REVOLVING CREDIT AGREEMENT AND ASSIGNMENT
Dated as of May 28, 2003
by and between
LEAF FINANCIAL CORPORATION,
LEASE EQUITY APPRECIATION FUND I, L.P.,
LEAF FUNDING, INC.
and
COMMERCE BANK, NATIONAL ASSOCIATION
Table of Contents
Page
1. The Loans................................................................2
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2. Security Interest and Assignment.........................................6
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3. Indebtedness Secured.....................................................7
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4. Representations and Warranties of Borrower...............................8
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5. Eligibility Requirements................................................11
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6. Covenants of Borrowers..................................................13
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7. Agreement to Indemnify..................................................17
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8. Agreements Regarding Collections........................................18
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9. Prepayments, Mandatory Prepayments......................................20
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10. Default.................................................................22
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11. Certain Defined Terms Not Defined Elsewhere in the Agreement............25
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12. Miscellaneous...........................................................25
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REVOLVING CREDIT AGREEMENT AND ASSIGNMENT
THIS REVOLVING CREDIT AGREEMENT AND ASSIGNMENT (this "Agreement") dated
as of May 28, 2003, is made, by and between LEAF FINANCIAL CORPORATION ("Leaf
Financial"), a Delaware corporation with offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, LEASE EQUITY APPRECIATION FUND I, L.P.
("Leaf I"), a Delaware limited partnership with offices at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇-▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, LEAF FUNDING, INC. ("Leaf Funding"), a
Delaware corporation with offices at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (Leaf Financial, Leaf I and Leaf Funding and, subject
to Section 1(c)(ii) hereof, Leaf I, each a "Borrower" and, collectively, the
"Borrowers") and COMMERCE BANK, National Association, a national banking
association with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
("Secured Party").
RECITALS
A. Until the Commitment Termination Date (as defined in Section 1(a)
below), Borrowers and Secured Party contemplate that Secured Party will from
time to time make loans to Borrowers (each, a "Loan" and, collectively, the
"Loans") evidenced by Borrowers' Master Note in the form attached hereto as
Exhibit A (the "Note").
B. In exchange for each Loan, Borrowers will assign to Secured Party one
or more leases or equipment finance agreements and will grant to Secured Party a
security interest in the equipment, the payments and all collateral covering and
proceeds arising under said leases and agreements.
C. Borrowers may repay such Loans with the proceeds of fundings to be
made under permanent financing to be undertaken in the near future, which
permanent financing may require a transfer and release of the Collateral (as
defined in Section 2(a) below) hereunder.
D. All of the requirements of law have been fully complied with and all
other acts and things necessary to make this Agreement a valid, binding and
legal instrument have been done and performed.
E. Resource America, Inc. and Leaf Asset Management, Inc (collectively,
the "Guarantors") have each executed a Guaranty of Payment, dated the date
hereof (collectively, the "Guaranty of Payment"), securing the Indebtedness (as
defined herein) for the benefit of the Secured Party.
F. Pursuant to that certain Revolving Credit and Assignment, dated as of
June 11, 2002, by and between Leaf Financial and National City Bank and the
Amendment to Revolving Credit Agreement and Assignment, dated as of March 28,
2003, among Leaf Financial, Leaf I, Leaf Funding, LLC and National City Bank,
National City Bank has extended credit to Leaf Financial and Leaf I and Leaf
Financial and Leaf I have granted National City Bank a security in certain
collateral.
G. Pursuant to the Intercreditor Agreement, dated as of the date hereof,
National City Bank and the Secured Party have agreed to coordinate and provide
for the application of any amounts received be either National City Bank or the
Secured Party in any realization on the Collateral (as defined herein) and in
the collateral granted to National City Bank by Leaf Financial and Leaf I.
H. Each initially capitalized term used herein shall have the meaning
set forth in these recitals, in Section 11 below, or as otherwise set forth in
this Agreement, for the purposes hereof and for each of the Loan Documents.
ACCORDINGLY, the parties agree as follows:
1. The Loans.
(a) Loan. Subject to the terms and conditions of this Agreement,
Secured Party agrees to make Loans to any of the Borrowers up to an aggregate
principal amount of Ten Million Dollars ($10,000,000) (the "Commitment"), during
the period commencing the date hereof and ending on the 364th day following the
date hereof unless earlier terminated pursuant to the terms of this Agreement,
including Section 11 hereof (the "Commitment Termination Date"). On or before
2:00 p.m. (Cherry Hill, New Jersey time) at least one (1) Business Day prior to
a Borrower's intention to obtain a Loan from the Secured Party pursuant to the
terms hereof, such Borrower shall have delivered to the Secured Party a notice
in the form attached hereto as Exhibit G specifying the requested borrowing date
and the principal amount of such Loan accompanied by (x) a borrowing computation
in the form satisfactory to the Secured Party specifying the Borrowing Limit (as
defined below) for such requested Loan and the aggregate Borrowing Base
outstanding on such date, and (y) a report in the form attached as Exhibit F
hereto. No Loan shall be made if, after giving effect thereto, the aggregate
outstanding principal amount of all Loans would exceed the lesser of (x)
Borrowing Base or (y) the Commitment (the "Borrowing Limit"). Each Contract (as
defined in Section 2(a)(i) below) offered to Secured Party in connection with a
Loan request shall (i) satisfy all of the conditions attributable to an Eligible
Contract (as defined below), (ii) be in form and substance satisfactory to the
Secured Party and otherwise comply with the conditions set forth in this
Agreement. Each Loan shall be in the amount equal to or greater than Two Hundred
Fifty Thousand Dollars ($250,000.00). Amounts borrowed and repaid may be
reborrowed subject to the satisfaction of the terms and provisions hereof.
(b) Note. The Loans shall be evidenced by the Note.
(c) Term of Loan, Payments of Principal and Interest. (i) Principal
on Loans advanced under the Commitment shall be due, in full on the Commitment
Termination Date; provided that at no time shall the aggregate principal of
outstandings exceed the Borrowing Limit. If at any time such excess exists,
Borrowers will promptly, and in any event within two Business Days, reduce the
outstanding aggregate principal balance of the Loans to an amount no greater
than the Borrowing Limit. Accrued interest on Loans advanced under the
Commitment shall be paid monthly on the first day of each month, on the
Commitment Termination Date and on any day that the Loans are paid in full
pursuant to Section 9 hereof. Loans may be voluntarily prepaid as provided in
Section 9 hereof.
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(ii) Takeout Financing. If, on or prior to the Commitment
Termination Date, Leaf I shall enter into and become a borrower under any credit
facility with a third-party lender, then Leaf I shall cease to be a Borrower
hereunder and any amounts advanced to Leaf I hereunder shall be due in full
immediately; provided, however, that if the Bank and the Borrowers other than
Leaf I agree that such third-party credit facility is not a permanent financing,
then Leaf I shall remain a Borrower hereunder.
(d) Interest Rate.
(i) Subject to the provisions of this Section 1(d), at the
election of the Borrowers, the principal balance of each Loan shall bear
interest at the Prime Rate (as defined below) plus One Hundred (100) basis
points or at the LIBOR Rate (as defined below) plus Three Hundred (300) basis
points. Each Borrower shall select the type of interest rate (Prime Rate or
LIBOR Rate) applicable to any Loan at the time a notice of borrowing is given
pursuant to Section 1(a) above. Any Loan or any portion thereof as to which the
Borrowers shall not have duly specified an interest rate as provided herein
shall conclusively be deemed to be a Loan at the Prime Rate. All interest on the
Loans shall be calculated on the basis of a 360 day year for the actual number
of days elapsed in such period. The interest rate on all outstanding Loans
bearing interest at the Prime Rate shall change simultaneously and automatically
upon each change in the Prime Rate.
The term "Prime Rate" shall mean the fluctuating rate of interest
per annum published in the "Money Rates" section of The Wall Street Journal on
the applicable date or the highest "Prime Rate," if more than one is published,
as such rate may change from day to day. If The Wall Street Journal ceases to be
published for any reason on any day, or if it ceases to publish a "Prime Rate,"
then the Secured Party may use any similar published Prime Rate or Base Rate, in
its sole discretion. The Prime Rate may not necessarily be the lowest or best
rate of interest charged by the Secured Party.
(ii) The term "LIBOR Rate" shall mean a rate per annum
determined when, in connection with each Loan, no later than 12:00 p.m. (New
Jersey time) two Business Days prior to the end of each calendar month, the
Borrower shall select the monthly interest rate applicable (as determined by the
Secured Party) to the current 30-day LIBOR period which shall then constitute
LIBOR for the succeeding calendar month to be applicable to the LIBOR Rate and
all LIBOR Rate Loans outstanding and which may become outstanding during the
succeeding calendar month. The Borrowers shall give the Secured Party notice of
its selection under this Paragraph in the form of Exhibit H hereto. If a
Borrower fails to make an election hereunder for any month, the previous
selection made under this Paragraph shall apply for that month.
(iii) Provided that no Event of Default or unmatured Event of
Default has occurred and is then continuing, the Borrowers shall have the option
to (i) convert no more than once per month all or any one of its outstanding
Prime Rate Loans into one or more LIBOR Rate Loans in a principal amount of not
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less than $250,000, (ii) convert no more than once per month all or any part of
its outstanding LIBOR Rate Loans in a principal amount equal to not less than
$250,000, into Prime Rate Loans, or (iii) continue such LIBOR Rate Loans as
LIBOR Rate Loans. Whenever the Borrowers desire to convert or continue Loans as
provided above, the Borrowers shall give the Secured Party irrevocable prior
written notice via facsimile in the form attached as Exhibit H (a "Notice of
Conversion/Continuation") not later than 11:00 a.m. (Cherry Hill, New Jersey
time) one Business Day before the day on which a proposed conversion or
continuation of such Loan is to be effective specifying (A) the Loans to be
converted or continued, (B) the effective date of such conversion or
continuation (which shall be a Business Day), and (C) the principal amount of
such Loans to be converted or continued
(iv) Maximum Rate of Interest. Notwithstanding anything to the
contrary herein or in any other Loan Document, no effective rate of interest
hereunder shall exceed the maximum effective rate of interest permitted by
applicable law or rule. Borrowers hereby agree to give Secured Party written
notice in the event that any Borrower has actual knowledge that any interest
payment made to Secured Party hereunder or under any other Loan Document will
cause the total interest payments collected in any one year to be usurious under
applicable law or rule, and Secured Party hereby agrees not to knowingly collect
any interest from Borrowers in the form of fees or otherwise which would render
the Loan usurious. In the event that interest hereunder or under any other Loan
Document would be usurious in the opinion of Secured Party, Secured Party
reserves the right to reduce the interest payable by Borrowers. This Section
shall survive the repayment of the Loan.
