EXHIBIT 10.21
LOAN AND SECURITY AGREEMENT
DIVERSIFIED FINANCIAL SYSTEMS, INC.
BORROWER
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
AND
BANK OF SCOTLAND
LENDERS
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
AGENT
APRIL 18, 1996
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND TERMS....................................................2
2. LOANS: GENERAL TERMS....................................................13
2.1 Loan Facilities; Interest.........................................13
2.2 Revolving Loans...................................................14
2.3 Term Loans........................................................15
2.4 Maximum Outstanding Loans.........................................16
2.5 Limitation on Lender's Obligations................................18
2.6 General Payment Provisions........................................18
2.7 Place of Payments.................................................20
2.8 Single Liability..................................................20
2.9 Business Purpose..................................................20
2.10 Reaffirmation of Warranties.......................................21
2.11 Payment of Bank Charges...........................................21
2.12 Loan Fees.........................................................21
2.13 Authorized Advances...............................................22
2.14 Prepayment........................................................22
2.15 Lender's Commitment...............................................22
2.16 Change of Laws....................................................22
3. DISBURSEMENTS AND APPLICATION OF PAYMENTS...............................23
3.1 Disbursement of Portfolio Advances................................23
3.2 Protective Advances Upon Borrower's Request.......................24
3.3 Disbursement of Other Advances by Lender..........................25
3.4 Proceeds of DFSLP Collections.....................................25
3.5 Application of Payment............................................26
3.6 Direction of Application..........................................28
4. COLLATERAL: GENERAL TERMS...............................................29
4.1 Grant of Security Interest........................................29
4.2 Supplemental Documentation........................................30
4.3 Inspection of Collateral..........................................31
4.4 Perfection; Location..............................................31
4.5 Special Collateral................................................32
4.6 Control of Proceeds...............................................32
4.7 Acceptance of Collateral..........................................32
4.8 Special Collateral................................................33
4.9 Release of Proceeds to Borrower...................................33
4.10 Limitation of Waivers.............................................33
4.11 Right to Set-Off..................................................33
5. COLLATERAL: LOAN ACCOUNTS...............................................34
5.1 General Representations Relating to Loan Accounts.................34
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5.2 Inspection of Loan Accounts.......................................35
5.3 Records...........................................................35
5.4 Cash Collateral Accounts..........................................35
5.5 Required Notices..................................................36
5.6 Rights of Lenders.................................................36
5.7 Appointment of Attorney-In-Fact...................................36
5.8 Release of Loan Account Documentation.............................37
6. OTHER COLLATERAL AND OTHER AGREEMENTS...................................38
6.1 Checklist Items...................................................38
6.2 Necessary Actions.................................................38
6.3 Conditions Precedent to Loans.....................................38
6.4 Conditions Precedent to Each Advance..............................40
7. INSURANCE AND TAXES:....................................................41
7.1 Insurance.........................................................41
7.2 Payment of Charges................................................42
8. WARRANTIES, REPRESENTATIONS AND COVENANTS ..............................43
8.1 General Representations...........................................43
8.2 Financial Covenants...............................................48
8.3 Affirmative Covenants.............................................49
8.4 Negative Covenants................................................52
9. DEFAULT.................................................................55
9.1 Events of Default.................................................55
9.2 Cumulate Remedies.................................................57
9.3 Acceleration......................................................57
9.4 Remedies..........................................................57
9.5 Assemble Collateral...............................................58
9.6 Notice of Sale....................................................58
9.7 Postpone Sale.....................................................58
9.8 WAIVER OF BOND....................................................58
9.9 Enforcement During Unmatured Default..............................58
10. AGENT...................................................................59
10.1 Appointment of Agent..............................................59
10.2 Delegation of Duties..............................................59
10.3 Nature of Duties..................................................59
10.4 Actions in Discretion of Agent; Instructions from the Lenders.....59
10.5 Reliance by Agent.................................................60
10.6 Holders of Notes..................................................60
10.7 Independent Credit Investigations.................................61
10.8 Exculpatory Provisions............................................61
10.9 Reimbursement and Indemnification.................................61
10.10 Agent in its Individual Capacity..................................62
10.11 Equalization of Lenders...........................................62
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10.12 Successor Agent...................................................62
11. GENERAL.................................................................63
11.1 Settlement........................................................63
11.2 Reaffirmation of Responsibilities.................................63
11.3 Service Fees......................................................63
11.4 Statement.........................................................63
11.5 Notices...........................................................64
11.6 Reaffirmation of Warranties and Representations...................65
11.7 Survival of Warranties and Representations........................66
11.8 Modification......................................................66
11.9 No Waiver.........................................................66
11.10 Severability......................................................67
11.11 Successors or Assigns.............................................67
11.12 Incorporation of Other Agreements.................................67
11.13 Waiver of Trial by Jury...........................................67
11.14 Designated Person.................................................68
11.15 Attorney-in-Fact..................................................68
11.16 Attorneys' Fees and Expenses; Agent's Expenses....................68
11.17 Acceptance........................................................69
11.18 Release of Collateral.............................................69
11.19 Knowledge.........................................................69
11.20 Waiver by Borrower................................................69
11.21 Governing Law.....................................................70
11.22 Service of Process................................................70
11.23 Representation by Counsel.........................................70
11.24 Release of Lender.................................................71
11.25 Invalidated Payments..............................................71
11.26 Superseded Prior Agreements.......................................71
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Schedule of Exhibits
Exhibit A - J-Hawk Servicing Agreement
Exhibit B - Term Loan Portfolios
Exhibit C - Permitted Disbursements
Exhibit D - Location of Collateral
Exhibit E - Cash Collateral Accounts
Exhibit F - Documentation Checklist
Exhibit G - Exceptions to General Representations
Exhibit H - Fictitious Names
Exhibit I - Affiliates
Exhibit J - Leases, Options and Real Property
Exhibit K - Agreements with Affiliates
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LOAN AND SECURITY AGREEMENT
DIVERSIFIED FINANCIAL SYSTEMS, INC.
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), made effective as of
April 18, 1996 by and among AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
("ANB"), Bank of Scotland, acting through its federal branch located in New
York, New York, ("BOS"), Diversified Financial Systems, Inc., an Indiana
corporation ("BORROWER"), and American National Bank and Trust Company of
Chicago, as collateral agent and administrative agent for BOS and ANB (in such
capacity the "AGENT").
RECITALS:
A. Borrower and ANB have entered into that certain Loan and Security
Agreement, as amended by that certain First Amendment to Loan and Security
Agreement dated as of January 20, 1994, that certain Second Amendment to Loan
and Security Agreement dated as of September 30, 1994, and modified by
agreements dated as of September 19, 1995, November 19, 1995 and December 21,
1995 ("PRIOR LOAN AGREEMENT").
B. BOS and ANB (collectively referred to herein as "LENDERS") entered
into that certain Participation Agreement dated September 30, 1994 pursuant to
which BOS agreed to purchase a participation in the credit facility provided by
ANB to Borrower pursuant to the terms of the Prior Loan Agreement.
C. On September 19, 1995 one hundred percent (100%) of the capital stock
of Borrower was sold by Randall R. Geist and J. Michael Hester ("SELLING
SHAREHOLDERS") to DFC Asset Corp., a Texas corporation, with the consent of
Lenders.
D. In connection with such sale, DFC Asset Corp. delivered to the Selling
Shareholders eight (8) promissory notes ("PURCHASE MONEY NOTES") in partial
payment of the purchase price of the stock of Borrower.
E. At the time of the sale of the shares, Lenders agreed (upon the terms
and conditions set forth in that certain Consent Agreement dated as of September
19, 1995, to forebear exercising any rights or remedies arising from certain
existing defaults pending resolution of various matters among the parties.
F. Lenders subsequently extended such forbearance upon the terms and
conditions set forth in those certain Forbearance Agreements dated as of October
13, 1995, November 17, 1995, December 21, 1995 and January 15, 1996,
respectively.
G. Lenders have agreed to terminate their participation in the credit
facility evidenced by the Prior Loan Agreement and to become co-lenders to
Borrower in credit facilities in an amount not to exceed $50,000,000, comprised
of a term loan and a revolving loan, which credit facilities will be
unconditionally guaranteed by Randall R. Geist and DFC Asset Corp. In addition:
(i) the holder of each of the Purchase Money Notes will agree to
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subordinate payment thereof to the payment of the credit facilities provided by
Lenders pursuant to the terms hereof; (ii) Randall R. Geist will pledge those
Purchase Money Notes payable to him, as collateral for his guaranty; and (iii)
FirstCity Financial Corporation (the sole shareholder of DFC Asset Corp.) will
provide certain additional guarantees.
H. Borrower, ANB and BOS have agreed that it is in their mutual best
interest to set forth their agreements with respect to the credit facilities
herein.
NOW THEREFORE, in consideration of any loan, advance, extension of credit
and/or other financial accommodation at any time made by Lenders to or for the
benefit of Borrower, and of the promises set forth herein, the parties hereto
agree as follows:
1. DEFINITIONS AND TERMS
1.1 The following words, terms and/or phrases shall have the meanings set
forth thereafter and such meanings shall be applicable to the singular and
plural form thereof, giving effect to the numerical difference. Whenever the
context so requires, the use of "IT" in reference to Borrower shall mean
Borrower as identified at the beginning of this Agreement:
(a) "ACCOUNTS": The definition ascribed to this term in Section 4.1
below.
(b) "ADVANCE": Each disbursement of the Loans made pursuant to the
terms of Section 3.
(c) "AFFILIATE": Any Person (i) in which Borrower, one or more
shareholders of Borrower, or other equity interest holders of Borrower, any
Subsidiary, and/or any Parent individually, jointly and/or severally, now or at
any time or times hereafter, has or have an equity or other ownership interest
equal to or in excess of five percent (5%) of the total equity of or other
ownership interest in such Person; and/or (ii) which directly or indirectly
through one or more intermediaries controls or is controlled by, or is under
common control with Borrower. For purposes of this definition "CONTROL" shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Stock or Partnership Interests, by contract or otherwise. For the
purposes of this Agreement (and without limiting the generality of the
foregoing), each Credit Party and DPAI shall be deemed to be an Affiliate of
Borrower.
(d) "AGENT": American National Bank and Trust Company of Chicago,
and its successors or assigns designated by Lenders in accordance with Section
10.12.
(e) "AGREEMENT": This Loan and Security Agreement, as amended,
modified, supplemented, restated, and extended from time to time.
(f) "AND/OR": One or the other or both, or any one or more or all,
of the things or Persons in connection with which such conjunction is used.
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(g) "ASSETS": Any and all real, personal and intangible property of
Borrower, including, without limitation, accounts, chattel paper, contract
rights, letters of credit, instruments and documents, Equipment, General
Intangibles, inventory (including, without limitation, all raw materials, work
in process, finished merchandise, supplies, goods, incidentals, office supplies
and packaging materials), wherever located, whether in transit, held by others
for Borrower's account, covered by warehouse receipts, purchase orders and
contracts, or in the possession of any carriers, forwarding agents, truckers,
warehousemen, vendors or other Persons, leases, licenses, and real estate,
whether now existing or hereafter acquired or arising.
(h) "BOOK VALUE": At any time, the then current principal balance
outstanding of each Loan Account.
(i) "BORROWER": Diversified Financial Services, Inc., an Indiana
corporation.
(j) "BORROWER'S COST": the difference between the Maximum Advance
Amount and the Proposed Acquisition Price of a Proposed Loan Portfolio.
(k) "BORROWER'S LIABILITIES": All monetary obligations and
liabilities of Borrower to Lenders (including, without limitation, all debts,
claims and indebtedness) whether primary, secondary, direct, contingent, fixed
or otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under this Agreement or the Other Agreements, or by oral
agreement or operation of law or otherwise.
(l) "BORROWER'S OBLIGATIONS": All terms, conditions, warranties,
representations, agreements, undertakings, covenants and provisions (other than
Borrower's Liabilities) to be performed, discharged, kept, observed or complied
with by Borrower pursuant to this Agreement and/or any of the Other Agreements.
(m) "BULK PACKAGED LOAN REPORT FORMAT 1": The printed report so
designated by the FDIC setting forth in reasonable detail information
identifying the debtors, original face amounts, maturity dates, interest rates,
principal and interest balances, per diem, days late and recent payment record
with respect to all Loan Accounts comprising a Loan Portfolio, or comparable
report prepared by or on behalf of the FDIC and acceptable in form and substance
to Lenders.
(n) "BUSINESS DAY": Means any day, other than (x) a Saturday,
Sunday, a day that is a legal holiday under the laws of one or both of the State
of Illinois and the State of New York, or (y) any other day on which banking
institutions located in one or both of Chicago, Illinois and New York, New York
are authorized or required by law or other governmental action to close.
(o) "CASH COLLATERAL ACCOUNTS": The definition ascribed to this
term in Section 5.4.
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(p) "CHARGES": All national, federal, state, county, city,
municipal and/or other governmental (or any instrumentality, division, agency,
body or department thereof, including without limitation the Pension Benefit
Guaranty Corporation) taxes, levies, assessments, charges, liens, claims or
encumbrances upon and/or relating to the Assets, Borrower's Liabilities,
Borrower's Obligations, Borrower's business, Borrower's ownership and/or use of
any of its Assets, Borrower's income and/or gross receipts and/or Borrower's
ownership and/or use of any of its material assets.
(q) "COLLATERAL": The definition ascribed to this term in Section
4.1 below.
(r) "COLLATERAL COLLECTIONS": The definition ascribed to this term
in Section 3.5.
(s) "CORPORATE CREDIT PARTY": Each of the Borrower, DFC Asset Corp,
DFSLP and FirstCity and, from and after the TLF Payment Date, as defined in that
certain DFC Asset Corp. Pledge and Security Agreement of even date, DPAI shall
be a Corporate Credit Party.
(t) "CREDIT PARTY": Each Corporate Credit Party and Geist.
(u) "DEDICATED ACCOUNT": The definition ascribed to this term in
Section 3.5.
(v) "DEFAULT RATE": A rate which is two percent (2%) plus the
Interest Rate.
(w) "DESIGNATED PERSON": Any Person identified as a "Designated
Person" on Borrower's Secretary's Certificate heretofore or hereafter delivered
to Agent, as amended or superseded from time to time.
(x) "DFC ASSET CORP.": DFC Asset Corp., a Texas corporation.
(y) "DFSLP": Diversified Financial Systems, L.P., an Indiana
limited partnership, of which Borrower is the sole general partner and DPAI is
the sole limited partner.
(z) "DFSLP PROCEEDS": The definition ascribed to this term in
Section 3.4.
(aa) "DIVIDEND REQUEST": The definition ascribed to this term in
Section 3.5.
(ab) "DPAI": Diversified Performing Assets, Inc., an Indiana
corporation which is a wholly owned subsidiary of DFC Asset Corp., and an
Affiliate of Borrower.
(ac) "ENVIRONMENTAL LAWS": Any Federal, state or local law, rule,
regulation, ordinance, order, code or statute applicable to the Borrower or its
property, in each case as amended (whether now existing or hereafter enacted or
promulgated), controlling, governing or relating to the pollution or
contamination of the air, water or land or concerning
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hazardous, special or toxic materials, wastes or substances, or any judicial or
administrative interpretation of such laws, rules or regulations, including,
without limitation, the Water Pollution Control Act (33 U.S.C. Section 1251 et
seq.), Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.),
Safe Drinking Water Act (42 U.S.C. Section 3000(f) et seq.), Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section
7401 et seq.), Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.).
(ad) "ESTIMATED REMAINING COLLECTIONS": With respect to any single
Loan Account, any Loan Portfolio or one or more Loan Portfolios taken in the
aggregate (whether such Loan Portfolio is, or is a part of, a Term Loan
Portfolio, a Proposed Loan Portfolio, or a Loan Portfolio acquired after the
date hereof pursuant to the terms in Section 3.1), an amount equal to Borrower's
good faith estimate of the remaining collections of principal from such Loan
Account or Loan Portfolio(s). With respect to any single Loan Account, any loan
portfolio or one or more loan portfolios taken in the aggregate that are owned
by DPAI or DFSLP, an amount equal to DPAI's or DFSLP's, as applicable, good
forth estimate of the remaining collections of principal from such Loan Account,
or loan portfolio(s).
(ae) "EQUIPMENT": The definition ascribed to this term in Section
4.1.
(af) "EVENT OF DEFAULT": The definition ascribed to this term in
Section 9.1.
(ag) "EXISTING OBLIGATIONS": The definition ascribed to this term
in Section 2.3.
(ah) Intentionally deleted.
(ai) "FDIC": The Federal Deposit Insurance Corporation or such
other qualified seller of Loan Portfolios as Lenders may determine with respect
to each Loan Portfolio in Lenders' sole and absolute discretion.
(aj) "FEDERAL FUNDS RATE": Means the rate of interest charged by
banks with excess reserves at a Federal Reserve district bank to banks needing
overnight loans to meet reserve requirements.
(ak) "FLC": First Lake Corp., a Delaware corporation.
(al) "FINANCIALS": Those financial statements of a Credit Party
heretofore, concurrently herewith or from time to time hereafter delivered by or
on behalf of Borrower and/or another Credit Party to Lenders.
(am) "FIRSTCITY": FirstCity Financial Corporation, a Delaware
corporation.
(an) "FRAUDULENT RECEIVABLE": Any Loan Account:
(i) As to which the putative Obligor (or any of
them, if there be more than one) does not exist; or
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(ii) As to which no goods or services were in fact
delivered or rendered; or
(iii) Which is duplicative, in whole or in part, of
another obligation (whether or not the Borrower is the
assignee or beneficiary thereof); or
(iv) Which was originated or obtained, directly or
indirectly, in a fraudulent manner or as a result of fraud;
or
(v) Which is otherwise, in the sole and absolute
discretion of the Lenders made reasonably and in good
faith, fraudulent (whether in its origin, with respect to
the circumstances involved in any assignment or transfer
thereof, or otherwise).
(ao) "FUNDING FEE": The meaning set forth in Section 2.12(d).
(ap) "GEIST": Randall R. Geist.
(aq) "GENERAL INTANGIBLES": The definition ascribed to this term in
Section 4.1.
(ar) "GUARANTOR": Any Person which has guaranteed to Lenders the
payment, collection or performance of all or any portion of the Secured
Obligations, and/or has granted to Lenders and/or Agent a security interest in,
or lien or encumbrance upon, some or all of such Person's real, personal
property and/or intangible property to secure the payment and/or performance of
all or any portion of the Secured Obligations, and/or has executed the
Deficiency Undertaking.
