[EXECUTION COPY]
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of June 1, 1998
Between
STATE OF WISCONSIN INVESTMENT BOARD
AND
BANDO McGLOCKLIN SMALL BUSINESS LENDING CORPORATION
AND
BANDO McGLOCKLIN CAPITAL CORPORATION
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
This Third Amended and Restated Credit Agreement (the "Agreement") is
dated as of June 1, 1998, between BANDO McGLOCKLIN SMALL BUSINESS LENDING
CORPORATION, a Wisconsin corporation (the "Company"), whose address is
P.O. Box 190 (W239 N 1700 Busse Road & Highway J), Pewaukee, Wisconsin
53072-0190, BANDO McGLOCKLIN CAPITAL CORPORATION (the "Parent"), whose
address is P.O. Box 190 (W239 N 1700 Busse Road & Highway J), Pewaukee,
Wisconsin 53072-0190, and the STATE OF WISCONSIN INVESTMENT BOARD (the
"Board"), whose address is P.O. Box 7842 (121 East Wilson Street),
Madison, WI 53707-7842.
PRELIMINARY STATEMENT
This Third Amended and Restated Credit Agreement amends that certain
Second Amended and Restated Credit Agreement dated as of November 7, 1991
between the Company and the Board, as amended by that certain Amendment to
Second Amended and Restated Credit Agreement dated as of January 27, 1993,
and as further amended by that certain Second Amendment to Second
Amendment and Restated Credit Agreement dated as of January 1, 1997
(collectively, the "Credit Agreement"). The Second Amended and Restated
Credit Agreement dated as of November 7, 1991 provided for the extension
of a Ten Million Dollar ($10,000,000) loan, as evidenced by a $10,000,000
Promissory Note dated July 9, 1990 (the "1990 Note"), and a Ten Million
Dollar ($10,000,000) loan by the Board to the Company, as evidenced by a
$10,000,000 Promissory Note dated November 7, 1991 (the "1991 Note"). The
1990 Note has been repaid in full and retired. The purpose of this
Agreement is to: (i) provide for the extension of an additional Ten
Million Dollar ($10,000,000) loan by the Board to the Company; and (ii) to
integrate the obligations, rights, and responsibilities of the parties
with regard to all loans made by the Board to the Company. The Credit
Agreement dated as of November 7, 1991, as amended, is restated solely for
the convenience of the parties and, except as specifically modified
herein, its terms and conditions as set forth herein shall continue in
full force and effect. The Company and the Board agree, subject to the
terms and conditions of this Agreement, that the Credit Agreement shall be
amended and restated in its entirety as follows:
ARTICLE 1
DEFINITIONS
1.01. "Affiliate" shall mean the Company and any Person (other than
the Company) which directly or indirectly through one or more
intermediaries control, or are controlled by, or are under common control
with the Company.
1.02. "Agreement" shall mean this Third Amended and Restated Credit
Agreement, as it may be amended from time to time.
1.03. "Banks" shall mean Firstar Bank Milwaukee, N.A., U.S. Bank
National Association, LaSalle National Bank, Harris Trust and Savings
Bank, Huntington Bank and such other lender who qualifies as a "Lender"
under the terms of the Revolving Credit Agreement (as hereinafter
defined). Any such lender who ceases to be subject to the Revolving
Credit Agreement shall cease being considered one of the "Banks" under the
terms of this Agreement.
1.04. "Board" shall mean the State of Wisconsin Investment Board,
an independent agency of the State of Wisconsin, located at P.O. Box 7842,
(121 East Wilson Street), Madison, WI 53707-7842.
1.05. "Business Day" shall mean with respect to borrowing, payment,
prepayment and for all other purposes under this Agreement a day on which
banks are not required or authorized to close in the State of Wisconsin.
1.06. "Closing Date" shall mean November 7, 1991 with respect to
the 1991 Loan (as hereinafter defined) and any Business Day on or after
June 1, 1998 with respect to the 1998 Loan (as hereinafter defined).
1.07. "Collateral" shall mean the property defined as "Collateral"
in the Security Agreements and any other property or proceeds now or
hereafter securing the Loans.
1.08. "Collateral Assignment" shall mean that certain collateral
assignment of contracts of even date herewith, executed by the Company in
favor of the Board, pursuant to which the Company collaterally assigns to
the Board all rights under its servicing agreement with InvestorsBank,
N.A. with respect to the servicing of Third Party Loans.
1.09. "Company" shall mean Bando McGlocklin Small Business Lending
Corporation, a Wisconsin corporation, with its principal offices at P.O.
Box 190 (W239 N 1700 Busse Road & Highway J), Pewaukee, Wisconsin 53072-
0190.
1.10. "Contractual Obligations" shall mean, collectively, as to the
Company, any provision of any security issued by it or of any agreement,
instrument or undertaking to which the Company is a party or by which it
or any of its property is bound.
1.11. "Counsel to the Board" shall mean Michael Best & Friedrich
LLP, One South Pinckney Street, P.O. Box 1806, Madison, WI 53701-1806, as
counsel to the Board.
1.12. "Counsel to the Company" shall mean Foley & Lardner, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202-5367, as counsel to the
Company.
1.13. "Debt" shall mean, with respect to the Company, all of its
respective debts, notes (including the Notes [as hereinafter defined]) and
liabilities of whatever nature or amount on a consolidated basis,
including, but not limited to: (a) obligations for borrowed money; (b)
obligations representing the deferred purchase price of property including
accounts payable arising in connection with the purchase of inventory,
supplies or services; (c) obligations, whether or not assumed, secured by
liens or payable out of the proceeds or production from property now or
hereafter owned or acquired by the Company; (d) the total amount of all
obligations (whether contingent or matured) created by any Guaranty
(hereinafter defined); and (e) lease obligations which are capitalized.
1.14. "Default" shall mean the occurrence of an event described in
Article 7 herein.
1.15. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
1.16. "Fiscal Year" shall mean a fiscal year of the Company ending
on December 31 of each year.
1.17. "GAAP" shall mean the generally accepted accounting
principles in effect from time to time in the United States.
1.18. "Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, whether foreign or
domestic, including, without limitation, any municipality, township and
county, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, the Securities and Exchange Commission, and
any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
1.19. "Guaranty" shall mean any agreement by which the Company
assumes, guaranties, endorses, contingently agrees to purchase or provide
funds for the payment of, or otherwise becomes liable for, the obligation
of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person or otherwise
assures any creditor of such other Person against loss and includes,
without limitation, the contingent liability of the Company in respect of
any letter of credit or similar document or instrument.
1.20. "Lien" shall mean any security interest, mortgage, pledge,
lien, claim, charge, encumbrance, title retention agreement or lessor's
interest under a financing lease or analogous instrument, in, of or on the
property or assets of the Company.
1.21. "Loans" shall mean the aggregate principal of the 1998 Loan
and the 1991 Loan advanced by the Board to the Company under this
Agreement, as evidenced by the Notes.
1.22. "Loan Documents" shall mean, collectively, this Agreement,
the Notes, the Security Agreements, the UCC Financing Statements, the
Collateral Assignment, the Parent Guaranty, and any other agreements,
instruments or documents that may be executed by or entered into between
the Company and the Board relating to the Loans.
1.23. "Master Note Purchase Agreement" shall mean that certain
Master Note Purchase Agreement, as amended, executed by the Company, the
Parent, and the Board and dated as of January 1, 1997, providing for the
purchase by the Board of a 90% participation interest in certain Third
Party Loans.
1.24. "Notes" shall mean the 1998 Note and the 1991 Note.
1.25. "Officer's Certificate" shall mean a certificate signed under
oath in the name of the Company by George Schonath, in his capacity as
President of the Company.
1.26. "Parent" shall mean Bando McGlocklin Capital Corporation, a
Wisconsin corporation, with its principal offices at P.O. Box 190 (W239 N
1700 Busse Road & Highway J), Pewaukee, Wisconsin 53072-0190.
1.27. "Parent Guaranty" shall mean that certain guaranty of payment
of even date herewith, executed by the Parent in favor of the Board,
pursuant to which the Parent has guarantied repayment of the Loans.
