Exhibit 10.6
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT dated as of June 10, 2004 by and
between TIMEPAYMENT CORP. LLC, a Delaware limited liability company, and AMPAC
CAPITAL SOLUTIONS, LLC, a Nevada limited liability company. The parties hereto
hereby agree as follows:
ARTICLE I: DEFINITIONS
Section 1.1. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"Acorn" means Acorn Capital Group, LLC, a Delaware limited
liability company.
"Acorn Credit Agreement" means the Credit Agreement of even
date herewith between Acorn and Borrower.
"Acorn Debt" means the Indebtedness evidenced by the Acorn
Note and any and all other Indebtedness and obligations of Borrower to Acorn
under the Acorn Credit Agreement.
"Acorn Guaranty" means the Conditional Guaranty, dated as of
the date hereof, made by Parent and Leasecomm in favor of Acorn, but effective
only upon satisfaction of certain conditions specified therein and in Section
2.7 of the Acorn Credit Agreement.
"Acorn Loan Documents" means the Acorn Note, the Acorn Credit
Agreement, the Acorn Conditional Guaranty, the Acorn Warrant and the other
instruments and documents executed pursuant to the Acorn Credit Agreement.
"Acorn Note" means Borrower's Promissory Note dated as of the
date hereof in the original principal amount of $8,000,000 and any substitution
for or replacement thereof.
"Acorn Warrant" means the Warrant Certificate, dated as of the
date hereof, by and between Parent and Acorn, and any substitutions therefor or
replacements thereof.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Board" means the Board of Directors of Parent.
"Borrower" means TimePayment Corp. LLC, a Delaware limited
liability company.
"Business Day" means a day other than a Saturday, Sunday or
any day on which commercial banks in New York, New York are authorized or
required by law to close.
"Change of Control" means at any time (a) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
shall become, or obtain rights (whether by means or warrants, options or
otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange Act), directly or indirectly, of more than 35% of the
outstanding common stock of Parent; (b) the Board shall cease to consist of a
majority of Continuing Directors, (c) Mr. Latour shall cease to be a member of
the Board, unless a replacement reasonably acceptable to Lender is appointed
within 120 days following such cessation, (d) a "change of control," "change of
control event" or similar circumstance or event shall occur under or pursuant to
agreements relating to Indebtedness which any Obligor is a party to, including,
without limitation, the Fleet Loan Agreement, or (e) Parent shall cease to own,
beneficially and of record, the full economic interest in, with full voting and
dispositive power, 100% of the total outstanding capital stock of Borrower or
shall cease to Control Borrower.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment Expiration Date" means the date that occurs ninety
(90) days after the Effective Date.
"Consolidated Net Worth" means, as of any date of
determination, for Parent and its Subsidiaries on a consolidated basis,
consolidated shareholder's equity of Parent and its Subsidiaries on such date,
computed in accordance with GAAP, minus the book value of all intangible assets
under GAAP on such date, including without limitation customer lists, goodwill,
computer software, copyrights, trade names, trademarks, patents, franchises,
licenses, unamortized depreciation charges and unamortized debt discount, plus
amounts outstanding on such date under the Subordinated Note Purchase Documents
and any other Subordinated Debt Documents.
"Continuing Directors" means the directors of Parent on the
date hereof and each other director, if, in each case, such other director's
nomination for election to the Board is recommended by a majority of the then
Continuing Directors.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, other than administrative functions, whether through the ability to
exercise voting power, by contract or otherwise. "Controlling" and "Controlled"
have meanings correlative thereto.
"Debt to Worth Ratio" means, as of any date of determination,
the ratio of (a) the aggregate outstanding principal amount of all Indebtedness
of Parent and its Subsidiaries of the type described in clauses (a) and (b) of
the definition thereof set forth below, determined on a consolidated basis in
accordance with GAAP, to (b) Consolidated Net Worth.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Dollars" or "$" refers to lawful money of the United States
of America.
"Effective Date" means the date on which the conditions
specified in Section 4.1 are satisfied.
"Equipment" means tangible equipment reasonably acceptable to
Lender, whether now or hereafter owned and leased to third party users by
Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event," as defined in
Section 4043 of ERISA of the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by Borrower or any ERISA Affiliate from
the Pension Benefit Guaranty Corporation or a plan administrator of any notice
relating to an intention to terminate any Plan or Plans or to appoint a trustee
to administer any Plan; (f) the incurrence by Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by Borrower or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from Borrower
or any ERISA Affiliate of any notice, concerning the imposition of liability to
a Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title
IV of ERISA or a determination that a Multiemployer Plan is, or is expected to
be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Event of Default" has the meaning set forth in Article VII.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Maturity Date" means June 30, 2007.
"Fleet" means Fleet National Bank.
"Fleet Loan Agreement" means the Fourth Amended and Restated
Revolving Credit Agreement, dated August 22, 2000, by and between the lenders
from time to time party thereto, Fleet, as agent for the Fleet Lenders, and
Leasecomm, as borrower.
"Fleet Waiver" means the Waiver Agreement dated as of June 3,
2004 by and between the Investors named therein and Parent.
"GAAP" means generally accepted accounting principles in the
United States of America as used to prepare the financial statements required to
be delivered hereunder.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantors" means, collectively, Parent (but only pursuant to
the Subordinated Conditional Guaranty on and after the effective date thereof)
and each other Person, if any, acceptable to Lender who may from time to time
guaranty the Obligations.
"Guaranty Effective Date" has the meaning set forth in Section
2.7.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to loans or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services, (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all guarantees by such Person of Indebtedness of others, (h)
all the obligations of such Person to pay rent or other amounts under any lease
of (or other arrangement conveying the right to use) real or personal property,
or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
(i) all obligations, contingent or otherwise, of such Person as an account party
in respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor. The
Indebtedness of any Person shall not include current accounts payable incurred
in the ordinary course of business.
"Leasecomm" means Leasecomm Corporation, a Massachusetts
corporation and subsidiary of Parent, and borrower under the Fleet Loan
Agreement.
"Lender" means Ampac Capital Solutions, LLC, a Nevada limited
liability company.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan" means, collectively, all loans made pursuant to Section
2.1.
"Material Adverse Effect" means, with respect to any event,
occurrence, circumstance or other matter of whatever nature, a material adverse
effect on (a) the business, assets, operations or financial condition of any
Obligor (exclusive of events, occurrences, circumstances and other matters
resulting from changes in general economic, civil or political conditions, legal
standards or regulatory conditions); or (b) the ability of any Obligor to
perform any material obligations under any Subordinated Note Purchase Document.
"Material Indebtedness" means Indebtedness (other than the
Loan or Indebtedness owing to another Obligor), of any one or more of the
Obligors in an aggregate principal amount exceeding (a) in the case of Borrower,
$300,000 and (b) in the case of all other Obligors, collectively, $750,000.