(as) "INDEBTEDNESS": With respect to any Person, at a particular
time, (i) indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise or any commitment by which such
Person assures a creditor against loss, (ii) obligations under leases which
shall have been or should be, in accordance with generally accepted accounting
principals, recorded as capital leases in respect of which obligations such
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a creditor against loss,
and (iii) all obligations and liabilities with respect to unfunded vested
benefits under any "EMPLOYEE BENEFIT PLAN" or with respect to withdrawal
liabilities incurred under ERISA by the Borrower or any ERISA Affiliate to a
"MULTIEMPLOYER PLAN," as such terms are defined under the Employee Retirement
Income Security Act of 1974.
(at) "INTEREST RATE": The variable rate of the sum of two percent
(2%) per annum plus the Prime Rate, adjusted from time to time automatically and
simultaneously with each announced change in the Prime Rate.
(au) Intentionally Deleted.
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(av) "INVENTORY": The definition ascribed to this term in Section
4.1.
(aw) "J-HAWK": J-Hawk Servicing Corporation, a Texas corporation,
which is an Affiliate of FirstCity.
(ax) "LEASES": The meaning ascribed to this term in Section 4.1.
(ay) "LENDERS": Individually or collectively, American National
Bank and Trust Company of Chicago and Bank of Scotland and any other lender
hereafter made a party to this Agreement pursuant to Section 11.8.
(az) "LENDER'S COMMITMENT": The meaning ascribed to this term in
Section 2.15.
(ba) "LOANS": Any and all loans, advances, extensions of credit
and/or other financial accommodations of any kind or nature made by Lenders, or
any one or more of them, at any time to, for the benefit or at the request of
Borrower pursuant to this Agreement and/or any of the Other Agreements.
(bb) "LOAN ACCOUNT": A loan obligation set forth as a single entry
with respect either to a Term Loan Portfolio or on a Bulk Packaged Loan Report
Format 1 and purchased by Borrower from the FDIC.
(bc) "LOAN ACCOUNT DOCUMENTATION": All notes, instruments,
agreements and other documents, including chattel paper, effecting, evidencing
or governing a Loan Account.
(bd) "LOAN ADVANCE CERTIFICATE": Certificate(s) delivered by
Borrower to Agent pursuant to Section 3.1 below, certified as true, accurate and
complete by an executive officer of Borrower and setting forth with respect to a
Proposed Loan Portfolio the following information: (i) the aggregate Book Value;
(ii) the aggregate interest due; (iii) the number of Loan Accounts; (iv) the
Book Value and aggregate interest outstanding of each Loan Account; (v) Proposed
Acquisition Price of such Proposed Loan Portfolio and allocated by Loan Accounts
comprising such Proposed Loan Portfolio ("Allocated Purchase Price"); (vi)
calculation of the Maximum Advance Amount with respect to such Proposed Loan
Portfolio; (vii) a statement of the Estimated Remaining Collections with respect
to the Proposed Loan Portfolio in the aggregate and for each Loan Account
comprising the Proposed Loan Portfolio; (viii) a statement that DFC Asset Corp.
is providing the Borrower's Cost as a capital contribution to Borrower; (ix) the
proposed date of acquisition; and (x) certification that no Loan Account in the
Proposed Loan Portfolio that is secured by Real Estate has an Allocated Purchase
Price in excess of Five Hundred Thousand Dollars ($500,000.00). No Loan Advance
Certificate shall be deemed to be complete unless accompanied by both the Bulk
Packaged Loan Report Format 1 with respect to the Proposed Loan Portfolio and
any and all written analyses by or on behalf of Borrower, however formal or
informal the same may be, of the Proposed Loan Portfolio, including, without
limitation, all such analyses of individual Loan Accounts which are included in
such Proposed Loan Portfolio.
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(be) "LOAN DOCUMENTS": This Agreement, the Other Agreements and
each guaranty, pledge agreement, security agreement, cash collateral agreement,
subordination agreement, deficiency undertaking, indemnity agreement or similar
agreement executed by a Credit Party or Lender in connection with this
Agreement, and all other instruments and agreements executed in connection
herewith and therewith, in each case as amended, modified, supplemented,
restated and extended from time to time. Without limiting the generality of the
foregoing, each amendment to (or constituting part of), this Agreement or any
other Loan Document and each instrument and agreement (including, without
limitation, waivers) executed in connection with any Loan Documents shall be
deemed to be a Loan Document for all purposes of this Agreement and the other
Loan Documents.
(bf) "LOAN PORTFOLIO": Loan Accounts purchased by Borrower together
on one date from the FDIC, all of which Loan Accounts are set forth on a single
Bulk Packaged Loan Report Format 1.
(bg) "MATURITY DATE": April 17, 1997 or such earlier date as all
Borrower's Liabilities shall be due and payable by acceleration or otherwise.
(bh) "MAXIMUM ADVANCE AMOUNT": With respect to each proposed
Advance of the Revolving Loan to acquire a Proposed Loan Portfolio, an amount
equal to the lesser of:
(a) The lesser of: (i) 80% of the Proposed Acquisition Price
of the Proposed Loan Portfolio, as set forth in the Loan Advance
Certificate, and (ii) 55% of the Estimated Remaining Collections of
such Proposed Loan Portfolio, as set forth in the Loan Advance
Certificate; or
(b) Such lesser amount as Lenders shall, in their sole and
absolute discretion, determine.
Unless the Lenders (or the Agent on their behalf) notify the Borrower that they
believe a lesser number is correct,the amounts of the Proposed Acquisition Price
and the Estimated Remaining Collections shall, for purposes of clause (a) above,
be as set forth by the Borrower in the relevant Loan Advance Certificate.
(bi) "MAXIMUM PORTFOLIO BALANCE": The maximum unpaid principal
balance of a Portfolio Advance (expressed as a percentage of the sum of the
original principal amount of said Portfolio Advance plus any amount added
thereto as a result of the making of any Protective Advance with respect to said
Loan Portfolio) on each Portfolio Advance Target Date, as set forth in Section
2.4(d).
(bj) "MAXIMUM TERM LOANS": The maximum aggregate outstanding
principal balance of the Term Loans, from time to time (expressed as a
percentage of the original aggregate principal balance of the Term Loans plus
any amount added thereto as a result of the making of any Protective Advance
with respect to the Term Loan Portfolios) on each Term Loan Target Date, as set
forth in Section 2.4(c).
(bk) "NET COLLECTIONS": The meaning ascribed to this term in
Section 3.5.(a).
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(bl) "NOTES": The Term Notes and the Revolving Notes, or any one or
more of them, as context requires.
(bm) "OBLIGOR": Any Person who is and/or may become obligated to
Borrower under or on account of Loan Accounts or other Accounts.
(bn) "OPTIONS": The meaning ascribed to this term in Section 4.1.
(bo) "OTHER AGREEMENTS": All agreements, instruments and documents,
including, without limitation, bond agreements, loan agreements, security
agreements, subordination agreements, guaranties, mortgages, deeds of trust,
notes, letters of credit, advises of credit, bankers acceptances, pledges,
powers of attorney, consents, assignments, contracts, notices, leases, financing
statements and all other written matter heretofore, now and/or from time to time
hereafter executed by and/or on behalf of Borrower and delivered or filed to or
for the benefit of Lenders and/or Agent, or issued by Lenders and/or Agent upon
the application and/or other request of, and on behalf of, Borrower, in each
case as amended, modified, supplemented, restated and extended from time to
time.
(bp) "OTHER LENDERS": The Lenders party to this Agreement other
than any Lender that is also the Agent.
(bq) "PARENT": Any Person, now or at any time or times hereafter,
owning or controlling (alone or with Borrower, any Subsidiary and/or any other
Person) at least a majority of the issued and outstanding Stock, Partnership
Interests or other ownership interest of Borrower or any Subsidiary. For
purposes of this definition control shall have the same meaning ascribed to this
term in Section 1.1(c) above.
(br) "PARTNERSHIP INTERESTS": All units of ownership, interests,
participations or other equivalents (however designated) of or in a limited or
general partnership, including, without limitation, such interests of general
and limited partners, and all agreements, instruments and documents convertible,
in whole or in part, into any one or more or all of the foregoing, and further
including, without limitation, the general partnership interest of Borrower in
DFSLP.
(bs) "PERSON": Means any individual, sole proprietorship, general
or limited partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise, including
without limitation any instrumentality, division, agency, body or department
thereof).
(bt) "PERMITTED LIENS": (i) The liens created in favor of Agent for
the benefit of Lenders, whether pursuant to this Agreement or any of the Other
Agreements or otherwise; (ii) liens for Charges which are not yet due and
payable or which are expressly permitted pursuant to the terms hereof, or claims
and unfunded liabilities under ERISA not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently pursued; (iii)
liens arising in connection with worker's compensation, unemployment insurance,
old age pensions and social security benefits which are not overdue or are being
9
contested in good faith by appropriate proceedings diligently pursued, provided
that in the case of any such contest any proceedings commenced for the
enforcement of such liens shall have been duly suspended and such reserve or
provision for the payment of such liens has been made on the books of Borrower
as may be required by generally accepted accounting principles; (iv) liens
incurred in the ordinary course of business to secure the performance of
statutory obligations arising in connection with progress payments or advance
payments due under contracts with the United States Government, any state
government, or any agency of any thereof entered into in the ordinary course of
business; and (v) additional liens expressly permitted from time to time in
writing by Lenders.
(bu) "PORTFOLIO ADVANCE": Each Advance, if any, made pursuant to
the terms of Section 3.1 for the purpose of acquiring a Loan Portfolio.
(bv) "PORTFOLIO ADVANCE TARGET DATE": Each of the dates determined
pursuant to Section 2.4(d).
(bw) "PRIME RATE": Means, for any day, the higher of (x) the
Federal Funds Rate in effect on such day plus 1/2%, or (y) the per annum rate of
interest announced or published publicly from time to time by ANB at its
principal place of business in Chicago, Illinois as its prime, base or
equivalent rate of interest. Each of such prime rate, base rate and Prime Rate
is a designated rate, and may not be the lowest or least rate charged by ANB to
its commercial customers. Each change in the interest rate resulting from a
change in the Prime Rate shall be effective as of the opening of business on the
day on which such change becomes effective.
(bx) "PROPOSED ACQUISITION PRICE": The cash price Borrower will pay
the FDIC for the acquisition of a Loan Portfolio, as set forth in the applicable
Loan Advance Certificate, both in the aggregate and allocated to each Loan
Account comprising such Loan Portfolio.
(by) "PROPOSED LOAN PORTFOLIO": A portfolio of Loan Accounts which
Borrower proposes to acquire and which is described in a Loan Advance
Certificate and Bulk Packaged Loan Report Format 1 submitted together by
Borrower to Lenders.
(bz) "PROTECTIVE ADVANCE": Any Advance made by Lenders to Borrower
to be used by Borrower to protect any collateral pledged by an Obligor as
security for a Loan Account or to preserve and protect the lien, security
interest or other encumbrance granted to Borrower in said collateral.
(ca) "RECORDS": The definition ascribed to this term in Section 4.1
below.
(cb) "REVOLVING LOAN PORTFOLIOS": The Loan Portfolios acquired by
Borrower after the date hereof, if any, from the proceeds of Revolving Loans in
accordance with Section 3.1.
(cc) "REVOLVING LOANS": Loans made or to be made by Lenders to
Borrower pursuant to the terms of Section 2.2(a).
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(cd) "REVOLVING NOTES": Those certain revolving promissory notes
each in the original principal amount of $5,000,000, each dated even date
herewith, delivered by Borrower to ANB and BOS, respectively, pursuant to
Section 2.2(d), together with all amendments, modifications, extensions,
supplements and restatements thereto or thereof.
(ce) "SECURED OBLIGATIONS": All Borrower's Liabilities and
Borrower's Obligations.
(cf) "SERVICING FEE": that fee payable by Borrower to J-Hawk
pursuant to the loan servicing agreement entered into by and between Borrower
and J-Hawk, as such loan servicing agreement is set out in Exhibit A ("SERVICING
AGREEMENT").
(cg) "SPECIAL COLLATERAL": The definition ascribed to this term in
Section 4.8 below.
(ch) "STOCK": All shares, interests, participations or other
equivalents (however designated) of or in a corporation, whether or not voting,
including, but not limited to, common stock, warrants, preferred stock,
convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.
(ci) "SUBSIDIARY": Any Person at least a majority of whose issued
and outstanding Stock, Partnership Interests or other ownership interests now or
at any time hereafter is owned by Borrower and/or one or more Subsidiaries.
(cj) "SUPPLEMENTAL DOCUMENTATION": The definition ascribed to this
term in Section 4.2 below.
(ck) "TANGIBLE NET WORTH": As determined at any time, the total of
shareholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) of Borrower, less the sum of
the total amount of any intangible assets, which, for purposes of this
definition, shall include, without limitation, General Intangibles and, if
applicable, all accounts receivable from shareholders or officers of Borrower,
all prepaid expenses, any unamortized debt, discount and expense, unamortized
deferred charges and good will, all as determined in accordance with generally
accepted accounting principles, consistently applied.
(cl) "TERM LOANS ": The term loan or loans made by Lenders to
Borrower pursuant to Section 2.3.
(cm) "TERM LOAN PORTFOLIOS": The Loan Portfolios set forth on
Exhibit B.
(cn) "TERM LOAN TARGET DATE": Each of the dates determined pursuant
to Section 2.4(c).
(co) "TERM NOTES": Those two certain promissory notes each in the
original principal amount of $20,881,245.78 each, dated even date herewith,
delivered by Borrower to
11
ANB and BOS, respectively, pursuant to Section 2.3(c), together with all
amendments, modifications, extensions, supplements and restatements thereto or
thereof.
(cp) "TLF": Transamerica Lender Finance, a division of Transamerica
Business Credit corporation.
(cq) "TRANSAMERICA DEFAULT": The definition ascribed to this term
in Section 3.4.
(cr) "UCC": The Uniform Commercial Code, as enacted in Illinois.
(cs) "UNMATURED DEFAULT": Any event or condition which, with the
passage of time or the giving of notice or both, would constitute an Event of
Default hereunder.
(ct) "WEEKLY PAYMENT": The definition ascribed to this term in
Section 3.5.
1.2 Except as otherwise defined in this Agreement or the Other
Agreements, all words, terms and/or phrases used herein and therein shall be
defined by the applicable definition therefor (if any) in the UCC.
2. LOANS: GENERAL TERMS
2.1 Loan Facilities; Interest.
(a) The Loans. The Loans shall be comprised of two (2) facilities,
the Revolving Loans and the Term Loans.
(b) Interest Rate. From the date of disbursement of funds until the
occurrence of an event set forth in Section 2.1(c), the principal balance of all
Loans from time to time unpaid shall bear interest at the Interest Rate. If
funds are disbursed into an account pursuant to Section 3.1(b) or into an escrow
at the direction of Borrower or to the FDIC, interest shall be charged from the
date of deposit or disbursement. Interest shall be computed on the basis of a
360 day year and charged for the actual number of days elapsed.
(c) Default Interest. If any of the Secured Obligations is not paid
when due and payable or declared due and payable, interest shall accrue thereon
from the due date of the same until paid at the Default Rate. Such amounts shall
be part of the Secured Obligations immediately due and payable by Borrower to
Agent without notice to or demand of Borrower.
2.2 Revolving Loans.
(a) Advances. Subject to the terms and conditions hereof, Lenders
may, in their sole and absolute discretion, make available to Borrower revolving
loans ("REVOLVING LOANS") from time to time in an aggregate principal amount not
to exceed at any time outstanding the lesser of: (i) Fifty Million and No/100
Dollars ($50,000,000.00) minus the aggregate outstanding principal amount of the
Term Loans and (ii) Ten Million and No/100 Dollars ($10,000,000.00). Subject to
the provisions hereof, the principal amount of each
12
Advance may be borrowed, repaid (without any premium or penalty) and reborrowed
again, from time to time, in whole or in part.
(b) Use of Proceeds of Revolving Loans. The Revolving Loans shall
be used by Borrower: (i) to acquire Loan Portfolios in accordance with the
provisions of Section 3.1; (ii) to fund Protective Advances in an amount not to
exceed, at any one time, $1,000,000; and (iii) in Lenders' sole and absolute
discretion, to pay any Secured Obligation, including Advances made pursuant to
Sections 2.11, 2.12, and 2.13. Portfolio Advances shall be made, if at all, in
accordance with Section 3.1. Protective Advances shall be made, if at all, in
accordance with Section 3.2. All other Advances of the Revolving Loan shall be
made, if at all, in accordance with the provisions of Section 3.3.
(c) Revolving Loan Commitments. All Revolving Loans shall be made
ratably from the Lenders in proportion to their respective Lender's Commitment
and shall be disbursed in accordance with the provisions of Sections 2.15, 3.1,
3.2 and 3.3. Notwithstanding anything to the contrary contained herein, Lenders
shall have no obligation to make any Revolving Loans to Borrower during the term
hereof. Revolving Loans may be made, if at all, only after compliance by
Borrower with the requirements of Sections 3.1, 3.2 and 3.3, Section 6 and the
other applicable provisions of this Agreement.
(d) Revolving Notes. The Revolving Loans are further evidenced by
two Revolving Notes delivered to ANB and BOS concurrently herewith. The
Revolving Notes bear interest at the Interest Rate and shall be repayable as
provided herein.
2.3 Term Loans.
(a) Existing Obligations. As used herein the term "EXISTING
OBLIGATIONS" shall mean and include:
(1) Liabilities of Borrower to ANB under the terms of the Prior
Loan Agreement in the aggregate amount of $26,648,597.14;
(2) Liabilities of First Lake Corp. to LaSalle National Bank in
the aggregate amount of 6,164,428.43; evidenced by a Payoff
Letter from LaSalle National Bank dated April 19, 1996
("LASALLE BANK FIRST LAKE LOAN");
(3) Liabilities of First Lake Corp. to LaSalle National Bank in
the principal amount of approximately $492,455.70 relating
to Protective Advances made prior to the date hereof.