1.28. "Person" shall mean an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, the United States federal
government or the government of any other nation, any political
subdivision or agency thereof, the State of Wisconsin, any other state or
any political subdivision thereof, or any agency of any such state or
subdivision.
1.29. "Plan" shall mean a defined benefit pension plan under ERISA
under which plan the Company could be held liable for the Unfunded
Liabilities by the Pension Benefit Guaranty Corporation upon termination
of such plan.
1.30. "Potential Default" shall mean an event which, but for the
lapse of time or the giving of notice or both, would constitute a Default.
1.31. "Reportable Event" shall mean the occurrence of an event in
regard to any Plan which must be reported to the Pension Benefit Guaranty
Corporation under ERISA and the regulations promulgated pursuant thereto.
1.32. "Requirements of Law" shall mean, collectively, as to the
Company, its certificate of incorporation and bylaws or other
organizational or governing documents of the Company, and any law, treaty,
franchise, rule or regulation, or determination of any arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon the Company or any of its property or to which the Company or
any of its properties are subject.
1.33. "Revolving Credit Agreement" shall mean that certain Credit
Agreement dated as of March 11, 1998, by and between the Company and
Firstar Bank Milwaukee, N.A., as agent for the Banks, which provides for
the making by the Banks of up to $60,000,000 in Revolving Credit Loans (as
hereinafter defined) to the Company.
1.34. "Revolving Credit Loans" shall mean the revolving credit
loans made or to be made to the Company as borrower, and each of the
Banks, and such loans that may hereafter be made by lenders who qualify as
a "Lender" under the terms of the Revolving Credit Agreement.
1.35. "Security Agreements" shall mean the 1991 Security Agreement,
as amended, and the 1998 Security Agreement, and all other security
agreements executed in favor of the Board by the Company.
1.36. "Subsidiary" shall mean a corporation organized under the
laws of the United States of America or the District of Columbia of which
more than 50% of the outstanding capital stock ordinarily entitled to vote
for the election of directors of such corporation is owned by the Company,
directly or indirectly, or any Subsidiary (as hereby defined), and shall
include any such corporation which shall, after the date of this
Agreement, become a Subsidiary.
1.37. "Third Party Loans" shall mean the loans to Persons made by
the Company.
1.38. "Third Party Loan Documents" shall mean the notes and other
loan documents under which the Company has made Third Party Loans.
1.39. "Transfer Agent Agreement" shall mean that certain Transfer
Agent Agreement, as amended by a first amendment of even date herewith,
executed by Firstar Trust Company, as transfer agent, the Company, and the
Board, and dated as of March 26, 1993.
1.40. "UCC Financing Statements" shall mean all Uniform Commercial
Code Financing Statements executed and delivered by the Company to the
Board with respect to the Collateral.
1.41. "Unfunded Liabilities" shall mean, with regard to any Plan,
the excess of the current value of such Plan's benefits guaranteed under
ERISA over the current value of such Plan's assets allocable to such
benefits.
1.42. "1991 Loan" shall mean the aggregate principal amount, not to
exceed $10,000,000, advanced by the Board to the Company under this
Agreement, as evidenced by the 1991 Note.
1.43. "1991 Note" shall mean the promissory note of the Company
payable to the order of the Board and dated as of November 7, 1991, in
substantially the form of the Exhibit A attached hereto, evidencing the
original principal amount of $10,000,000.
1.44. "1991 Security Agreement" shall mean that certain security
agreement dated as of November 7, 1991, as amended, given by the Company
to the Board as security for the Notes and this Agreement.
1.45. "1998 Loan" shall mean the aggregate principal amount, not to
exceed $10,000,000, advanced by the Board to the Company under this
Agreement, as evidenced by the 1998 Note.
1.46. "1998 Note" shall mean the promissory note of the Company
dated June 12, executed by the Company in favor of the Board, evidencing
the original principal amount of $10,000,000.
1.47. "1998 Security Agreement" shall mean that certain security
agreement, of even date herewith, executed by the Company to the Board as
security for the Notes and this Agreement.
ARTICLE 2
AMOUNTS AND TERMS OF BORROWING
2.01. Loans and Notes. The Board agrees to lend and the Company
agrees to borrow the Loans pursuant to the terms of this Agreement. The
Loans shall be made by the Board to the Company, subject to the conditions
precedent set forth in Article 3 of this Agreement, in the following
manner:
(a) A loan in the original principal amount of Ten Million Dollars
($10,000,000) made on or about June 12, 1998, evidenced by the
1998 Note;
(b) A loan in the original principal amount of Ten Million Dollars
($10,000,000) made on or about November 7, 1991, evidenced by
the 1991 Note.
2.02. Interest Rate and Method of Computation (Fixed Rate).
(a) The amounts of the Loans remaining unpaid from time to time
shall bear interest at all times at the rate set forth in the Notes,
provided that any amount of principal that is not paid when due (whether
at the stated due date or maturity, by acceleration or otherwise) shall
bear interest at the rate set forth in the Notes, or the maximum rate
permitted by law, whichever is lower.
(b) The Company shall pay a late payment fee equal to 5% of the
amount of any principal or interest payment that is not paid within five
(5) Business Days of when due on any such late payments accepted by the
Board without declaring the Loan to be in Default.
2.03. Prepayment of Notes.
(a.1) The principal amount due under the 1991 Note may be prepared
in whole or in part, with accrued interest to the date of such prepayment,
subject to this Section 2.03 and provided the Company pays a prepayment
premium (the "1991 Note Prepayment Premium") equal to four and one-half
percent (4.5%) of the outstanding principal balance at the time of
prepayment, which percentage shall be reduced by one-half of one percent
(0.5%) on January 1, 1999, and each succeeding year. Written notice of
each optional prepayment of the 1991 Note shall be given to the Board (or
the holder of the Notes), not less than ten (10) days prior to the
proposed prepayment date, which shall coincide with a principal
installment payment date, whereupon the principal amount of said
prepayment, together with the Prepayment Premium applicable thereto, if
any, shall become due and payable on such payment date. Such notice shall
include a statement of the amount of principal to be prepaid and the
payment date on which such prepayment will be made. The final
determination of any prepayment fee hereunder shall be made by the Board
and shall be conclusive and binding for all purposes absent manifest
error.
(a.2) The principal amount due under the 1998 Note may be prepaid in
whole or in part with accrued interest to the date of such prepayment,
subject to this Section 2.03 and provided:
(i) the Company shall provide the Board with an Officer's
Certificate, dated not less than 15 days prior to the date fixed for
said prepayment, setting forth the Company's calculation of the
prepayment premium, as defined below (the "1998 Prepayment Premium"),
due in connection with such prepayment, calculated as of the date
fixed for such prepayment, together with any accompanying worksheets;
(ii) if the Board disagrees with the Company's calculation of
the Prepayment Premium, the Board shall so notify the Company in
writing prior to the date fixed for said prepayment, and the Board's
recalculation of the Prepayment Premium shall be deemed conclusive
absent manifest error; and
(iii) on the date fixed for said prepayment, the Company paid to
the Board the amount of the Prepayment Premium.
For purposes of this Section 2.03(a.2), the term "1998 Prepayment
Premium" shall mean an amount equal to the excess, if any, of the
Discounted Value (as defined below) of the Remaining Scheduled Payments
(as defined below) with respect to the Called Principal (as defined below)
of such Note over the amount of such Called Principal, provided that the
1998 Prepayment Premium may in no event be less than 0.5% of the Called
Principal, which amount is agreed to be a reasonable fee meant to
reimburse the Board for the costs and expenses, direct and indirect, of
reinvesting the proceeds of the prepayment. For the purposes of
determining the 1998 Prepayment Premium, the following terms have the
following meanings:
"Called Principal" means the outstanding principal balance of the
Note that is to be prepaid by the Company.
