronically) (this
report will only be delivered to the Agent)
Schedule of all Portfolio sales and leases
Quarterly Reports. To Agent and Lenders, within 20 days after the end of each
Fiscal Quarter, a reasonably detailed report of any and all Servicing Agents or
other Persons (including any collection agent, agency or attorney) who, in the
aggregate, are contractually responsible for the collection of Accounts and
other Collateral in excess of an amount equal to ten percent (10%) of all
Accounts and other Collateral of all Credit Parties, together with a reasonable
description of all Accounts and other Collateral for which such Servicing Agent
or other Person is responsible, and the collection history of such Accounts and
other Collateral during that Fiscal Quarter.
Furthermore, Borrowers shall deliver or cause to be delivered to Agent and
Lenders (within a reasonable period of time after request therefor) such
additional reports, summaries and information relating to the Portfolios, the
Collateral, the Accounts, the business operations and activities of the Credit
Parties, the transactions and other matters contemplated by the Agreement, the
Loan Documents, and the Obligations, as Agent shall reasonably request from time
to time.
F-1
ANNEX G (SECTION 6.10)
TO
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
FINANCIAL COVENANTS
Borrowers shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP
consistently applied:
(a) Minimum Fixed Charge Coverage Ratio. Asta Funding and its Subsidiaries shall
have on a consolidated basis at the end of each Fiscal Quarter a Fixed Charge
Coverage Ratio for the 12-month period then ended of not less than 1.25 to 1.0.
(b) Minimum Tangible Net Worth. Asta Funding and its Subsidiaries on a
consolidated basis shall maintain at all times during each Fiscal Quarter a
Minimum Tangible Net Worth of not less than $92,000,000 plus fifty percent (50%)
of cumulative net income reported after December 31, 2003.
(c) Maximum Cash Flow Leverage Ratio. Asta Funding and its Subsidiaries shall
have on a consolidated basis at the end of each Fiscal Quarter a Cash Flow
Leverage Ratio of not more than 1.25 to 1.0.
(d) No Net Loss. Asta Funding and its Subsidiaries shall have no net loss on a
consolidated basis during any Fiscal Year. For purposes of computing net loss of
Asta Funding and its Subsidiaries, the net income of any Non-Credit Party
Affiliate (to the extent such net income is greater than zero) shall be excluded
from such computation.
Unless otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied. That certain items or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. If any "Accounting Changes" (as defined below)
occur and such changes result in a change in the calculation of the financial
covenants, standards or terms used in the Agreement or any other Loan Document,
then Borrowers, Agent and Lenders agree to enter into negotiations in order to
amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrowers' and their Subsidiaries' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii)
changes in accounting principles concurred in by any Borrower's certified public
accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (iv) the reversal of any
G-1
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If Agent,
Borrowers and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been implemented, any reference to GAAP contained in
the Agreement or in any other Loan Document shall, only to the extent of such
Accounting Change, refer to GAAP, consistently applied after giving effect to
the implementation of such Accounting Change. If Agent, Borrowers and Requisite
Lenders cannot agree upon the required amendments within 30 days following the
date of implementation of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying Accounting Change.
For purposes of Section 8.1, a breach of a Financial Covenant contained in this
Annex G shall be deemed to have occurred as of any date of determination by
Agent or as of the last day of any specified measurement period, regardless of
when the Financial Statements reflecting such breach are delivered to Agent.
G-2
ANNEX H (Section 9.9(a))
to
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
WIRE TRANSFER INFORMATION
Name: Palisades Collections LLC
Israel Discount Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
ABA# ▇▇▇▇▇▇▇▇▇
Accounts Payable-ABL
Account #: 355397901611
Attention: ▇▇▇▇▇ ▇▇▇▇/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Re: Palisades Collection LLC
H-1
ANNEX I (Section 11.10)
to
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or IDB, at
Israel Discount Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to (which shall not constitute notice):
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to any Borrower, any Credit Party, or any Guarantor, to Borrower
Representative, at
Palisades Collection, L.L.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
with copies to (which shall not constitute notice):
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
I-1
ANNEX J (from Annex A - Commitments definition)
to
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
------------------------------------------------------------
Lender Revolving Loan Commitment
------------------------------------------------------------
Israel Discount Bank $30,000,000.00
of New York
------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ $15,000,000.00
------------------------------------------------------------
Bank Leumi USA $5,000,000.00
------------------------------------------------------------
▇▇▇▇▇▇ Trust and $10,000,000.00
Savings Bank
------------------------------------------------------------
Total $60,000,000.00
------------------------------------------------------------
J-1
SCHEDULE 1.1
AGENTS' REPRESENTATIVE
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Operations Manager
Israel Discount Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
K-1
SCHEDULE 1.1 (b)
-------------------------------------------------------------------------------------------------------------------------
Description of
Pledged Interest
Borrower/ and Operating Cert. Number of % of Outstanding
Owner Credit Party Agreement No.(s) Interests Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Palisades Collection, Membership 100%
L.L.C. Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Asta Funding Membership 100%
Acquisition I, LLC Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Asta Funding Membership 100%
Acquisition II, LLC Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Asta ▇▇▇▇▇▇▇.▇▇▇, LLC Membership 100%
Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Asta Commercial, LLC Membership 100%
Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Computer Finance, LLC Membership 100%
Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Palisades Membership 100%
Acquisition I, LLC Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Palisades Membership 100%
Acquisition II, LLC Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. Palisades Membership 100%
Acquisition IV, LLC Interests
-------------------------------------------------------------------------------------------------------------------------
Asta Funding, Inc. E.R. Receivables Corp., Membership 100%
LLC Interests
-------------------------------------------------------------------------------------------------------------------------
L-1