"Mr. Latour" means Mr. Richard F. Latour, an individual.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Obligations" means any and all now existing or hereafter
arising obligations of any Obligor to Lender, whether primary or secondary,
direct or indirect, absolute or contingent, joint or several, secured or
unsecured, due or not, liquidated or unliquidated, arising by operation of law
or otherwise under any Subordinated Note Purchase Document whether for
principal, interest, fees, expenses or otherwise, together with all costs of
collection or enforcement, including, without limitation, reasonable attorneys'
fees incurred in any collection efforts or in any action or proceeding. All of
the Obligations constitute Subordinated Debt.
"Obligor" means each of Borrower and each Guarantor, if any.
"Parent" means MicroFinancial Incorporated (f/k/s Boyle
Leasing Technologies, Inc.), a Massachusetts corporation, and the sole member of
each of Borrower and Leasecomm.
"Permitted Encumbrances" means: (a) Liens imposed by law for
taxes that are not yet due or are being contested in compliance with Section
5.4; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and
other like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue or are being contested in compliance
with Section 5.4; (c) deposits or pledges made in the ordinary course of
business in compliance with worker's compensation, unemployment insurance and
other social security laws or regulations; (d) deposits or pledges to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business; (e) deposits or pledges made in
connection with casualty insurance maintained as permitted hereunder; (f) Liens
of or resulting from any judgment or award, the time for the appeal or petition
for rehearing of which has not yet expired, or in respect of which Borrower is
in good faith prosecuting an appeal or proceeding for a review or which is not
an Event of Default under Section 7.1(k); (g) easements, zoning restrictions,
right-of-way and similar encumbrances on real property imposed by law or arising
in the ordinary course of business that do not secure any monetary obligations
and do not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of Borrower or any Subsidiary;
and (h) restrictions under federal and state securities laws on the transfer of
securities, provided, that the term "Permitted Encumbrances" shall not include
any Lien securing Indebtedness.
"Person" means any natural person, corporation, limited
liability company, limited partnership, trust, joint venture, association,
company, partnership, Governmental Authority or other entity.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among Parent, Lender and Acorn.
"Restricted Payment" has the meaning set forth in Section 6.5.
"Senior Lender" has the meaning set forth in the Subordinated
Notes.
"Senior Obligations" has the meaning set forth in the
Subordinated Notes.
"Servicing Fee" means, collectively, all fees and other
amounts paid or payable from time to time by Borrower to Parent pursuant to the
Servicing Agreement dated as of June 10, 2004.
"Special Purpose Subsidiary" means a Subsidiary that is a
special purpose entity for the securitization and financing of lease receivables
in the ordinary course of business in accordance with Section 6.8.
"Subordinated Conditional Guaranty" means the Subordinated
Conditional Guaranty, dated as of the date hereof, made by Parent in favor of
Lender, but effective only upon satisfaction of certain conditions specified
therein and in Section 2.7.
"Subordinated Debt" means all Indebtedness of Borrower or any
other Obligor to the Subordinated Noteholders and any other Indebtedness of
Parent and its Subsidiaries that is subordinate in right of payment to that of
Acorn or any other Senior Lender.
"Subordinated Debt Documents" means all of the Subordinated
Note Purchase Documents and any and all other instruments and agreements
evidencing, or executed in connection with, any other Subordinated Debt.
"Subordinated Note Purchase Documents" means this Agreement,
the Subordinated Notes, the Subordinated Conditional Guaranty, the Warrant
Certificates, the Registration Rights Agreement and any other documents
hereafter delivered to Lender by any Obligor evidencing, guarantying or securing
the Obligations.
"Subordinated Noteholders" means Lender and its successors and
assigns under Section 8.5 as holders of the Obligations.
"Subordinated Notes" means the subordinated promissory note(s)
of Borrower, executed and delivered as provided in Section 2.1, together with
all replacements thereof and substitutions therefor.
"Subsidiary" means, with respect to any Person (the "parent")
at any date, any entity the accounts of which would be consolidated with those
of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, Controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
"Transactions" means the execution, delivery, and performance
by the Obligors of the Subordinated Note Purchase Documents, the borrowing and
repayment of the Loan, the payment of interest and fees under the Subordinated
Note Purchase Documents, the issuance to Lender of warrants for the purchase of
shares of Parent's common stock pursuant to the Warrant Certificates (including
the granting to Lender of certain registration rights pursuant to the
Registration Rights Agreement), and the use of the proceeds of the Loan.
"Warrant Certificates" means the Warrant Certificates, dated
as of the date hereof, by and between Parent and Lender, and all replacements
thereof and substitutions therefor.
"Warrant Shares" has the meaning specified in Section 2.8.
Section 1.2. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes," and
"including" shall be deemed to be followed by the phrase "without limitation."
The word "will" shall be construed to have the same meaning and effect as the
word "shall." Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented, replaced or otherwise modified (subject to
any restrictions on such amendments, supplements, replacements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein," "hereof,"
and "hereunder," and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Exhibits, Articles, Sections, and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits, and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
Section 1.3. Specified Times and Dates; Determinations. All
times specified in this Agreement shall be determined, unless specifically
herein to the contrary, on the basis of the prevailing time in New York City.
Unless specifically herein to the contrary, if any day or date specified in this
Agreement for any notice, action or event is not a Business Day, then the due
date for such notice, action or event shall be extended to the immediately
succeeding Business Day; provided that interest shall accrue on any payments due
by Borrower which are extended by the operation of this Section 1.3. Any
determination by Lender hereunder shall be presumptive evidence of the validity
and accuracy thereof.
ARTICLE II: THE LOAN
Section 2.1. Loan.
(a) Loan. Subject to the terms and conditions and relying upon
the representations and warranties herein set forth, Lender hereby agrees to
make loans to Borrower, in two installments, in the aggregate principal amount
of $2,000,000. The first installment of the Loan shall be in the principal
amount of $1,500,000 and shall be made on the Effective Date. The balance of
$500,000 shall be made in accordance with Section 2.1(c) on the Commitment
Expiration Date.
(b) Subordinated Notes. The Loan shall be evidenced by the
Subordinated Notes, payable to the order of Lender, as referred to herein.
Additional terms and conditions relating to the Loan are set forth in the
Subordinated Notes. The Subordinated Notes are hereby referenced and
incorporated herein as if set forth in their entirety.
(c) Second Installment. Upon satisfaction of the conditions
set forth in Section 4.2, Lender will make the second installment of the Loan
available to Borrower by disbursing such funds on the Commitment Expiration Date
as directed in writing by Borrower.
Section 2.2. Repayment of Loan. The aggregate outstanding
principal amount of the Subordinated Notes shall be payable in four (4) equal
quarterly payments, each in the amount of $500,000, on the last day of each
fiscal quarter, commencing June 30, 2005. Any principal of the Loan not
previously paid shall be payable on the Final Maturity Date.
Section 2.3. Interest.