"Discounted Value" means, with respect to the Called Principal of the
Note that is to be prepaid by the Company, the amount obtained by
discounting all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates to the
Settlement Date (as defined below) with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Note is payable to the Board) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
each Note that is to be prepaid by the Company, 0.25% over the yield
to maturity implied by the Treasury Constant Maturity Series Yields
reported, for the week most recently ended for which such yields have
been so reported as of the second Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by interpolating linearly between (i) the
yield reported for such week for the Treasury Constant Maturity
Series with the maturity closest to and greater than the Remaining
Average Life and (ii) the yield reported for such week for the
Treasury Constant Maturity Series with the maturity closest to and
less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (aa) the principal component of
each Remaining Scheduled Payment with respect to such Called
Principal by (bb) the number of years (calculated to the nearest one-
twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"Remaining Scheduled Payment" means, with respect to the Called
Principal of the Note that is to be prepaid by the Company, all
payments of such Called Principal and interest thereon that would be
due after the Settlement Date to the Company with respect to such
Called Principal under the terms and conditions set forth in the Note
being prepaid by the Company.
"Settlement Date" means, with respect to the Called Principal of the
Note that is to be prepaid by the Company, the date on which the Note
is to be prepaid.
(b) All prepayments on either the 1998 Note or the 1991 Note shall
be applied to the installments of the respective note in the inverse order
of their stated maturities and must be in multiples of $100,000.
2.04. Manner, Time and Place of Payment.
(a) All payments (and prepayments when permitted under Section 2.03
hereof) of principal and interest due under the Notes and this Agreement
shall be made by wire transfer of immediately available funds by the
Company to Mellon/Boston Safe (ABA #011-00-1234), Boston, Massachusetts
(or such other account as the Board may hereafter specify), for credit to
the account of the Board (Account #064300, for the State of Wisconsin
Investment Board), with sufficient text to identify the Loans and amount
being remitted as interest, fees or principal, as the case may be, no
later than 11 a.m. (Madison, Wisconsin, time) on the dates when due.
(b) Any payments received after the time specified in Section
2.04(a) hereof shall be deemed to have been received on the next
succeeding Business Day.
(c) If any payment of principal or interest on the Loans shall
become due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and, in the case of a principal
payment, such extension of time shall be included in computing interest in
connection with such payment.
2.05. Use of Proceeds. The Company will use the proceeds of the
1998 Loan to reduce or repay indebtedness owing to the Banks or to make
Third Party Loans.
ARTICLE 3
CONDITIONS PRECEDENT TO BORROWING
With respect to the 1998 Loan, the Board shall not be obligated to
make any such Loan unless the following actions shall have occurred, all
the documents described herein shall have been delivered to the Board, and
all legal matters incident to any such Loan shall be satisfactory to the
Board and Counsel to the Board:
3.01. Conditions to Closing. Prior to the Board making the 1998
Loan, the Board shall have received from the Company, in a form and
substance satisfactory to the Board and Counsel to the Board, the
following:
(a) (i) The 1998 Note, executed by the Company;
(ii) The 1998 Security Agreement, executed by the Company;
(iii) A UCC Financing Statement, executed by the Company and
describing the Collateral;
(iv) The Collateral Assignment, executed by the Company;
(v) The Parent Guaranty, executed by the Parent; and
(vi) An amendment to the Master Note Purchase Agreement,
executed by the Parent and the Company, in form and content
acceptable to the Board.
(b) All of the Third Party Loan Documents constituting the
Collateral, together with an estoppel letter in substantially the form of
Exhibit B attached hereto executed by the borrower under each such Third
Party Loan stating the balance due thereunder, that the Third Party Loan
Documents are valid, binding and enforceable in accordance with their
terms, that there is no default by or claim against the Company
thereunder, and such other matters as the Board may reasonably require;
(c) A security interest subordination agreement in substantially the
form of Exhibit C attached hereto executed by Firstar Bank Milwaukee,
N.A., as agent for the Bank and any lender who has become a "Lender" under
the terms of the Revolving Credit Agreement;
(d) An amendment to the Transfer Agent Agreement in form and content
acceptable to the Board, executed by Firstar Trust Company, as Transfer
Agent, the Company, and the Board, providing for the terms and conditions
under which Third Party Loans constituting the Collateral may be
substituted by the Company;
(e) An Officer's Certificate containing and certifying as true and
correct:
(i) Certified copies of the resolutions of the Board of
Directors of the Company approving and authorizing the
execution and delivery of the Loan Documents;
(ii) The names and signatures of the officers of the
Company authorized to sign the Loan Documents;
(iii) Copies of the Company's Articles of Incorporation and
Bylaws;
(iv) A statement that all representations and warranties
contained in Article 4 herein are true and correct and
that such representations and warranties will remain
true and correct on the Closing Date; and
(v) A statement that all Third Party Loans constituting
the Collateral meet the criteria set forth in Sections
4.14 and 4.15 hereof;
(f) A favorable opinion of Counsel to the Company;
(g) Certificates of the Company's (a) good standing from the state
of incorporation, and (b) good standing as a foreign corporation in each
state in which it is required to be licensed and failure to be so
qualified would have a material adverse effect on the Company, all
certified no earlier than 30 days prior to the Closing Date; and
(h) A Uniform Commercial Code search, prepared by a reputable Title
Company acceptable to the Board, of the records of the Waukesha County
Register of Deeds and the State of Wisconsin Secretary of State,
disclosing that all property of the Company in which the Board is to be
granted a security interest under the Security Agreements is free and
clear of all liens and encumbrances whatsoever, excepting the liens and
encumbrances set forth in Section 6.01 herein.
3.02. No Material Adverse Change. There shall not be in
existence any event, including any judicial or administrative proceeding,
which, in the opinion of the Board, would have a material adverse effect
upon the financial condition of the Company.
3.03. No Default. As of the date of advancement of the loan
proceeds under this Agreement, there shall be no Default or Potential
Default under this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company and the Parent each represent and warrant to the Board as
follows:
4.01. Corporate Existence and Standing. The Company and the
Parent each: (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation; (b) has the
corporate power and authority and the legal right to own and operate its
business and property, to lease the property it occupies and to conduct
the business in which it is currently engaged; and (c) is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification.
4.02. Authorization and Validity. The execution, delivery and
performance by the Company and the Parent of the Loan Documents to which
each entity is a party are within the said entity's corporate powers, have
been duly authorized by all necessary corporate action and do not and will
not (1) require any consent or approval of the stockholders of the Company
or the Parent, as the case may be; (2) contravene or conflict with the
Articles of Incorporation or Bylaws of the Company or the Parent, as the
case may be; (3) violate any provision of any law, rule, regulation
(including, without limitation, Regulation U of the Board of Governors of
the Federal Reserve System), order, writ, judgment, injunction, decree,
determination, award, or any license or certificate of authority of or
issued by a Governmental Authority, presently in effect having
applicability to the Company or the Parent, as the case may be; (4) result
in a breach of or constitute a default under any indenture, loan or credit
agreement or any other agreement, lease, instrument, license or
certificate of authority to which the Company or the Parent, as the case
may be, is a party or by which it or its properties may be bound or
affected; or (5) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge
or encumbrance of any nature upon or with respect to any of the properties
now owned or hereafter acquired by the Company or the Parent, as the case
may be; and the Company or the Parent, as the case may be, is not in
default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, award, license or certificate of
authority or any such indenture, agreement, lease or instrument.
4.03. No Governmental Approvals. No authorization or approval or
other action by, and no notice to or filing with, any Governmental
Authority is required for the due execution, delivery and performance by
the Company or the Parent, as the case may be, of the Loan Documents,
excepting any of the foregoing required to be made by the Board.
4.04. Enforceable Obligations. The Loan Documents, when
delivered hereunder, will be legal, valid and binding obligations of the
Company or the Parent, as the case may be, enforceable in accordance with
their respective terms except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally.
4.05. Financial Condition. The financial statements of the
Company and the Parent dated as of the end of the Fiscal Year prior to the
Closing Date, heretofore delivered to the Board, were prepared in
accordance with GAAP, are complete and correct and fairly present the
financial condition of the Company and the Parent at such dates and the
results of its operations for the periods then ended. No material adverse
change in the condition of the Company or the Parent as shown on said
financial statements has occurred since the date thereof.
4.06. Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or the
Parent or against any of its respective properties or revenues (a) with
respect to this Agreement and the Loans contemplated hereby or (b) which
would have a material adverse effect on the business, operations, property
or financial or other condition of the Company or the Parent taken as a
whole, or the ability of the Company or the Parent to (i) continue its
business in a manner consistent with its present business operation or
(ii) perform its obligations under the Loan Documents.