(e) Interest on Overdue Amounts. If any Borrower shall fail to
timely pay any amount due to Secured Party under any Loan, Borrowers shall
continue to pay Secured Party interest on such unpaid amount at the per annum
rate of interest applicable to that Loan prior to such late payment, provided,
however, that if such payment is not made to Secured Party within five (5)
Business Days after the applicable due date, then interest upon such unpaid
amount shall be paid at a per annum rate equal to three percent (3%) above the
Prime Rate (the "Default Rate").
(f) Method of Payment. All Loan payments shall, unless otherwise
specified by Secured Party in writing, be debited from any account maintained by
Borrowers at the Secured Party. The authorization to debit any account at the
Secured Party for all amounts due under the Agreement and the Loans shall
continue, and is irrevocable, so long as any Obligations are outstanding. In the
event the funds in such accounts are insufficient to pay in full the required
payments, Borrowers shall immediately pay such deficiency by wire transfer of
immediately available funds. If Secured Party permits payment to be made to
Secured Party by wire transfer it shall be to an account designated in writing
by Secured Party.
(g) Direct and Continuing Liability; General Limitation on Guaranty
Obligations. (i) Notwithstanding any other provision of the Note or this
Agreement, each Borrower shall be jointly, severally and directly liable for the
full and prompt payment of each Loan and any other Obligations. Liability for
each Loan will be fully recourse to all of Borrowers' assets.
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(ii) In any action or proceeding involving any state, federal
or foreign bankruptcy, insolvency, reorganization or other law affecting the
rights of creditors generally, if the obligations of any Borrower under the Loan
Documents would otherwise be held or determined to be void, voidable, invalid or
unenforceable, or subordinated to the claims of any limited partner or any other
creditors, solely on account of the amount of its liability thereunder, then,
notwithstanding any other provision to the contrary, the amount of such
liability shall, without any further action by such Borrower, the Secured Party
or any other person, be automatically limited and reduced to the highest amount
that is valid and enforceable and not subordinated to the claims of limited
partners or other creditors as determined in such action or proceeding.
(h) Loans as Debt. The parties intend the Loans to be treated as
debt for tax and all other purposes.
(i) Conditions Precedent. The Secured Party shall not be obligated
to make any loan to the Borrowers hereunder until the following conditions have
been satisfied, in addition to any of the other conditions set forth herein:
(i) no Event of Default (as defined in Section 11 below) or
event which upon notice, lapse of time or both would constitute an Event of
Default on the date of the proposed borrowing shall have occurred and be
continuing;
(ii) on the date hereof, the Secured Party shall have received
a favorable opinion of counsel from the Borrowers substantially in the form
attached hereto as Exhibit E;
(iii) on the date hereof, the Secured Party shall have received
(x) evidence of the legal existence and good standing of each Borrower dated as
a recent date issued by the Secretary of State of the State of Delaware and (y)
a certificate of the secretary, assistant secretary of each Borrower certifying
as to the corporate charter, operating agreement or partnership agreement, as
the case may be and by-laws, if any, of each Borrower, the incumbency and
signatures of the officer of each Borrower who have executed this Agreement and
the other documents to be executed in connection herewith and the resolutions of
the Board of Directors authorizing the execution, delivery and performance of
this Agreement and the making of the loans hereunder;
(iv) the Secured Party shall have received on the date of the
proposed borrowing a list of the Contracts with counterpart schedules or notes
endorsed to the Secured Party, delivery and acceptance certificates, UCC
financing statements with respect to Collateral and other documents,
certificates and filings as required by the Secured Party in its discretion in
connection with the funding of such Contracts, the originals of which documents
shall be held or filed by the Secured Party;
(v) on the date of the proposed borrowing the Secured Party
shall have received the Assignment referred to in Section 2(b) duly executed by
each Borrower;
(vi) the Note executed by the Borrowers;
(vii) the Guaranty of Payment; and
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(viii) on the date hereof, the Secured Party shall have received
UCC-1 searches pertaining to Borrowers in all jurisdictions which Secured Party
deems appropriate, to be performed by a company designated by Secured Party, at
the sole cost and expense of the Borrowers.
2. Security Interest and Assignment.
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(a) Security Interest. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Indebtedness, each Borrower hereby assigns
over to and grants to Secured Party a security interest (the "Security
Interest") in and to all of such Borrower's right, title and interest in and to
the following properties, rights, interests and privileges, whether now owned or
hereafter acquired, and in all products thereof and cash and non-cash proceeds
of insurance policies from the loss thereof (all of which properties, rights,
interests, privileges and proceeds are hereinafter called the "Collateral").
(i) Contracts. All lease agreements, conditional sale
contracts, pay-per-use agreements, notes, security agreements and/or financing
documents and agreements of any kind arising out of a lease, rental or provision
of, or financing of Equipment entered into between each Borrower as lessor,
seller, provider or lender and the entity named therein as lessee, purchaser,
user or borrower (together with any guarantors or other parties obligated in
respect of the Contracts, an "Obligor" or the "Obligors"), together with any
master lease agreements or other documents which relate to the above described
documents, all of which are in each case covered by or identified in any
Assignment (collectively the "Contracts");
(ii) Goods. All goods and other property and rights covered by
any Contract assigned to Secured Party, together with all accessories,
accessions, attachments and appurtenances appertaining or attached to or used in
connection with any of such property, whether now owned or hereafter acquired
(the "Equipment");
(iii) Obligor Guaranties. All Guaranties given to each Borrower,
or under which such Borrower has rights, by any person or entity guaranteeing
the payment and/or performance of any Contract assigned to Secured Party (an
"Obligor Guaranty")
(iv) Rights and Payments. All right, title and interest of each
Borrower in, under and to the Contracts, and all rents and other sums due and to
become due thereunder, including any and all extensions or renewals thereof
("Payments");
(v) Software. All software products and license agreements or
rights covered under any Contract assigned to Secured Party (to the extent any
Borrower has transferable rights in such software);
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(vi) Other Security. All instruments, documents of title,
accounts, general intangibles, or money in each case related to, or property of
any kind securing the payment of, any Contract assigned to Secured Party;
(vii) Substitutions, Renewals, Replacements, Improvements.
All enhancements to and substitutions, renewals and replacements of, and
improvements to, any of the foregoing;
(viii)Proceeds. All cash and noncash proceeds of any of the
foregoing including, but not limited to, insurance proceeds and casualty loss
payments ("Proceeds"); and
(ix) General Corporate Assets. (i) all of Borrowers' inventory
now owned or hereafter acquired; (ii) all of the Borrowers' documents of title
now owned or hereafter acquired; (iii) all of the Borrowers' accounts now
existing or hereafter arising; (iv) all of the Borrowers' general intangibles,
chattel paper and instruments now existing or hereafter acquired or arising; (v)
all guaranties of the Borrowers' existing and future accounts and general
intangibles and all other security held by each Borrower for the payment or
satisfaction thereof; (vi) the goods or the services, the sale or lease or
performance of which gave rise to any account or general intangible of each
Borrower, including any returned goods; (vii) all of the Borrowers' Equipment
now owned or hereafter acquired; (viii) any balance or share belonging to each
Borrower of any deposit, agency or other account with any Secured Party and any
other amounts which may be owing from to time by any Secured Party to each
Borrower; (ix) all property of any nature whatsoever of each Borrower now or
hereafter in the possession of or assigned or hypothecated to the Secured Party
for any purpose; (x) all Proceeds of all of the foregoing, including all
Proceeds of other Proceeds and all rights of each Borrower, or any subsidiary of
such Borrower, as servicer and/or administrator for any chattel paper and
equipment of third parties.
(b) Assignment. In connection with each Loan, each Borrower shall
execute and deliver to Secured Party an assignment (the "Assignment") in the
form attached hereto as Exhibit B which shall identify the Borrowing Limit of
the Contracts assigned pursuant thereto.
(c) No Assumption by Secured Party. Secured Party shall not be
deemed by reason of any Assignment to have assumed any of Borrowers', or any
lessor's or vendor's, obligations under any Contract.
3. Indebtedness Secured.
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(a) Security for Loan Related to Assignment and Other Indebtedness.
All Collateral covered under the Assignment shall secure the full and prompt
payment of all Loans made pursuant to this Agreement and other amounts due to
Secured Party under this Agreement, whether now existing or hereafter incurred,
direct or indirect, absolute or contingent, and including any sums advanced and
any costs and expenses incurred by Secured Party pursuant to this Agreement (all
of which is herein sometimes referred to as the "Indebtedness").
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(b) Periodic Releases. Provided no Event of Default shall have
occurred and be continuing, at such time as Secured Party has received the
payment in full of the Prepayment Amount (as defined in Section 10(g) below)
with respect to any Contract covered by such Loan under this Agreement, Secured
Party shall release its security interest in the Contract and directly related
Collateral within one business day of such payment of the Prepayment Amount,
without recourse to, and without representations or warranties by, Secured Party
of any kind whatsoever. Upon Secured Party's release of Collateral as provided
above, the released Collateral shall no longer constitute security for the
payment of any Indebtedness.
4. Representations and Warranties of each Borrower.
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Each Borrower represents and warrants (each representation and warranty
shall be considered as having been made and restated concurrently with the
making of any Loan as an inducement to Secured Party to make such Loan) that:
(a) Organization and Qualification. Each Borrower is a corporation,
limited liability company or limited partnership, as the case may be organized,
validly existing and in good standing under the laws the State of Delaware; and
such Borrower is duly qualified and in good standing as a foreign business
entity authorized to do business in each state or jurisdiction where such
qualification is necessary, where lack of qualification would have a materially
adverse affect on such Borrower's business operations.