(4) The amount of $1,741,615.00 advanced by FirstCity to
Borrower on January 26, 1996 as the purchase price of the
Loan Portfolio commonly referred to as Atlanta II;
(5) Liabilities of Borrower to DFC Asset Corp. in the amount of
$1,138,514.66 which liability is evidenced by an unsecured
promissory note dated September 19, 1995;
13
(6) Liabilities of Borrower to DFC Asset Corp. in the amount of
$828,011.63, which liability is evidenced by an unsecured
promissory note dated September 19, 1995;
(7) The amount of $858,047.00 advanced on December 27, 1995 by
FirstCity to Borrower and advanced by Borrower to LaSalle
National Bank as principal payments with respect to the
LaSalle Bank First Lake Loan for the Loan Portfolio
commonly referred to as Manchester II;
(8) The amount of $1,109,159.00 advanced on March 26, 1996 by
FirstCity to Borrower and advanced by Borrower to LaSalle
National Bank as principal payments with respect to the
LaSalle Bank First Lake Loan for the Loan Portfolio
commonly referred to as Connecticut I; and
(9) Liabilities of Borrower to Transamerica in the principal
amount of $2,781,663.00 under the terms of that certain
Loan and Security Agreement dated February 28, 1994.
(b) Use of Proceeds of the Term Loans. Subject to the conditions
set forth in Section 6, Lenders will loan to Borrower an amount equal to the
Existing Obligations as the Term Loans. The Term Loans shall be made ratably by
the Lenders in accordance with their respective Lender's Commitments. The
proceeds of the Term Loans shall be used solely by Borrower for the purpose of
paying the Existing Obligations in full.
(c) Term Notes. The Term Loans are further evidenced by two
promissory notes delivered concurrently herewith in the original principal
amount of $20,881,245.78 each, payable to the order of ANB and BOS,
respectively. The Term Notes bear interest at the Interest Rate and shall be
payable as provided herein.
2.4 Maximum Outstanding Loans. Notwithstanding anything contained in this
Agreement or the Other Agreements to the contrary:
(a) Maximum Borrower's Liabilities. The principal portion of
Borrower's Liabilities outstanding at any one time shall not exceed the sum of
Fifty Million and No/100 Dollars ($50,000,000).
(b) Maximum Revolving Loans. The principal portion of Borrower's
Liabilities under the Revolving Loans shall not exceed the lesser of: (i) Fifty
Million and No/100 Dollars ($50,000,000.00) minus the aggregate outstanding
principal amount of the Term Loans, and (ii) Ten Million Dollars and No/100
($10,000,000.00).
(c) Maximum Term Loans. The principal portion of Borrower's
Liabilities under the Term Notes (including, without limitation, the unpaid
principal amount of Protective Advances made with respect to Term Loan
Portfolios) shall not exceed the following
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percentages of the aggregate principal balance on the date hereof of the Term
Loans on or before the following Term Loan Target Dates:
TERM LOAN
TARGET DATE MAXIMUM TERM LOANS
June 30, 1996 87.5% of the original principal balance
September 30, 1996 75% of the original principal balance
December 31, 1996 62.5% of the original principal balance
Maturity Date The unpaid principal balance plus all accrued
but unpaid interest shall be due in full.
Following Borrower's written request, Agent shall deliver to Borrower a schedule
(subject to the Other Lender's concurrence) of the amount of the Maximum Term
Loans that may be outstanding on each of the foregoing Term Loan Target Dates.
(d) Maximum Portfolio Balance. The principal portion of each
Portfolio Advance outstanding (which principal outstanding shall include for
this purpose the unpaid principal amount of all Protective Advances made with
respect to such Loan Portfolio) shall not exceed an amount equal to the
following percentage of the original principal balance of such Portfolio Advance
(i.e., excluding from the original principal balance of the Portfolio Advance
the original principal amount of any such Protective Advances) on or before the
following Portfolio Advance Target Dates:
MAXIMUM PORTFOLIO PORTFOLIO ADVANCE TARGET DATE
BALANCE
90% of the Portfolio Advance on or before the 6 month anniversary of the
applicable Portfolio Advance
75% of the Portfolio Advance on or before the 9 month anniversary of the
applicable Portfolio Advance
Paid in Full on or before the Maturity Date
Following Borrower's written request, Agent shall deliver to Borrower a schedule
(subject to the Other Lender's concurrence) setting forth the Maximum Portfolio
Balance on each of the Portfolio Advance Target Dates with respect to each
Revolving Loan Portfolio.
(e) Fraudulent Receivable. In the event any Loan Account is
determined by Lenders, in their sole and absolute discretion made reasonably and
in good faith, to be a Fraudulent Receivable, that portion of the Loans
allocable thereto (in Lenders' reasonable discretion), shall be repaid to the
Lenders by FirstCity on behalf of the Borrower pursuant to the Deficiency
Undertaking.
15
(f) Ratio of Term Loans to Estimated Remaining Collections. At no
time shall the unpaid principal balance of the Term Loans be greater than 65% of
the Estimated Remaining Collections of the Term Loan Portfolios.
(g) Ratio of Portfolio Advance to Estimated Remaining Collections.
At no time shall the total unpaid principal balance of any Portfolio Advance
exceed 55% of the Estimated Remaining Collections of the Loan Portfolio to which
such Portfolio Advance relates.
(h) Ratio of Borrower's Liabilities to Real Property. At no time
shall the aggregate unpaid principal balance of Loans with respect to Loan
Accounts which are secured by real property exceed 40% of the total aggregate
unpaid principal balance of the Borrower's Liabilities.
(i) Maximum Amounts Secured by Real Property. At no time shall the
Allocated Purchase Price of any individual Loan Account which is secured by real
property (or any one or more Loan Accounts secured in whole or in part by the
same real property) which is a part of a Loan Portfolio exceed Five Hundred
Thousand Dollars ($500,000.00).
(j) Maximum DFC Indebtedness. At no time shall the aggregate
Indebtedness of DFC Asset Corp., Borrower, DPAI and DFSLP and their
Subsidiaries, if any, be greater than 60% of the sum of (x) the Estimated
Remaining Collections of the Revolving Loan Portfolios and (y) the Estimated
Remaining Collections of the Term Loan Portfolios, and (z) the Estimated
Remaining Collections of all loan portfolios of either DPAI or DFSLP.
2.5 Limitation on Lender's Obligations. Notwithstanding anything to the
contrary contained herein or in any other Loan Document:
(a) Revolving Loans. Lenders shall have no duty or obligation to
make any Revolving Loans under the terms hereof. All Revolving Loans shall be
made, if at all, in Lenders' sole and absolute discretion. Borrower hereby
acknowledges that Lenders shall not be bound by any course of prior dealings,
the duty of good faith and fair dealing or reasonableness in exercising such
discretion.
(b) No Extension. Lenders shall have no duty to extend the Maturity
Date and the unpaid principal balance of the Term Loans and the Revolving Loans
shall be due and payable in full on the Maturity Date.
(c) Failure to Make Loans. The failure of any Lender to make its
ratable portion of an Advance which Lenders then have become obligated to make
pursuant to the terms of this Agreement shall not relieve any other Lender of
its obligation to make Advances under this Agreement. If any Lender fails to
make its ratable portion of an Advance neither Agent nor any of the other
Lenders will have any obligation to make that Lender's Advance or to find
another lender to make that Advance on the same terms and conditions or upon any
other terms and conditions.
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2.6 General Payment Provisions. Except as otherwise specifically provided
in this Agreement, that portion of Borrower's Liabilities consisting of:
(a) Payment of Interest. Interest payable by Borrower to Lenders
with respect to the Revolving Loans and the Term Loans shall be due and payable
by Borrower weekly on the last Business Day of each week with respect to such
week (to the extent able to be paid from Collateral Collections pursuant to
Section 3.5) and, to the extent not then previously paid, on the final Business
Day of each month. Weekly interest payments shall be paid from Collateral
Collections in accordance with the provisions of Section 3.5; provided that in
the event Collateral Collections are not so permitted or are insufficient to
satisfy Borrower's obligations to pay interest in accordance with the provisions
of this Section and of Section 3.5, Borrower shall pay to Agent the amount
necessary to pay such deficiency on the last Business Day of each month, without
notice or demand;
(b) Payment on Maturity. The unpaid principal balance of all Loans
and all accrued Interest with respect thereto shall be due and payable on the
Maturity Date;
(c) Payment of Principal of Term Loans. Subject to the provisions
of Section 2.6(b), principal payable on account of the Term Loans shall be
payable in accordance with the provisions of Sections 2.4(c) and 2.6(i).
Principal payments shall be paid from Collateral Collections in accordance with
Section 3.5(b) to the extent permitted thereby or the Lenders shall otherwise
agree in their sole and absolute discretion; provided that in the event
Collateral Collections are not so permitted or are insufficient to satisfy
Borrower's obligations to reduce the principal amount of the Term Loans to an
amount which is equal to or less than the Maximum Term Loans on each Term Loan
Target Date, Borrower shall pay to Agent, without notice or demand on or before
the applicable Term Loan Target Date, the amount necessary to pay such
deficiency;
(d) Payment of Principal of Portfolio Advance. Subject to the
provisions of Section 2.6(b), principal payable on account of any Portfolio
Advance shall be payable in accordance with the provisions of Sections 2.4(d)
and 2.6(i). Principal payments shall be paid from Collateral Collections in
accordance with Section 3.5(a) to the extent permitted thereby, or as the
Lenders may otherwise agree in their sole and absolute discretion; provided that
in the event that Section 3.5(a) does not permit or Collateral Collections are
not sufficient to satisfy Borrower's obligations to reduce the principal amount
of such Portfolio Advance to an amount which is equal to or less than the
Maximum Portfolio Balance on each Portfolio Target Date, Borrower shall pay to
Agent, without notice or demand on or before the applicable Portfolio Loan
Target Date, the amount necessary to pay such deficiency;
(e) Payment of Protective Advances. Protective Advances shall be
made, if at all, in accordance with Section 3.2. Subject to the provisions of
Section 2.6(b), the principal balance of any Advance made to fund a Protective
Advance shall be due and payable on the earliest of (i) the date on which
Borrower receives reimbursement or payment relating to such Protective Advance
from the Obligor thereof, or (ii) the sale or disposition of the Loan Account
(or the collateral therefor) for which such Protective Advance was made, or
(iii) if not sooner paid, in accordance with Section 2.4(c) with respect to
Protective Advances that are
17
made with respect to Term Loan Portfolios and Section 2.4(d) with respect to
Protective Advances that are made with respect to Revolving Loan Portfolios;
(f) Payment of Other Advances. Subject to the provisions of Section
2.6(b), principal payable on account of any Advance made in accordance with
Section 3.3 shall be due and payable on demand and shall be paid from Collateral
Collections in accordance with Sections 3.5 (a)(ii)(1) and 3.5(b)(ii)(1) to the
extent permitted thereby;
(g) Payment of Costs. Costs, fees and expenses payable by Borrower
to Lenders and/or Agent shall be payable to Agent or to such other Person or
Persons designated by Agent, on demand and, if not sooner paid, shall be paid
from Collateral Collections in accordance with Sections 3.5 (a)(ii)(1) and
3.5(b)(ii)(1) to the extent permitted thereby;
(h) Other Borrower's Liabilities. All other Borrower's Liabilities,
if any, shall be payable by Borrower as and when provided in this Agreement or
the Other Agreements but in any event, no later than the Maturity Date; and
(i) Obligation to Eliminate Excess. In the event that at any time
Borrower's Liabilities (or any portion thereof) exceeds the applicable maximum
amount therefor as set forth in Section 2.4, or if at any time the principal
portion of any Portfolio Advance exceeds the applicable amount therefor as set
forth in said section, Borrower shall immediately, without demand therefor, pay
to Agent an amount sufficient to eliminate such excess.
2.7 Place of Payments. All payments shall be payable to Agent, for the
ratable benefit of Lenders, in lawful currency of the United States of America
and without setoff or counterclaim, at 33 N. LaSalle Street, Chicago, Illinois
or at such other place or places as Agent may hereafter designate in a written
notice given to Borrower in accordance with Section 11.5. Promptly upon receipt
thereof, Agent shall forward each Lender's ratable share of such amounts to such
Lenders.
2.8 Single Liability. All of the Secured Obligations shall constitute one
obligation secured by the security interest, lien or encumbrance in or upon the
Collateral and by all other security interests, liens, claims and encumbrances
heretofore, now and/or from time to time hereafter granted by Borrower and/or
any Guarantor to Agent, for the ratable benefit of Lenders.
2.9 Business Purpose. Borrower warrants and represents to Lenders that
Borrower shall use the proceeds of all Loans solely for business purposes and
consistently with all applicable laws and statutes. Borrower further warrants
and represents to Lenders and covenants with Lenders that Borrower is not in the
business of extending credit for the purpose of purchasing or carrying margin
Stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Loans will be used to
purchase or carry any margin Stock or to extend credit to others for the purpose
of purchasing or carrying any margin Stock.
2.10 Reaffirmation of Warranties. The disbursement of the Term Loans and
each Advance thereafter shall constitute an automatic warranty and
representation by Borrower to
18
Lenders that there does not then exist an Event of Default or an Unmatured
Default at the time of making such Loan and that all representations and
warranties contained herein and in each and every one of the other Loan
Documents is true and correct as of the date of disbursement of said Loan.
2.11 Payment of Bank Charges. Borrower shall pay to Agent as part of
Borrower's Liabilities, on demand, any and all charges asserted by a bank or
similar institution against Lenders and/or Agent for or with respect to Agent's
forwarding to Borrower or at the direction of Borrower of proceeds of any Loans
or for or with respect to Agent's depositing for collection any check or item of
payment received and/or delivered to Agent on account of Borrower's Liabilities,
or in connection with any Cash Collateral Account.
2.12 Loan Fees. Borrower shall pay:
(a) To Agent, to be retained by Agent, monthly as part of
Borrower's Liabilities, a loan administration fee equal to $3,500 for each month
(or part thereof) from the date hereof until the date on which Borrower's
Liabilities are paid in full. Said fees shall be paid on the earlier of (i)
quarterly in arrears on the last day of each May, August, November and February
during the term hereof, commencing May 31, 1996 or (ii) that date when
Borrower's Liabilities are paid in full;
(b) To Agent, to be retained by Agent, at the time of each
Portfolio Advance under the Revolving Loan, a fee equal to $7.00 for each Loan
Account for which Loan Account Documentation is pledged to Lenders and/or Agent;
(c) To Agent, for the ratable benefit of Lenders, a quarterly loan
fee equal to $25,000 payable on the last day of each May, August, November and
February during the term hereof, provided that, if Borrower pays Borrower's
Liabilities in full before November 30, 1996 the unpaid balance of the unpaid
aggregate quarterly loan fees shall be immediately due and payable; and
(d) To Agent, for the ratable benefit of Lenders, a Funding Fee in
the amount of $400,000 payable in installments of $100,000 concurrently herewith
and on May 31, 1996, August 31, 1996 and November 30, 1996; provided that, if
Borrower pays Borrower's Liabilities in full before November 30, 1996 the unpaid
balance of the Funding Fee shall be immediately due and payable.
2.13 Authorized Advances. Lenders, in their sole and absolute discretion,
upon notice thereof to Borrower, may disburse for the account of Borrower, as a
disbursement of the Revolving Loans, any or all funds necessary to pay: (a) any
costs, expenses or other amounts required to be paid by Borrower hereunder and
not so paid (but not, unless Lenders agree in their sole and absolute
discretion, any amounts payable under Section 2.12 hereof); (b) any Person as
Lenders deem necessary or desirable to insure that the security interest, lien
or other encumbrance granted to Agent, on behalf of Lenders in the Collateral
shall at all times have the priority represented and covenanted in this
Agreement and the Other Agreements; (c) to protect the Collateral or Agent's
and/or Lenders' security interest therein; and (d) for any and all other costs
or expenses incurred by Borrower or Lenders and/or Agent (including,
19
without limitation expenses and reasonable fees of Lenders' attorneys in
connection with the Loans).
2.14 Prepayment. The Loans may be prepaid in part, but not in whole, at
any time without premium or penalty; provided that any prepayment of the Loans
in full shall be accompanied by the payment of all accrued but unpaid interest.
The Loans may be prepaid in whole upon not less than five (5) days prior notice,
without premium or penalty. Borrower shall not be subject to any penalty or
other charge solely because no Revolving Loans are advanced hereunder or because
any or all Loans are prepaid in full.
2.15 Lender's Commitment. Each Lender hereby agrees that its loan
commitment (a "LENDER'S COMMITMENT") shall be 50% of all Loans made by Lenders
to Borrower pursuant to the terms hereof. This provision may be modified from
time to time, as to all Loans, or as to individual Portfolio Advances, by
written agreement between the Lenders, without notice to or consent by Borrower.
Each and every Loan made by Lenders pursuant to the terms hereof shall be made
by Lenders depositing their ratable share of each Advance (based upon each
Lender's Commitment) with Agent, in immediately available funds, no later than
10:00 A.M.
Chicago time on the date of the funding of such Loan.
2.16 Change of Laws. If either Lender shall determine at any time after
the date hereof that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof or compliance
by such Lender with any request or directive regarding capital adequacy (whether
or not having the force of law) from any such authority, central bank or
comparable agency, has or would have the affect of reducing the rate of return
on Lender's capital as a consequence of its obligations hereunder to a level
below that which Lender could have achieved but for such adoption, change or
compliance (taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by such Lender to be material, then, upon Lender's
presentation to Borrower of a written calculation and explanation of such charge
and its effect, Borrower shall pay to such Lender upon demand such amount or
amounts, in addition to the amounts payable under any other provision of this
Agreement or the Other Agreements, as will compensate Lender for such reduction.
Determinations by a Lender for purposes of this paragraph of the additional
amount or amounts required to compensate Lenders with respect to the foregoing
shall be conclusive in the absence of manifest error. In determining such amount
or amounts, Lenders may use any reasonable averaging or attribution methods.
3. DISBURSEMENTS AND APPLICATION OF PAYMENTS
3.1 Disbursement of Portfolio Advances. Subject to the limitations set
forth in Sections 2.2 and 2.4 and other applicable provisions of this Agreement
(including, without limitation, Section 6 hereof), and provided no Event of
Default or Unmatured Default then exists hereunder or would then be created
thereby, Lenders may, in their sole and absolute discretion, disburse Advances
to Borrower and Borrower may use Advances from time to time to acquire Loan
Portfolios under the following terms and conditions.