4.07. Compliance with Laws and Contractual Obligations.
(a) The Company and the Parent are each in compliance with all
Contractual Obligations and Requirements of Law, each Contractual
Obligation is in full force and effect and no default by the Company or
the Parent exists thereunder, except to the extent such a default or
failure by the Company to comply would not, in the aggregate, have a
material adverse effect on the business, operations, property or financial
or other condition of the Company or the Parent, and would not have a
material adverse effect on the ability of the Company or the Parent to
perform its obligations under the Loan Documents.
(b) Neither the execution and delivery of the Loan Documents and the
performance of the obligations herein undertaken by the Company or the
Parent nor the use of the proceeds therefrom, will violate, conflict with
or constitute a default under any Requirement of Law (including, without
limitation, Regulations G, X or U of the Board of Governors of the Federal
Reserve System, the Securities Act of 1933 and the Securities Exchange Act
of 1934) or any Contractual Obligation (other than certain rights and
powers granted to enforce the liens or security interests permitted under
Section 6.01 hereof, which may conflict with the rights and powers
granted to the Board).
4.08. Taxes. The Company has filed or caused to be filed all tax
returns which are required to be filed and has paid all taxes shown to be
due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority and no tax liens
have been filed and no claims are being asserted with respect to any such
taxes, fees or other charges. No material claims are threatened, pending
or being asserted with respect to, or in connection with, the Company's
tax returns through the Fiscal Year ending prior to the Closing Date.
4.09. Ownership of Property and Liens. The Company has good and
marketable title to all of its owned assets, and none of such assets are
subject to any lien, except those Liens set forth in Section 6.01 herein.
4.10. Pension Reform Act of 1974. The Company has not incurred
any material accumulated Unfunded Deficiency within the meaning of ERISA
nor has it incurred any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") established under ERISA (or any successor thereto
under ERISA) in connection with any Plan established or maintained by the
Company, and the Company is in full compliance in all material respects
with all provisions of ERISA.
4.11. Subsidiaries. The Parent has no Subsidiaries other than
the Company (wholly owned), Bando McGlocklin Investment Corporation (99%
owned) and Lee Middleton Original Dolls, Inc. (100% owned) and License
Products, Inc. (51% owned). The Company has no Subsidiaries.
4.12. Accuracy of Information. No information, exhibit or report
furnished by the Company or the Parent to the Board in connection with the
negotiation of the Loans and while the Notes, or either of them, remain
unpaid contains any material misstatement of fact or omits to state a
material fact or any fact necessary to make the statements contained
therein not misleading.
4.13. REIT Status. The Company and the Parent have each elected,
and are each duly qualified, to operate as a "Real Estate Investment
Trust" ("REIT") pursuant to Section 856 of the Internal Revenue Code and
regulations applicable thereto. Neither the Company nor the Parent has
any knowledge of any facts or circumstances that would disqualify the
Company or the Parent as a REIT or any knowledge of any pending or
threatened action by the Internal Revenue Service to revoke or terminate
the Company's or Parent's election to operate, or status, as a REIT.
4.14. Form of Documents. The form of the Third Party Loan
Documents constituting the Collateral that have heretofore been approved
by the Board are attached hereto as Exhibit D. All of the Third Party
Loan Documents constituting the Collateral shall utilize the form of the
note and other loan documents in substantially the form attached hereto as
Exhibit E or such forms that may be approved by the Board.
4.15. Characteristics of Third Party Loans. At all times that the
Loans remain outstanding:
(a) all of the Third Party Loan Documents constituting Collateral
are and will remain the legal, valid binding obligation of the borrowers
thereunder enforceable according to their terms;
(b) all of the Third Party Loan Documents constituting Collateral
are and will remain secured by a perfected first or second mortgage
against real estate owned by the borrower thereunder;
(c) all of the Third Party Loan Documents constituting Collateral are
and will remain secured by a perfected first security interest in the
personal property acquired with the proceeds of the Third Party Loan;
(d) No Third Party Loan or Third Party Loans constituting
Collateral, when combined with all Third Party Loans in which the Board
holds a 90% participation interest pursuant to the Master Note Purchase
Agreement, to a single borrower (including Affiliates of a borrower) are
for an aggregate amount in excess of $4,000,000; and
(e) No Third Party Loan or Third Party Loans constituting
Collateral, when combined with all Third Party Loans in which the Board
holds a 90% participation interest pursuant to the Master Note Purchase
Agreement, consist of more than $8,000,000 in any one industry as
classified by the Company consistent with its existing industry
classification practices which are set forth on Exhibit F;
(f) Each Third Party Loan constituting Collateral must conform to
the Company's underwriting standards set forth in Exhibit G.
ARTICLE 5
AFFIRMATIVE COVENANTS
During the term of this Agreement and as long as the Notes, or any of
them, remain unpaid, unless the Board shall otherwise consent in writing,
the Company will:
5.01. Reports.
(a) Financial Statements. Maintain a standard and modern system of
accounting in accordance with sound accounting practice, and furnish to
the Board such information respecting the business, assets and financial
condition of the Company and the Parent as the Board may reasonably
request and, without request furnish to the Board:
(i) as soon as available, and in any event within 45 days
after the end of each quarter, financial statements for
the Company and the Parent, including the balance sheet
for the Company and the consolidated and consolidating
balance sheet of the Parent and its Subsidiaries, as of
the end of each such month, and statements of income of
the Company and the consolidated and consolidating
statements of income of the Parent and its Subsidiaries
for each such month and for that part of the fiscal year
ending with such month, setting forth in each case, in
comparative form, figures for the corresponding periods
in the preceding fiscal year, all in reasonable detail
and certified as true, correct and complete, subject to
review and normal year-end adjustments, by the chief
executive officer of the Company;
(ii) as soon as available, and in any event within 105 days
after the close of each fiscal year, a copy of the
detailed annual audit report for such year and
accompanying financial statements for the Parent and its
Subsidiaries as of the end of such year, containing
balance sheets and statements of income, retained
earnings and cash flows for such year and for the
previous fiscal year and consolidated and consolidating
balance sheets, statements of income and cash flows for
such year, as audited by independent certified public
accountants of recognized standing selected by the
Company and satisfactory to the Board, which report shall
be accompanied by the unqualified opinion of such
accountants to the effect that the statements present
fairly, in all material respects, the financial position
of the Parent and its Subsidiaries as of the end of such
year and the results of its operations and its cash flows
for the year then ended in conformity with GAAP;
(iii) with the financial statements described in Section
5.01(a)(ii), an Officer's Certificate to the effect that
(i) a review of the activities of the Company during such
period has been made under the supervision of the
president of the Company to determine whether the Company
has observed, performed and fulfilled each and every
covenant and condition in this Agreement, including
specifically certifying the Company is in compliance with
the Company's loan policies and underwriting standards
set forth on Exhibit G and the loan characteristics set
forth in Section 4.15 hereof; (ii) no Default has
occurred; and (iii) if a Default has occurred, the
certificate shall specify the nature thereof and the
period of existence thereof and the steps, if any, being
undertaken to correct the same;
(iv) with the financial statements described in Section
5.01(a)(ii), at the Company's option, either: (a) an
audit by the Company's independent certified public
accountants of the reconciliation report prepared by the
Company for the fiscal year, as required under Section
5.01(c), that such reconciliation accurately presents in
all material respects the information therein contained
and the year-end balances of the Third Party Loans
constituting Collateral as of the end of the fiscal year
then ending, individually and in the aggregate and
confirms that they have no knowledge of any Third Party
Loan Document constituting Collateral being in payment
default as of the end of the fiscal year then ended; or,
(b) an estoppel letter in substantially the form of
Exhibit B attached hereto executed by the borrower under
each Third Party Loan constituting Collateral, dated as
of the end of the fiscal year then ending, together with
a statement of the Company's independent certified public
accountants that they have no knowledge of any Third
Party Loan constituting Collateral being in payment
default as of the end of the fiscal year then ended.