(a) General. The Loan shall bear interest on the unpaid
principal amount thereof from the Effective Date until payment of the Loan in
full. Interest shall be payable in arrears on the last day of each month
beginning on June 30, 2004. Any accrued interest that remains unpaid on the
Final Maturity Date shall be due and payable on the Final Maturity Date and any
accrued and unpaid interest on the Loan shall be payable in arrears on any date
that any principal of the Loan is paid or payable (on the principal amount so
paid or payable).
(b) Interest Rate. The interest rate for the Loan shall be 13%
per annum.
(c) Default Interest. After the occurrence and during the
continuance of an Event of Default, to the extent permitted by applicable law,
Borrower shall pay on demand, on the outstanding principal amount of the Loan,
interest at a per annum rate equal to the interest rate applicable to the Loan
pursuant to Section 2.3(b) plus 1.00%.
(d) Maximum Interest Rate. Notwithstanding anything herein to
the contrary, in no event shall the interest charged hereunder exceed the
maximum rate of interest permitted under applicable law. Any payment made which
if treated as interest would cause the interest charged to exceed the maximum
rate permitted shall instead be held by Lender to the extent of such excess and
applied to future interest payments as and when such amount becomes due and
payable hereunder.
(e) Calculations. Interest shall be calculated on the basis of
the actual days elapsed in a year of 360 days. In computing interest on the Loan
(or interest on such interest), the date of the making of the Loan shall be
included and the date of payment of the Loan shall be excluded.
Section 2.4. Prepayment of Loan. Borrower may prepay the Loan
in whole or in part, without premium or penalty, on at least two Business Days'
(or such shorter period as shall be agreed to by Lender) irrevocable prior
written notice to Lender. All prepayments of the Loan shall be applied first to
accrued but unpaid fees payable under this Agreement and the other Subordinated
Note Purchase Documents, then to accrued but unpaid interest under the
Subordinated Notes and last to installments of principal under the Subordinated
Notes, in the inverse order of maturity.
Section 2.5. Payment Records. Lender shall maintain its
records to reflect the amount and date of the Loan and of each payment of
principal and interest thereon. All such records shall be presumptive evidence
of the outstanding principal amount hereof; provided, however, that the failure
to make any notation to Lender's records shall not limit or otherwise affect the
obligations of Borrower to repay the Loan.
Section 2.6. Payments. All payments by Borrower shall be
payable on or prior to 12:00 Noon on the due date thereof, in immediately
available funds in Dollars, without any set-off, counterclaim, withholding or
deduction of any kind. All payments shall be applied by Lender as follows:
first, to the payment of all accrued but unpaid fees, costs or expenses under
the Subordinated Note Purchase Documents; second, to the payment of all accrued
but unpaid interest under the Subordinated Note Purchase Documents; third, to
the repayment of then outstanding principal amount of the Loan; and fourth, the
balance, if any, to Borrower or to whomsoever may be entitled to such amounts as
determined by Lender in its reasonable discretion.
Section 2.7. Guaranty. The Obligations of Borrower under the
Subordinated Note Purchase Documents shall be guarantied by Parent pursuant to
the terms and conditions of the Subordinated Conditional Guaranty, provided,
however, that such Subordinated Conditional Guaranty shall not become effective
until the earlier of the day (the "Guaranty Effective Date") that (A) all
obligations under the Fleet Loan Agreement shall have been discharged in full,
or (B) Fleet otherwise consents to the Subordinated Conditional Guaranty. On
such date Borrower shall cause Parent to become a party to this Agreement as an
Obligor by executing and delivering a Joinder to Note Purchase Agreement in the
form of Schedule 2.7 attached hereto.
Section 2.8. Warrants and Registration Rights Agreement. As
partial consideration for Lender making the Loan to Borrower, (a) Parent shall
issue to Lender warrants for the purchase of (i) 110,657 shares of Parent's
capital stock at a per share purchase price of $2.00 and (ii) 191,685 shares of
Parent's capital stock, at a per share purchase price of $2.91, all pursuant to
the terms and conditions of the respective Warrant Certificates (including
without limitation certain vesting, exercise and transfer restrictions), and (b)
Lender shall be entitled to certain registration rights with respect to such
shares of Parent's capital stock (the "Warrant Shares") as set forth under the
Registration Rights Agreement.
Section 2.9. Taxes. Any and all payments made by Borrower
hereunder shall be made free and clear of and without deduction for any present
or future taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities with respect thereto to the extent attributable to the Loan,
excluding (i) taxes imposed on net income and (ii) all income and franchise
taxes of the United States, any political subdivisions thereof, and any state of
the United States, and any political subdivisions thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.9) Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make such
deductions and (iii) Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law. Within
30 days after the date of any payment of Taxes, Borrower will furnish Lender
with evidence of payment thereof. Borrower hereby indemnifies Lender for the
full amount of Taxes (including, without limitation, any Taxes imposed by any
jurisdiction on amounts payable under this Section 2.9) paid by Lender and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally asserted.
Payment pursuant to this indemnification shall be made upon written demand
thereof. The obligations of Borrower under this paragraph shall survive the
termination of this Agreement. Lender hereby represents and warrants to Borrower
that, as of the date hereof, no payments to Lender hereunder are subject to any
withholding taxes of the United States. In the event, the Lender assigns its
interest in this Agreement without the approval of the Borrower, Borrower shall
not be obligated to pay any assignee any amounts under this Section in excess of
any amounts Borrower would be obligated. Any such assignee shall (x) provide
Borrower with reasonably adequate evidence that payments to such assignee
hereunder are not subject to any withholding taxes of the United States or (y)
agree with Borrower that payments to such assignee hereunder shall not be
increased by the amount of any applicable withholding taxes of the United
States.
Section 2.10. Fee. As additional consideration for Lender's
willingness to make the Loan, Borrower shall pay to Lender a fee in the amount
of $120,000 on the Final Maturity Date.
ARTICLE III: REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants to Lender on the date
hereof and on the date of the making of any Loan that:
Section 3.1. Organization; Powers; Authorization;
Enforceability, Etc. Each Obligor is duly organized or formed, validly existing
and in good standing (if and to the extent applicable) under the laws of the
jurisdiction of its organization or formation, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in
every jurisdiction where such qualification is required. Borrower does not have
any Subsidiaries. The Transactions are within the powers of each Obligor and
have been duly authorized by all necessary action for each Obligor. Each
Subordinated Note Purchase Document has been duly executed and delivered by each
Obligor party hereto and constitutes a legal, valid and binding obligation of
such Obligor enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, other than
registrations, qualifications or filings under applicable federal and state
securities laws or regulations that may be made after the date hereof, (b) will
not, to any Obligor's knowledge, violate any applicable law or regulation or the
charter, by-laws, limited liability company operating agreement or other
organizational documents of any Obligor or any order of any Governmental
Authority binding on any Obligor, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon any Obligor or
its assets, or give rise to a right thereunder to require any payment to be made
by such Obligor to the extent that such violation (in each case, after giving
effect to the Fleet Waiver), or such default or right to payment could be
reasonably expected to result in a Material Adverse Effect, and (d) will not
result in the creation or imposition of any Lien on any asset of any Obligor
other than pursuant to the Subordinated Note Purchase Documents. Except as set
forth on Schedule 3.1 attached hereto, there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of any Obligor, threatened against or affecting any
Obligor (i) that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect, or
(ii) that involve the Subordinated Note Purchase Documents or the Transactions.