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(a) Proposed Loan Portfolio. If Borrower proposes to acquire one or
more Loan Portfolios with the proceeds of an Advance to be made hereunder, then
(i) Borrower shall execute and deliver to Lenders a Loan Advance Certificate
with respect to such Proposed Loan Portfolio, in form and detail acceptable to
Lenders, in their sole and absolute discretion, no less than three (3) Business
Days prior to the proposed date of Borrower's submission of a bid to the FDIC
with respect to such Proposed Loan Portfolio; (ii) if Lenders determine, for any
reason or no reason, that the Proposed Loan Portfolio is acceptable to become a
Revolving Loan Portfolio and at the time of such determination the Proposed Loan
Portfolio is available for acquisition by Borrower, then Lenders will make
available to Borrower an Advance in an amount equal to the Maximum Advance
Amount or such lesser amount as Borrower shall have requested (in each case
subject to the limitation in Section 2.4(b)); (iii) if either Lender determines,
for any reason or no reason, that the Proposed Loan Portfolio is not acceptable
to become a Revolving Loan Portfolio, then no Revolving Loan shall be disbursed
with respect to such Proposed Loan Portfolio and Borrower acknowledges that
Lenders shall have no liability in connection with a Revolving Loan not being
made hereunder with respect to such Proposed Loan Portfolio.
(b) Funding Portfolio Advances. In the event Lenders determine to
make a Revolving Loan with respect to a Proposed Loan Portfolio in accordance
with Section 3.1(a), Agent shall notify Borrower (telephonic notice being
sufficient for the purposes of this Section 3.1(b)), and not later than 10:00
a.m. Chicago time on the date of the proposed funding Lenders shall deliver to
Agent an amount equal to each Lender's ratable share of said Revolving Loans,
and Borrower shall deliver to Agent an amount equal to Borrower's Cost in
immediately available funds, together with a certificate executed by DFC Asset
Corp., that said funds have been contributed by DFC Asset Corp. to Borrower as
an equity contribution. Funds so deposited by Agent shall be deemed deposited
into escrow for purposes of Sections 2.1(b) and 3.1(e). It shall be a condition
precedent to Lenders' obligation to make any Portfolio Advance that DFC Asset
Corp. contribute as equity (and not as subordinated loans or in any other
manner) an amount in cash equal to Borrower's Cost with respect to any Loan
Portfolio acquired with the proceeds of an Advance.
(c) Disbursement to FDIC. Funds deposited with Agent in accordance
with Section 3.1(b) shall be disbursed by Agent upon delivery to Agent of notice
from the FDIC that Borrower has acquired the Proposed Loan Portfolio and against
delivery to Agent from the FDIC of all Loan Account Documentation relating to
the applicable Loan Portfolio. Borrower hereby irrevocably authorizes and
directs Agent to disburse to the FDIC, for and on behalf of Borrower and for
Borrower's account the proceeds of each Portfolio Advance and Borrower's Cost,
to the extent delivered to Agent in immediately available funds.
(d) Failure to Acquire. Borrower covenants with Lenders and Agent
(i) that if for any reason Borrower does not acquire a Proposed Loan Portfolio
after Lenders have made a Revolving Loan pursuant hereto for such acquisition,
then Borrower shall promptly repay such Revolving Loan in full together with
interest thereon, and (ii) that if for any reason Borrower redelivers title to
any Loan Accounts to the FDIC, then Borrower shall promptly repay the portion of
the Revolving Loan made with respect to such redelivered Loan Accounts and (iii)
that each time Borrower does acquire a Proposed Loan Portfolio Borrower will
direct the FDIC to deliver Loan Account Documentation to Agent and that if the
FDIC does not do
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so, Borrower will promptly deliver or cause the delivery of such Loan Account
Documentation to Agent or promptly repay such Revolving Loan in full.
(e) Portfolio Advance. Each Advance of Revolving Loans for the
acquisition of a Loan Portfolio acquired pursuant to the foregoing provisions,
if any, shall be identified on the books and records of Agent as a "PORTFOLIO
ADVANCE", funds received by Agent as proceeds of said Loan Portfolio shall be
applied to the payment of the applicable Portfolio Advance in the manner set
forth herein, and Borrower shall pay principal and interest on each Portfolio
Advance in accordance with the provisions of Sections 2.2 and 2.6.
3.2 Protective Advances Upon Borrower's Request. In the event Borrower
desires Lenders to make Revolving Loans for Protective Advances, Borrower shall
give Lenders not less than five (5) business days prior notice, together with
information, in form and detail acceptable to Lenders, in their sole and
absolute discretion, relating to the purpose and use of the proposed Advance.
Agent shall promptly deliver to Lenders copies of all materials, if any,
delivered by Borrower to Agent pursuant to this Section 3.2. If Lenders elect,
for any reason or no reason, in their sole and absolute discretion to make such
Advance, and provided no Event of Default or Unmatured Default then exists or
would be created thereby (including but not limited to a default under the
provisions of Sections 2.2 and 2.4), Lenders shall deliver to Agent an amount
equal to its ratable share of such Advance and Agent shall thereupon immediately
transfer to Borrower's operating account maintained with Agent the amount of
said Advance. If either Lender determines, for any reason or no reason, not to
make such an Advance, then no Revolving Loan shall be disbursed with respect to
such requested Protective Advance and Borrower acknowledges that Lenders shall
have no liability in connection with a Revolving Loan not being made hereunder
with respect to such requested Protective Advance. The principal amount of any
Protective Advance made with respect to a Term Loan Portfolio shall be added to
the principal balance of the Term Loans and shall be payable in accordance with
the provisions of Section 2.6(e). The principal amount of any Protective Advance
made with respect to a Revolving Loan Portfolio shall be added to the principal
balance of the related Portfolio Advance and shall be payable in accordance with
the provisions of Section 2.6(e). Any Advance made by Lenders pursuant to the
terms of this Section 3.2 for any purpose other than a Protective Advance shall
be payable by Borrower on demand (unless Lenders agree otherwise at the time of
making such Advance) and shall be paid from Collateral Collections, in
accordance with Sections 3.5(a)(ii) or 3.5(b)(ii), if permitted by the terms
thereof, or in accordance with Section 2.6 and the other applicable provisions
of this Agreement.
3.3 Disbursement of Other Advances by Lender. In addition to the Advances
made pursuant to Borrower's request set forth in Sections 3.1 and 3.2, Lenders
(if both agree) may make Advances for the payment of Borrower's obligations
pursuant to the terms of Sections 2.11, 2.12 and 2.13. All monies shall be
disbursed by Agent at the direction of Lenders, upon notice to Borrower;
provided that Agent's failure to notify Borrower shall not affect the validity
of Lenders' and/or Agent's actions hereunder. All monies so disbursed shall be a
part of the Secured Obligations, payable by Borrower to Agent on demand, and
shall be paid from Collateral Collections in accordance with Sections 3.5
(a)(ii) and 3.5(b)(ii), if permitted by the terms thereof, or in accordance with
Section 2.6 and the other applicable provisions of this Agreement.
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3.4 Proceeds of DFSLP Collections. DPAI, an Affiliate of Borrower, and
TLF have entered into a Loan and Security Agreement dated as of February 28,
1994, pursuant to which TLF has made loans to DPAI. As additional collateral for
the loans by TLF to DPAI, DFSLP has pledged to TLF all assets of DFSLP. Pursuant
to the terms of a security agreement executed concurrently herewith ("TLF
SECURITY AGREEMENT"), DFSLP has pledged to Agent, for the ratable benefit of
Lenders, a springing security interest in all assets of DFSLP. Concurrently
herewith, Lenders and TLF have entered into an agreement pursuant to which,
until an "EVENT OF DEFAULT" (of which notice has been given, if applicable, and
all cure or grace periods have expired) has occurred under the terms of the loan
agreement with Transamerica (a "TRANSAMERICA DEFAULT"), TLF will deliver to
Agent all proceeds of DFSLP's assets, less servicing fees of no more than 12.5%
of such proceeds ("DFSLP PROCEEDS"), which shall be applied in accordance with
Section 3.5(b).
3.5 Application of Payment. One hundred percent (100%) of the collected
balance in each Cash Collateral Account shall be debited and delivered to Agent
on behalf of the Lenders, at such intervals as Agent shall (in its sole and
absolute discretion) determine, but in no event less often than once each week
("COLLATERAL COLLECTIONS"). Agent shall hold all Collateral Collections with
respect to each Loan Portfolio in a non-interest-bearing account at Agent
identified to such Loan Portfolio and/or the DFSLP Proceeds, as applicable
(each, a "DEDICATED ACCOUNT"). Borrower hereby pledges, assigns and transfers to
the Agent for the benefit of the Lenders, as collateral for the Secured
Obligations, all of Borrower's right, title and interest in and to each Cash
Collateral Account and each Dedicated Account, together with all monies due or
to become due thereunder or otherwise deposited therein and all sums due or to
become due on any such amounts, whether by way of interest, dividends, bonus,
redemption, repayment or otherwise. Provided no Event of Default or Unmatured
Default has occurred and is continuing, on the final Business Day of each week,
Agent shall apply the sum of all Collateral Collections in each Dedicated
Account (a "WEEKLY PAYMENT") as follows:
(a) Revolving Loan Portfolio. Agent shall apply the sum of all
Collateral Collections in each Dedicated Account applicable to a Portfolio
Advance as follows:
(i) if no Event of Default or Unmatured Default then exists, 12.5%
shall be delivered to an account at Agent in the name of
J-Hawk in full satisfaction of the Servicing Fee;
(ii) The remaining 87.5% (100%, if an Event of Default or Unmatured
Default then exists) of Collateral Collections ("NET
COLLECTIONS") shall be applied as follows:
(1) Any unpaid fees and expenses (including, when due, the
quarterly installment of the Funding Fee and the
quarterly loan fee) and any Advances made pursuant to
Section 3.3;
(2) Interest due and payable with respect to the Portfolio
Advance to which the Dedicated Account is dedicated;
(3) Interest due and payable with respect to the Revolving
Loans;
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(4) Principal outstanding with respect to the Portfolio
Advance to which the Dedicated Account is dedicated; and
(5) If no Borrower's Liabilities are then outstanding with
respect to the Portfolio Advance to which the Dedicated
Account is dedicated, then the balance, if any, to a
Cash Collateral Account maintained with Agent, to be
applied by Agent within thirty (30) days to any other of
Borrower's Liabilities (other than Interest or fees
which are not yet accrued, due and owing), applied in
such order of priority as Borrower shall designate in
writing to Agent or, in the absence of such written
designation during the applicable thirty (30) day
period, as Lenders may determine.
(b) Term Loan Portfolios. Agent shall apply Collateral Collections
applicable to a Term Loan Portfolio as follows:
(i) If no Event of Default or Unmatured Default then exists, 12.5%
of the Collateral Collections shall be delivered to an account
at Agent in the name of J-Hawk in full satisfaction of the
Servicing Fee;
(ii) The Net Collections plus the DFSLP Proceeds shall then be
applied as follows:
(1) Any unpaid fees and expenses (including, when due, the
quarterly installment of the Funding Fee and the
quarterly loan fee) and any Advances made pursuant to
Section 3.3;
(2) Interest due and payable with respect to the Term Loans;
(3) Principal outstanding with respect to the Term Loans
(including any amount due pursuant to Section 2.4(a),
relating to Fraudulent Receivables); and
(4) If no Borrower's Liabilities are then outstanding with
respect to the Term Loans, then the balance, if any, to
a Cash Collateral Account maintained with Agent, to be
applied by Agent within thirty (30) days to any other of
Borrower's Liabilities (other than Interest or fees
which are not yet accrued, due and owing), applied in
such order of priority as Borrower shall designate in
writing to agent or, in the absence of such written
designation, during the applicable thirty (30) day
period, as Agent may determine.
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(c) Approved Disbursements.
(i) Notwithstanding anything to the contrary contained in this
Section 3.5, provided no Transamerica Default, Event of
Default or Unmatured Default has occurred and is continuing or
would be created thereby, following written request therefor
from Borrower (which request shall certify that Borrower's
Board of Directors has declared such a dividend and ordered it
paid) in each instance (each, a "DIVIDEND REQUEST"), Agent
shall deliver to an account maintained with Agent in the name
of DFC Asset Corp. as a dividend, an amount of DFSLP Proceeds
which are received by Agent after the date of such Dividend
Request that is equal to the lesser of all DFSLP Proceeds
received by Agent after the date of such Dividend Request or
the amount of the next payment of principal and interest due
to Geist under the terms of that certain promissory note dated
as of September 19, 1995 in the original principal amount of
$3,700,000 from Borrower, but only if Geist is entitled to
receive same in accordance with the terms of the relevant note
and his subordination agreement in favor of the Lenders with
respect thereto.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, Lenders consent to the disbursements by Borrower on
the date hereof to the parties and in the amounts identified
on Exhibit C ("PERMITTED DISBURSEMENTS"), hereto.
(d) Payment to Lenders. All payments received by Agent pursuant to
the foregoing provisions of this Section 3.5 (other than amounts payable to DFC
Asset Corp. pursuant to clause (c) above, to the extent so paid) shall be deemed
to be received by Agent, ratably on behalf of the Lenders, and shall be
disbursed to Lenders ratably in accordance with Lender's Commitment, in payment
of the Secured Obligations no later than the end of business on the last
Business Day of each week.
(e) Application After Default. Following an Event of Default or
Unmatured Default and during the continuation thereof, one hundred percent
(100%) of all Collateral Collections shall be applied in payment of the Secured
Obligations in such order of priority as Lenders shall determine, in their sole
and absolute discretion. To the extent any portion of Collateral Collections has
been received by virtue of Borrower's sale of any of the Loan Accounts, no
portion thereof shall be payable or paid to J-Hawk but 100% of such monies shall
be distributed as set forth in Section 3.5(a)(ii), 3.5(b)(ii) or 3.5(e), as
applicable.
3.6 Direction of Application. Subject to compliance by Agent with the
provisions of Section 3.5, Borrower waives the right to direct the application
of any and all payments at any time or times hereafter received by Agent on
account of the Secured Obligations and Borrower agrees that Agent shall have the
continuing exclusive right to apply and reapply any and all such payments in
such manner as Agent or the Lenders may deem advisable, notwithstanding any
other provision of this Agreement or any entry by Agent upon any of its books
and records.
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4. COLLATERAL: GENERAL TERMS
4.1 Grant of Security Interest. To secure the prompt payment to Lenders
of Borrower's Liabilities and the prompt, full and faithful performance of
Borrower's Obligations, Borrower hereby grants to Agent, for the ratable benefit
of and as Collateral Agent for Lenders, a security interest in and to, and
assigns and pledges to Agent on behalf of the Lenders, all of Borrower's now
existing and/or owned and hereafter arising and/or acquired:
(a) Loan Accounts and Loan Account Documentation relating thereto;
(b) All right, title and interest of Borrower under any purchase
contract pursuant to which Borrower acquires any Loan Portfolio or any Loan
Account;
(c) All right, title and interest of Borrower under any agreement
pursuant to which a Person agrees to act as Borrower's agent in servicing the
Loan Accounts, the Loan Portfolios and enforcing Borrower's rights thereunder,
including without limitation, the service agreement heretofore entered into with
J-Hawk.
(d) Accounts, chattel paper, contract rights, leases and rental
income thereunder, leasehold interests, letters of credit, instruments and
documents, both related to and not related to Loan Portfolios ("ACCOUNTS");
(e) All patents, copyrights and trademarks, and all applications
for and registrations of the foregoing, all franchise rights, tradenames,
goodwill, Partnership Interests, beneficial interests, rights to tax refunds and
all other general intangibles of any kind or nature whatsoever ("GENERAL
INTANGIBLES");
(f) All inventory of Borrower, wherever located, whether in
transit, held by others for Borrower's account, covered by warehouse receipts,
purchase orders and contracts, or in the possession of any carriers, forwarding
agents, truckers, warehousemen, vendors or other Persons, including without
limitation all raw materials, work in process, finished merchandise, supplies,
goods, incidentals, office supplies and packaging materials ("INVENTORY");
(g) Goods (other than Inventory), machinery, equipment, vehicles,
appliances, furniture, furnishings and fixtures ("EQUIPMENT");
(h) Monies, reserves, deposits, certificates of deposit and deposit
accounts and interest or dividends thereon, securities, cash, cash equivalents
and other property now or at any time or times hereafter in the possession or
under the control of Lenders and/or Agent or their respective bailee;
(i) All books, records, computer records, ledger cards, programs
and other computer materials, customer and supplier lists, invoices, orders and
other property and general intangibles at any time evidencing or relating to the
Collateral ("RECORDS");
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(j) All rights of Borrower under all leases, licenses, occupancy
agreements, concessions or other agreements entered into by Borrower as tenant
or lessee or licensee or concessionaire thereunder, whether written or oral,
whether now existing or entered into at any time hereafter, whereby Borrower is
granted the right, either exclusively or in common with others, to use, possess,
or occupy real estate ("LEASES");
(k) All options, rights of first refusal, grants, contracts,
agreements, or rights to purchase, lease, license, or otherwise acquire any
interest in real property, whether now existing or hereafter acquired
("OPTIONS");
(l) All accessions to any of the Collateral and all substitutions,
renewals, improvements and replacements of and additions thereto;
(m) The collateral referenced in Article 6 ("OTHER COLLATERAL AND
OTHER AGREEMENTS");
(n) All other property of Borrower, real and/or personal; and
(o) All products and proceeds of the foregoing (whether such
proceeds are in the form of cash, cash equivalents, proceeds of insurance
policies, Accounts, General Intangibles, Inventory, Equipment, Records or
otherwise).
All of the foregoing is referred to herein individually and collectively as the
"COLLATERAL". It is the intent of the parties hereto that "Collateral" include
all Assets of Borrower, including real, personal and intangible property of
Borrower, of every kind and nature, whether specifically enumerated herein or
not, and shall be given the broadest possible meaning and interpretation.
Borrower shall make appropriate entries upon its financial statements and
Records disclosing Agent's security interest in and assignment and pledge of the
Collateral.
4.2 Supplemental Documentation. Borrower shall execute and/or deliver to
Agent, at any time and from time to time hereafter at the request of Agent, all
agreements, instruments, documents and other written matter ("SUPPLEMENTAL
DOCUMENTATION") that Agent reasonably may request, in form and substance
acceptable to Agent, to perfect and maintain perfected Agent's security
interest, lien and/or encumbrance in and/or assignment and pledge of the
Collateral and to consummate the transactions contemplated in or by this
Agreement and the Other Agreements. Borrower, irrevocably, hereby appoints Agent
(and all Persons designated by Agent for that purpose) as Borrower's true and
lawful agent and attorney-in-fact to sign the name of Borrower on the
Supplemental Documentation and to deliver the Supplemental Documentation to such
Persons as Agent, in its sole and absolute discretion, may elect; provided that
notwithstanding the foregoing, Agent shall execute such Supplemental
Documentation only upon Borrower's failure to execute and deliver the same to
Agent within five (5) Business Days following Agent's request that Borrower
execute such Supplemental Documentation. Borrower agrees that a carbon,
photographic or photostatic copy, or other reproduction, of this Agreement or of
any financing statement, shall be sufficient as a financing statement.