All financial statements referred to herein shall be complete and correct
in all material respects and shall be prepared on a consolidated and
consolidating basis, in reasonable detail, and in accordance with GAAP,
applied consistently throughout all accounting periods.
(b) Furnish to the Board copies of (i) all financial statements,
reports and returns as the Parent, the Company, InvestorsBancorp, Inc., or
any Affiliate shall send to its stockholders, and (ii) all regular,
periodic, or special reports (including, but not limited to, annual
reports on form 10-K, and quarterly reports on form 10-Q) which the
Parent, the Company, InvestorsBancorp, Inc., or any Affiliate is or may be
required to file with the Securities and Exchange Commission ("SEC") or
any governmental department, bureau, commission or agency succeeding to
the functions of the SEC; all of which documents shall be delivered to the
Board forthwith as and when sent, filed, or received by the Parent, the
Company, InvestorsBancorp, Inc., or any Affiliate.
(c) Furnish to the Board a report certified by the President of the
Company prepared on a monthly basis reporting: (i) the principal balances
of all Third Party Loans constituting Collateral as of the end of the
preceding month, individually and in the aggregate; (ii) all interest,
payments of principal and prepayments received on account of the Third
Party Loans constituting Collateral, with appropriate explanations of the
character of each payment for all such Third Party Loans individually and
in aggregate; (iii) the aggregate principal balances of all Third Party
Loans constituting Collateral reported by Company's industry
classifications set forth on Exhibit F; and (iv) defaults under any Third
Party Loan Document constituting Collateral which remain uncured,
identifying the Third Party Loan pursuant to which such default occurred
and summarizing briefly the nature of such default. After the end of each
fiscal year and with the financial statements to be provided under Section
5.01(a)(ii), the Company will furnish a report certified by the President
prepared on an annual basis containing all of the same information.
(d) Furnish to the transfer agent under the Transfer Agent Agreement
annual financial statements of each of the borrowers under Third Party
Loans constituting Collateral in the form required to be provided to the
Company pursuant to the Third Party Loan Documents governing said Third
Party Loans.
5.02. Notice of Default. As soon as the Company knows of the
occurrence of any Default or Potential Default and of any other
development, financial or otherwise, which may have a material adverse
effect on the business, property or affairs of the Company or the ability
of the Company to perform its obligations under the Loan Documents, give
prompt notice thereof in writing to the Board.
5.03. Conduct of Business and Maintenance of Existence. Continue
to (a) engage in business of the same type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence,
and take all reasonable action to maintain all rights, privileges,
licenses and franchises necessary or desirable in the ordinary course of
its business; (b) comply with all Contractual Obligations and Requirements
of Law with respect to which a default or noncompliance would have a
material adverse effect on the Company; (c) adhere to its loan policies
and underwriting criteria set forth on Exhibit G in the making of Third
Party Loans constituting Collateral; and (d) maintain all Third Party
Loans constituting Collateral in compliance with the loan characteristics
set forth in Section Section 4.14 and 4.15.
5.04. Taxes. Pay, when due, all taxes, assessments and
governmental charges, fees and levies upon it and its income, profits,
revenues or property, unless any of the foregoing is being contested in
good faith and the Company has established adequate reserves for the
payment of the amounts being contested.
5.05. Maintenance of Property and Insurance. Keep all of its
property useful and necessary in its business in good working order and
condition and maintain, during the term of this Agreement and the Notes,
insurance of the types and amounts of coverages that would be reasonable
for companies in the same industry as the Company, with financially sound
and reputable insurance companies. The Company will furnish to the Board,
upon the Board's written request, full information as to the insurance
carried and, upon request of the Board, will provide an affirmative
endorsement that such insurance companies provide 30 days' prior written
notice to the Board of cancellation or nonrenewal of any insurance policy.
5.06. Books and Records and Inspection. Keep proper books of
record and account in which full, true and correct entries shall be made
of all dealings and transactions in relation to its business and
activities in conformity with GAAP and all Requirements of Law, and permit
representatives of the Board to (a) visit and inspect any of its
properties at any time during normal business hours and as often as may
reasonably be desired, and to discuss the business, operations, properties
and financial and other conditions of the Company with officers and
employees of the Company and with the Company's independent certified
public accountants, and (b) inspect any of the corporate books and
financial and other records of the Company and to make copies thereof.
5.07. Notice of Litigation and Defaults. Promptly provide notice
to the Board of (a) the commencement or knowledge of the pending or
threatened commencement of all actions, suits and proceedings before any
court or Governmental Authority, affecting the Company taken as a whole
which, if determined adversely to the Company, could have a material
adverse effect on the financial condition, properties or operations of the
Company; and (b) any default continuing for more than ninety (90) days by
any Person under any Third Party Loan Document constituting Collateral,
whether or not the Company has declared a default or accelerated such
Third Party Loan.
5.08. Notice of ERISA Reportable Event. Promptly provide to the
Board, after the filing or receipt thereof, copies of all reports,
including annual reports and notices which the Company files with or
receives from the PBGC or the United States Department of Labor under
ERISA; and as soon as possible and in any event within thirty (30) days
after the Company knows or has reason to know that any Reportable Event
has occurred with respect to any Plan or that the PBGC or the Company has
instituted or will institute proceedings under Title IV of ERISA to
terminate any Plan, a certificate of the chief financial officer of the
Company setting forth details as to such Reportable Event or Plan
termination and the action the Company proposes to take with respect
thereto.
5.09. Information to Other Creditors. Promptly provide to the
Board, after the furnishing thereof, copies of any statement or report
furnished to any other party pursuant to the terms of any indenture, loan,
credit or similar agreement and not otherwise required to be furnished to
the Board pursuant to any other clause of this Article 5.
5.10. Net Worth. The Company shall maintain a net worth at all
times at least equal to the sum of Nineteen Million Five Hundred Thousand
Dollars ($19,500,000) plus eighty-five percent (85%) of any increase in
the Company's net worth after March 3, 1995 which may result from, inter
alia, the receipt of any proceeds (cash or other property) from the
issuance by the Company of any shares of its capital stock, the receipt of
any capital contributions (cash or other property) from existing or future
shareholders of the Company, whether in the form of paid-in capital or
otherwise, or the retention of earnings by the Company. For purposes of
this Section 5.10, the Company's net worth shall be equal to the aggregate
amount of assets less the aggregate amount of liabilities and preferred
stock (if any), all according to GAAP definitions. (As presented on the
Company's balance sheet, net worth includes common stock, paid-in surplus,
treasury stock, undistributed realized earnings, unrealized gain or loss
on loans and investments, and realized gain or loss on loans and
investments. Any realized or unrealized gain or loss on interest rate
swaps are, and shall continue to be, accounted for, as the case may be, as
realized or unrealized gain or loss on loans and investments.)
5.11. Collateral Value. Maintain at all times an aggregate balance
due on Third Party Loans constituting Collateral an amount equal to or
greater than one hundred and ten percent (110%) of the principal amount
due and owing under the Notes at any time. In the event the aggregate
balance due under such Third Party Loans at any time is less than one
hundred and ten percent (110%) of the principal amount due and owing under
the Notes, the Company shall, within ten (10) days thereof, pledge,
transfer, assign and deliver such additional Third Party Loans held by the
Company to the Board as additional Collateral so that the aggregate
balance due under all such Third Party Loans pledged to the Board as
Collateral under the Security Agreements is equal to or greater than one
hundred and ten percent (110%) of the balance then due under the Notes.
The pledge of additional Collateral shall provide the Board with a
security interest of first priority on said Collateral and shall be
accompanied by an estoppel certificate and subordination agreement in the
form described respectively in Section Section 3.01(b) and 3.01(c)
hereof.
5.12. Status of Third-Party Loans. The Company agrees that:
(a) The aggregate outstanding principal amount past due on the Third
Party Loans shall not exceed seven and one-half percent (7.5%) of the
total principal amount of all Third Party Loans outstanding on the 10th
day of each month for any three consecutive months; nor shall the
aggregate outstanding principal amount of past due Third Party Loans
exceed seven and one-half percent (7.5%) of the total principal amount of
all Third Party Loans outstanding on the 10th day of any one month. A
Third Party Loan shall be deemed "past due" if any scheduled payment of
interest and/or principal is not made within ninety (90) days of its
scheduled due date. The Company may only amend or modify the amount of
any scheduled payment or any scheduled due date on a Third Party Loan with
the prior written consent of the Board.