Each Obligor is in compliance with all laws, regulations and orders (including
ERISA and environmental laws, regulations and orders) of any Governmental
Authority applicable to it or its property and all indentures, agreements and
other instruments binding upon it or its property, to the extent that any
noncompliance therewith could be reasonably expected to result in a Material
Adverse Effect. No Default has occurred and is continuing.
Section 3.2. Financial Condition. Any financial statements,
balance sheets, cash flow statement or other financial reports furnished by any
Obligor to Lender present fairly the financial condition of such Obligor as of
the dates thereof. Any projections or pro forma financial information contained
in the materials referenced above are based on good faith estimates and
assumptions believed by the management of each Obligor to be reasonable at the
time made, it being recognized by Lender that such financial information as it
relates to future events is not to be viewed as fact and that actual results
during the period(s) covered by such financial information may differ from the
projected results set forth therein by a material amount.
Section 3.3. Licenses. Each Obligor is licensed and authorized
to carry on its business as now conducted under all applicable laws,
regulations, and orders of any Governmental Authority, except where the failure
to do so, individually or in the aggregate, could not be reasonably expected to
result in a Material Adverse Effect.
Section 3.4. Investment and Holding Company Status. No Obligor
or any of its Subsidiaries is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
Section 3.5. Taxes. (a) Each Obligor has timely filed or
caused to be filed all tax returns and reports required to have been filed
(giving effect to any extensions) and has paid or caused to be paid all taxes
required to have been paid by it, except taxes that are being contested in
compliance with Section 5.5. The federal and state tax returns of each Obligor
delivered to Lender prior to the Effective Date are the true, correct and
complete tax returns of such Obligor as of the date thereof. (b) Borrower does
not intend to and shall not treat the Loan and related transactions as being a
"reportable transaction" (within the meaning of Treasury Regulation Section
1.6011-4). In the event Borrower determines to take any action inconsistent with
such intention or treatment, (i) it will promptly notify Lender thereof, and
(ii) Borrower acknowledges that Lender may treat the Loan as part of a
transaction that is subject to Internal Revenue Code section 6112 and the
Treasury Regulations thereunder, and that Lender will maintain lists and other
records to the extent required by such statute and regulations.
Section 3.6. Security Interests; Certain Information. The
state of residence or organization and any names used within the past five years
of each Obligor (or potential Obligor, in the case of the Guarantors) is set
forth on Schedule 3.6. Each Obligor which has not made an organizational filing
in any jurisdiction has set forth on Schedule 3.6 its place of business, if it
has only one place of business, or its chief executive office, if it has more
than one place of business. No Obligor (as applicable) has any Subsidiaries
other than those set forth on Schedule 3.6 hereto.
Section 3.7. Environmental Matters. The operations of each
Obligor are and have been in compliance in all material respects with all
applicable federal, state or local environmental, health and safety statutes and
regulations since their respective effective dates and, none of the operations
of the Obligors is subject to any judicial or administrative proceeding alleging
any material violation of any federal, state or local environmental, health or
safety statute or regulation or are the subject of any federal, state or local
investigation evaluating whether any material remedial action is needed to
respond to a release of any hazardous or toxic waste, substance or constituent,
or of any other substance into the environment. No Obligor has filed any notice
under any federal, state or local law indicating past or present treatment,
storage or disposal of a hazardous or toxic waste, substance or constituent, or
other substance into the environment and has no material contingent liability in
connection with any release of any hazardous or toxic waste, substance or
constituent, or other substance into the environment.
Section 3.8. Disclosure. All agreements, instruments and
corporate or other restrictions, and all other matters known to any Obligor
pertaining to such Obligor, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect have been
disclosed to Lender. None of the written reports, financial statements,
certificates or other written information (other than financial projections and
pro forma information) furnished by or on behalf of any Obligor to Lender in
connection with the negotiation of the Subordinated Note Purchase Documents or
delivered hereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE IV: CONDITIONS
Section 4.1. Effective Date. The obligation of Lender to make
the first installment of the Loan to Borrower hereunder shall not become
effective until each of the following conditions is satisfied:
(a) On the date on which the Loan is to be made:
(i) the representations and warranties set forth in
Article III and in any documents delivered herewith, shall be true
and correct with the same effect as though made on and as of such
date, except to the extent made as of a specific date and except as
to actions or changes in circumstances not prohibited hereunder;
(ii) each of the covenants set forth in Article V shall
have been complied with or performed in full as of such date; and
(iii) Borrower and Parent shall be in compliance with all
the terms and provisions contained herein and in the Subordinated
Note Purchase Documents to be observed or performed, and no Default
shall have occurred and be continuing.
(b) Lender shall have also received the following documents:
(i) a counterpart of this Agreement, executed by Borrower;
(ii) the initial Subordinated Note, executed by Borrower;
(iii) the Subordinated Conditional Guaranty, executed by
Parent;
(iv) each of the Warrant Certificates, executed by Parent;
(v) the Registration Rights Agreement, executed by Parent
and Acorn; and
(vi) consolidated balance sheet and statements of income,
retained earnings and cash flows for Parent's most recently ended
fiscal year and interim consolidated balance sheet and statements of
income, retained earnings and cash flows for Parent covering the
fiscal year ended December 31, 2003.
(c) Lender shall have received reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by Borrower hereunder.
(d) Lender shall have received satisfactory legal opinions
regarding Borrower and Parent as to the organization or formation, existence and
good standing (if and to the extent applicable) of Borrower and Parent, the
authorization of the Transactions, the execution, delivery and enforceability of
the Subordinated Note Purchase Documents, no violations of law including margin
regulations, no violations of any contracts with Fleet and other legal matters
relating to Borrower and Parent, the Subordinated Note Purchase Documents or the
Transactions, all in form and substance reasonably satisfactory to Lender and
its counsel.
(e) Lender shall have received such documents and certificates
regarding Borrower and Parent as to the organization or formation, existence and
good standing (if and to the extent applicable) of Borrower and Parent, the
authorization of the Transactions, the execution, delivery and enforceability of
the Subordinated Note Purchase Documents, the incumbency of signatories, and
other legal matters relating to Borrower and Parent, the Subordinated Note
Purchase Documents or the Transactions, all in form and substance satisfactory
to Lender and its counsel.
(f) Lender shall be satisfied that no event has occurred which
could reasonably be expected to have a Material Adverse Effect.