27
4.3 Inspection of Collateral.
(a) Lenders and/or Agent (by any of its officers, employees and/or
agents) shall have the right, at any time or times during Borrower's usual
business hours, to inspect the Collateral (and the premises upon which it is
located) and all related Records and to verify the amount and condition of or
any other matter relating to the Collateral. All reasonable costs, fees and
expenses incurred by Agent, or for which Agent becomes obligated, in connection
with such inspection and/or verification shall constitute part of Borrower's
Liabilities, payable by Borrower to Agent on demand.
(b) Borrower will allow any representative, officer or accountant
of any Lender or the Agent to discuss the Financial Statements, the other
financial information from time to time delivered hereunder and the financial
condition of the Borrower and its Affiliates with their respective outside
auditors. Borrower hereby irrevocably authorizes such auditors to discuss the
foregoing with all such Persons.
4.4 Perfection; Location.
(a) Perfection. Borrower hereby warrants and represents to and
covenants with Lenders that: (b) Agent's security interest in the Collateral,
including, without limitation, Agent's security interest in the Loan Account
Documentation with respect to each of the Loan Portfolios heretofore or
hereafter to be purchased by Borrower with the proceeds of the Revolving Loans,
when the same attaches, is now and at all times hereafter shall be perfected and
have a first priority; (b) the principal place of business of Borrower and the
location where Borrower keeps the Collateral and the Records, other than the
Loan Account Documentation, is the location specified on Exhibit D ("LOCATION OF
COLLATERAL"); Borrower has no other offices or locations and Borrower shall not
remove such Records and/or the Collateral from its principal place of business
and shall not keep any of such Records and/or the Collateral at any other office
or location unless Borrower gives Agent written notice thereof at least thirty
(30) days prior thereto and the same is within the continental United States of
America. Borrower, by written notice delivered to Agent at least thirty (30)
days prior thereto, shall advise Agent of Borrower's opening of any new office
or place of business or its closing of any then existing office or place of
business and any new office or place of business shall be within the continental
United States of America.
(c) Maintain Perfection, Location of Collateral. Borrower shall
perform all the acts requested by Lenders and/or Agent which are reasonably
necessary to maintain a valid security interest in the Collateral, including but
not limited to, executing and/or delivering to Agent, at any time and from time
to time hereafter, any and all Supplemental Documentation that Agent may
request, in form and substance reasonably acceptable to Agent, to perfect and
maintain perfected Agent's security interest, lien and/or encumbrance in and/or
assignment and pledge of the Collateral and to consummate the transactions
contemplated in or by this Agreement and/or the Other Agreements. Borrower
agrees that Agent, to the extent permitted by applicable law, may execute, on
behalf of and in the name of Borrower, any Supplemental Documentation covering
all or any of the Collateral and file the same in each and every appropriate
jurisdiction.
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4.5 Special Collateral. Borrower shall receive, as the sole and absolute
property of Agent and as trustee for Agent, all monies, checks, notes, drafts
and all other payment for and/or proceeds of Collateral which come into the
possession or under the control of Borrower (or any of its general or limited
partners, agents, employees or the shareholders, directors, officers, employees,
partners or agents of any of its general or limited partners, or those Persons
acting for or in concert with Borrower,) and immediately upon receipt thereof,
Borrower shall remit the same (or cause the same to be remitted by such persons
set forth above), in kind, to Agent (at Agent's principal place of business
designated herein); provided that if such payment or proceeds represent amounts
collected with respect to a Loan Portfolio, then Agent hereby designates the
proper place of delivery to be the Cash Collateral Account(s) established with
respect to such Loan Portfolio.
4.6 Control of Proceeds. Agent, now or at any time hereafter, in its sole
and absolute discretion, may take control of, in any manner, and may endorse
Borrower's name to any of the items of payment or proceeds described in Section
4.5 above and, subject to Section 4.9 below, Agent shall apply the same to and
on account of the Secured Obligations in accordance with the provisions of
Section 3.5. Borrower, irrevocably, hereby makes, constitutes and appoints Agent
(and all Persons designated by Agent for that purpose) as Borrower's true and
lawful agent and attorney-in-fact, with power, upon notice to Borrower, to take
any such actions.
4.7 Acceptance of Collateral. Agent, in its sole and absolute discretion,
upon notice to Borrower, without waiving or releasing any Secured Obligations or
any Event of Default or Unmatured Default, may at any time or times hereafter,
but shall be under no obligation to, pay, acquire and/or accept an assignment of
any security interest, lien, encumbrance or claim asserted by any Person against
the Collateral. All sums paid by Agent in respect thereof and all costs, fees
and expenses, including reasonable attorneys' fees, court costs, expenses and
other charges relating thereto incurred by Agent or for which Agent becomes
obligated on account thereof shall be part of the Secured Obligations payable by
Borrower to Agent on demand.
4.8 Special Collateral. In the event that Borrower shall receive that
portion of the Collateral consisting of chattel paper and/or evidenced by an
instrument and/or document ("SPECIAL COLLATERAL"), including, without
limitation, Loan Account Documentation, Borrower immediately shall mark the same
to show that such Special Collateral is subject to a security interest in favor
of Agent and shall deliver the original thereof to Agent, together with
appropriate endorsement and/or other specific evidence of assignment thereof to
Agent, in form and substance acceptable to Agent.
4.9 Release of Proceeds to Borrower. Agent may, in its sole and absolute
discretion, retain as additional Collateral or (with the consent of the Other
Lender) release to Borrower, from time to time, such portion of the monies,
reserves and proceeds received by Agent with respect to the Collateral as Agent
(with the consent of the Other Lender) may determine. All such monies, reserves
and proceeds and other property of Borrower in the possession of Agent or its
bailee at any time or times hereafter are hereby pledged by Borrower to Agent as
additional Collateral hereunder, and, in Agent's sole and absolute discretion,
may be held by Agent (with the consent of the Other Lender) until the Secured
29
Obligations are paid in full or, at any time, may be applied by Agent on account
of Secured Obligations.
4.10 Limitation of Waivers. Except as set forth in Section 5.8, no
authorization given by Agent or any Lender pursuant to this Agreement or the
Other Agreements to sell any specified portion of Collateral or any items
thereof, and no waiver by Agent or any Lender in connection therewith shall
establish a custom or constitute a waiver of the prohibition contained in this
Agreement against such sales, with respect to any portion of the Collateral or
any item thereof not covered by said authorization.
4.11 Right to Set-Off. Regardless of the adequacy of any Collateral, any
deposits or other sums at any time credited by or payable or due from Agent or
any Lender to Borrower, or any monies, cash, cash equivalents, certificates of
deposit, securities, instruments, documents or other assets of Borrower in the
possession or control of Agent or its bailee or any Lender or its bailee for any
purpose may at any time be reduced to cash and applied by Agent or such Lender
to, or setoff by Agent or such Lender against, the Secured Obligations.
5. COLLATERAL: LOAN ACCOUNTS
5.1 General Representations Relating to Loan Accounts. With respect to
Loan Accounts, except as otherwise disclosed by Borrower to Lenders in writing
at the time of or prior to delivery to Lenders of the applicable Loan Advance
Certificate or thereafter promptly upon Borrower becoming aware of each
qualification to the representations and warranties set out below, Borrower
warrants and represents to Lenders that:
(a) Each Loan Account to the extent reflected by the greater of
Allocated Purchase Price and Estimated Remaining Collections for the Loan
Accounts represents an undisputed, bona fide transaction completed in accordance
with the terms and provisions contained in the applicable Loan Account
Documentation delivered to Agent with respect thereto;
(b) To the extent of the greater of the Allocated Purchase Price
and Estimated Remaining Collections for the Loan Accounts, the amounts thereof,
as shown on the Loan Advance Certificate and all statements delivered to Agent
with respect thereto, are actually and absolutely owing to Borrower and are not
contingent for any reason;
(c) Since acquisition of such Loan Accounts, including, without
limitation, the Loan Accounts acquired from FLC, no payments have been or shall
be made thereon except payments immediately delivered to Agent pursuant to this
Agreement;
(d) There are no setoffs, counterclaims or disputes existing or
asserted against Borrower (or, to the knowledge of Borrower, against any
Obligor) with respect thereto and Borrower has not made any agreement with any
Obligor thereof for any deduction therefrom except a discount allowed by
Borrower in the ordinary course of its business in exchange for prompt payment
in settlement or for assignment of the entire applicable Loan Account;
30
(e) There are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the greater of the Allocated Purchase Price and the
Estimated Remaining Collections thereof;
(f) To the best of Borrower's knowledge all Obligors had the
capacity to contract and were solvent at the time the applicable Loan Account(s)
arose;
(g) Borrower has no knowledge of any fact or circumstance which
would impair the validity or collectibility thereof;
(h) To the best of Borrower's knowledge, there are no proceedings
or actions which are threatened or pending against any Obligor which might
result in any material adverse change in its financial condition;
(i) To the best of Borrower's knowledge, none of the collateral for
any of the Loan Accounts is subject to a security interest or lien in favor of
any Person other than the Borrower;
(j) To the best of Borrower's knowledge, no Obligor is a resident
of, incorporated in or otherwise located in, any jurisdiction outside of the
United States;
(k) To the best of Borrower's knowledge, no Obligor is a government
or governmental agency, department or instrumentality; and
(l) No Loan Account is payable other than in U.S. dollars.
5.2 Inspection of Loan Accounts. Any of Agent's and/or Lenders' officers,
employees or agents shall have the right, at any time or times hereafter, in
Agent's and/or Lenders' name or in the name of a nominee of Agent, to verify the
validity, amount or any other matter relating to any Loan Accounts by mail,
telephone, telegraph or otherwise. All reasonable costs, fees and expenses
relating thereto incurred by Agent (or for which Agent becomes obligated) shall
be part of the Secured Obligations, payable by Borrower to Agent on demand.
5.3 Records. Borrower shall keep accurate and complete Records relating
to its Loan Accounts, which Records shall be made available to Agent, and to any
representative of Agent or one or both of Lenders, at all times hereafter
(during Borrower's customary business hours) for Agent's inspection, copying,
verification or otherwise.
5.4 Cash Collateral Accounts. All payments made with respect to Loan
Accounts, whether by or on behalf of Obligor or assignees of such Loan Accounts,
shall be made to lockbox or other depositary accounts established for such
purposes, as to which one or more representatives of Agent shall be the only
authorized signatory or signatories ("CASH COLLATERAL ACCOUNTS"). One or more
Cash Collateral Accounts, as Agent may determine in its sole and absolute
discretion, shall be established to receive payments with respect to each Loan
Portfolio. The Cash Collateral Accounts shall be at Agent and/or such other
banks or financial institutions as Lenders shall determine in their sole and
absolute discretion. A separate account
31
agreement shall be established for each Cash Collateral Account, which shall
authorize Agent in its sole and absolute discretion to debit balances in such
account. All Cash Collateral Accounts currently in existence, together with all
other deposit accounts of Borrower are identified on Exhibit E hereto. Unless an
Event of Default or Unmatured Default has occurred and is continuing, funds in
each Cash Collateral Account shall be paid to Agent no less often than weekly
and applied to the Secured Obligations in accordance with the provisions of
Section 3.5. All costs, fees and expenses paid or incurred by Agent with respect
to Cash Collateral Accounts established at other banks or financial
institutions, and all costs, fees and expenses customarily imposed upon such
accounts by Agent with respect to Cash Collateral Accounts established at Agent,
shall be part of the Secured Obligations, payable by Borrower to Agent on
demand. Any other bank or financial institution at which a Cash Collateral
Account is established shall be deemed to be Agent's bailee with respect to
instruments and other forms of payment received in such Cash Collateral Accounts
and shall waive all rights of set-off with respect to such Cash Collateral
Accounts. Borrower covenants and agrees promptly following acquisition by
Borrower of each Loan Portfolio to deliver written direction to each Obligor
under the Loan Accounts in such Loan Portfolio that all payments with respect to
such Loan Accounts shall be delivered to the applicable Cash Collateral
Account(s). Copies of all such written directions shall be retained by Borrower
during the term hereof as Records.
5.5 Required Notices. Unless Agent notifies Borrower in writing (with a
copy to the Other Lenders) that Agent suspends any one or more of the following
requirements, Borrower shall promptly upon Borrower's learning thereof, inform
Agent, in writing, of (i) any material delay in Borrower's performance of any of
its obligations to any Obligor, (ii) any assertion of any claims, offsets or
counterclaims by any Obligor and of any allowances, credits and/or other monies
granted by Borrower to any Obligor, (iii) any assertion by an Obligor that a
Loan Account is a Fraudulent Receivable.
5.6 Rights of Lenders. Agent shall have the right, now and at any time or
times hereafter, in its sole and absolute discretion, upon notice thereof to
Borrower: (a) to notify any or all Obligors that the Loan Accounts and Special
Collateral have been assigned to Agent and that Agent has a security interest
therein; (b) to direct such Obligor to make all payments due from them to
Borrower upon the Loan Accounts and Special Collateral directly to Agent; (c) to
enforce payment of and collect, by legal proceedings or otherwise, the Loan
Accounts and Special Collateral in the name of Agent and Borrower; and (d) to
take control, in any manner, of any item of payment or proceeds referred to in
Section 4.5 above.
5.7 Appointment of Attorney-In-Fact. Borrower, irrevocably, hereby
designates, makes, constitutes and appoints Agent (and all Persons designated by
Agent) as Borrower's true and lawful agent and attorney-in-fact, with power,
without notice to Borrower and at such time or times hereafter as Agent, in its
sole and absolute discretion, may determine, in Borrower's or Agent's name: (a)
to demand payment of the Loan Accounts and Special
32
Collateral; (b) to enforce payment of the Loan Accounts and Special Collateral
by legal proceedings or otherwise; (c) to exercise all of Borrower's rights and
remedies with respect to the collection of the Loan Accounts and Special
Collateral; (d) to settle, adjust, compromise, extend or renew the Loan Accounts
and Special Collateral; (e) to settle, adjust or compromise any legal
proceedings brought to collect the Loan Accounts and Special Collateral; (f) to
sell or assign the Loan Accounts and Special Collateral upon such terms, for
such amounts and at such time or times as Agent deems advisable; (g) to
discharge and release the Loan Accounts and Special Collateral; (h) to take
control, in any manner, of any item of payment or proceeds referred to in
Section 4.5 above; (i) to prepare, file and sign Borrower's name on any notice
of lien, assignment or satisfaction of lien or similar document in connection
with the Loan Accounts and Special Collateral; (j) to prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or similar document against
any Obligor; (k) to do all acts and things necessary, in Agent's sole and
absolute discretion, to fulfill Borrower's Obligations under this Agreement; (l)
to endorse the name of Borrower upon any of the items of payment or proceeds
referred to in Section 4.8 and to deposit the same in the Dedicated Account; (m)
to endorse the name of Borrower upon any chattel paper, document, instrument,
invoice, freight bill, bill of lading or similar document or agreement relating
to the Loan Accounts and Special Collateral; and (n) to sign the name of
Borrower to verifications of the Loan Accounts and Special Collateral and
notices thereof to Obligor.
5.8 Release of Loan Account Documentation. Once each week, Borrower may
withdraw from Agent's possession Loan Account Documentation with respect to one
or more Loan Accounts which at that time remain Collateral, solely for the
purpose of and as necessary to enforce collection of such Loan Accounts or in
connection with a bona fide proposed liquidation through assignment, sale or
transfer of such Loan Accounts to a party which is not an Affiliate of Borrower.
Borrower shall withdraw such Loan Account Documentation as Agent's trustee only
pursuant to delivery, and redelivery on a weekly basis with respect to Loan
Account Documentation which Borrower retains for more than one week, to Agent
and acceptance by Agent of a Trust Receipt in form and substance satisfactory to
Agent executed by the chief executive officer of Borrower or such other officer
of Borrower as may be acceptable to Agent in its sole and absolute discretion.
Borrower acknowledges and agrees that delivery of Loan Account Documentation to
Borrower and Borrower's possession thereof pursuant to Trust Receipts shall not
affect Agent's perfected first security interest in the related Loan Accounts.
Notwithstanding the foregoing, Agent shall not release to Borrower Loan Account
Documentation with respect to Loan Accounts representing more than 5% of the
then Book Value of the Loan Portfolio to which such Loan Account Documentation
relates. Once each week, Borrower may withdraw from Agent's possession Loan
Account Documentation with respect to one or more Loan Accounts which at that
time are eligible for release from Collateral because the underlying Loan
Accounts have then been fully collected, settled or
33
liquidated through assignment, sale or transfer to a party which is not an
Affiliate of Borrower. Borrower shall withdraw such Loan Account Documentation
only pursuant to delivery to and acceptance by Agent of a Collateral Release
Certificate in form and substance satisfactory to Agent and executed by the
chief executive officer of Borrower or such other officer of Borrower as may be
acceptable to Agent in its sole and absolute discretion. All Loan Account
Documentation delivered to Borrower, whether pursuant to Trust Receipts or
Collateral Release Certificates, shall be delivered at Borrower's expense, the
amount of which shall be part of the Secured Obligations, payable by Borrower to
Agent on demand.
6. OTHER COLLATERAL AND OTHER AGREEMENTS.
6.1 Checklist Items. The obligation of Lenders to make the Term Loans to
Borrower is subject to the condition precedent that, in addition to satisfaction
of the conditions set forth in Sections 6.2, 6.3, 6.4 and elsewhere in this
Agreement, Lenders shall have received all documents, instruments, agreement,
notes, mortgages, collateral assignments, evidences of Borrower's authority, and
all other instruments as Lenders shall, in their sole and absolute discretion,
request, including but not limited to all items on the documentation checklist,
attached hereto as Exhibit F ("DOCUMENTATION CHECKLIST").