(b) Authorization. Each Borrower is duly authorized to execute and
deliver this Agreement, and is and will (as long as this Agreement is in effect
and thereafter until payment in full of all amounts due and owing Secured Party
pursuant to the Note or this Agreement) continue to be, duly authorized to
perform all of its obligations to Secured Party under this Agreement and under
the Note, instrument and document delivered in connection with this Agreement.
(c) No Conflict. The execution, delivery and performance by
Borrowers of this Agreement does not, and will not by the passage of time, the
giving of notice or otherwise, (i) violate any provision of any law or
regulation, (ii) violate any organizational document of any Borrower, or (iii)
violate any judgment, order, decree, agreement, trust or other indenture or
instrument to which a Borrower is a party or by which any of its property is
bound. No Borrower is in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any governmental authority;
(d) Financial Statements. Each Borrower has individually or on a
combined basis, delivered to Secured Party copies of (i) such Borrower's most
recent annual audited financial statements, prepared and certified by an
independent firm of certified public accountants satisfactory to Secured Party,
in conformity with generally accepted accounting principles applied on a basis
consistent with that of the preceding fiscal year and presenting fairly such
Borrower's financial condition as at such date, and the results of such
Borrower's operations for the twelve month period then ended and (ii) such
Borrower's most recent quarterly financial statements, prepared in conformity
with generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal quarter and presenting fairly such Borrower's
financial condition as at such date and the results of its operations for the
quarter then ended, certified as true and correct by such Borrower's president,
executive vice president, controller or chief financial officer, and since the
date of the above described financial statements there has been no material
adverse change in such Borrower's financial condition.
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(e) Litigation and Contingent Liabilities. Each Borrower has
delivered to Secured Party a schedule of material litigation or governmental
proceedings pending or threatened against such Borrower (including estimates of
the dollar amounts involved). Other than any liability incident to the
litigation or proceedings disclosed in such schedule, such Borrower has no
contingent liabilities not provided for or disclosed in the financial statements
referred to in Section 4(d).
(f) Addresses. Each Borrower's records concerning that part of the
Collateral constituting accounts or chattel paper are kept at the address
specified on the first page hereof, which is its chief executive office and
principal place of business and has been its chief executive office and place of
business since the earlier of (i) the date of such Borrower's organization and
(ii) five calendar years prior to the date hereof.
(g) Tradenames. Each Borrower has not conducted and does not conduct
business under any tradename or assumed name other than those set forth on
Schedule 4(g) attached hereto.
(h) Taxes. Each Borrower has filed all tax returns (federal, state,
and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
(i) No Default. Each Borrower has satisfied all judgments and such
Borrower is not in default with respect to obligations, covenants or conditions
contained in any material contract, agreement or instrument to which it is a
party or by which it is bound or any judgment, writ, injunction, decree,
material rule, or material regulation of any court, arbitrator, or federal,
state, municipal, or other governmental authority, commission, board, bureau,
agency, or instrumentality, domestic or foreign.
(j) Legally Enforceable Agreement. This Agreement and each of the
other Loan Documents to which each Borrower is a party, constitutes the legal,
valid and binding obligations of such Borrower, enforceable against it in
accordance with their respective terms.
(k) Priority of Liens; Condition of Collateral. Each Borrower owns
the Collateral free and clear of all Liens, encumbrances, security interests or
other rights of third parties, excepting only the rights and interests granted
Secured Party herein and in the other Loan Documents, and upon perfection of
Secured Party's security interest in such Collateral, Secured Party will have a
first Lien on such Collateral.
(l) Solvency.
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(i) The present fair saleable value of the assets of each
Borrower after giving effect to the funding of the Loan hereunder exceeds the
amount that will be required to be paid on or in respect of the debts and other
liabilities (including contingent liabilities) of such Borrower as they mature;
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(ii) The assets of each Borrower do not constitute unreasonably
small capital for such Borrower to conduct its business as now conducted and as
proposed to be conducted, including the capital needs of each Borrower;
(iii) Each Borrower does not intend to, nor does such Borrower
believe that it will, incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be received by
such Borrower and of amounts to be payable on or in respect of debt of such
Borrower). The cash available to each Borrower, after taking into account all
other anticipated uses of the cash of such Borrower, is anticipated to be
sufficient to pay all amounts on or in respect of the Indebtedness when the
Indebtedness or any part thereof is required to be paid;
(iv) The aggregate fair value of each Borrower's assets exceeds
the aggregate of all its liabilities; and
(v) Each Borrower agrees that Loans made hereunder and the
assignment and grant of a security interest in the Collateral by the Borrowers
hereunder is for the benefit of each Borrower and will not affect any of the
Secured Party's rights hereunder.
(m) Contracts. Each of the Contracts constitutes the legal, valid
and binding obligations of the parties thereto as set forth therein and is
enforceable against the lessee thereunder in accordance with its terms and there
is no default or event of default under any contract on the part of any lessee
thereunder.
(n) Authorizations. Each Borrower has all authorizations, consents,
approvals, licenses, accreditations and exceptions from, and has made all
registrations and filings with, and all reports to, all federal, state and local
governmental bodies and agencies and accreditation authorities (collectively
referred to as "Governmental Approvals") necessary for the conduct of its
business, and the conduct of its business is not and has not been in violation
of any such Governmental Approvals or any applicable federal or state law, rule
or regulation, including ERISA, or the rules and regulations of an accreditation
authority, the failure of which to obtain or to comply with could not, in any
such case, reasonably be expected to have a Material Adverse Effect. No Borrower
requires any Governmental Approvals to enter into, or perform under, this
Agreement, the Note, or any other Loan Document to which Borrowers are a party.
There are no actions or investigations pending or, to the knowledge of any
Borrower, threatened against or affecting any Borrower before any governmental
authority, which could reasonably be expected to result in a material adverse
change.
(o) Accuracy of Representations; No Default. The information set
forth herein and in each of the other Loan Documents is complete and accurate in
all material respects and contains full and complete disclosure of all pertinent
information in connection with each Borrower. None of such information contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the information contained herein or therein not misleading or
not incomplete. No Event of Default or unmatured Event of Default hereunder, or
under any other Loan Document, has occurred.
10
5. Eligibility Requirements.
-------------------------
Each of the Loans made pursuant to this Agreement will be made on the
basis that the Contracts assigned to Secured Party with respect to each Loan
are, at the time that the Loan is made, and will be at all times thereafter
until payment in full of such Loans continue to be, Eligible Contracts. In order
for a Contract to be an "Eligible Contract". all of the following conditions
must be true, correct and satisfied with respect to the Contract, the Payments
due under the Contract and the related Collateral:
(a) Waiver of Defenses. The Contract provides that the Obligor under
the Contract waives all defenses, set-offs, counterclaims, deductions or
allowance or adjustment against the assignee of the lessor, vendor or financier.
(b) Bona Fide Transaction; Fixtures. The Contract arises from a bona
fide lease or sale of the Equipment, in the ordinary course of business,
described in the Contract and the Equipment is in all respects in accord with
the requirements of the Contract and has been delivered to and unqualifiedly
accepted by the lessee, vendee or borrower thereunder, none of the Equipment
covered by the Contract, after its delivery and acceptance by such lessee or
vendee, is a fixture under the applicable laws of any state where the Equipment
is or may be located.
(c) Compliance with Laws; Validity, Enforceability; No Liens. The
Contract and the related Equipment comply in all material respects with all
applicable laws and regulations (including, without limitation, interest/usury
laws); the Contract is genuine, valid, enforceable in accordance with its terms,
accurately describes the related Equipment and Collateral and the Payments due
under the Contract, and is in all respects what it purports to be; the Contract,
the Payments due under the Contract, the related Equipment and Collateral and
all proceeds thereof are not subject to any Lien, claim or security interest
except the interest of the Obligor and each Borrower under the Contract and the
Lien in Secured Party's favor.
(d) Good Title. At the time of the Loan made with respect to the
Contract, the applicable Borrower had (i) good title to the Contract and either
good title or a first priority interest in Collateral, free of all Liens, claims
or security interests; and (ii) all legal power, right and authority to assign
the Contract to Secured Party.
(e) Interest Transferred. A first priority perfected security
interest in the Contract, the Payments due under the Contract, and each Obligor
Guaranty related to the Contract, free of all Liens, claims or security
interests, and valid security interest superior to the rights of all others in
the Collateral, and all proceeds thereof, shall be vested in Secured Party by
the Assignment executed by each Borrower relating to the Contract and the terms
of the Assignment and the execution thereof do not result in a breach of the
Contract or the related Obligor Guaranty.
11
(f) Counterparts of Contract. All counterparts of the Contract have
been clearly marked to indicate that only one counterpart is the "Original" and
assignable, and that counterpart will be delivered to Secured Party upon an
Event of Default defined in Section 11 hereof.
(g) Entire Agreement. The Contract represents the total and complete
agreement between each Borrower and Obligor with respect to the Collateral and
no Borrower has entered into any other agreements, whether written or oral, with
the Obligor in respect of the Collateral.
(h) Written Agreements. At the time a Loan is made with respect to a
Contract, the applicable Borrower has informed Secured Party in writing of all
agreements entered into in connection with the Contract and fully executed
copies (all original copies if requested by Secured Party) of all those
agreements will be delivered to Secured Party simultaneously with delivery of
the Contract.
(i) Capacity and Authority. Each party to the Contract and any
Obligor Guaranty has all the legal capacity, power and right required for it to
enter into the Contract or Obligor Guaranty and any supplemental agreements, and
to perform its obligations thereunder; all such actions have received all
corporate or governmental authorization required by any applicable charter,
by-law, constitution, law rule or regulation.
(j) No Obligor Default. No Obligor Default (as defined below in
Section 10(c)), or event which with the passage of time or giving of notice, or
both, would become an Obligor Default, exists and no Borrower has any knowledge
of any fact that may impair the Contract's or the related Obligor Guaranty's
validity. No Obligor is in bankruptcy, receivership, reorganization or is
insolvent. No material change has occurred with respect to the Contract or the
Obligor.
(k) No Setoffs of Claims. There exist no setoffs, counterclaims or
defenses on the part of any Obligor under the Contract or any Obligor Guaranty
to any claims against or obligations of any obligor thereunder.
(l) No Impairment of Value. No Borrower has done anything that might
impair the value of the Contract or any related Obligor Guaranty or any of
Secured Party's rights under the Contract, any related Obligor Guaranty, or to
the Equipment covered by the Contract or Payments due under the Contract.