Section 4.2. Balance of Loan. Lender's obligation to make the
second and last installment of the Loan on the Commitment Expiration Date shall
not become effective until each of the following conditions is satisfied:
(a) the representations and warranties set forth in Article
III and in any documents delivered herewith, shall be true and correct with the
same effect as though made on and as of such date, except to the extent made as
of a specific date and except as to actions or changes in circumstances not
prohibited hereunder;
(b) each of the covenants set forth in Article V shall have
been complied with or performed in full as of such date; and
(c) Borrower and Parent shall be in compliance with all the
terms and provisions contained herein and in the Subordinated Note Purchase
Documents to be observed or performed, and no Default shall have occurred and be
continuing.
(d) Lender shall be satisfied that no event has occurred which
could reasonably be expected to have a Material Adverse Effect.
ARTICLE V: AFFIRMATIVE COVENANTS
Until the principal of and interest on the Loan and all fees
and other Obligations payable under the Subordinated Note Purchase Documents
shall have been paid in full, each Obligor covenants and agrees with Lender
that:
Section 5.1. Financial Statements, Reports and Other
Information
(a) Borrower will furnish to Lender on a monthly basis, within
15 days after the end of each of Borrower's fiscal months, compliance
certification from an executive officer of each of Parent and Borrower stating
that (A) no Default has occurred during such month or setting forth the details
of the occurrence of any Default and any action taken or proposed to be taken by
Parent or Borrower with respect thereto, (B) all covenants and conditions
contained in each Subordinated Note Purchase Document have been complied with or
performed in full as of such date, and (C) each of the reports delivered
pursuant to this Section 5.1(a) and 5.1(b) present fairly the financial
condition of the Person described in such reports and any information provided
in such reports is true and correct as of the date such information is
furnished.
(b) Borrower will furnish to Lender on a monthly basis within
30 days after the end of each of Borrower's fiscal months internally prepared
financial statements and a report setting forth in detail the amount and nature
of all outstanding obligations of Borrower under the Fleet Loan Agreement as of
such date.
(c) Parent will furnish to Lender on an annual basis promptly
after the same becomes available, but in any event within 90 days of Parent's
fiscal year end, a consolidated balance sheet and statements of income, retained
earnings and cash flows as of and for such fiscal year accompanied by an
unqualified report by an independent public accounting firm reasonably
acceptable to Lender that such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of Borrower and its consolidated Subsidiaries as of such date and for such
periods in accordance with GAAP. The financial statements delivered pursuant
hereto shall be accompanied by a certification from an executive officer of
Parent that such financial statements present fairly the financial condition of
the Persons described in such financial statements and any information provided
in such financial statements is true and correct as of the date such information
is furnished.
(d) Promptly after the same becomes publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
Parent (and/or any Subsidiary of Parent) with the Securities and Exchange
Commission, or with any securities exchange, or distributed by Parent to its
shareholders generally, as the case may be.
(e) All financial statements, material reports and material
written information regarding Parent or Borrower provided to Fleet (or the bank
group under the Fleet Loan Agreement) within two Business Days after the time
such financial statements, reports and information are provided to Fleet (or the
bank group under the Fleet Loan Agreement).
(f) Promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of Parent, Borrower or any Subsidiary of Borrower or Parent, or compliance with
the terms of the Subordinated Note Purchase Documents, as Lender may reasonably
request.
(g) On the date of the delivery of any financial statements or
projections under this Section 5.1, Borrower shall be deemed to have made a
representation to Lender that such financial statements shall present fairly the
financial condition of the Person described in such financial statements, and
any information provided pursuant to this Section 5.1 shall be true and correct
as of the date such information is furnished and, as to projections, that such
projections are based upon reasonable assumptions in light of prior performance.
Any projections or pro forma financial information contained in the materials
referenced above are based on good faith estimates and assumptions believed by
the management of each Obligor to be reasonable at the time made, it being
recognized by Lender that such financial information as it relates to future
events is not to be viewed as fact and that, subject to the requirements of
Section 5.12(a), actual results during the period(s) covered by such financial
information may differ from the projected results set forth therein by a
material amount.
Section 5.2. Notices of Material Events. Borrower will furnish
to Lender prompt written notice of the following: (a) the occurrence of any
Default; (b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any Obligor
that, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect; (c) written notice of Borrower's intent to pay in full
all of Borrower's obligations under the Fleet Loan Agreement no less than ten
(10) Business Days prior to such payment; and (d) any other development that
results in, or could reasonably be expected to result in, a Material Adverse
Effect. Each notice delivered under this Section 5.2 shall be accompanied by a
statement of Borrower setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.
Section 5.3. Existence. Each Obligor will do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business.
Section 5.4. Payment of Obligations. Each Obligor will pay its
liabilities including tax liabilities, that, if not paid, could reasonably be
expected to result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Obligor has
set aside on its books adequate reserves with respect thereto and (c) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
Section 5.5. Maintenance of Properties; Insurance. Each
Obligor will (a) keep and maintain all property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and (b) maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations.
Section 5.6. Books and Records; Inspection Rights; Access. At
Borrower's expense, Borrower will keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. Borrower will permit any
representatives designated by Lender, during normal business hours and upon
reasonable advance notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to directly discuss its affairs,
finances and condition with its partners or trustees (or its designee), officers
and independent accountants, as applicable.
Section 5.7. Compliance with Laws. Each Obligor will comply
with all laws, rules, regulations and orders of any Governmental Authority
applicable to it (including ERISA and environmental laws), except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 5.8. Use of Proceeds. The proceeds of the Loan shall
be used by Borrower solely to finance leases and the related revenues thereto
and the working capital needs of Borrower. No part of the proceeds of the Loan
will be used for the purpose, whether immediate, incidental or ultimate, of
buying or carrying Margin Stock. "Margin Stock" means "margin stock" as used and
defined in Regulation U of the Regulations of the Board of Governors of the
Federal Reserve System.
Section 5.9. Subsidiary Guarantors. Borrower shall cause each
and every Subsidiary and each Obligor shall cause each and every Affiliate of
Borrower that receives any money from Borrower, except as permitted under
Section 6.4, to be a party to this Agreement and to guaranty the Obligations.
ARTICLE VI: NEGATIVE COVENANTS
Until the principal of and interest on the Loan and all fees
payable hereunder have been paid in full, each Obligor covenants and agrees with
Lender that:
Section 6.1. Indebtedness. Other than Indebtedness permitted
under the Fleet Loan Agreement, no Obligor shall issue, incur or increase the
principal amount of any of its Indebtedness, except (a) for any Indebtedness to
Lender, (b) for the Acorn Debt; (c) for current liabilities for ordinary trade
accounts payable, accrued payroll and severance obligations payable on customary
terms in the ordinary course of business; (d) that Parent may incur purchase
money Indebtedness and capital leases secured as provided in Section 6.7(c) in
an aggregate principal amount not exceeding $750,000 at any time; (e) existing
Indebtedness described on Schedule 6.1 attached hereto; (f) that Parent may
incur Indebtedness in respect of inter-company loans and advances among Parent
and its Subsidiaries which are not prohibited by Section 6.6; (g) that Parent
may make Guarantees of Indebtedness and other obligations incurred by any of its
Subsidiaries and permitted by the other provisions of this Section 6.1; and (h)
for Indebtedness of Parent and its Subsidiaries (including Borrower) in addition
to the foregoing, including, without limitation, any other Senior Obligations,
provided, however, that, as of the date that any such additional Indebtedness is
incurred, the Debt to Worth Ratio shall not exceed 5.00:1.00.