6.2 Necessary Actions. The obligation of Lenders to make the Loans to
Borrower is subject to the further condition precedent that all proceedings
taken in connection with the transaction contemplated by this Agreement, and all
instruments, authorizations and other documents applicable thereto, shall be
satisfactory in form and substance to Lenders, in their sole and absolute
discretion.
6.3 Conditions Precedent to Loans. It shall be a condition precedent to
Lenders' obligation to make any Loan hereunder that the following documents,
instruments or security agreements in form and substance satisfactory to
Lenders, in Lenders' sole and absolute discretion, shall have been delivered to
Lenders.
(a) Guarantees. Each of the Guarantors, to wit, Geist and DFC Asset
Corp., contemporaneously with the execution and delivery of this Agreement, will
enter into and deliver to Agent, a joint and several guaranty of payment and
performance of the Secured Obligations. Such guaranties are incorporated herein
by reference and made a part hereof.
(b) Pledge of Subordinate Notes. The Guaranty of Geist shall be secured
by a pledge of the following promissory notes: (i) promissory note dated as of
September 19, 1995 in the original principal amount of $3,700,000 payable to
Geist made by DFC Asset Corp.; (ii)
34
cash flow note dated as of September 19, 1995 in the original principal amount
of $2,700,000 payable to Geist made by DFC Asset Corp.; (iii) cash flow note
dated as of September 19, 1995 in the original principal amount of $3,500,000
payable to Geist made by DFC Asset Corp.; (iv) cash flow note with respect to
DFSI dated September 19, 1995 payable to Geist made by DFC Asset Corp.; and (v)
receivables note with respect to DFSI receivables dated September 19, 1995
payable to Geist made by DFC Asset Corp., the original of which notes have been
delivered to Agent. Such pledge shall be evidenced by a pledge and security
agreement, in form and substance acceptable to Lenders, in their sole and
absolute discretion, to be entered into concurrently herewith.
(c) Pledge of Assets. The Guaranty of DFC Asset Corp. shall be secured by
a pledge of 100% of the issued and outstanding stock of Borrower and a security
interest in all other assets of DFC Asset Corp., except the stock of DPAI. DFC
Asset Corp shall grant to Agent, for the ratable benefit of Lenders, a security
interest in such stock and other assets, pursuant to the terms of one or more
pledge and security agreements in form and substance acceptable to Lenders, in
their sole and absolute discretion, entered into concurrently herewith. Said
agreements shall require, inter alia, that DFC Asset Corp. maintain its primary
banking relationship with ANB.
(d) Pledge of Partnership Interests. Borrower shall grant to Agent a
security interest in the general partnership interests of DFSLP, pursuant to the
terms of a pledge agreement in form and substance acceptable to Lenders, in
their sole and absolute discretion, executed concurrently herewith.
(e) Guaranty by FirstCity. To secure payment and performance of the
Secured Obligations, FirstCity shall, concurrently herewith, enter into a
guaranty of payment and performance of Borrower's Liabilities, in form and
substance acceptable to Lenders in their sole and absolute discretion.
(f) Deficiency Undertaking. In addition to guaranty of FirstCity pursuant
to Section 6.3(e), FirstCity shall, concurrently herewith, enter into a
deficiency undertaking, in form and substance acceptable to Lenders in their
sole and absolute discretion ("DEFICIENCY UNDERTAKING").
(g) Intentionally Deleted.
(h) Termination of Sale and Repurchase Agreements. All obligations of
Borrower to sell or otherwise transfer Loan Accounts to, or purchase or
otherwise acquire Loan
35
Accounts from, one or more of DPAI or any other Affiliate of any Credit Party
shall be terminated, and all amounts due thereunder, if any, shall have been
paid in full.
(i) Intentionally Deleted.
(j) Prior Fees and Expenses. All amounts payable to the Lenders with
respect to the Prior Loan Agreement shall have been paid in full.
(k) Reports. The Lenders shall have received from the relevant Corporate
Credit Parties and DPAI an analysis of all litigation (if any) to which any such
Corporate Credit Party or DPAI or any of their respective properties is a party
or subject, or by which Borrower of such Corporate Credit Party or DPAI is
otherwise affected; provided, however, that no such report must be provided with
respect to litigation in which the aggregate amount claimed is less than
$250,000.
(l) Insurance. There shall have been delivered to the Agent certificates
of insurance from Borrower's various insurers (and from those of DFC Asset
Corp.) naming the Agent and the Lenders as additional insured or Lenders loss
payable, as their interests may appear, and otherwise complying with the
requirements of Section 7 hereof and the comparable provisions of the guaranty
agreement executed by DFC Asset Corp.
(m) Legal Opinions. The Agent shall have received legal opinions,
addressed to the Lenders and dated the Closing Date, of counsel to the Borrower
and the other Corporate Credit Parties covering such matters as the Agent or any
Lender may reasonably request.
(n) Fees and Expenses. The fees referred to in Section 2.12(d) that are
payable concurrently with execution and delivery of this Agreement and the legal
fees and expenses of counsel for each of the Lenders in connection with the
transactions contemplated by this Agreement and the Prior Loan Agreement shall
(to the extent demand for payment thereof shall have been made) have been paid
in full.
(o) Financial Statements. Recent Financial Statements of each Credit
Party shall have been delivered to the Lenders.
(p) J-Hawk Servicing Agreement. The existing servicing agreement with
J-Hawk shall have been amended to provide that at any time when an Event of
Default or Unmatured Default exists no fee, costs or expenses shall be paid to
J-Hawk with respect to such servicing agreement, that such non-payment shall not
constitute a default or breach with respect to such servicing agreement, no
penalties or interest or other amount shall accrue as a result of such
36
non-payment and that such servicing agreement shall terminate upon written
notice from Lenders on or after the earlier of acceleration by Lenders of any of
Borrower's Liabilities hereunder or the Maturity Date if all of Borrower's
Liabilities are not then paid in full.
(q) First Lake Acquisition. Borrower shall have delivered to Lenders
evidence satisfactory to Lenders in their sole and absolute discretion that the
acquisition of assets by Borrower pursuant to that certain Asset Sale Agreement
between First Lake Corp. and Borrower, has closed.
6.4 Conditions Precedent to Each Advance. In addition to the foregoing,
prior to Lenders making of any and all Loans hereunder, including each Portfolio
Advance, if any, all of the following shall have been satisfied in a manner
satisfactory to Lenders:
(a) No change in the condition or operations, financial or otherwise, of
Borrower or any Affiliate, shall have occurred which change, in the sole and
absolute judgment of Lenders, may have a material adverse effect on Borrower or
such Affiliate or on any of the Collateral;
(b) No litigation shall be outstanding or have been instituted or
threatened which Lenders determine to be material against Borrower or any
Affiliate or any of the Collateral;
(c) All of the representations and warranties of Borrower set forth in
this Agreement and each of the Other Agreements to which Borrower as a party
shall be true and correct on the date of the contemplated Loan to the same
extent as originally made on such date;
(d) No Event of Default or Unmatured Default has occurred and is
continuing or would be created thereby;
(e) All UCC-1 and UCC-2 financing statements (including those naming DFC
Asset corp. as debtor) shall have been filed in the appropriate jurisdictions
and Agent shall have received evidence, in form and substance satisfactory to
Lenders thereof;
(f) A report of Petersen Consulting, L.P., meeting the conditions of
Section 8.3(d)(ix) shall have been delivered to the Lenders and been
satisfactory to them;
(g) All deficiencies, if any, with respect to conditions precedent to any
prior Loan shall have been corrected;
37
(h) No issuer of any legal opinion in connection with any Loan Document
or in connection with the making of any Loan shall have rescinded or qualified
any such legal opinion;
(i) No issuer thereof shall have rescinded or qualified any of the
financial statements, certificates, letters, reports or other documents
identified in this Section 6.
7. INSURANCE AND TAXES:
7.1 Insurance. Borrower, at its sole cost and expense, shall keep and
maintain: (a) policies of insurance against all hazards and risks ordinarily
insured against by other owners or users of properties in similar business or as
reasonably requested in writing by Agent; and (b) public liability insurance
relating to Borrower's ownership and use of its assets. All such policies of
insurance shall be in form, with insurers and in such amounts as may be
satisfactory to Agent. Borrower shall deliver to Agent the original (or
certified) copy of each policy of insurance, and evidence of payment of all
premiums for each such policy. Such policies of insurance (except those of
public liability) shall contain an endorsement, in form and substance acceptable
to Agent, showing loss payable to Agent. Such endorsement or an independent
instrument furnished to Agent, shall provide that all insurance companies will
give Agent at least thirty (30) days prior written notice before any such policy
or policies of insurance shall be altered or cancelled and that no act or
default of Borrower or any other Person shall affect the right of Agent to
recover under such policy or policies of insurance in case of loss or damage.
Borrower hereby directs all insurers under such policies of insurance (except
those of public liability) to pay all proceeds payable thereunder directly to
Agent. Borrower, irrevocably, appoints Agent (and all officers, employees or
agents designated by Agent) as Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance. In the event Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Agent, without
waiving or releasing any of Borrower's Obligations or any Event of Default or
Unmatured Default hereunder, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and
pay such premium and take any other action with respect thereto which Agent
deems advisable. All sums so disbursed by Agent, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall be part of
Borrower's Liabilities, payable by
38
Borrower to Agent on demand. The Agent and the Lenders shall also have been
named as additional insureds with respect to Borrower's liability insurance.
7.2 Payment of Charges. Borrower shall pay promptly, when due, all
Charges and Borrower shall not permit the Charges to arise or to remain unpaid,
and will promptly discharge the same. In the event Borrower, at any time or
times hereafter, shall fail to pay the Charges or to obtain such discharges as
required herein, Borrower shall so advise Lenders thereof in writing. Agent may,
without waiving or releasing any of Borrower's Obligations or any Event of
Default or Unmatured Default hereunder, in its sole and absolute discretion (but
with the other Lenders' consent), at any time or times thereafter, make such
payment, or any part thereof, or obtain such discharge and take any other action
with respect thereto which Lenders deem advisable. All sums so paid by Agent and
any expenses, including reasonable attorneys' fees, court costs, expenses and
other charges relating thereto, shall be part of Borrower's Liabilities, payable
by Borrower to Agent on demand. Notwithstanding the foregoing, Borrower may
permit or suffer the Charges to attach to Borrower's assets and may dispute,
without prior payment thereof, the Charges, on the conditions that (a) Borrower,
in good faith, shall be contesting the same in an appropriate proceeding
diligently pursued, (b) enforcement thereof against any assets of Borrower shall
be stayed and (c) appropriate reserves therefor shall have been established on
the Records of Borrower in accordance with generally accepted accounting
principles. In the event Borrower, at any time or times hereafter, shall fail to
pay the Charges required herein, Borrower shall so advise Lenders thereof in
writing; Lenders may, without waiving or releasing any of Borrower's Obligations
or any Event of Default or Unmatured Default hereunder, in their sole and
absolute discretion, at any time or times thereafter, make such payment, or any
part thereof, and take any other action with respect thereto which Lenders deem,
in their sole and absolute discretion, advisable. All sums so paid by Agent
and/or Lenders and any expenses, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be part of the Secured
Obligations, payable by Borrower to Agent on demand.
8. WARRANTIES, REPRESENTATIONS AND COVENANTS
8.1 General Representations. Except as disclosed in writing to Lenders in
Exhibit G attached hereto (with, as to each exception listed there, a reference
to which section and subsection in this Section 8.1 such exception applies)
("EXCEPTIONS TO GENERAL REPRESENTATION"), Borrower warrants and represents to
and covenants with Lenders that:
(a) Organization. Borrower is and at all times hereafter shall be a
corporation, duly organized and existing and in good standing under the laws of
the State of
39
Indiana and qualified or licensed to do business and in good standing in all
states in which the laws thereof require Borrower to be so qualified and/or
licensed, including without limitation the State of Illinois and the State of
Texas;
(b) Corporate Power. Borrower, has the right, power and capacity
and is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and the Other Agreements, as applicable;
(c) Violation of Organizational Documents. The execution, delivery
and/or performance by Borrower, of this Agreement and the Other Agreements, as
applicable, shall not, by the lapse of time, the giving of notice or otherwise,
constitute a violation of any applicable law or a breach of any provision
contained in the articles of incorporation or by-laws of Borrower, or contained
in any agreement, instrument or document to which Borrower, is now or hereafter
a party or by which it or any of its assets is or may become bound;
(d) Enforceability. This Agreement and the Other Agreements are and
will be the legal, valid and binding agreements of Borrower enforceable in
accordance with their terms, except as enforcement thereof may be subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and to general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law);
(e) Borrower is Subsidiary. Borrower is, and at all times during
the term hereof shall be, a wholly-owned Subsidiary of DFC Asset Corp. There
are, and at all times during the term hereof shall be, 150 shares of issued and
outstanding common stock of Borrower. The shares of stock pledged by DFC Asset
Corp. pursuant to the pledge agreement delivered in accordance with Section 6.3
hereof shall all times during the term hereof represent 100% of the issued and
outstanding stock of Borrower;
(f) Organization of DFC Asset Corp. DFC Asset Corp. is and at all
times during the term hereof shall be a corporation, duly organized and existing
and in good standing under the laws of the State of Texas and qualified or
licensed to do business and in good standing in all states in which the laws
thereof require DFC Asset Corp. to be so qualified and/or licensed. DFC Asset
Corp is, and at all times during the term hereof shall be, a wholly-owned
Subsidiary of First City.
(g) Organization of DFSLP. DFSLP is, and at all times during the
term hereof shall be, a limited partnership duly organized and in good standing
under the laws of
40
the State of Indiana and is qualified or licensed to do business and is in good
standing in all states in which the laws thereof require DFSLP to be so
qualified and/or licensed.
(h) Ownership of DFSLP. As of the date hereof and at all times
during the term hereof, the sole general partner of DFSLP is and shall be
Borrower and the sole limited partner of DFSLP is and shall be DPAI. Borrower
and DPAI now and at all times during the term hereof shall own such Partnership
Interests, free and clear of all liens and encumbrances other than the pledge of
Borrower's general partnership interest in DFSLP to Agent hereunder and the
pledge of DPAI's limited partnership interest in DFSLP to TLF.
(i) Fictitious Names. Each of the fictitious names, if any, used by
Borrower during the five (5) year period preceding the date of this Agreement is
set forth on Exhibit H attached hereto ("FICTITIOUS NAMES") and none of such
fictitious names are registered trademarks or tradenames with the U.S. Patent
and Trademark Office;
(j) Title. At all times following Borrower's acquisition thereof
until release thereof by Agent, Borrower shall have good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of all
liens, claims, security interests and encumbrances, except the Permitted Liens.
(k) Solvency. Borrower is now, and at all times hereafter shall be,
solvent and generally paying its debts as they mature and Borrower now owns, and
shall at all times hereafter own, property which, at a fair valuation, is
greater than the sum of its debt. Borrower now has, and shall have at all times
hereafter, capital sufficient to carry on its business and transactions and all
businesses and transactions in which it is about to engage;
(l) Proceedings. There are no actions or proceedings which are
pending or threatened against Borrower or any Guarantor which might result in
any material and adverse change in its financial condition or materially
adversely affect its assets or the Collateral or its ability to fully pay and
perform the Secured Obligations;
(m) Government Contracts. Borrower is not subject to the
renegotiation of any government contracts;
(n) Adequate Licenses. Borrower possesses adequate assets,
licenses, patents, copyrights, trademarks and tradenames to continue to conduct
its business as previously conducted by it and as contemplated in the
foreseeable future;
41
(o) Government Permits. Borrower has and is in good standing with
respect to all governmental permits, certificates, consents and franchises
necessary to continue to conduct its business as previously conducted prior to
the date hereof and to own or lease and operate its properties as now owned or
leased by it. None of said permits, certificates, consents or franchises contain
any term, provision, condition or limitation more burdensome than such as are
generally applicable to Persons engaged in the same or similar business as
Borrower;
(p) Charge Restrictions. Borrower is not a party to (nor are any of
its assets otherwise subject to) any contract or agreement or subject to any
charge, restriction, judgment, decree or order materially and adversely
affecting its business, property, assets, operations or condition, financial or
otherwise;
(q) Compliance with Laws. Borrower is not, and will not be during
the term hereof, in violation of any applicable statute, regulation, order or
ordinance of the United States of America, of any state, city, town,
municipality, county or of any other jurisdiction, or of any agency thereof,
including the Federal Reserve Board, in any respect materially and adversely
affecting its business, property, assets, operations or condition, financial or
otherwise;
(r) Compliance with Agreements. Borrower is not in default with
respect to any indenture, loan agreement, mortgage, deed or other similar
agreement relating to the borrowing of monies to which it is a party or by which
it is bound;
(s) Financials. The Financials (audited by independent auditors, in
the case of Borrower and FirstCity) heretofore delivered by Borrower or any
Affiliate to Lenders and/or Agent, fairly and accurately present the assets,
liabilities and financial conditions and results of operations of Borrower and
such other Persons described therein as, of and for the periods ending on such
dates and have been prepared in accordance with generally accepted accounting
principles and such principles have been applied on a basis consistently
followed in all material respects throughout the periods involved;
(t) Tax Returns. Borrower has filed or caused to be filed all tax
returns which are required to be filed, and has paid all Charges shown to be due
and payable on said returns or on any assessments made against it or any of its
property, and all other Charges imposed on it or any of its properties by any
governmental authority;
(u) No Adverse Change. There has been no material and adverse
change in the assets, liabilities or financial condition of Borrower since the
date of the Financials.
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(v) No Indebtedness.
(i) Except as disclosed in the most recent Financials
heretofore delivered by Borrower to Lenders and/or Agent, Borrower has no
Indebtedness (except for Indebtedness arising in the ordinary course of its
business since the dates reflected in the Financials that is not indebtedness
for borrowed money), has not guaranteed (other than as a result of the
endorsement of any instrument of items of payment for deposit or collection in
the ordinary course of business or as otherwise expressly permitted pursuant to
the terms hereof) the obligations of any Person, and there are no actions or
proceedings which are pending or, to the best of Borrower's knowledge,
threatened against Borrower which, in any of the foregoing cases, are reasonably
likely to result in any material adverse change in its financial condition or
materially adversely affect its assets or the Collateral or its ability to fully
perform and satisfy Borrower's Liabilities hereunder;
(ii) DFC Asset Corp. has no Subsidiaries other than DPAI and
Borrower and is neither a general or limited partner, directly or indirectly, of
any Person other than DFSLP. Neither DFC Asset Corp. nor DPAI nor DFSLP has
outstanding any Indebtedness for borrowed money,or any guarantee of any
Indebtedness for borrowed money, other than indebtedness to TLF under the
agreement referred to in the first sentence of Section 3.4 hereof. The amount
now outstanding to TLF under such agreement is $8,687,523; the maximum principal
amount of Indebtedness that may at any time be outstanding thereunder is
$25,000,000.