(m) Insurance. The Contract requires that the Equipment covered by
or the subject of the Contract be insured to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated and as each Borrower or its assigns may reasonably request from time to
time.
(n) Taxes. All taxes, assessments, fines, fees and other liabilities
relating to the Contract, the Payments due under the Contract, the related
Collateral, or any related Obligor Guaranty have been paid when due, and all
filings in respect of any such taxes, assessments, fines, fees and other
liabilities have been timely made, except for taxes being contested in good
faith.
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(o) No Borrower Default or Violation. No Borrower nor any vendor or
lessor of the Equipment is in default of any of such party's obligations under
the Contract or arising by contract or imposed by applicable law, rule or
regulation with respect to the Contract and the related Equipment.
(p) Perfection. Each Borrower has taken, at its expense, all steps
from time to time requested by Secured Party to perfect (and continue the
perfection of) Secured Party's security interest in the Contract, the Payments
and the Equipment covered by the Contract. Perfection will be accomplished by
Borrowers' perfection of a security interest against the Obligors and Secured
Party's perfection of its security interest against each Borrower.
(q) No Amendments. Neither the Contract nor any related Obligor
Guaranty has been, or will be, altered, modified, changed or amended without
Secured Party's prior written consent.
(r) No Prepayments. At the time of the Loan made with respect to the
Contract, no amounts have been prepaid on the Contract except advance payments
and security deposits which are required by the terms of the Contract.
(s) Use of Proceeds. Each Loan shall be used by each Borrower to
finance all or a portion of the cost to such Borrower of the Equipment, which
shall be or has been leased to unaffiliated third persons and is the subject of
an Eligible Contract securing a Loan or, if such Equipment has already been
acquired by such Borrower to reimburse such Borrower for the cost so incurred
and for no other purpose.
(t) Equipment. The Equipment is located in the United States of
America and is used for commercial purposes.
(u) Term. The Contract does not have an initial term greater than 84
months.
(v) Past Due. No Contract payments are, and have not been at any
time, more than 60 days contractually past due.
(w) Progress Payments. No more than 20% of the Borrowing shall at
any time be secured by Contracts pursuant to which any Borrower is entitled to
receive progress payments from the Obligors.
6. Covenants of Borrowers.
-----------------------
Each Borrower covenants that so long as the Commitment is in effect or
Indebtedness is outstanding, such Borrower will:
(a) Financial Statements. Furnish, individually or on a consolidated
basis, to Secured Party: (i) as soon as available, but not later than sixty (60)
days after the end of each quarter (except the last) of each fiscal year,
13
quarterly unaudited financial statements concerning such business, prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the preceding fiscal quarter, presenting fairly such
Borrower's financial condition as at the end of that quarter and containing such
data as may be reasonably requested by Secured Party and the results of its
operations for the three (3) month period then ended, and certified as true and
correct by such Borrower's president, executive vice president, controller or
chief financial officer; (ii) as soon as available, but not later than one
hundred-twenty (120) days after the end of each fiscal year, a copy of such
Borrower's annual audit report for that year, prepared in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the preceding fiscal year, presenting fairly such Borrower's financial
condition as at the end of that fiscal year; containing such data as may be
reasonably requested by Secured Party and the results of its operations for the
twelve (12) month period then ended and signed without qualification by
independent certified public accountants of recognized standing or otherwise
satisfactory to Secured Party; (iii) at the time that any financial statements
furnished under clause (i) or (ii) above, a certificate in substantially the
same form as Exhibit C hereto or such other form as shall be satisfactory to
Secured Party, signed by such Borrower's president, executive vice president,
controller or chief financial officer setting forth such Borrower's compliance
or noncompliance with the covenants and obligations under this Agreement and
providing details as to such matters, and if such Borrower is not in compliance
with any such covenant or obligation, setting forth a statement indicating the
measures taken and proposed, and the time for such Borrower's return to
compliance, and (iv) from time to time any other information as Secured Party
may reasonably request.
(b) Notice of Adverse Events. Notify Secured Party promptly upon
such Borrower's learning of any default by any Obligor, and/or (ii) any and all
litigation or other matters or events concerning such Borrower which might
reasonably be construed to affect adversely Secured Party's interest in any
Collateral or any of Secured Party's rights under this Agreement.
(c) Access to Books and Records. Permit a representative of Secured
Party (including any field examiner or auditor retained by Secured Party), upon
at least two (2) Business Days' prior written notice, to inspect and make copies
of such Borrower's books and records at such Borrower's offices, and to conduct
field audits, with expenses (including reasonable travel expenses) to be paid by
Borrowers not to exceed the lesser of actual reasonable costs or $7,500. So long
as no default or Event of Default shall have occurred or be continuing, the
Secured Party shall not conduct more than one (1) field audit in any fiscal year
of any Borrower.
(d) Taxes, Etc. Make or cause to be made all filings in respect of,
and pay or cause to be paid when due, all taxes, assessments, fines, fees and
other liabilities (including all taxes and other claims in respect to the
Contracts and the related Equipment), except for taxes being contested in good
faith.
(e) Continuity of Business. Not (i) cease to engage in substantially
the same line of business in which such Borrower is engaged on the date of this
Agreement, (ii) cease to engage in the sale, lease and remarketing of goods
14
comparable to the Equipment, or (iii) without Secured Party's prior written
consent, sell, transfer or convey a substantial part of such Borrower's assets
outside of the ordinary course of business which shall include non-recourse
financing or be a party to any merger or consolidation.
(f) Performance of Obligations. Perform all such Borrower's
obligations arising by contract or imposed by applicable law, rule or regulation
with respect to the Contracts and the related Equipment.
(g) Changed Locations. Notify Secured Party at least (30) days prior
to such Borrower's (i) changing the location of its principal place of business
or chief executive office, (ii) opening or closing any places of business in any
jurisdictions where such openings or closings might affect the place where a UCC
financing statement or similar document would need to be filed in order to
perfect or protect Secured Party's security interest or other interest in any of
the Collateral, or (iii) change the state of its organization.
(h) Further Assurances. From time to time execute and deliver such
further documents and do such further acts and things as Secured Party may
reasonably request in order to fully effect the purposes of this Agreement and
to protect Secured Party's interest in the Collateral.
(i) Defense Against Claims. Defend the Collateral against the claims
and demands of all other parties, including without limitation defenses,
set-offs, claims, cross claims and counterclaims asserted by any Obligor against
any Borrower or Secured Party and claims, cross claims and counterclaims
asserted by any other person claiming an interest in the Collateral.
(j) Delivery of Additional Documents. Upon Secured Party's
reasonable request, will deliver to Secured Party or its designees any relevant
instruments, documents of title and chattel paper representing or relating to
the Collateral or any part thereof, and all schedules, invoices, shipping, or
delivery receipts: together with any necessary endorsement or assignment and all
purchase orders, contracts, or other documents representing or relating; to
purchases or other acquisitions or sales, leases or other dispositions of the
Collateral and the proceeds thereof and any and all other schedules, documents,
and statements relating to the Collateral which Secured Party may from time to
time reasonably request.
(k) Limits. Not permit more than twenty percent (20%) of the
Commitment to be secured by Contracts with the same lessee or its affiliates.
(l) UCC Financing Statements. Deliver to Secured Party such Uniform
Commercial Code ("UCC") financing statements against such Borrower as shall be
reasonably required by Secured Party to perfect its interest in the Collateral.
(m) Searches. Deliver and pay for such UCC and tax Lien searches at
the Secretary of State of Delaware on such Borrower as Secured Party may from
time to time reasonably require, but not more frequently than annually in the
absence of an Event of Default.
15
(n) Monthly Reports. By the twenty-fifth day of each month, provide
to Secured Party, in form and detail satisfactory to Secured Party, an aging
report on all assigned Contracts and a calculation showing that the Borrowing
Limit under Eligible Contracts does not exceed the Borrowing Base. Such monthly
aging reports shall be certified by such Borrower's president, or its executive
Vice President, or controller or chief financial officer.
(o) Deposit Account. Maintain a demand deposit account at the
Secured Party in which funds will be maintained sufficient to satisfy, in any
given month, the interest payment due on the Indebtedness.
(p) Financial Covenants. The Borrowers shall, on a combined basis:
(i) maintain a minimum Adjusted Net Worth of Eight Hundred
Thousand Dollars ($800,000) from the date hereof and hereafter through and
including the termination of this Agreement, plus fifty percent (50%) of
consolidated quarterly net income (without any reduction for losses) commencing
with the quarter ended June 30, 2003.
(ii) maintain an Interest Coverage Ratio of at least 1.10:1 to
be measured quarterly from the quarter ending December 31, 2003 until
termination of this Agreement. As used herein "Interest Coverage Ratio" shall
mean earnings before interest expense, taxes, depreciation and amortization
("EBITDA") divided by interest expense.
(iii) maintain a Senior Leverage Ratio (as defined below) no
greater than 4:1.
As used herein "Adjusted Net Worth" means Net Worth plus the
non-current portion of Subordinated Debt. "Net Worth" means the sum of capital
stock, plus retained earnings, plus paid-in-surplus, minus treasury stock.
"Subordinated Debt" means all Borrowers' debt which is specifically junior and
subordinated to the Indebtedness on terms satisfactory to Secured Party. The
"Senior Leverage Ratio" shall be calculated by dividing the Borrowers' Combined
Recourse Debt by the Borrowers' Adjusted Net Worth. "Combined Recourse Debt"
means all Borrowers' debts, liabilities and obligations including, but not
limited to, all accounts payable, income taxes payable and accrued liabilities
and all contingent liabilities of Borrowers, including guaranties computed as
the maximum liability guaranteed, and any partially recourse debt to the maximum
extent of such recourse, but excluding non-recourse debt.
(q) Fees. Pay the following fees: (i) reasonable closing fees and
expenses (including, without limitation, reimbursement of audit fees and legal
expenses) upon execution of this Agreement and (ii); a commitment fee equal to
..50% of the average daily unused balance of the Commitment during each calendar
quarter payable quarterly in arrears at the end of each calendar quarter
commencing with the calendar quarter ending June 30, 2003 and on the date of
termination of the Commitment. The commitment fee shall not be first payable
until the September 30, 2003 calculation in arrears.