(b) For purposes of Section 5.13(a), (i) the total amount of past
due Third Party Loans shall include all amounts by which Third Party Loans
have been reduced by reason of the Company's acquisition of the real
estate securing said loans provided such real estate is still owned by the
Company at the time of calculation, and (ii) with respect to Third Party
Loans with respect to which the Company has realized a loss (as determined
under GAAP), the amount of the loss shall not be included in any
calculation under this section.
(c) The aggregate total realized losses on Third Party Loans since
the date of the first Third Party Loan made by the Company (as determined
under GAAP), whether or not any of said Third Party Loans have constituted
or presently constitute Collateral, shall not exceed the greater of
$1,000,000 or two and one-half percent (2.5%) of the total principal
amount of all currently outstanding Third Party Loans, as determined from
the then most recent monthly financial statements to be provided by the
Company to the Board pursuant to Section 5.01(a)(i) of this Agreement. For
the purposes of this section, a loss on a Third Party Loan is "realized"
when the loss is so identified on the Company's financial statements (as
determined under GAAP).
(d) All Third Party Loans will conform to the characteristics and
criteria set forth in Sections 4.14 and 4.15, hereof.
ARTICLE 6
NEGATIVE COVENANTS
During the term of this Agreement and as long as the Notes, or either
of them, remain unpaid, unless the Board shall otherwise consent in
writing, the Company will not:
6.01. Liens, Etc. Assume or suffer to exist any Lien or other
charge or encumbrance, or any other type of preferential arrangement, upon
or with respect to any of its properties, including, but not limited to,
all of the Company's assets and real property, whether now owned or
hereafter acquired, or assign any right to receive income, in each case to
secure any Debt of any Person except:
(a) Liens in favor of the Board;
(b) Liens created in favor of Firstar Bank Milwaukee, N.A., as agent
for the Banks, to secure the Revolving Credit Loans and such other
indebtedness permitted by Section 6.02(a) hereof, provided, that any such
Liens, to the extent they attach to the Collateral, are subject to
security interest subordination agreements substantially in the form of
described in Section 3.01(c) hereof;
(c) Any Liens created after the Closing Date by purchase money
mortgages, capitalized leases, conditional sales contracts, security
interests, deeds of trust, realty mortgages or similar instruments given
to secure the payment of the purchase price incurred in connection with
the acquisition of fixed assets useful and intended to be used in carrying
out the business of the Company provided that (i) the Lien or charge shall
attach solely to the property purchased; and (ii) the aggregate principal
amount with respect to any single purchase shall not be in excess of the
fair market value of such property;
(d) Liens created pursuant to the Company's reverse repurchase
agreements with the Banks in connection with treasury bond obligations;
(e) Liens securing the payment of taxes, assessments or governmental
charges or levies, provided the same are not at the time delinquent or are
being contested in good faith and the Company has established adequate
resources for the payment of the amounts being contested;
(f) Liens imposed by law, such as claims or demands of suppliers,
mechanics, carriers, warehousers, landlords and other like Persons which
secure payment of obligations, provided the same are not more than 120
days past due or are being contested in good faith and the Company has
established adequate resources for the payment of the amounts being
contested;
(g) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance,
social security and other like laws.
6.02. Indebtedness. Create, incur, assume or suffer to exist any
Debt except:
(a) The amounts evidenced by the Notes;
(b) Revolving Credit Loans and such other indebtedness to the Banks
to the extent provided for or permitted under the Revolving Credit
Agreement, provided that the creation of any such indebtedness requiring
an amendment to the Revolving Credit Agreement shall require the prior
written consent of the Board;
(c) Unsecured liabilities not aged more than 120 days from the
billing date which are incurred in the ordinary course of business and
paid within the specified time, subject to the Company's good faith
objection to any such liabilities provided the Company has created
adequate resources for the payment of the amounts being contested;
(d) Commercial paper and interest rate swap obligations;
(e) Indebtedness incurred in the ordinary course of business
consisting of (i) amounts held in escrow for the payment of real estate
taxes, (ii) amounts held as security deposits, and (iii) loan
participations (including those with recourse against the Company and
those sold on a "first-out" basis); and
(f) All other indebtedness shown on the Company's financial
statements as of the date hereof.
6.03. Purchase of Stock. Acquire, directly or indirectly, for
value, any of its capital stock now or hereafter outstanding.
6.04. Sale of Assets, Merger and Consolidation. Sell, transfer or
assign all or substantially all of its assets; create a Subsidiary; or
sell, transfer or assign assets which have a value, in the aggregate, in
excess of twenty-five percent (25%) of the total assets of Company, using
the values shown on the Company's financial statements unless such assets
are sold for amounts which, in the aggregate, equal or exceed their
original cost or in the case of Third Party Loans or partial interests in
Third Party Loans, are sold for an amount that is equal to or greater than
the outstanding balance or the ratable percentage of the outstanding
balance, as the case may be, then due and owing; or merge or consolidate
with or amalgamate with or into any other Person (other than by sales made
in the ordinary course of business and sales of participation interests in
Third-Party Loans).
6.05. Transactions With Affiliates. Enter into or be a party to
any transaction or arrangement, including, without limitation, the
purchase, sale, exchange or use of any property or asset, or any interest
therein, whether real, personal or mixed, or tangible or intangible, or
the rendering of any service, with any Affiliate or any director or
officer of the Company or any holder of 10% or more of the Company's
outstanding stock, except in the ordinary course of and pursuant to the
reasonable requirements of the Company's business and upon fair and
reasonable terms no less favorable to the Company than it would obtain in
a comparable arm's-length transaction with a Person not an Affiliate or a
director or officer of the Company, or a holder of 10% or more of the
Company's outstanding stock. Notwithstanding the above, the office
facilities and resources of the Company may be used to a limited extent in
conducting the business of a real estate investment trust of which certain
officers of the Company are officers.
6.06. Fiscal Year. Change its Fiscal Year.
ARTICLE 7
DEFAULTS AND REMEDIES
The occurrence of any one or more of the following events shall
constitute a Default:
7.01. Payment of Notes and Other Obligations. The failure by the
Company to pay any principal or interest payment due under the 1998 Note
or the 1991 Note within five (5) Business Days of when such payment is
due, whether by acceleration or otherwise, or the occurrence of a Default
under (and as defined in) any of the Loan Documents.
7.02. Covenants. The breach by the Company of any of the terms or
provisions of Articles 5 and 6 hereof, and the Company's failure to cure
said breach within thirty (30) days after the occurrence thereof, provided
that a breach of Section Section 6.01, 6.02, 6.04, or 6.06 hereof shall
constitute a Default immediately upon the occurrence of such breach.
7.03. Representations and Warranties. Any representation or
warranty made or deemed made by the Company or the Parent to the Board
under or in connection with any Loan Documents or any certificate or
information delivered in connection with this Agreement shall be
materially false or misleading as of the date on which made.
7.04. Other Debt. The Company or the Parent shall: (a) fail to
pay when due or within any applicable grace period any Debt (other than
the amounts outstanding under the Notes) in excess of $50,000 in the
aggregate at any one time outstanding for the Company or the Parent, as
the case may be; or (b) default in the performance of any other term,
provision or condition contained in any agreement, including, but not
limited to, the Revolving Credit Loans, under which any such Debt (other
than the amounts outstanding under the Notes) was created or is governed,
the effect of which is to cause to come due prior to its stated maturity,
or to permit the holder or holders of the same to call due prior to its
stated maturity, any Debt (other than the Notes) in excess of $50,000 in
the aggregate at any one time outstanding for the Company or the Parent,
as the case may be.
7.05. Note Purchase Documents. An Event of Default shall occur
under the Master Note Purchase Agreement.