Section 6.2. Disposition of Assets. Borrower shall not
distribute, sell, transfer, lease or otherwise dispose of (in one transaction or
in a series of transactions) all, substantially all or any substantial part, of
its assets, except for dispositions of assets made in the ordinary course of
business (including without limitation dispositions to Special Purpose
Subsidiaries in accordance with Section 6.7) so long as immediately prior to any
such disposition, and after giving effect thereto, Borrower is in compliance
with Section 6.1.
Section 6.3. Fundamental Changes
(a) Borrower shall not merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) any material portion of its assets (in each case,
whether now owned or hereafter acquired) other than in the ordinary course of
business, or liquidate or dissolve.
(b) Borrower shall not engage to any material extent in any
business other than the business of leasing tangible equipment pursuant to
leases and businesses reasonably related thereto.
(c) Borrower shall not amend, modify or change its certificate
of incorporation or by-laws or other organizational documents in any manner that
would be adverse to Lender.
(d) Borrower shall not create or acquire any Subsidiaries,
other than Special Purpose Subsidiaries created in compliance with Section 6.8)
without the prior written consent of the Lender.
Section 6.4. Transactions with Affiliates. Neither Borrower
nor any of its Subsidiaries shall sell, lease or otherwise transfer any property
or assets to, or purchase, lease or otherwise acquire any property or assets
from, or otherwise engage in any other transactions with, any of its Affiliates,
except in the ordinary course of business at prices and on terms and conditions
not less favorable to Borrower or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties.
Section 6.5. Dividends and other Restricted Payments. Neither
Borrower nor any of its Subsidiaries shall declare or pay any dividends,
purchase, redeem, retire, defease or otherwise acquire for value any of
Borrower's or such Subsidiary's capital stock or membership interests (as
applicable) or any warrants, rights or options to acquire such capital stock or
membership interests (as applicable), now or hereafter outstanding, return any
capital to Borrower's or such Subsidiary's stockholders or members (as
applicable) as such, or make any distribution or exchange of assets, capital
stock, warrants, rights, options, obligations or securities to Borrower's or
such Subsidiary's stockholders or members (as applicable) (in each case a
"Restricted Payment"), except that:
(a) Borrower may make any Restricted Payment permitted by the
Senior Lender(s); and
(b) From and after the Guaranty Effective Date, Borrower may
pay cash dividends to Parent not to exceed, in the aggregate in any fiscal year,
an amount equal to fifty percent (50%) of Borrower's net income for the
immediately preceding fiscal year (determined in accordance with GAAP), provided
that both at the time any such cash dividend is declared or paid, and after
giving effect to the payment thereof, no Default shall have occurred and be
continuing.
Section 6.6. Investments. Borrower shall not make any loan or
advance to any Person, or purchase or otherwise acquire, or permit any of its
Subsidiaries to purchase or otherwise acquire, any capital stock or other equity
interest, warrants, rights, options, obligations or other securities of, make
any capital contribution to, or otherwise invest in, any Person, except for (a)
subject to Section 6.3(d), investments of Borrower and its Subsidiaries in
Persons that become wholly owned Subsidiaries and Guarantors after the date
hereof in accordance with the provisions of this Agreement; (b) investments in
Special Purpose Subsidiaries made in compliance with Section 6.8; and (c)
reimbursements to employees and directors for expenses incurred in the ordinary
course of business.
Section 6.7. Liens. Borrower shall not (and shall not permit
any Subsidiary to), create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable or rights in respect of any
thereof), except:
(a) Permitted Encumbrances;
(b) Liens securing the Acorn Debt;
(c) Liens securing any other Senior Obligations;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by Borrower or any Subsidiary or existing on any property or
asset of any Person that becomes a Subsidiary after the date hereof prior to the
time such Person becomes a Subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition or such
Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply
to any other property or assets of Borrower or any Subsidiary and (iii) such
Lien shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(e) Liens created in compliance with Section 6.8; and
(f) Liens on fixed or capital assets acquired, constructed or
improved by Borrower or any Subsidiary; provided that (i) such security
interests secure purchase money Indebtedness or capital leases permitted under
Section 6.1(d) or otherwise approved by Lender, (ii) such security interests and
the Indebtedness secured thereby are incurred prior to or within 90 days after
such acquisition or the completion of such construction or improvement, (iii)
the Indebtedness secured thereby does not exceed the cost of acquiring,
constructing or improving such fixed or capital assets and (iv) such security
interests shall not apply to any other property or assets of Borrower or any
Subsidiary.
Section 6.8. Permitted Securitizations. Lender acknowledges
and agrees that a substantial portion of Borrower's assets consists of lease
and/or financing agreements, lease and/or financing receivables, interests in
equipment leased and/or financed to various customers and residual interests in
such leased equipment. Lender further acknowledges and agrees that Borrower
contemplates, after the date hereof and prior to the repayment in full of the
Loan, securitizations and or similar financing arrangements with respect to the
aforementioned assets. Accordingly, notwithstanding anything contained in this
Agreement to the contrary, Lender agrees that: (a) the transfer or other
disposition, on one or more occasions, of all or substantially all of, or of any
portion of, the assets of Borrower to one or more Special Purpose Subsidiaries
shall be a permitted transfer or disposition of Borrower's assets; (b) in
connection with the foregoing transfer or disposition of assets to any such
Special Purpose Subsidiary, Borrower shall be permitted to make loans, advances
or capital contributions to, invest in or otherwise acquire all or any portion
of the equity interests of such Special Purpose Subsidiary, and the Lender shall
have no interest in, or Lien on, the assets of any such Special Purpose
Subsidiary; and (c) the occurrence of either of the foregoing shall not require
the consent or approval of Lender and shall not be an Event of Default
hereunder. Upon request of Borrower, Lender agrees to execute and deliver to
Borrower any and all lien waivers or other releases required by Borrower to
consummate the transfer of such assets to such Special Purpose Subsidiary free
and clear of any Liens or security interests granted to Lender hereunder.
Borrower agrees to provide Lender with thirty (30) days' written notice prior to
any transfer of any assets of Borrower to any Special Purpose Subsidiary.
Borrower further agrees that all sales made by its Special Purposes Subsidiaries
shall be exclusively for cash and that all such funds (other than monies applied
to pay the Servicing Fee) will (i) be applied to repay that amount of the Loan
related to each of such sold assets; and (ii) that any excess funds after such
repayment will remain in the direct or indirect (i.e., through possession by the
wholly-owned SPE) possession of Borrower.