7. Negative Covenants. Each Borrower covenants that so long as the
Commitment is in effect or any Indebtedness remains outstanding such Borrower
will not:
16
(a) Restricted Payments. Declare or pay any dividends; purchase,
redeem, retire, or otherwise acquire for value any of its capital stock, now or
hereafter outstanding; make any distribution of assets to its stockholders as
such whether in cash, assets, or in obligations of such Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
stock; make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock. Except that each Borrower may
declare and-pay cash dividends to its stockholders of fifty percent (50%) of the
positive net income of such Borrower arising after the date hereof and computed
on a cumulative basis so long as no Event of Default or event which upon notice,
lapse of time or both would constitute an Event of Default has occurred and is
continuing or would occur after giving effect thereto.
(b) Negative Pledge. Other than with respect to Secured Party,
create, incur, assume, or suffer to exist on the Collateral, any mortgage, deed
of trust, pledge, Lien security interest, assignment, charge, or encumbrance
(including without limitation, any conditional sale, or other title retention
agreement, or finance lease, except the Contracts themselves), of any nature,
upon or with respect to any of the Collateral now owned or hereafter acquired,
or sign or file under the UCC of any jurisdiction a financing statement which
names any Borrower, as a debtor, and any Collateral, as the property, covered by
such financing statement or sign, any security agreement authorizing any secured
party thereunder to file such financing statement.
(c) Mergers. Merge or consolidate with any person during any twelve
(12) month period, or acquire all or substantially all of the assets or the
business of any person, unless (a) such person is in the same line of business
as Borrowers, (b) a Borrower is the surviving entity and (c) no Event of Default
exists prior to or after such transaction.
(d) Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of more than ten percent (10%) of the Borrowers', now owned or hereafter
acquired, assets (including, without limitation receivables and leasehold
interests) during any twelve (12) month period provided, however, that Borrowers
may (a) lease equipment in the ordinary course of business, (b) enter into
securitization of its assets in the ordinary course of business, (c) sell
equipment at the expiration or termination of any Contract, and (d) create Liens
in contracts and specific assets and related equipment not constituting
collateral financed on a non recourse basis.
(e) Intercompany Investments. Permit any subsidiary of any Borrower
to be in substantially the same line of business and make a loan to, guaranty
the obligations of, or purchase assets of, any subsidiary of any Borrower,
affiliate of any Borrower, or person under common control with a Borrower, any
person shall include any entity in whatever form.
8. Agreement to Indemnify.
-----------------------
(a) Indemnification. Secured Party assumes no obligation or
liability to the Obligor under any Contract and no assignment of any Contract
shall impose any such obligation or liability on Secured Party. Borrowers
jointly and severally agree to indemnify and save Secured Party harmless of,
from and against any losses, damages, penalties, forfeitures, claims, costs,
expenses (including court costs and reasonable attorney's fees) or liabilities
17
which may at any time be brought, incurred, assessed or adjudged against Secured
Party, related to or arising from the Contracts and the related Collateral
excluding (except as provided in 13(m) hereof) any of the foregoing relating to
any action by any regulatory agency with jurisdiction over Secured Party, but,
including, without limitation, those arising or resulting from: any alleged
failure of any Contract or the related Equipment to comply with any applicable
law, rule, regulation or contractual specification; any alleged failure on any
Borrower's part to keep or perform any of its obligations, express or implied,
with respect to any Contract or the related Equipment; any alleged injury to
persons or property or any violation or invasion of any patent or invention
rights; any governmental fees, charges, taxes or penalties (other than from
relating to the revenue or income of Secured Party) levied or imposed in respect
to any Contract or any related Equipment; any breach by any Borrower of any of
its representations, warranties, covenants or other obligations or agreements
contained in this Agreement, in any Contract or in any agreement related hereto
or thereto; or any inaccuracy in any information provided to Secured Party by
any Borrower. The provisions of this Section 8 shall survive termination of this
Agreement.
(b) Indemnity Notices; Control of Proceedings. Each Borrower will give
Secured Party notice of any event or condition that requires indemnification by
Borrowers hereunder, or any allegation that such event or condition exists,
promptly upon obtaining knowledge thereof. Each Borrower may, at its option
assume the defense of any claim or lawsuit for which Secured Party seeks
indemnification hereunder, and after any such assumption Secured Party shall no
longer defend such claim or lawsuit, provided that counsel shall be reasonably
satisfactory to Secured Party. Borrowers agree to be jointly and severally
obligated to pay all amounts due hereunder promptly on notice thereof from
Secured Party. To the extent that Borrowers may make or provide to Secured
Party's satisfaction for payment under this indemnity provision, and if
Borrowers are otherwise in compliance with the terms of this Agreement,
Borrowers shall be subrogated to Secured Party's rights with respect to such
event or condition and shall have the right to control litigation related
thereto and to determine the settlement of claims thereon. All of the
indemnities and agreements contained in this Section shall survive and continue
in full force and effect notwithstanding termination of this Agreement or of any
Contract.
9. Agreements Regarding Collections.
---------------------------------
(a) Collections. Each Borrower agrees to collect Payments under all
Contracts which are the subject of Loans. Each Borrower will undertake such
collections as owner or servicer and not as Secured Party's agent, and in
connection therewith will, at its sole cost and expense, diligently perform all
billing and collecting for amounts due and to become due with respect to such
Contracts. Each Borrower shall ▇▇▇▇ Obligors in accordance with its standard
billing procedures.
(b) Collection Reports. So long as any Borrower shall administer
Contracts, such Borrower shall maintain books and records pertaining to all such
Contracts. Each Borrower will provide to Secured Party, on or before the 25th
day of each month, a report in the form attached hereto as Exhibit F, as of the
preceding month, concerning Contracts assigned to Secured Party under this
Agreement, and Equipment related thereto. Subject to the limitations in Section
18
6(c) hereinabove, each Borrower shall give Secured Party and its representatives
during normal business hours and upon reasonable notice, access to all records,
files, books of account, databases and information pertaining to all Contracts
and Payments which are the subject of Loans made pursuant to this Agreement and
shall permit such representatives to inspect, audit, and to make extracts there
from.
(c) Taxes. Each Borrower will make or cause Obligors to make all
filings in respect of, and file or cause Obligors to file for and remit payments
received on account of, any and all personal property taxes, license, permit and
registration fees, sales, use, excise, or similar taxes, together with any
penalties or interest in connection therewith, now or hereafter imposed by any
state, Federal or other government or agency on any Equipment covered or
Payments due under any Contracts, whether the same shall be payable by or billed
or assessed to Obligors, Borrowers or Secured Party.
(d) Notice Letters and Billing Information, Contracts with Obligors.
Each Borrower agrees to provide to Secured Party (i) an original notice in the
form of Exhibit D hereto, which shall be issued on plain paper and executed by
such Borrower's duly authorized officer, but be blank as to the addressee and
contract information as shown on the Exhibit, and (ii) a supply of such
Borrower's letterhead upon which copies of the foregoing letter may be
reproduced. Each Borrower irrevocably authorizes Secured Party or its designee,
to (i) deliver such executed letter to each Obligor, (ii) mechanically reproduce
the executed letter (with completed information as to the Obligor, etc.) and/or
(iii) to reproduce such letters and execute them on such Borrower's behalf and
to deliver the same as an original to each Obligor to whom notice under this
Section is to be given. Each Borrower also agrees to provide to Secured Party as
reasonably requested, with information stating the names and current addresses
of, and to the extent known by such Borrower the names of the contact persons
for, each Obligor under any Contract then subject to any Loan.
(e) Power of Attorney. Each Borrower hereby irrevocably constitutes
and-appoints Secured Party after the occurrence and during the continuation of
any uncured Event of Default, as such Borrower's true and lawful attorney with
full power of substitution, for such Borrower and in its name, place and stead,
to ask, demand, collect, receive, receipt for, ▇▇▇ for, compound and give
acquittance for any and all Payments and other sums due under Contracts assigned
hereunder, to endorse, in writing or by, stamp, such Borrower's name or
otherwise on all checks, collections, receipts or instruments given in payment
or part payment thereof Secured Party's authority may be delegated by Secured
Party to any qualified entity with which Secured Party has arranged for the
performance of any billing, collection or administration of Contracts.
(f) Secured Party's Discretion. After the occurrence and during the
continuation of any uncured Event of Default Secured Party and its designee may
take or fail to take whatever action with respect to the collection of such
Payments and receipt of such funds as Secured Party or such designee, in their
reasonable but sole discretion, shall deem proper. Regardless of any such action
Secured Party may or may not take, the provisions of Section 10 which govern
Prepayment will remain in force and shall be unaffected by any such action or
failure to act on Secured Party's part.
19
(g) Reimbursement of Collection Expenses. Borrowers agree to be
jointly and severally obligated to reimburse Secured Party, within ten (10) days
after Secured Party's request therefor, for all reasonable and customary
out-of-pocket expenses and costs which have been incurred in connection with
Secured Party's billing and collection of such Contracts, including but not
limited to the costs and expenses incurred or charged in connection with the
delegation of such responsibilities to a designee.
(h) Application of Payments; Excess Payments to Reserve. Following
any Event of Default and during the continuation thereof, Secured Party may
receive all Payments under the Contracts and apply such Payments against any
amounts due from such Borrower on account of the Loans or otherwise. The amount
of Payments received in excess of such amounts due shall be allocated by Secured
Party to an interest bearing reserve account for the benefit of such Borrower
("Reserve") and held for later application against amounts due from such
Borrower or release to such Borrower as provided below.
10. Prepayments, Mandatory Prepayments.
-----------------------------------
(a) Contract Prepayments. If a Contract is prepaid in full for any
reason, Borrowers shall be jointly and severally obligated to prepay in full the
Prepayment Amount related to such Contract, subject to provisions of Section
3(b) hereof.
(b) Mandatory Partial Prepayment of Loans (Lack of Eligibility). In
the event that (i) the Contract related to any Loan at any time is not an
Eligible Contract or ceases to be an Eligible Contract, and (ii) Secured Party
in its sole discretion requests or demands that the Loan be paid with respect to
such Contract, then Borrowers shall be jointly and severally obligated to make a
mandatory Prepayment of the Loan within three (3) Business Days of Secured
Party's request or demand, by paying to Secured Party the Prepayment Amount with
respect to the Contract, determined as of the date of prepayment.