(w) No Liability on Lenders. The execution, delivery and
performance by Borrower of this Agreement and/or the Other Agreements will not,
except to the extent caused by independent actions of Lenders and/or Agent,
impose on or subject Lenders and/or Agent to any liability, whether fixed or
contingent, in respect of any Environmental Law relating to the operation of
Borrower's business. Lenders' and/or Agent's exercise of any of the rights or
remedies described in this Agreement or in any of the Other Agreements shall not
constitute a breach of any provision contained in any agreement, instrument or
document concerning the assignment or license of, or the payment of royalties
for, any patents, patent rights, tradenames, trademarks, trade secrets,
know-how, copyrights or any other form of intellectual property now or at any
time or times hereafter protected as such by any applicable law;
(x) Margin Stock. Borrower's execution and delivery of this
Agreement or any of the Other Agreements does not directly or indirectly violate
or result in a violation of the Securities Exchange Act of 1934, as amended, and
Regulations U, G, T and X of the Board of Governors of the Federal Reserve
System (12 CFR 221, 207, 220 and 224,
43
respectively), and Borrower does not own or intend to purchase or carry any
"MARGIN SECURITY," as defined in such Regulations;
(y) Affiliates. Borrower has no wholly owned Subsidiaries. Exhibit
I attached hereto ("AFFILIATES") is a true, accurate and complete schedule of
Borrower's Affiliates, together with a description of Borrower's relationship to
such Affiliate.
(z) Environmental Issues. To the best of Borrower's knowledge, no
real estate ("REAL PROPERTY") that is collateral for a Loan Account has ever had
hazardous wastes or substances used on or in them in a manner which violates any
Environmental Law and that all of the Real Property is free of any hazardous
waste or substance. Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission resulting in the
releasing, or otherwise disposing of hazardous waste or hazardous substances
into the environment with respect to any of such Real Property collateral.
Concurrently herewith Borrower will execute an Environmental Indemnity
Agreement.
(aa) Leases; Real Property. Attached hereto as Exhibit J ("LEASES,
OPTIONS AND REAL PROPERTY") is a true, accurate and complete schedule of all
Leases and Options to which Borrower is a party and all Real Property owned by
Borrower.
(ab) Investment Company Act and Public Utility Holding Company Act.
Neither the Borrower nor any Affiliate nor the entering into of the Loan
Documents nor the issuance of the Notes is subject to any of the provisions of
the Investment Company Act of 1940, as amended. Neither the Borrower nor any
Affiliate is a "holding company" as defined in the Public Utility Holding
Company Act of 1935, as amended, or subject to any other federal or state
statute or regulation limiting its ability to insure Indebtedness for money
borrowed.
(ac) Disclosure. Neither this Agreement or any Loan Document nor
any statement, list, certificate or other document or information, or any
schedules to this Agreement or any other Loan Document, delivered or to be
delivered to the Agent or any Lender, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
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(ad) Qualification.
(i) Solely by reason of (and without regard to any other
activities of the Agent or any Lender in any state in which Collateral is
located) the entering into, performance and enforcement of this Agreement, the
Notes and the other Loan Documents by the Agent or any Lender will not
constitute doing business by the Agent or any Lender in any of such states or
result in any liability of the Agent or such Lender for taxes or other
governmental charges; and qualification by the Agent or any Lender to do
business in such jurisdiction is not necessary in connection with, and the
failure to so qualify will not affect, the enforcement of, or exercise of any
rights or remedies under, any of such documents.
(ii) No "business activity," "doing business" or similar
report or notice is required to be filed by the Agent or any Lender in any such
jurisdiction in connection with the Loans or the transactions contemplated by
this Agreement, and the failure to file any such report or notice will not
affect the enforcement of, or the exercise of any rights or remedies under, this
Agreement or any of the other Loan Documents.
8.2 Financial Covenants.
(a) At all times during the term hereof, Borrower shall maintain
Tangible Net Worth equal to at least Four Million Dollars ($4,000,000).
(b) At all times during the term hereof, DFC Asset Corp. shall
maintain Tangible Net Worth determined on a consolidated basis equal to at least
Three Hundred Thousand Dollars ($300,000).
(c) Borrower warrants and represents to and covenants with Lenders
that, now and at all times hereafter, (i) the aggregate Estimated Remaining
Collections of each then existing Revolving Loan Portfolio owned by Borrower
shall be at least 182% of the principal portion then outstanding of Borrower's
Liabilities represented by the Revolving Loan made by Lenders to Borrower
pursuant to Section 3.1 (including, for this purpose, any Protective Advances in
respect thereof) with respect to such Revolving Loan Portfolio; (ii) the
aggregate Estimated Remaining Collections of all then existing Term Loan
Portfolios shall be at least 154% of the principal portion then outstanding of
Borrower's Liabilities represented by the Term Loans; and (iii) the aggregate
principal portion of Borrower's Liabilities outstanding shall be at least 250%
of the principal portion of Borrower's Liabilities outstanding that represents
Loans with respect to Loan Portfolios which are secured by Real Property. In the
event of a breach of such warranty, representation and covenant, Borrower,
immediately, shall pay to Lenders an amount of money sufficient to cure the same
and/or if both Lenders agree,
45
in their sole and absolute discretion, deliver to Agent as additional Collateral
Certificate(s) of Deposit of Agent in an amount at least equal the amount of
money sufficient to cure the same and/or Agent, in its sole and absolute
discretion, may pay to itself for the ratable benefit of Lenders, for the
account of Borrower, from monies, reserves and proceeds received or collected by
Agent pursuant to Section 4.9 above, an amount necessary to satisfy (in whole or
in part) the foregoing requirement. Notwithstanding the provisions of Section
9.1, if Borrower does not timely make such payment or if the funds referred to
in the preceding sentence above are not sufficient therefor, the same shall be
deemed an Event of Default or Unmatured Default by Borrower under this
Agreement.
8.3 Affirmative Covenants. In addition to and not in lieu of those
covenants contained in other provisions of this Agreement, Borrower covenants
and agrees with Lenders and Agent that Borrower shall, unless Lenders otherwise
consent thereto in writing, do all of the following during the term hereof:
(a) Representation and Warranties. To the extent any representation
or warranty contained herein refers to an event or state of facts which exists
on the date hereof and shall exist during the term hereof or at the time of each
Advance hereunder, said representation or warranty shall be deemed to be an
affirmative covenant by Borrower to take all actions, omit to take such actions
or cause such actions to be taken which shall be necessary or desirable to cause
such representation or warranty to be true and accurate at all times during the
term hereof.
(b) Operating Accounts. Borrower shall maintain and shall cause DFC
Asset Corp. to maintain its primary banking relationship with ANB, including
without limitation maintaining all operating accounts of Borrower and/or DFC
Asset Corp. with ANB.
(c) Corporate Existence. Borrower shall preserve and maintain its
corporate existence, rights, privileges and franchises in the jurisdiction of
its incorporation or organization, and qualify and remain qualified to do
business in each other jurisdiction in which such qualification is necessary in
view of its business or operations.
(d) Records; Reports. Borrower covenants with Lenders that Borrower
shall keep Records and prepare financial statements and shall cause to be
furnished to Lenders the following (all of the foregoing and following which
comprise financial statements are to be kept and prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
Financials unless Borrower's certified public accountants concur in any changes
therein and such changes are consistent with then generally accepted accounting
principles).
46
(i) As soon as available but not later than ninety (90) days
after the close of each fiscal year of Borrower (including the fiscal year ended
December 31, 1995), a balance sheet of Borrower as at the end of, and the
related statement of operations, including income statement, for, such year and
a reconciliation of capital for such year, all certified on an unqualified basis
by a firm of independent certified public accountants selected by Borrower and
acceptable to Lenders, in Lenders' sole and absolute discretion.
(ii) Concurrently with the delivery of the financial
statements described in Section (i) above for fiscal years ending after December
31, 1995: (A) a certificate of the aforesaid certified public accountants
certifying to Lenders that based upon their examination of the affairs of
Borrower, performed in connection with the preparation of said financial
statements, they are not aware of the occurrence or existence of any condition
or event which constitutes an Event of Default or Unmatured Default, or, if they
are aware thereof, the nature thereof, and (B) a reliance letter executed by an
authorized partner of the aforesaid certified public accountants, in form and
substance reasonably acceptable to Lenders, and acknowledging that Lenders may
rely on such financial statements in connection with this Agreement
notwithstanding that Lenders are not in privity with such certified public
accountants in connection with such financial statements.
(iii) As soon as available, but not later than thirty (30)
days after the end of each calendar year, financial statements, in form and
substance reasonably acceptable to Lenders, including income statements and
balance sheets, as at the end of such calendar year, of each of Geist and DFC
Asset Corp., DPAI and DFSLP.
(iv) As soon as available but not later than thirty (30) days
after the end of each calendar month hereafter, a balance sheet of Borrower (and
of DFC Asset Corp., DPAI and DFSLP) as at the end of, and the related statement
of operations for, the portion of such Person's fiscal year then elapsed, all
certified by the chief financial officer of such Person's to be prepared in
accordance with generally accepted accounting principles and to present fairly
the financial position and results of operations of such Person for such period.
(v) Concurrently with delivery to its shareholders or any
other equity owners or Affiliates of Borrower by any Corporate Credit Party,
copies of all financial and other information delivered by such Corporate Credit
Party to such Persons, including without limitation with respect to FirstCity,
its proxy statements and annual reports to stockholders. Concurrently with
delivery to the Securities Exchange Commission ("SEC") by FirstCity, copies of
all reports filed by FirstCity with the SEC, including without limitation, all
reports on Forms 10K, 10Q or 8K promulgated under the Securities Exchange Act of
1934, as amended.
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(vi) As soon as available, but not later than thirty (30) days
after the end of each month, a reconciliation statement in form and substance
acceptable to Lenders, certified as true, accurate and complete by the chief
financial officer of Borrower, setting forth with respect to each Loan Portfolio
the total amount of funds: (A) deposited into the applicable Cash Collateral
Account; (B) collected by or on behalf of Borrower during such month; and (C)
collected to date (both the amount and the percentage of such Loan Portfolio's
Book Value, as set forth in the Loan Advance Certificate, that such amount
represents). Each such reconciliation statement shall be prepared in accordance
with the manner in which Book Value of the applicable Loan Accounts was
determined for the purposes of preparing the Loan Advance Certificate in
connection with acquisition of such Loan Accounts.
(vii) With respect to each Loan Portfolio, a Monthly
Performance Report in form and substance acceptable to Lenders, certified as
true, accurate and complete by the chief financial officer of Borrower, setting
forth in reasonable detail the payment, settlement and transfer activity with
respect to each Loan Account in such Loan Portfolio and aggregate Estimated
Remaining Collections with respect to each such Loan Portfolio and each Loan
Account comprising such Loan Portfolio. Such performance reports shall be
delivered to Lenders within thirty (30) days following the close of each
calendar month during which any Loan Accounts comprising the applicable Loan
Portfolio remain Collateral. Such performance reports shall be prepared in
accordance with the manner in which Book Value and Estimated Remaining
Collections of the applicable Loan Portfolio and Loan Accounts were determined
for the purposes of preparing the Loan Advance Certificate in connection with
acquisition of such Loan Portfolio.
(viii) With respect to all loan portfolios owned by either
DPAI or DFSLP, a report of the current Estimated Remaining Collections from each
of such loan portfolios, certified as true and complete by the chief financial
officer of DPAI or DFSLP, as applicable, identifying such loan portfolio and the
aggregate Estimated Remaining Collections of DPAI and DFSLP, respectively, and
otherwise in form and substance satisfactory to Lenders. Such reports shall be
delivered to Lenders within thirty (30) days following the close of each
calendar month and shall be prepared consistently from month to month.
(ix) Such other data and information (financial and otherwise)
as either Lender, from time to time, reasonably may request bearing upon or
related to the Collateral, Borrower's financial condition and/or results of
operations; including, without limitation, immediately prior to funding of the
Term Loans and no more often than once every twelve (12) months thereafter
(unless an Event of Default or Unmatured Default shall then exist, in which case
there shall be no limit on the number of such audits and review that the Lenders
can request), an audit and review of the Collateral which shall be conducted in
such scope and
48
result in such report(s) as may be satisfactory to Lenders in their sole and
absolute discretion, by Peterson Consulting L.P., or such other party as Lenders
may designate in their sole and absolute discretion, which audits shall be
performed at Borrower's sole cost and expense and with respect to which audits
Borrower covenants and agrees to fully cooperate at its own expense.
(e) Pay Debts. Borrower shall pay or discharge or otherwise satisfy
all Indebtedness at or before maturity or before the same becomes delinquent,
provided that Borrower shall not be required to pay any Indebtedness which is
unsecured while the same is being contested by it in good faith and by
appropriate proceedings so long as Borrower shall have set aside on its books
reserves in accordance with generally accepted accounting principles with
respect thereto and title to any property of Borrower is not jeopardized.
(f) Compliance with Laws. Borrower shall comply with all laws,
rules, regulations and governmental orders (federal, state and local), including
all Environmental Laws, having applicability to it or to the business or
businesses at any time conducted by it, where the failure to so comply would
have a material adverse effect, either individually or in the aggregate, on the
business, condition (financial or otherwise) and assets, operations or prospects
of Borrower.
(g) Perform Obligations. Borrower shall duly and punctually pay and
perform each of its obligations under this Agreement and the Other Agreements in
accordance with the terms thereof.
8.4 Negative Covenants. Borrower warrants and represents to and covenants
with Lenders that Borrower shall not, without Lenders prior written consent,
which Lenders may or may not give in their sole and absolute discretion,
concurrently or hereafter:
(a) Sell or Encumber Collateral. Grant a security interest in,
assign, sell or transfer any of the Collateral to any Person or permit, grant,
or suffer a lien, claim or encumbrance upon any of the Collateral, except: (i)
the Permitted Liens; or (ii) a sale, assignment or transfer of Loan Accounts
pursuant to Section 5.8; or (iii) from the date hereof through October 18, 1996,
the lien, claim and security interest created pursuant to the terms of that
certain Assignment of Deposit Account, dated April 18, 1996, by Borrower in
favor of TLF, but only to the extent of $750,000 on deposit in such deposit
account.
(b) Transactions with Affiliates. Purchase, acquire, settle or
liquidate one or more Loan Account(s) through assignment, sale or transfer to or
from one or more Affiliates of any Credit Party.
49
(c) Attachment. Permit or suffer any levy, attachment or restraint
to be made affecting any of its Assets or the Collateral;
(d) Receiver. Permit or suffer any receiver, trustee or assignee
for the benefit of creditors, or any other custodian to be appointed to take
possession of all or any of its Assets or any of the Collateral;
(e) Amend Organizational Documents. Make any material change: (i)
in Borrower's articles of incorporation, by-laws or capital structure, or (ii)
in any of its business objectives, purposes and operations, either by ceasing to
collect, service, settle and transfer Loan Portfolios or by undertaking
additional business activities;
(f) Merge. Merge or consolidate with, acquire (or sell Borrower to)
any Person, whether by sale of assets or sale or exchange of stock or purchase,
lease, or otherwise acquire all or any substantial part of the property or
assets of any Person,or permit any Subsidiary so to do, or purchase, lease or
otherwise acquire property or net assets in excess of $50,000 in any Fiscal
Year, or permit any Subsidiary so to do, other than Loan Portfolios purchased in
accordance with Section 3.1 hereof.
(g) Redeem Stock. Redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower's Stock or other evidence of ownership
interest of Borrower or any other corporation or partnership or any subordinated
debt of any Credit Party;
(h) Advance Transactions. Enter into any transaction not in the
ordinary course of business which materially and adversely affects Borrower's
ability to repay Borrower's Liabilities or any other Indebtedness, or materially
and adversely affects the Collateral;
(i) Investments. Make any investment in the Stock or obligations of
any Person.
(j) Pay Dividends. Except as expressly permitted pursuant to
Section 3.5, declare or pay dividends or other distributions upon any of
Borrower's Stock or make any distributions of Borrower's property or assets or
make any loans, advances and/or extensions of credit to any Persons;
(k) Terminate ERISA Plans. Terminate or withdraw from any pension
(or similar) plan so as to result in any material liability (in the sole and
absolute discretion of Agent) of Borrower to the Pension Benefit Guaranty
Corporation, or permit to exist any
50
occurrence of any Reportable Event (as defined in Title IV of the Employee's
Retirement Income Security Act of 1974 as the same may be amended and in effect
from time to time), or any other event or condition, which presents a material
risk (in the sole and absolute discretion of Agent) of such a termination by the
Pension Benefit Guaranty Corporation;
(l) Agreements with Affiliates. Attached hereto as Exhibit K
("AGREEMENTS WITH AFFILIATES"), is a true, accurate and complete schedule of all
service agreements, notes, or agreements between Borrower and its Affiliates.
Lenders hereby expressly consent to the performance by Borrower of said
agreements as in effect on the date hereof. Borrower shall not enter into any
other transactions with any Affiliate, including, without limitation, agreements
for the purchase, sale or exchange of property (including Loan Portfolios or
Loan Accounts) or the rendering of any services to or by any Affiliate, or enter
into, assume or suffer to exist any employment, management, administration,
advisory or consulting contract with any Affiliate or, in each of the foregoing
cases, with any officer, director or partner of any Affiliate (or a spouse or
other relative of any of them).
(m) Loan Servicing Agreement. Borrower has delivered to Lenders a
true, accurate and complete copy of the Servicing Agreement with J-Hawk,
together with all amendments thereto. Borrower shall not modify or amend (or
waive any rights with respect to) such Servicing Agreement without Lenders'
prior written consent. Borrower shall fully perform all of Borrower's
obligations under the terms of such Servicing Agreement and shall keep such
Servicing Agreement in full force and effect during the term hereof and shall
not terminate such Servicing Agreement or employ any other service agent,
without the prior written consent of Lenders; provided, however, that it shall
not be a breach of this section if such Servicing Agreement is terminated at a
time when an Event of Default or Unmatured Default exists and a successor
servicing agent, satisfactory to the Lenders, is appointed in its place.