ARTICLE VII: EVENTS OF DEFAULT
Section 7.1. If any of the following events ("Events of
Default") shall occur:
(a) Borrower shall fail to pay any principal of the Loan when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or otherwise;
(b) Borrower shall fail to pay any interest on the Loan, any
fee or any other amount (other than an amount referred to in clause (a) of this
Section 7.1) payable under any Subordinated Note Purchase Document when and as
the same shall become due and payable;
(c) any representation or warranty made or deemed made by or
on behalf of any Obligor in or in connection with any Subordinated Note Purchase
Document or any amendment or modification thereof, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with any Subordinated Note Purchase Document or any amendment or
modification hereof shall prove to have been incorrect in any material respect
when made or deemed made, except to the extent made as of a specific date and
except as to actions or changes in circumstances not prohibited hereunder;
(d) any Obligor shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5.2, 5.3 (but solely as to an
actual Obligor's legal existence), 5.6 or 5.9, or in Article VI;
(e) any Obligor shall fail to observe or perform any covenant,
condition or agreement contained in any Subordinated Note Purchase Document
(other than those specified in clause (a), (b), (c) or (d) of this Section 7.1)
and such failure shall continue for 30 days, provided such Obligor is diligently
pursuing efforts to make such cure;
(f) any Obligor shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable, after the
expiration of any grace or cure periods;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of any Obligor or its debts, or of a substantial part of
its assets, under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Obligor or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered;
(i) any Obligor shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under
any federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (h) of this Section 7.1, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Obligor or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi)
take any action for the purpose of effecting any of the foregoing;
(j) any Obligor shall become unable, admit in writing or fail
generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $100,000 shall be rendered against Borrower (or an
aggregate amount in excess of $250,000 shall be rendered against Parent or
Leasecomm) or any combination thereof and the same shall remain undischarged for
a period of 10 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of any Obligor to enforce any such judgment;
(l) any Change of Control shall occur;
(m) an ERISA Event shall have occurred that, in the opinion of
Lender, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect;
(n) any material provision of any Subordinated Note Purchase
Document shall, for any reason, cease to be valid and binding on any Obligor, or
any Obligor shall so state in writing;
(o) any "default" or "event of default" under the Fleet Loan
Agreement, after giving effect to the Fleet Waiver;
then, and in every such event (other than an event with respect to Borrower
described in clause (h) or (i) of this Section 7.1), and at any time thereafter
during the continuance of such event, Lender may by notice to Borrower, declare
the Loan then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loan so
declared to be due and payable, together with accrued interest thereon and all
fees and other Obligations of Borrower accrued hereunder, shall become due and
payable immediately, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower; and in case of any event with
respect to Borrower described in clause (h) or (i) of this Section 7.1, the
principal of the Loan then outstanding, together with accrued interest thereon
and all fees and other Obligations of Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by Borrower.
ARTICLE VIII: MISCELLANEOUS
Section 8.1. Notices. Unless otherwise specified herein, all
notices hereunder to any party hereto shall be in writing and shall be given (a)
by personal delivery, (b) by certified mail, return receipt requested, (c) by
nationally recognized overnight courier (e.g., Federal Express) or (d) by
electronic facsimile transmission (with confirmation of successful transmission)
or by electronic mail (provided, however, that if a notice is given by facsimile
or electronic mail, a copy of such notice shall also be delivered by one of the
other delivery methods set forth in clauses (a), (b) and (c) above), in each
case addressed to such party at its address indicated on Schedule 3.6 or on the
signature pages hereof or to any other address specified by such party in
writing. All such notices, requests, demands and other communication shall be
deemed given upon the earlier of (i) receipt by the party to whom such notice is
directed (or a person of suitable age and discretion accepting such notice at
such address), (ii) refusal to accept delivery by the party to whom such notice
is directed (or by such other suitable person) or (iii) if mailed, the third
Business Day following the date of mailing.
Section 8.2. Waivers. Without limiting the generality of the
foregoing, the making of the Loan shall not be construed as a waiver of any
Default, regardless of whether Lender may have had notice or knowledge of such
Default at the time.
Section 8.3. Expenses; Indemnity; Damage Waiver.
(a) Expenses. Borrower shall pay all reasonable out-of-pocket
expenses incurred by Lender, including reasonable fees and disbursements of
counsel for Lender, in connection with (i) the preparation of the Subordinated
Note Purchase Documents, any amendments, modifications or waivers of the
provisions thereto requested or agreed to by any Obligor (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) the
administration of the Subordinated Note Purchase Documents, including any wire
transfer fees, and (iii) the enforcement or protection of Lender's rights in
connection with any Subordinated Note Purchase Document, including its rights
under this Section 8.3, or in connection with the Loan made hereunder, including
in connection with any workout, restructuring or negotiations in respect
thereof.
(b) Each Obligor shall indemnify, jointly and severally,
Lender and each Affiliate, director, officer, employee, agent and advisor of
Lender (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees and disbursements of counsel for
any Indemnitee (the "Losses"), incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of, any actual or prospective
claim, litigation, investigation or proceeding relating to (i) the execution or
delivery of any Subordinated Note Purchase Document, the performance of the
parties hereto of their respective Obligations thereunder or the consummation of
the Transactions or (ii) the Loan or the use of the proceeds therefrom, in each
case, whether based on contract, tort or any other theory and regardless of
whether any Indemnitee is a party thereto; provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that any Losses claimed by
such Indemnitee are determined by a final judgment of a court of competent
jurisdiction to have been incurred by reason of gross negligence, bad faith or
willful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, no Obligor
shall assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, any Subordinated Note Purchase Document or any agreement or
instrument contemplated thereby, the Transactions, the Loan or the use of the
proceeds thereof.
(d) All amounts due under this Section 8.3 shall be payable
promptly after written demand therefor. The Obligations of the Obligors under
this Section 8.3 shall survive payment in full of the Loan.
Section 8.4. Amendments. Any term of this Agreement or any
other Subordinated Note Purchase Document may be amended, waived, discharged or
terminated only by an instrument in writing signed by each party to this
Agreement or such Subordinated Note Purchase Document. No notice to or demand on
any Obligor shall be deemed to be a waiver of the Obligations of any Obligor or
of the right of Lender to take further action without notice or demand as
provided in this Agreement. No course of dealing between any Obligor and Lender
shall change, modify or discharge, in whole or in part, this Agreement or any
Obligations. No waiver of any term, covenant or provision of this Agreement or
any other Subordinated Note Purchase Document shall be effective unless given in
writing by Lender and if so given shall only be effective in the specific
instance in which given. In the event Lender shall assign a portion of its
interests under this Agreement or any other Subordinated Note Purchase Document,
then any such consents, waivers or amendments may be consented to by lenders or
assignees holding a majority in principal amount of the Loans except that each
lender and assignee affected shall be required to consent to any consents,
waivers or amendments which (a) increase the obligations of such lender or
assignee, (b) reduce the principal amount, interest rate or fees due to such
lender or assignee, (c) extend, delay or postpone the Final Maturity Date or due
date of any payment of principal, interest or fees due to such lender or
assignee or (d) release the Guarantors.