(c) Mandatory Partial Prepayment of Loans (Obligor Default). Upon
any of the following (each, an "Obligor Default") (i) failure of an Obligor
under any Contract to make a Payment within sixty (60) days of the due date of
that payment; (ii) failure of any Obligor to perform any of its material
obligations under any Contract which failure is not cured within thirty (30)
days of notice; (iii) insolvency of any Obligor, inability of any Obligor to pay
its debts as they mature, the making by any Obligor of an Assignment for the
benefit of creditors, or institution of any proceeding by any Obligor alleging
that the obligor is insolvent or unable to pay its debts as they mature; (iv)
the institution of any proceeding against any Obligor alleging that the Obligor
is insolvent or unable to pay its debts as they mature if such proceeding is not
withdrawn or dismissed within sixty (60) days after its institution; (v) entry
of any final judgment against any Obligor remaining unsatisfied for a period of
thirty (30) days if such judgment is deemed by Secured Party to be a material
factor in the creditworthiness of the Obligor, (vi) death of any Obligor who is
a natural person, (vii) dissolution, merger, consolidation or transfer of a
substantial part of the property of any Obligor which is a corporation or a
partnership, if such dissolution, merger, consolidation or transfer is deemed by
Secured Party to be a material factor in determining the creditworthiness of
such Obligor, or (viii) falsity as of the date made in any material statement,
20
representation or warranty of any Obligor in connection with any Contract, then
and in any of such events, Borrowers shall be jointly and severally obligated to
make a mandatory prepayment of the Loan, by paying to Secured Party the
Prepayment Amount with respect to the Contract within three (3) Business Days of
any such event, determined as of the date of prepayment.
(d) Mandatory Partial Prepayment of Loans (Payment Shortfall). In
the event that the aggregate principal balance on the Loans exceeds the
Borrowing Base, then Borrowers shall be jointly and severally obligated to
immediately make a mandatory partial prepayment of the Loans equal to the amount
of such excess.
(e) Substitution of Contracts. In lieu of payment of the Prepayment
Amount with respect to the Contract, as provided in Section 10(b), (c) and (d)
above, each Borrower may offer Secured Party as a substitute a Contract
("Qualifying Contract") which has the same or substantially similar terms and
the same or more favorable Payment requirements as the Contract to be prepaid,
all as determined by Secured Party in Secured Party's sole and reasonable
discretion. If Secured Party determines, in its discretion that such Contract is
a Qualifying Contract and that the Obligor under the Qualifying Contract has an
acceptable credit quality and Secured Party accepts such Qualifying Contract in
substitution for the Contract to be prepaid (it being acknowledged that Secured
Party shall have no obligation to accept such Qualifying Contract), then the
substitution shall occur upon such Borrower's execution and delivery to Secured
Party of such documents as Secured Party shall reasonably request, including an
Assignment, to collaterally assign to Secured Party all of such Borrower's
right, title and interest in the Qualifying Contract, the Payments arising
thereunder and all related Obligor Guaranties, and a first priority perfected
security interest in the Equipment related Collateral, and all proceeds thereof.
All the terms and conditions of this Agreement, including the eligibility
requirements of Section 6 shall apply with respect to the substituted Qualifying
Contract. The term of the Qualifying Contract, the amortization schedule for
such Qualifying Contract and the Borrowing Limit and monthly payment for such
Qualifying Contract shall all be deemed equal to the term, amortization
schedule, Borrowing Limit and monthly payment of the Contract to be prepaid as
of the date of substitution. Upon each Borrower's assignment and Secured Party's
acceptance of the Qualifying Contract as soon as practicable Secured Party will
release to such Borrower all of Secured Party's right, title and interest in the
Contract which was to prepaid, any unpaid Payments due thereunder and the
Equipment and Collateral securing the same. Upon the substitution of Qualifying
Contract for a Contract subject to prepayment under this Section, each Borrower
shall be relieved of any further prepayment obligation with respect to the
Contract originally subject to prepayment.
(f) Mandatory Prepayment of All Loans. If an Event of Default occurs
and is continuing, then upon demand by Secured Party, Borrowers shall be jointly
and severally obligated to immediately make a mandatory prepayment of all of the
Loans by paying to Secured Party the aggregate Prepayment Amount of each of the
Loans, determined as of the date of prepayment.
21
(g) Determining Prepayment Amounts. The "Prepayment Amount"
attributable to any Contract covered by a Loan shall be an amount equal to a pro
rata portion of the unpaid principal and accrued interest on such Loan based on
a ratio in which the Borrowing Limit of the Contract shall be the numerator and
the aggregate Borrowing Limits of all Contracts covered by such Loan shall be
the denominator.
(h) Voluntary Prepayment. Each Borrower may make optional prepayment
of any one or more of the Loans in all or in part (subject to paragraph a
hereof) at any time without premium or penalty; provided, however, that, without
the Secured Party's prior written consent, no such prepayment of any LIBOR Rate
Loan may be made on any day other than the last day of the Interest Period for
such Loan.
11. Default.
--------
(a) Events of Default. Any of the following events or conditions
shall constitute an "Event of Default" under this Agreement with respect to the
Note and affected Collateral:
(i) Non-payment within five (5) days of when due, whether by
acceleration or otherwise, of any Indebtedness, time being of the essence, or
failure by any Borrower to observe or perform and the continuance thereof for
twenty (20) days after notice from Secured Party, any obligation, covenant,
condition or agreement required to be observed or performed by any Borrower
under this Agreement, the Note, Assignment, evidence of Indebtedness, or any
Contract or any other default under this Agreement or any material provision of
a Contract;
(ii) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against any Borrower provided, however, that if filed against a Borrower an
Event of Default will not occur unless such proceedings are not dismissed within
sixty (60) days of filing;
(iii) Making a general assignment by any Borrower for the
benefit of creditors; the appointment of a receiver or trustee for any Borrower
or for any of their assets; or the institution by or against any Borrower of any
kind of insolvency proceedings or any proceeding for the dissolution or
liquidation of such Borrower; provided, however, that if filed against any
Borrower an Event of Default will not occur unless such proceedings are not
dismissed within sixty (60) days of filing;
(iv) (1) Failure to pay any indebtedness to Secured Party for
borrowed money (other than the Loans or any interest or premium thereon), when
due after applicable notice and grace periods (whether by scheduled maturity
required prepayment, acceleration, demand, or otherwise), or (2) failure to
perform or observe any term, covenant, or condition on its part to be performed
or observed under any agreement or instrument relating to any such indebtedness,
when required to be performed or observed after applicable notice and grace
periods, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration of, after the giving of notice or passage of time,
or both, the maturity of such indebtedness whether or not such failure to
perform or observe shall be waived by the holder of such indebtedness, or any
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
22
(v) Any representation, warranty or statement made herein or in
any other document delivered in connection herewith or any certificate or
statement furnished pursuant to or in connection herewith or therewith, shall
prove to be incorrect, misleading or incomplete in any material respect on the
date as of which made or deemed made;
(vi) A judgment or judgments for the payment of money in excess
of Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate shall be
rendered against any Borrower and such judgment or judgments shall not have been
vacated, discharged, stayed or bothered pending appeal within thirty (30) days
from the entry thereof;
(vii) Imposition of any Lien or series of Liens against the
Collateral whether by operation of law or by consent other than any Liens
granted to the Secured Party as security for the Obligations;
(viii) The Secured Party's first Lien and security interest in
any of the Collateral shall cease, other than solely as a result of an act or
omission by Secured Party, to constitute a first Lien on the Collateral or
otherwise to be in full force and effect, or the validity or enforceability
thereof shall be contested by any Borrower or any Borrower shall deny that it
has any further liability or obligation under any of the Loan Documents; or
(ix) An "Event of Default" (as defined therein) shall have occurred
under that certain Revolving Credit Agreement and Assignment between Leaf
Financial and National City Bank dated as of June 11, 2002, as the same may be
amended from time to time.
(b) Rights and Remedies upon Default. Upon the happening and during
the continuation of any Event of Default, Secured Party (i) may declare one or
all of the Borrowers to be in Default hereunder and all or any part of the
Indebtedness to be immediately due and payable without notice or demand; (ii)
may, without any notice whatsoever, demand, collect and ▇▇▇ for any of the
payments, Collateral or proceeds thereof and any funds represented by the
Reserve and retain and apply such proceeds and funds against the Indebtedness,
(iii) take whatever actions as are legally available to it in enforcing the
rights or remedies under any or all of the Contracts, or to mitigate damages
under the Contracts or to (but Secured Party, shall not be required to) cure any
default of any Borrower or provide for the performance of any Borrower's
obligations under the Contracts; (iv) may terminate the Commitment and
discontinue making any Loans pursuant to this Agreement; (v) shall have all of
the rights and remedies of a secured party under the UCC as enacted and under
any other applicable law from time to time in effect and (vi) may ▇▇▇ or take
any other legal action to collect all the Indebtedness from any Borrower.
Secured Party may also exercise any additional remedies granted herein, in any
other agreement now or hereafter in effect between any Borrower and Secured
Party, in any Contract, or otherwise granted by law or equity. Without limiting
the generality of the foregoing, at all times and for any reason Secured Party
shall have the right to make a demand for payment of any Indebtedness which is
payable upon demand. All rights and remedies of Secured Party under this
Agreement, under the Contract, under the UCC, or otherwise shall be cumulative
and exercisable concurrently or consecutively or in the alternative, at Secured
Party's option.
23
Without limiting the generality of the foregoing, each Borrower
expressly agrees that, after an Event of Default and during the continuation
thereof, Secured Party may (i) subject to Obligor's right under the Contract,
lawfully enter any premises where any Collateral (concerning which an Event of
Default has occurred) may be without judicial process and take possession of the
Collateral, (ii) directly ▇▇▇▇ and collect for Payments under the Contracts (and
take such further actions with respect to the Collateral as provided in Section
8 hereof, and (iii) sell, lease or otherwise dispose of any or all of the
Collateral.