7.06. Bankruptcy or Insolvency. The Company or the Parent shall:
(a) have an order for relief entered with respect to it under the Federal
Bankruptcy Code; (b) not pay, or admit in writing its inability to pay,
its debts generally as they become due; (c) make an assignment for the
benefit of creditors; (d) apply for, seek, consent to, or acquiesce in the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its property;
(e) institute any proceeding seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding-up, liquidation,
reorganization, arrangement, adjustment or composition of it or its Debt
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors and fail to have such proceeding dismissed within sixty
(60) days of its filing or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it;
(f) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 7.06; or (g) fail to contest in good
faith any appointment or proceeding described in this Section 7.06.
7.07. Administrator or Receiver. Without the application,
approval or consent of the Company or the Parent, as the case may be, a
receiver, trustee, examiner, liquidator or similar official shall be
appointed for the Company or the Parent, as the case may be, or any
substantial part of its property, or a proceeding described in Section
7.06 hereof shall be instituted against the Company or the Parent, as the
case may be, and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of sixty (60)
consecutive days.
7.08. Condemnation or Seizure. Any court or Governmental
Authority shall condemn, seize or otherwise appropriate, or take custody
or control of all or a substantial portion of the property or assets of
the Company or the Parent.
7.09. Judgments. The Company or the Parent shall fail, within
sixty (60) days, to pay, bond or otherwise discharge judgments or orders
for the payment of money in excess of $50,000 in the aggregate at any one
time outstanding for the Company or the Parent, as the case may be, which
are not stayed on appeal or otherwise being appropriately contested in
good faith.
7.10. Security Agreements. The Security Agreements and any UCC
Financing Statements shall, at any time after their execution and delivery
and filing, and for any reason, cease (a) to create a valid and perfected
first priority security interest in and to the Collateral purported to be
subject to such Security Agreements or UCC Financing Statements, or (b) to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested by the party thereto
or the party thereto shall deny it has any further liability or obligation
under such Security Agreements or UCC Financing Statements.
7.11. REIT Status. The Company or the Parent shall terminate its
election, or shall cease to be duly qualified, to operate as a "Real
Estate Investment Trust" ("REIT") pursuant to Section 856 of the Internal
Revenue Code, and regulations applicable thereto; or, the Internal Revenue
Service shall have revoked or terminated the Company's or the Parent's
election to operate, or status, as a REIT; or, the Internal Revenue
Service shall have notified the Company or the Parent that the Internal
Revenue Service will institute proceedings to revoke or terminate, the
Company's or the Parent's election to operate, or status, as a REIT unless
such proceedings to revoke or terminate the Company's or the Parent's REIT
election or status are dismissed within ninety days of the date of said
notification to the Company or the Parent.
7.12. Remedies. If a Default as specified in this Article 7
occurs, the Board may do any one or more of the following:
(a) declare all amounts due under any one or all of the Loans due
and payable (provided that, in the case of the occurrence of a Default
under Section Section 7.05 or 7.06, all amounts due under all of the
Loans shall forthwith become due and payable without such declaration)
whereupon the unpaid amount of such Loan or Loans shall become immediately
due and payable,
(b) exercise all of the rights and remedies of a secured party after
the occurrence of a Default under the Loan Documents, and
(c) exercise any right or remedy the Board may have at law or in
equity with respect to the Loans or the subject matter of this Agreement.
If the Notes are prepaid as the result of a Default and acceleration of
the amounts due under the same, the Company shall pay the Board a
Prepayment Premium equal to the amount, if any, that the Company would pay
under Section 2.03 hereof.
ARTICLE 8
GENERAL PROVISIONS
8.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Notes, nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Board, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. Unless specifically stated, no amendment or restatement of
this Agreement shall constitute a rescission, substitution, or otherwise
affect the validity and enforceability of the original Agreement.
8.02. Notices. Any notice required or permitted to be delivered
under this Agreement or under any of the Loan Documents by any party to
the other shall be given as follows:
To the Company or Parent: Bando McGlocklin Capital Corporation
Attn: Chief Executive Officer
if by delivery: W239 N 1700 Busse Road & Highway J
if by mail: P.O. Box 190
Pewaukee, WI 53072-0190,
To the Board: Portfolio Manager, Private Placements Core
Portfolio
State of Wisconsin Investment Board
if by delivery: 121 East Wilson St.
if by mail: P.O. Box 7842
Madison, WI 53707-7842
Copy to: Tod B. Linstroth, Esq.
Michael Best & Friedrich LLP
if by delivery: One South Pinckney St., #700
if by mail: P.O. Box 1806
Madison, WI 53701-1806
Notices shall be deemed given (a) when deposited in the United States
Mail, postage prepaid; (b) upon delivery to the telegraph company for
transmission, charges prepaid; (c) in the case of telefax notice, when
sent, answer back received; (d) in the case of overnight courier delivery,
when deposited with the overnight courier; or (e) when physically
delivered by hand to the addressee of such notice, request or demand by or
on behalf of the person initiating such notice. The Company and the Board
may each change the address for service of notice upon it by a notice in
writing to the other.
8.03. No Waivers; Remedies. No course of dealing between the
Company and the Board and no delay or omission by the Board to exercise
any right under the Loan Documents shall impair such right or be construed
to be a waiver of any Default or Potential Default or an acquiescence
therein, and any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other
right. All remedies contained in the Loan Documents or by law afforded
shall be cumulative, and all shall be available to the Board until the
Loans have been paid in full. The Board may exercise such remedies in any
order of priority.
8.04. Cost, Expenses and Taxes. The Company agrees to pay on
demand all costs and expenses of the Board in connection with the
preparation, execution, delivery, enforcement and administration of this
Agreement, the Notes, and the other documents that may be delivered
hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of Counsel to the Board with respect thereto and
with respect to advising the Board as to its rights and responsibilities
under the Loan Documents, and all costs and expenses, if any (including
reasonable counsel fees and expenses), of the Board in connection with the
enforcement of the Loan Documents. In addition, the Company shall pay any
and all fees and other taxes payable or determined to be payable in
connection with the execution and delivery of the Loan Documents including
without limitation all recording, filing and refiling expenses, and agrees
to save the Board harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
fees and taxes.
8.05. Benefit of Agreement. The Board will accept the Notes as
evidence of loans made in the ordinary course of its business and will
acquire the Notes for its own account without any present intention of
making any sale or distribution of the Notes in any manner, provided that
the disposition of the Notes shall be in the control of the Board. The
terms and provisions of the Loan Documents shall be binding upon and inure
to the benefit of the Company and the Board and their respective
successors and assigns, including, without limitation, all future holders
of the Notes, except the Company shall not have the right to assign its
rights or obligations under the Loan Documents or any interest therein,
without the prior written consent of the Board.
8.06. Survival of Representations. All representations and
warranties of the Company contained in the Loan Documents shall survive
the making of the Loans.
8.07. Choice of Law and Construction. The Loan Documents shall be
construed in accordance with the laws of the State of Wisconsin. Whenever
possible, each provision of the Loan Documents shall be interpreted in
such manner as to be effective and valid under such applicable law, but if
any provisions of any Loan Document shall be held to be prohibited or
invalid under such applicable law, such provisions shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of any such
Loan Document.
8.08. Section Headings and References. Section headings in the
Loan Documents and the tables of contents thereof are for convenience of
reference only and shall not govern the interpretation of any of the terms
or provisions of the Loan Documents. All references to sections or
articles in the Loan Documents are to the section or article of the Loan
Document in which such section or article reference appears, unless a
different Loan Document is expressly specified.
8.09. Exhibits. All exhibits and schedules referred to in the
Loan Documents are hereby incorporated into each other Loan Document by
this reference, and all terms as defined in the Loan Documents shall have
the same meanings in such exhibits and schedules, unless otherwise defined
in such exhibits and schedules. All references to exhibits and schedules
in the Loan Documents are to those attached to the Loan Document in which
such reference appears, unless a different Loan Document is expressly
specified.
8.10. Lawful Money. All references in the Loan Documents to
payment of amounts of money shall be to lawful money of the United States
of America.
8.11. Entire Agreement. The Loan Documents embody the entire
agreements and understandings between the Company and the Board and
supersede all prior agreements and understandings between the Company and
the Board relating to the subject matter thereof.