Section 8.5. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that (a) no Obligor may
assign or otherwise transfer any of its rights or Obligations hereunder without
the prior written consent of Lender and (b) any assignment by Lender (or any
other Noteholder) of its rights or obligations hereunder (other than to an
Affiliate or any Person that acquires Lender or all or substantially all of the
assets of Lender) shall be subject to Borrower's consent, which consent shall
not be unreasonably withheld or delayed and shall not be required during the
existence of an Event of Default. Any attempted assignment or transfer by any
Obligor without the required consent (if any) shall be null and void.
Section 8.6. Replacement of Subordinated Notes. Upon (a)
request made by Lender (or any other Noteholder) made following an assignment
permitted under Section 8.5 or (b) receipt of a Subordinated Noteholders'
affidavit or other evidence reasonably satisfactory to Borrower of the loss
theft, destruction or mutilation of any Subordinated Note and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to Borrower, and, in the case of any such mutilation,
upon the surrender of such Subordinated Note for cancellation, Borrower, at the
expense of Lender (or such Noteholder), shall execute and deliver, respectively,
(a) new Subordinated Notes appropriately reflecting such assignment or (b) in
lieu of such lost, stolen, destroyed, or mutilated Subordinated Note, a new
Subordinated Note of like tenor.
Section 8.7. Survival. All covenants, agreements,
representations and warranties made by any Obligor in any Subordinated Note
Purchase Document and in the certificates or other instruments delivered in
connection with or pursuant to any Subordinated Note Purchase Document shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of each Subordinated Note Purchase Document
and the making of the Loan, regardless of any investigation made by any such
other party or on its behalf and notwithstanding that Lender may have had notice
or knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on the Loan or any fee or any
other amount payable under any Subordinated Note Purchase Document is
outstanding and unpaid. The provisions of Section 8.3 shall survive and remain
in full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loan or the termination of this
Agreement or any provision hereof.
Section 8.8. Right of Set-off. If any amount payable hereunder
or under any other Subordinated Note Purchase Document is not paid as and when
due, each Obligor hereby authorizes Lender and each Affiliate of Lender to
proceed, to the extent permitted by applicable law, without prior notice, by
right of set-off, bankers' lien, counterclaim or otherwise, against any assets
of such Obligor in any currency that may at any time be in the possession of
Lender or such Affiliate, at any branch or office, to the full extent of all
amounts payable to Lender hereunder or thereunder. Lender shall give prompt
notice to such Obligor after any exercise of Lender's rights under the preceding
sentence, but the failure to give such notice shall not affect the validity of
any of Lender's actions.
Section 8.9. Severability. Any provision of any Subordinated
Note Purchase Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without effecting the validity,
legality and enforceability of the remaining provisions thereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
Section 8.10. Governing Law; Jurisdiction; Consent to Service
of Process.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(b) Each Obligor hereby designates Kristine LaCourse (c/o
MicroFinancial Incorporated, 10M Commerce Way, Woburn, MA 01801) as its agent to
receive service of process in any action or proceeding arising out of or
relating to any Subordinated Note Purchase Document, and also as its agent for
the purposes of taking any action required to be taken under the terms of the
Subordinated Note Purchase Documents such as delivery of notices.
(c) EACH OBLIGOR HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
AND CONSENTS TO THE PLACING OF VENUE IN NEW YORK COUNTY OR OTHER COUNTY
PERMITTED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OBLIGOR HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN
ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER, OR THAT ANY SUBORDINATED NOTE PURCHASE DOCUMENT OR
INSTRUMENT REFERRED TO HEREIN MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH OBLIGOR AGREES NOT TO SEEK AND HEREBY
WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF
ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN
ENFORCEMENT OF SUCH JUDGMENT. EXCEPT AS PROHIBITED BY LAW, EACH OBLIGOR HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH ANY
SUBORDINATED NOTE PURCHASE DOCUMENT.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.1. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
Section 8.11. Headings. Article and Section headings and the
table of contents (if applicable) used herein are for convenience of reference
only, are not part of this Agreement and shall not affect the construction of,
or be taken into consideration in interpreting, this Agreement.
Section 8.12. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed counterpart of a
signature page of this Agreement or of any other Subordinated Note Purchase
Document by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement or of such other Subordinated Note Purchase
Document.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER:
TIMEPAYMENT CORP. LLC
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
LENDER:
AMPAC CAPITAL SOLUTIONS, LLC
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Notice Address:
------------------------------------
------------------------------------
------------------------------------
Attention:
--------------------------
State of____________________________)
) ss.
County of___________________________)
On June _____, 2004, before me, a Notary Public, personally appeared
__________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that she executed the same in her authorized
capacity, and that by her signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
Witness my hand and official seal. SEAL
Signature:
----------------------------------
State of____________________________)
) ss.
County of___________________________)
On June _____, 2004, before me, a Notary Public, personally appeared
__________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal. SEAL
Signature:
----------------------------------
SCHEDULE 2.7
FORM OF JOINDER TO NOTE PURCHASE AGREEMENT
[Date of Joinder to Note Purchase Agreement]
Ampac Capital Solutions, LLC
____________________________
____________________________
Attention:__________________
Re: Note Purchase Agreement dated as of June 10, 2004 (as amended,
supplemented, replaced or otherwise modified from time to
time, the "Subordinated Note Purchase Agreement") between
TimePayment Corp, LLC ("Borrower") and Ampac Capital
Solutions, LLC ("Lender")
Ladies and Gentlemen:
1. Reference is made to the above-captioned Subordinated Note Purchase
Agreement Capitalized terms not otherwise defined herein are used herein with
the meanings assigned thereto in the Subordinated Note Purchase Agreement.
2. As of the date hereof the conditions set forth in Section 2.7 of the
Subordinated Note Purchase Agreement have been satisfied, with the result that
(1) the Subordinated Conditional Guaranty of the undersigned, MicroFinancial
Incorporated, a Massachusetts corporation and Borrower' sole member ("Parent"),
in favor of Lender is effective as of the date hereof and (b) Parent is required
to execute this Joinder to Note Purchase Agreement (this "Joinder") and thereby
become a party to the Subordinated Note Purchase Agreement as an "Obligor".
3. Therefore, by executing this Joinder, Parent hereby agrees to be
bound by all provisions relating to an Obligor under, and as defined in, the
Subordinated Note Purchase Agreement. Parent further agrees, as of the date
first above written, that each reference in the Subordinated Note Purchase
Agreement or any other Subordinated Note Purchase Document to an "Obligor" or a
"Guarantor" shall also mean and be a reference to Parent.
4. This Joinder shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, Parent has caused this Joinder to be executed by
its duly authorized officer as of the day and year first above written.
MICROFINANCIAL INCORPORATED
By: -------------------------------------
Name:
--------------------------------
Title:
-------------------------------