(c) Notice. Each Borrower agrees that any notice by Secured Party of
the sale, lease or other disposition of Collateral or any other intended action
under this Section 11, whether required by the UCC or otherwise, shall
constitute reasonable notice to such Borrower or its successors, assigns or
transferees if the notice is mailed by overnight mail via nationally recognized
overnight carrier, at least ten (10) calendar days before the date of any public
sale, lease or other disposition of the Collateral, or at least ten (10)
calendar days before the date after which any private sale, lease or other
disposition of the Collateral is to take place, to such Borrower's address as
specified in this Agreement or to any other address which such Borrower has
notified Secured Party in writing as the address to which notices shall be given
to such Borrower or such Borrower's successors, assigns or transferees.
(d) Effect of Sale of Collateral. Any sale by Secured Party whether
under any power of sale hereby given or by virtue of judicial proceedings shall
operate to divest all right, title, interest, claim and demand whatsoever,
either at law or in equity, of any Borrower in and to the Collateral sold and
shall be a perpetual bar, both at law and in equity, against such Borrower, its
successors and assigns, and against any all persons claiming the property sold
or any part thereof under, by or through such Borrower, its successors and
assigns, and against any and all persons claiming the property sold or any part
thereof under, by or through such Borrower, its successors and assigns (subject,
however, to the then existing rights, if any, of the obligor under the
applicable Contract and to the rights and interest of such Borrower, its
successors and assigns, in the proceeds of such sale which are in excess of the
amount required to satisfy the Indebtedness).
(e) Application of Proceeds. The proceeds of any sale or collection
of the Collateral or any part thereof, and the proceeds and the avails of any
remedy hereunder shall be paid to and applied as follows:
(i) To the payment of costs and expenses of foreclosure or suit,
if any, and of such sale, and the reasonable compensation of the
agents, attorneys, paralegals and counsel of Secured Party and of
all expenses, liabilities and advances incurred or made hereunder by
Secured Party, or the holder or holders of the Note, and of all
taxes, assessments or Liens superior to the Lien of these presents,
except any taxes, assessments or other superior Lien subject to
which said sale may have been made;
24
(ii) To the payment to the holder of the Note of the amount then
owing or unpaid on the Note for principal, late charges and interest
(first to late charges, then to interest and then to principal); and
in case any such proceeds shall be insufficient to pay the whole
amount so due upon the Note then to the payment of such principal,
late charges and/or interest then owing on the Note as Secured Party
or the holders of such Notes shall elect;
(iii) To the payment of any other Indebtedness; and
(iv) To the payment to Borrowers of all sums remaining.
12. Certain Defined Terms Not Defined Elsewhere in the Agreement.
-------------------------------------------------------------
"Acquisition Costs" shall mean with respect to any item of Equipment
the original cost to any Borrower of acquiring the same.
"Borrowing Base" shall mean the lesser of (i) eighty percent (80%) of
present value of the cash flow stream from the underlying leases or (ii) the
original underlying lease amount.
"Business Day" shall mean any day, excluding Saturday and Sunday and
excluding any other day which in the Commonwealth of Pennsylvania is a legal
holiday or a day on which banking institutions are authorized by law to close.
"Lien" means any charge against or interest in property securing
payment of a debt or performance of an obligation owed to any person, whether
created by agreement, statute, common law or judicial or governmental authority,
legal action or equitable process, or proceeding, including, but not limited to,
any security interest, lien, encumbrance, mortgage, assignment, pledge,
conditional sale, lease, consignment or bailment.
"Obligations" means the Indebtedness and all covenants and agreements
of the Borrowers contained in, or arising out of or in connection with, this
Agreement or the other Loan Documents.
"Scheduled Payments" shall mean those non-cancelable payments that are
scheduled to become due under an Eligible Contract (as hereinafter defined) on
account of rent or payment of the equipment cost financed under the Contract,
but excluding payments due for taxes, insurance and non-equipment related items.
13. Miscellaneous.
--------------
(a) Costs of Enforcement. Borrowers agree to be jointly and
severally obligated to pay all reasonable costs and expenses, including
reasonable attorney's and paralegals' fees, expenses and court costs incurred by
Secured Party in enforcing any of the provisions of this Agreement or in
enforcing any obligations of any Borrower contained in the Note or an
Assignment.
25
(b) Waiver of Notice of Obligor Default. Borrowers consent that,
after the occurrence and during the continuation of an Event of Default and
without affecting any of Borrowers' liabilities or obligations hereunder or
under the Note or an Assignment, Secured Party may agree with any Obligor as to
any commercially reasonable modification, alteration, release, compromise,
extension, waiver, consent, or other similar or dissimilar indulgence of or with
respect to any Contract.
(c) Notices. Any notice under this Agreement shall be in writing and
shall be delivered in person, by overnight delivery or by United States first
class mail, postage prepaid, and addressed:
(i) if to any Borrower, at such Borrower's address set forth on
the first page of this Agreement;
(ii) if to Secured Party, at Commerce Bank, National
Association, ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President;
(iii) if to either party at any other address as such party may,
by notice as herein provided, received by the other, designate as its
address for all notices under this Agreement.
(d) VENUE; JURISDICTION. THIS AGREEMENT HAS BEEN DELIVERED FOR
ACCEPTANCE BY SECURED PARTY IN PHILADELPHIA, PENNSYLVANIA AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. BORROWERS HEREBY (1) IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA OVER ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS AGREEMENT; (II) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT BORROWERS MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY SUCH ACTION OR PROCEEDING; (III) AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW AND
(IV) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST SECURED PARTY
OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY
MATTER ARISING OUT OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE
LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA. NOTHING IN THIS SECTION SHALL
AFFECT OR IMPAIR SECURED PARTY'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER
PERMITTED BY LAW OR SECURED PARTY'S RIGHT TO BRING ANY ACTION OR PROCEEDING
AGAINST ANY BORROWER, OR ANY SUCH BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
26
(e) Successors and Assigns, Entire Agreement; Assignment by Secured
Party. This Agreement shall be binding on, and inure to the benefit of, Secured
Party and Borrowers and their respective successors and assigns and contains the
entire understanding and agreement with respect to the subject matter hereof. It
is understood and agreed that from time to time Secured Party may assign (i) to
one or more of Secured Party's affiliates, subsidiaries or subsidiaries of its
affiliates, all of Secured Party's right, title and interest in any Loan, loan
documents or Collateral; and with Borrowers' prior consent (so long as no Event
of Default or event which upon notice, lapse of time or both would constitute an
Event of Default) to any other person or entity, and (ii) assign, transfer or
grant participations (but not assignments) in this Agreement or any Loan, Loan
Documents or Collateral, of not more than forty-nine percent (49%) interest to
any person or entity.
(f) Assignment of Borrower. This Agreement is not assignable by any
Borrower, by operation of law or otherwise, except to a party acquiring
substantially all of such Borrower's assets, employees and business and any
Borrower's obligations may not be delegated, except in connection therewith.
(g) Secured Party's Reliance. All of the covenants, agreements,
representations and warranties made by each Borrower in this Agreement shall,
notwithstanding any investigation by Secured Party, be deemed to be material to
and to have been relied upon by Secured Party with respect to each Loan made by
Secured Party pursuant to this Agreement. Secured Party's knowledge at any time
of any breach of or non-compliance with any of such covenants, agreements,
representations or warranties shall not constitute a waiver of any thereof. None
of Secured Party's rights under this Agreement will be waived except by a
writing signed by Secured Party and any such waiver will be effective only as to
the matters expressly set forth in such writing.
(h) Illegality. Secured Party's obligation to perform under this
Agreement is limited by and subject to any and all applicable laws, rules and
regulations. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement. Notwithstanding anything herein to the contrary,
in no event shall interest, fees or charges payable under this Agreement, the
Note or any Loan Document exceed those permitted by applicable law. Any
provision of this Agreement, the Note or of any Loan Document which would
otherwise charge or require payment of any interest, fee or charge in excess of
the maximum permitted by applicable law shall be hereby amended to charge and
require payment of only the maximum interest, fee or charge permitted by
applicable law.
27
(i) Perfection of Security Interest. Each Borrower authorizes
Secured Party to file any financing statement or statements relating to the
Collateral (with or without such Borrower's signature thereon), and to take any
other action deemed necessary or appropriate by Secured Party to perfect and to
continue perfection of the Security Interest. Each Borrower hereby irrevocably
appoints Secured Party as its attorney-in-fact to execute financing statements
in such Borrower's name and to perform all other acts which Secured Party deems
necessary or appropriate to perfect and protect the Security interest. Such
appointment is binding and coupled with an interest. Upon request of Secured
Party before or after the occurrence of an Event of Default, each Borrower
agrees to give Secured Party or its designees possession of any Collateral in
its control or physical possession, possession of which is, in Secured Party's
opinion, necessary or desirable to perfect or continue perfection of priority of
the Security Interest. A photocopy of this Agreement is sufficient as a
financing statement and may be filed as such if Secured Party so elects.
(j) Right of Offset. In addition to all liens upon and rights of
setoff against the Borrower's money, securities or other property given to the
Secured Party by law, the Secured Party shall have, with respect to the
Obligations, and to the extent permitted by law, a contractual possessory
security interest in, and a contractual right of setoff against, and each
Borrower hereby assigns, conveys, delivers, pledges, and transfers to the
Secured Party all of such Borrower's right, title and interest in and to, all of
such Borrower's deposits, monies, securities, and other property now or
hereafter in the possession of or on deposit with, or in transit to, the Secured
Party, or any direct or indirect subsidiary or affiliate of the Secured Party,
whether held in a general or special account or deposit. Every such security
interest and right of setoff may be exercised without demand upon or notice to
any Borrower to satisfy Borrowers' obligations hereunder. Each such right of
setoff shall be deemed to have been exercised immediately upon the occurrence of
an Event of Default hereunder without any action of the Secured Party, although
the Secured Party may enter such setoff on its books and records at a later
time.
(k) Failure to Perform; Reimbursement. Upon Borrowers' failure to
perform any of their duties hereunder or under any Contract, Secured Party may,
but it shall not be obligated to, perform any of such duties and Borrowers shall
forthwith upon demand reimburse Secured Party for any expense incurred by
Secured Party in doing so with interest thereon at a rate equal to the lesser of
the Prime Rate plus three percent (3%) or the maximum rate permitted by
applicable law.