8.12. Term of Agreement. The Loan Documents shall terminate only
when the Notes, all interest thereon and all other fees or charges due
under the Notes and this Agreement have been paid in full.
8.13. Counterparts. This Agreement may be executed by the parties
hereto individually or in several separate counterparts, each of which
shall be an original and all of which taken together shall constitute one
and the same agreement.
8.14. Further Assurance. The Company agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Board may at any time
request in connection with the administration or enforcement of the Loan
Documents in order to better assure and confirm unto the Board its rights,
powers and remedies hereunder.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company, the Parent, and the Board have
executed this Agreement as of the date first above written.
BANDO McGLOCKLIN SMALL BUSINESS
LENDING CORPORATION (the "Company")
By:
George R. Schonath
President
BANDO McGLOCKLIN CAPITAL CORPORATION (the
"Parent")
By:
George R. Schonath
President
STATE OF WISCONSIN INVESTMENT BOARD
(the "Board")
By:
Monica A. Jaehnig
Assistant Portfolio Manager
EXHIBIT A
COPY OF
1991 PROMISSORY NOTE
[Attached]
EXHIBIT B
FORM OF
ESTOPPEL LETTER
[Date]
Dear ____________:
The purpose of this letter is to confirm certain information relating
to the loans that Bando McGlocklin Small Business Lending Corporation
("Bando McGlocklin") has extended to you. We are asking for this
confirmation because we are obtaining a credit facility from the State of
Wisconsin Investment Board (the "Board"). Bando McGlocklin will of course
continue to be your lender; your loan will merely be used as collateral
for this new credit facility.
According to our books, the original principal amount of the loan was
$ . The loan was evidenced by the following documents: Commitment
and Loan Agreement dated ; Promissory Note dated
; Mortgage dated ; and Guaranty of
Payment by , dated .
Our records show that there have been no modifications, changes,
amendments or adjustments in these documents in any respect, and that
these are the only documents and agreements between you and us relating to
these loans.
As of June 1, 1998, the principal amount outstanding on your loan is
$_________. Our records show that you have no right of offset or other
claim against us, and it is our understanding that the loan documents
above are valid, binding and enforceable as written.
If this description is accurate, please so confirm by signing below
and returning the duplicate copy of this letter to me. You should be
aware that your response will be relied on by the State of Wisconsin
Investment Board in making the credit facility available to us. We
certainly appreciate your cooperation in this matter, and are confident
that we can continue our good working relationship.
Sincerely,
George R. Schonath
President
The undersigned agrees with the statements made above and confirms that
the facts stated are correct.
By:
Date:
EXHIBIT C
FORM OF
SECURITY INTEREST SUBORDINATION AGREEMENT
The undersigned, FIRSTAR BANK MILWAUKEE, N.A. ("Bank"), as agent for
the "Lenders", as said term is defined in that certain Credit Agreement
dated as of March 11, 1998 (the "Credit Agreement") by and between Bank
and BANDO McGLOCKLIN SMALL BUSINESS LENDING CORPORATION, a Wisconsin
corporation (the "Company"), has or may acquire a security interest or
other interest in the property of the Company which is described on
Exhibit A attached hereto and made a part hereof (the "Collateral") and
understands that the State of Wisconsin Investment Board (the "Board") has
or may acquire a security interest in the Collateral as security for two
loans, each in an original principal amount not exceeding $10,000,000, as
evidenced by the promissory notes in such amounts attached as Exhibits B
and C, respectively (the loans together referred to as the "Secured
Loans"). In consideration of the Board's extension of the Secured Loans
to the Company, and the mutual covenants of the parties set forth below,
the parties agree as follows:
1. Notwithstanding the date, manner or order of perfection of
the security interests and liens granted to the Bank (as agent for
the "Lenders" under the Credit Agreement and in its individually
capacity as a "Lender" thereunder), and notwithstanding any
provisions of the UCC or any applicable law or decision or the Credit
Agreement and all other related loan and security documents
(collectively the "Bank Loan Documents"), or whether the Bank or the
Company holds possession of all or any part of the Collateral, the
Board shall have a first and prior security interest in and lien on
the Collateral and the collections and proceeds therefrom, whether
now or hereafter acquired, as security for the Secured Loans, and the
Bank shall have a subordinate security interest therein and lien
thereon.
2. If the Company shall default under the Secured Loans
secured by the Collateral, or default under the Bank Loan Documents,
all proceeds of the Collateral shall be distributed to the Board,
without regard to any interest in the Bank to the Collateral, to
satisfy all of the Company's obligations under the Secured Loans, and
after the Board has been paid in full, the balance of the proceeds of
the Collateral, if any, shall be distributed in accordance with the
terms and conditions of the Revolving Credit Agreement. The Board
shall account to the Bank for any amount received on account of the
Collateral in excess of the Company's obligations under the Secured
Loans, including the expenses of collecting and/or realizing upon the
Collateral incurred by the Board.
3. If the Company shall default under the Bank Loan Documents:
(i) the Bank may not exercise any of its rights or remedies with
respect to the Collateral until it has given notice of such default
to the Board, provided, however, that the Bank may exercise its right
of set-off so long as it provides the Board with notice of such
exercise promptly thereafter, and (ii) the Bank shall give the Board
notice within a reasonable time after the Bank commences exercising
its rights and remedies with respect to the collateral (other than
the Collateral) provided under the Bank Loan Documents. If the
Company shall default under the Secured Loans, the Board shall give
the Bank notice within a reasonable time after the Board commences
exercising its rights and remedies with respect to the Collateral.
Notice shall be deemed given to the Board or to the Bank at the
address listed next to their respective signatures below (a) when
delivered personally, (b) the second day after being deposited in the
United States mail registered or certified mail (return receipt
requested), (c) the first business day after being deposited with
Federal Express or any other recognized national overnight courier
service, or (d) on the business day on which it is sent and received
by facsimile.
4. This Agreement binds and benefits the Bank (as agent for
the "Lenders" under the Credit Agreement and in its individually
capacity as a "Lender" thereunder) and the Board and their respective
successors and assigns. No course of dealing between the Company and
the Board and no delay or omission by the Board to exercise any right
it has against the Collateral shall impair the rights of the Board
with respect to the Collateral. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner so as to be
effective and valid under applicable law, but if any provision hereof
shall be held to be prohibited or invalid under such applicable law,
such provision shall be ineffective only to the extent of such
prohibition and invalidity, without invalidating the remainder of the
provisions contained herein. The Bank agrees to do such further acts
and things and to execute and deliver such additional agreements as
the Board may at any time reasonably request in connection with the
administration or enforcement of its security interests against the
Collateral or in order to better assure and confirm onto the Board
its rights and interests in the Collateral.
5. Notwithstanding anything herein to the contrary, this
Agreement shall be effective and enforceable against the Bank only if
and so long as the security interest of the Board in the Collateral
shall remain a perfected security interest.
6. The Board agrees that possession of the Collateral by the
Board shall be on behalf of and for the benefit of both the Board and
the Bank for purposes of the perfection of their respective security
interests in the Collateral. Upon termination of its security
interest in the Collateral, the Board will deliver the Collateral to
Firstar Trust Company as collateral agent for the Bank together with
any endorsements and assignments by the Board as may be necessary to
terminate its interest in the Collateral.
7. This Agreement shall be effective only upon execution
hereof by both parties.
8. All capitalized terms not defined herein shall have the
same meanings ascribed to such terms in that certain Third Amended
and Restated Credit Agreement by and between the Company and the
Board dated as of June 1, 1998.
IN WITNESS WHEREOF, this Agreement has been executed as of the 1st
day of June, 1998.
FIRSTAR BANK MILWAUKEE, N.A., as agent
By:
Name:
Title:
Address:
STATE OF WISCONSIN INVESTMENT BOARD
By:
Name:
Title:
Address:
EXHIBIT D
COPIES OF PLEDGED THIRD PARTY LOAN DOCUMENTS
[Attached]
EXHIBIT E
FORM OF
THIRD PARTY LOAN DOCUMENTS
[Attached]
EXHIBIT F
INDUSTRY CLASSIFICATIONS
[Attached]
EXHIBIT G
UNDERWRITING STANDARDS