(l) Waiver of Notice of Dishonor and Protest, etc. Each Borrower
waives dishonor, protest, presentment, demand for payment, notice of dishonor
and notice of protest of any instrument at any time held by Secured Party with
respect of which any Borrower is any way liable and waives notice of any other
action by Secured Party.
(m) CERTAIN WAIVERS. SECURED PARTY SHALL NOT BE LIABLE TO ANY
BORROWER OR ANY AFFILIATE OF ANY BORROWER FOR CONSEQUENTIAL DAMAGES ARISING FROM
ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THE ESTABLISHMENT,
ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS, OR RELATING IN ANY WAY TO THIS
LOAN AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR THE ACTION OR
INACTION OF ANY SUCH PERSONS UNDER, IN CONNECTION WITH OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
28
(n) Releases. Each Borrower acknowledges that it has been
represented by competent counsel in connection with the transactions
contemplated hereby and has been fully advised by such counsel of the full range
of rights and obligations possessed by each Borrower and undertaken and received
pursuant to the terms of this Agreement and the other Loan Documents and,
specifically, the provisions of this Agreement and the other Loan Documents.
Each Borrower hereby knowingly and, after consultation with counsel, freely
acknowledges and agrees that it does not now have nor does it know of any basis
for any claim in tort, contract or otherwise against Secured Party for breach of
any of the terms of any of the Loan Documents. Each Borrower acknowledges and
agrees that this Agreement and the other Loan Documents were negotiated,
executed and delivered freely and with full and informed knowledge of the
consequences of this Agreement and the other Loan Documents and that it has
executed this Agreement and the other Loan Documents without duress, and that
Secured Party has proceeded in a commercially reasonable manner in light of all
of the facts and circumstances surrounding the transactions that are the subject
of this Agreement and the other Loan Documents.
(o) WAIVER OF JURY TRIAL. BORROWERS AND SECURED PARTY ALL HEREBY
WAIVE TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
RELATIONSHIP EVIDENCED HEREBY OR THEREBY. EACH BORROWER ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT SECURED PARTY WOULD NOT EXTEND
CREDIT TO ANY BORROWER IF THE WAIVER SET FORTH IN THIS SECTION WERE NOT A PART
OF THIS AGREEMENT.
(p) Increased Costs. In the event that any future law:
(i) changes the basis of taxation of any amounts payable to
the Secured Party under this Agreement or the Loans (other than taxes imposed on
the overall net income of the Secured Party) by the United States or the
jurisdiction in which the Lender has its principal offices; or
(ii) impose or modify any reserve, Federal Deposit Insurance
Corporation premium or assessment, special deposit, minimum capital, capital
ratio or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or liabilities of, the Secured Party, and the
result of any such event shall be to increase the Secured Party's costs of
making or maintaining any Loan or to reduce any amount receivable by the Secured
Party from the Borrowers in respect of any Loan, then, upon demand made by the
29
Secured Party as promptly as practicable after it obtains knowledge that such
aforesaid cost exist but in no event later than ninety (90) days after obtaining
such knowledge, the Borrowers shall be jointly and severally obligated to pay to
Secured Party additional fees in an amount which shall be sufficient to
compensate the Secured Party for such costs. In the event that Secured Party
shall make any demand for additional fees as hereinabove set forth, the
Borrowers shall be entitled to receive from the Lender documentation reasonably
substantiating the occurrence of any event referred to in Subsection (i) or (ii)
above and a determination of how the increased costs to Secured Party and the
amount of additional fees to Secured Party have been determined.
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Borrowers:
----------
\
LEAF FINANCIAL CORPORATION
By: ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
President
LEASE EQUITY APPRECIATION FUND I, L.P.,
a Delaware limited partnership
By: Leaf Asset Management, Inc., its general partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
LEAF FUNDING, INC.
By: ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President
Secured Party:
--------------
COMMERCE BANK, NATIONAL ASSOCIATION
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
31
SCHEDULE 4(g)
-------------
(Tradenames)
HVAC Capital Corp
Advantage Leasing Corp
Integrity Leasing & Financing
Millennium Leasing & Financial Services
Medstrat Capital
American Equipment Finance
May 28, 2003
MASTER NOTE
$10,000,000.
FOR VALUE RECEIVED, the undersigned LEAF FINANCIAL CORPORATION, a
Delaware corporation with offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, LEASE EQUITY APPRECIATION FUND I, L.P., a
Delaware limited partnership with offices at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇-▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and LEAF FUNDING, INC., a Delaware corporation with
offices at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
(collectively, the "Borrowers") promise to be jointly and severally obligated to
pay to the order of COMMERCE BANK, National Association together with any other
holder hereof, "Lender"), at its office at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as Lender may from time to time designate
in writing, without grace, the principal sum of Ten Million Dollars
($10,000,000.00) or so much thereof as has been advanced hereunder, together
with interest on the unpaid balance of the principal from time to time
outstanding at the rate per annum set forth in the Revolving Credit Agreement
and Assignment between Borrowers and Lender dated as of the date hereof (the
"Credit Agreement"). Principal and interest owing under this Note shall be
payable as provided in the Credit Agreement.
In the event that any payment of principal or interest is not made
within five (5) days of the date when due hereunder, whether at its stated
maturity, by acceleration or otherwise, it is hereby agreed that Lender shall
have the option of collecting, on demand, interest on the unpaid amount of such
delinquent payment from the day when due until the day when paid, at a rate
equal to three percent (3%) above the "Prime Rate" (as defined in the
Agreement), provided however, that in no event shall the rate of interest
charged exceed the maximum rate permitted by applicable law.
Interest owing under this Note shall be computed on the basis of a
360-day year for the actual number of days elapsed. All payments made hereunder
shall at Lender's option be applied first to late charges, then to accrued
interest, then to principal. All amounts owing under this Note shall be payable
in lawful money of the United States of America which, as at the time of
payment, shall be legal tender for the payment of public and private debts and
shall be payable without relief or `benefit of any valuation, stay,
appraisement, extension or redemption laws now or hereafter existing.
This Note is secured by the Credit Agreement between Borrowers and
Lender and the separate Guaranties of Payment, each dated as of May 28, 2003, by
Resource America, Inc. and Leaf Asset Management, Inc. ("collectively, the
Guarantor") and by Assignments issued pursuant to the Credit Agreement, under
which a security interest is granted in favor of Lender, which together with all
other agreements, instruments and documents delivered in connection therewith
and herewith, are hereinafter sometimes referred to as the "Loan Documents".
In the event of any default, after applicable notice and cure periods,
if any, in the payment or performance of any liability or obligation owing under
this Note, under any of the Loan Documents, or under any other instrument,
document or agreement executed by or binding on each Borrower in favor of
Lender, Lender may during the continuation of such default declare this Note,
all interest hereunder and all other amounts payable hereunder to be immediately
due and payable, without further notice or demand of any kind. In addition, upon
the occurrence and during the continuation of any such default, Lender shall
have all other rights and remedies existing in Lender's favor at law or in
equity or provided for in any of the Loan Documents or in any of such other
instruments, documents, or agreements. The rights and remedies of Lender as
provided herein, in the Loan Documents, in such other instruments, documents,
and agreements, at law and in equity shall be cumulative and concurrent, and may
be pursued singularly, successively, or together, at the sole discretion of
Lender. No act of omission or commission of Lender, including specifically any
failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of the same, such waiver or release to be effected only
through a written document executed by Lender and then only to the extent
specifically recited therein. A waiver or release with reference to any one
event shall not be construed as continuing, as a bar to or as a waiver or
release of, any subsequent right, remedy or recourse as to any other event.
Voluntary prepayments of this Note are permitted as more fully provided
in the Credit Agreement. Mandatory prepayment in full of this Note shall be
required to be paid upon the occurrence of certain events and within the times
provided in the Credit Agreement.
Notwithstanding anything herein to the contrary, in no event shall
interest, fees or charges payable under this Note or any Loan Document exceed
those permitted by applicable law. Any provision of this Note or of any Loan
Document which would otherwise charge or require payment of any interest, fee or
charge in excess of the maximum permitted by applicable law shall be hereby
amended to charge and require payment of only the maximum interest, fee or
charge permitted by applicable law.
Borrowers waive presentment and demand for payment, dishonor, notice of
dishonor, protest and notice of protest of this Note. Borrowers agree to be
jointly and severally obligated to pay all of Lender's reasonable costs and
expenses of collection, including reasonable attorneys' and paralegals' fees and
expenses.
If more than one party shall execute this Note, the term "Borrower" as
used herein shall mean all parties signing this Note and each of them, and all
such parties shall be jointly and severally obligated hereunder. The provisions
of this Note shall be binding upon each Borrower and its heirs, personal
representatives, successors and assigns and shall inure to the benefit of Lender
and its successors and assigns.
THE LOAN EVIDENCED HEREBY HAS BEEN MADE, AND THIS NOTE HAS BEEN
DELIVERED, AT PHILADELPHIA, PENNSYLVANIA AND SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) OF THE COMMONWEALTH OF PENNSYLVANIA. BORROWERS HEREBY (I)
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IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
THE COMMONWEALTH OF PENNSYLVANIA, OVER ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS NOTE OR ANY OF THE LOAN
DOCUMENTS; (II) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT BORROWERS MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY SUCH ACTION OR PROCEEDING; (III) AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND
(IV) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST LENDER OR ANY
OF LENDER'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY
MATTER ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE LOAN DOCUMENTS IN
ANY COURT OTHER THAN ONE LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA. NOTHING
IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR LENDER'S RIGHT TO SERVE LEGAL PROCESS
IN ANY MANNER PERMITTED BY LAW OR LENDER'S RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY BORROWER OR ANY SUCH BORROWER'S PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION. BORROWERS WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION ARISING OUT OF THIS NOTE.
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If this Note is not dated when executed by each Borrower, Lender is
hereby authorized, without notice to such Borrower, to date this Note as of the
date when the first loan evidenced hereby is made. Wherever possible each
provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Note.
LEAF FINANCIAL CORPORATION
By: ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Borrower's Address:
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▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LEASE EQUITY APPRECIATION FUND I, L.P.,
a Delaware limited partnership
By: Leaf Asset Management, Inc., its general
partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇
---------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Borrower's Address:
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▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇-▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LEAF FUNDING, INC.
By: ▇▇▇▇▇ ▇▇▇▇▇▇
------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President
Borrower's Address:
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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