(n) DFSLP Activities. Borrower will not cause or permit DFSLP to
acquire any loan obligations or otherwise to engage in any business activity
other than collection and settlement of loan obligations that DFSLP currently
owns, without first obtaining the prior written consent of Lenders, which will
not be unreasonably withheld.
(o) Indebtedness. Borrower will not contract, create, incur, assume
or suffer
51
to exist any Indebtedness or permit any of its Subsidiaries so to do; except for
(x) the Loans, (y) Indebtedness existing on the date hereof and reflected on the
Financials of the Borrower delivered on such date and (z) unsecured trade
payables to parties other than Affiliates incurred in the ordinary course of
business that do not exceed $375,000 in the aggregate at any time outstanding.
(p) Engage in Same Type of Business. Borrower will not enter into,
or permit any of its Subsidiaries to enter into, any business which is
substantially different from the business in which the Borrower is engaged on
the date hereof.
(q) Agreement Modifications. Borrower will not amend, extend or
otherwise modify, directly or indirectly, or waive any of its rights with
respect to, any of the following: the notes payable to Geist referred to in
Section 3.5(c); and the notes payable to J. Michael Hester referred to in
Section 6.3(g).
(r) DPAI Indebtedness. DPAI will not contract, create, incur assume
or suffer to exist any Indebtedness except for (x) Indebtedness to TLF existing
on the date hereof; (y) Indebtedness existing on the date hereof and reflected
on financial statements of DPAI delivered on such date and (z) unsecured trade
payables to parties other than Affiliates incurred in the ordinary course of
business that do not exceed $50,000 in the aggregate at any time outstanding.
9. DEFAULT
9.1 Events of Default. The occurrence of any one of the following events
shall constitute a default ("EVENT OF DEFAULT") by Borrower under this
Agreement:
(a) If Borrower fails or neglects to perform, keep or observe any
of Borrower's Obligations;
(b) If any representation, warranty or material statement, report
or certificate made or delivered by any Credit Party, or any of its directors,
officers, authorized employees or agents, to Lenders and/or Agent is not true
and correct; provided, however, that with respect to such obligations of Geist,
an Event of Default shall occur following five (5) days written notice thereof
to Borrower;
(c) If Borrower fails to pay any of Borrower's Liabilities, when
due and payable or declared due and payable;
52
(d) If the Collateral or any other of Borrower's Assets or the
assets of any Credit Party , or any portion thereof are attached, seized,
subjected to a writ of distress warrant, or are levied upon, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors and the same is not terminated or dismissed within sixty (60) days
thereafter;
(e) If a petition under any section or chapter of the United States
Bankruptcy Code or any similar law or regulation shall be filed by any Credit
Party or if any Credit Party shall make an assignment for the benefit of its
creditors or if any case or proceeding is filed by any Credit Party for its
dissolution or liquidation;
(f) If any Credit Party is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business affairs or if a petition under any section or chapter of the United
States Bankruptcy Code or any similar law or regulation is filed against any
Credit Party or if any case or proceeding is filed against any Credit Party for
its dissolution or liquidation and such injunction, restraint or petition is not
dismissed or stayed within sixty (60) days after the entry or filing thereof;
(g) If an application is made by any Credit Party for the
appointment of a receiver, trustee or custodian for any of its assets;
(h) If an application is made by any Person other than a Credit
Party for the appointment of a receiver, trustee, or custodian for any of its
Assets and the same is not dismissed within sixty (60) days after the
application therefor;
(i) If a notice of any Charge is filed of record with respect to
all or any of any Credit Party's assets, or if (except as permitted in Section
7.2 above) any Charge becomes a lien or encumbrance upon any of its assets and
the same is not released within sixty (60) days after the same becomes a lien or
encumbrance;
(j) If any Corporate Credit Party or DPAI is in default in the
payment of any Indebtedness (other than Borrower's Liabilities) and such default
is not cured within the time, if any, specified therefor in any agreement
governing the same and such default permits any holder or holders of such
Indebtedness (or a trustee, agent or other representative on behalf of such
holder or holders) to cause any of such Indebtedness evidenced thereby to become
due prior to its stated maturity or if any of such Indebtedness so becomes due
prior to its stated maturity;
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(k) The occurrence of a default or Event of Default or Unmatured
Default under any agreement, instrument and/or document executed and delivered
by any Guarantor to Agent or a Lender, which is not cured within the time, if
any, specified therefor in such agreement, instrument or document or any of the
Loan Documents shall fail to grant to the Agent on behalf of the Lenders the
lien or other security interest (if any) intended to be created thereby or any
Credit Party thereto shall assert that it is not liable with respect thereto; or
any Guarantor shall assert that it is not liable as a guarantor or otherwise
under its guarantee agreement (including, without limitation, the Deficiency
Undertaking) executed in connection herewith;
(l) The occurrence of an Event of Default under any of the Other
Agreements, which is not cured within the time, if any, specified therefor in
such Other Agreement; provided, however, that with respect to the obligations of
Geist, an Event of Default shall occur following five (5) days written notice
thereof to Borrower;
(m) If Borrower or DFC Asset Corp. fails to maintain its primary
banking relationship with ANB at any time during the term of this Agreement;
(n) If Borrower issues to or transfers to any Person, any stock of
Borrower, or any Person other than DFC Asset Corp. is a shareholder of the
Borrower, or any Person other than FirstCity is a shareholder of DFC Asset
Corp.;
(o) If Borrower acquires any Loan Portfolio in which a Loan Account
that is secured by Real Estate has an Allocated Purchase Price in excess of Five
Hundred Thousand Dollars ($500,000.00);
(p) If DFC Asset Corp. has not at any time provided to the
Borrower, in cash and as a capital contribution, the Borrower's Cost for the
acquisition of a Loan Portfolio; or
(q) If any final non-appealable judgment for the payment of money
in excess of $250,000 (after giving effect to any amount covered by insurance as
to which the insurer shall not have defied or questioned its obligation to pay)
shall be rendered against the Borrower or DFC Asset Corp.; or final judgment for
the payment of money in excess of $250,000 shall be rendered against the
Borrower or DFC Asset Corp. and the same shall remain undischarged for a period
of thirty (30) days during which execution shall not be effectively stayed or
diligently contested in good faith by appropriate proceedings.
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9.2 Cumulate Remedies. All of Lenders' rights and remedies under this
Agreement and the Other Agreements and the other Loan Documents are cumulative
and non-exclusive.
9.3 Acceleration. Upon the occurrence of an Event of Default, and at any
time thereafter, if any Event of Default shall then be continuing, the Lenders
jointly may (and the Agent shall, if so instructed in writing by both Lenders)
by written notice to the Borrower: declare the principal of and accrued interest
on the Loans to be, whereupon the same shall forthwith become, due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided that if any Event of Default
described in any of clauses (d)-(h) (inclusive) of Section 9.1 shall occur with
respect to the Borrower, the result which would otherwise occur only upon the
giving of written notice by the Agent or Lenders to the Borrower as herein
described shall occur automatically, without giving of any such notice.
9.4 Remedies. Upon the occurrence of an Event of Default Agent, for the
ratable benefit of Lenders, may in its sole and absolute discretion (and shall,
if so directed by both Lenders) exercise any one or more of the rights and
remedies accruing to a secured party under the UCC of the relevant state or
states and any other applicable law upon default by a debtor, including without
limitation the following:
(a) Enter, with or without process of law and without breach of the
peace, any premises where the Collateral is or may be located, and without
charge or liability to Lenders and/or Agent therefor seize and remove the
Collateral from said premises and/or remain upon said premises and use the same
for the purpose of collecting, preparing and disposing of the Collateral;
(b) Sell or otherwise dispose of the Collateral at public or
private sale for cash or credit, provided that Borrower shall be credited with
the net proceeds of such sale only when such proceeds are actually received by
Agent.
9.5 Assemble Collateral. Upon the occurrence of an Event of Default,
Borrower, immediately upon demand by the Lenders jointly or Agent at the written
instruction of both Lenders, shall assemble the Collateral and make it available
to Agent at a place or places to be designated by Agent or Lenders which are
reasonably convenient to Agent and Borrower. Borrower recognizes that in the
event Borrower fails to perform, observe or discharge any of Borrower's
Obligations, no remedy of law will provide adequate relief to Lenders, and
agrees that Lenders shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of posting bond or proving actual
damages.
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9.6 Notice of Sale. Any notice required to be given to Borrower by Agent
or one or both Lenders of a sale, lease, other disposition of the Collateral or
any other intended action by Agent, deposited in the United States mail, postage
prepaid and duly addressed to Borrower at its principal place of business
specified in Section 11.5 of this Agreement not less than five (5) days prior to
such proposed action, shall constitute commercially reasonable and fair notice
to Borrower thereof.
9.7 Postpone Sale. Upon the occurrence of an Event of Default, Borrower
agrees that Agent may, if Lenders deem it reasonable, postpone or adjourn any
such sale of the Collateral from time to time by an announcement at the time and
place of sale or by announcement at the time and place of such postponed or
adjourned sale, without being required to give a new notice of sale. Borrower
agrees that neither Agent nor any Lender has any obligation to preserve rights
against prior parties to the Collateral. Further, Borrower waives and releases
any cause of action and claim against Agent and Lenders as a result of Agent's
possession, collection or sale of the Collateral, any liability or penalty for
failure of Agent to comply with any requirement imposed on Agent relating to
notice of sale, holding of sale or reporting of sale of the Collateral, and, to
the extent permitted by law, any right of redemption from such sale.
9.8 WAIVER OF BOND. IN THE EVENT AGENT SEEKS POSSESSION OF THE COLLATERAL
THROUGH REPLEVIN OR OTHER COURT PROCESS, BORROWER HEREBY IRREVOCABLY WAIVES (A)
ANY BOND, SURETY OR SECURITY REQUIRED AS AN INCIDENT TO SUCH POSSESSION, AND (B)
ANY DEMAND FOR POSSESSION OF THE COLLATERAL PRIOR TO COMMENCEMENT OF ANY SUIT OR
ACTION TO RECOVER POSSESSION THEREOF.
9.9 Enforcement During Unmatured Default. Upon the occurrence and during
the existence of any one of the events described in Section 9.1 above,
notwithstanding that the Loans have not yet been accelerated, both Lenders
jointly or the Agent at the written direction of Lenders, if they determine that
the Collateral or the payment of Borrower's Liabilities is jeopardized, may
enforce such of its rights and remedies under this Article as Agent or Lenders
deems necessary or proper.
10. AGENT
10.1 Appointment of Agent. The Lenders hereby appoint Agent to act as
administrative agent and collateral agent of and for Lenders as specified in
this Agreement and the other Loan Documents. Each of the Lenders accepts and
agrees to all the terms and
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conditions of this Agreement and the other Loan Documents. Each of the Lenders
hereby irrevocably authorizes, and each holder of any Note by the acceptance of
a Note shall be deemed irrevocably to authorize, the Agent to take such action
on its behalf under the provisions of this Agreement and the other Loan
Documents and any other instruments and agreements referred to in this
Agreement, and to exercise such powers and to perform such duties under this
Agreement and the other Loan Documents, as are specifically delegated to or
required of the Agent by the terms of this Agreement and the other Loan
Documents, together with such powers as are reasonably incidental to this
Agreement and the other Loan Documents. The Agent agrees to act as the Agent on
behalf of the Lenders to the extent provided in this Agreement and the other
Loan Documents.
10.2 Delegation of Duties. The Agent may perform any of its duties under
this Agreement and the other Loan Documents by or through agents or employees
and shall be entitled to advice of counsel concerning all matters pertaining to
its duties under this Agreement and the other Loan Documents.
10.3 Nature of Duties. The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan Documents.
The duties of the Agent shall be mechanical and administrative in nature.
Nothing in this Agreement or any Loan Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Agent any obligations
in respect of this Agreement or any Loan Document, except as expressly set forth
in this Loan Agreement or in any of the other Loan Documents. EACH OF THE
LENDERS EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE AGENT SHALL NOT HAVE BY
REASON OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS A FIDUCIARY
RELATIONSHIP IN RESPECT OF ANY LENDER.
10.4 Actions in Discretion of Agent; Instructions from the Lenders.
(a) In addition to the powers and duties expressly delegated to the
Agent under this Agreement, and the other Loan Documents, the Agent agrees, upon
the written instructions of all the Lenders, to take any action of the type
specified in any such written instructions as being within the Agent's rights,
powers or discretion under this Agreement or any of the other Loan Documents.
(b) In the absence of instructions by the Lenders, and in the case
of actions to be taken, following three (3) Business Days prior written notice
to the Other Lender, the Agent shall have authority, in its sole and absolute
discretion, to take or not to take any of the following actions: (i) to accept
additional security or instruments of further assurance; (ii) to limit any
right, power or authority reserved to or conferred upon the Borrower under this
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Agreement or any of the other Loan Documents; and (iii) to permit the Agent to
comply with any obligations imposed upon it by law.
(c) The Agent shall not, without the prior written consent of both
Lenders, (i) modify, amend, waive or release any right with respect to, any
covenant set forth in this Agreement or the occurrence or existence of an Event
of Default described in Section 9.1 of this Agreement, or (ii) amend, waive or
modify any other provisions of the Loan Documents, or (iii) release any
Collateral or any collateral under any of the other Loan Documents or any
Guarantor or other Credit Party from its obligations under the Loan Agreement,
except as may be expressly permitted under this Agreement or the other Loan
Documents, including without limitation, pursuant to Section 5.8.
(d) Any action taken pursuant to written instructions or discretion
in accordance with the terms of this Section shall be binding on Lenders. No
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting under this Agreement or the other
Loan Documents in accordance with the instructions of the Lenders (or in the
case of ANB as agent, in accordance with its instructions) as provided in this
Agreement, or in the absence of such instructions, in the sole and absolute
discretion of the Agent (except to the extent such instructions are required by
Section 10.4(c) or other applicable provisions of this Agreement). So long as
the Agent shall obtain any consents expressly required under this Section 10.4
and other applicable provisions of this Agreement, the failure by the Agent to
take any action recommended by any one Lender shall not create a cause of action
against the Agent or create any claim or right on behalf of the Lenders, or any
one or more of them. The provisions of this Section 10.4 are for the benefit of
the Agent and the Lenders and are not intended to, and shall not, inure to the
benefit of the Borrower or any third party.
10.5 Reliance by Agent. The Agent shall be entitled to rely upon any
writing, telegram, telecopy, telex or teletype message, resolution, notice,
consent, certificate, letter, cablegram, statement, or order or other document
or phone conversation by telephone or otherwise believed by it to be genuine and
correct and to have been signed, sent or made by an authorized person, and upon
opinions of counsel and other professional advisers selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or under any of the other Loan Documents unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
10.6 Holders of Notes. The Agent may deem and treat any payee of any
Note as the owner thereof for all purposes under this Agreement and the other
Loan Documents unless and
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until written notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any legal entity who at the
time of making such request or giving such authority or consent is the holder of
any Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
10.7 Independent Credit Investigations. Each Lender expressly
acknowledges (a) that the Agent has not made any representations or warranties
to it and that no act by the Agent hereafter taken, including any review of the
affairs of the Borrower or any of its Affiliates, shall be deemed to constitute
any representation or warranty by the Agent to any Lender; (b) that it has made
and will make its own independent investigation of the financial condition and
affairs and its own appraisal of the credit-worthiness of the Borrower in
connection with the making and continuance of the Loans under this Agreement;
(c) that it has made its own independent investigation of the legal matters
relating to this Agreement and the other Loan Documents; and (d) that except
following the written request of a Lender the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect to the Borrower, whether
coming into its possession before the making of a Loan or at any time or times
thereafter.
10.8 Exculpatory Provisions. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it or them under this Agreement or any of the other
Loan Documents, or in connection with this Agreement or any of the other Loan
Documents, unless caused by its or their own gross negligence or willful
misconduct. In performing its functions and duties under this Agreement on
behalf of the Lenders, the Agent shall exercise the same care which it would
exercise in dealing with loans for its own account, but it shall not (a) be
responsible in any manner to any of the Lenders for the effectiveness,
enforceability, genuineness, validity or the due execution of this Agreement,
any other Loan Document or any of the Notes, or for any recital, representation,
warranty, document, certificate, report or statement in this Agreement or made
or furnished under or in connection with this Agreement or any other Loan
Document, or (b) be under any obligation to any of the Lenders to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of the Borrower, or the financial
condition of the Borrower, or the existence or possible existence of an Event of
Default or Unmatured Default.
10.9 Reimbursement and Indemnification. Each Lender agrees to reimburse
and indemnify the Agent (to the extent not reimbursed by the Borrower) ratably,
in proportion to its Lender's Commitment, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or
59
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent, in its capacity as such, in any way relating to or arising out of this
Agreement or any of the other Loan Documents or any actions taken or omitted by
the Agent under this Agreement or any of the other Loan Documents, provided that
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements if the same results from the Agent's gross negligence or willful
misconduct or if incurred as a result of the inclusion herein of Section 6.3(c)
(last sentence), Section 8.3(b), Section 9.1(m) or the requirement contained
therein. Without limitation of the foregoing, each Lender agrees to reimburse
the Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including attorney's fees) incurred by the Agent in connection with
the preparation, execution, administration or enforcement of, or the
preservation of any rights under, this Agreement and the other Loan Documents to
the extent that the Agent is not reimbursed for such expenses by the Borrower.
10.10 Agent in its Individual Capacity. With respect to its commitments,
the Loans made by it and any Note held by it, American National Bank and Trust
Company of Chicago shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not the Agent, and the terms "Lenders" or "holders" of a "Note"
shall, unless the content otherwise indicates, include the Agent in its
individual capacity.
10.11 Equalization of Lenders. The Lenders agree among themselves that,
with respect to all amounts received by any Lender for application on any
obligation hereunder or on the Notes, after the earlier of an exercise of any
Lender's rights of set-off or the acceleration of maturity of any of the Notes,
equitable adjustment will be made in the manner stated in the next succeeding
sentence so that, in effect, all such amounts will be shared ratably among the
Lenders, in proportion to the sum of the amounts then outstanding under the
Notes, whether received by voluntary payment, by realization upon security, by
the exercise of the right of set-off or banker's lien, by counterclaim or cross
action or any other non-pro rata source. Any Lender receiving any such amount
shall purchase for cash from the other Lenders an interest in their Notes, and
all other obligations of the Borrower to the Lenders, if any, in such amount as
shall result in a ratable participation by each of the Lenders in the aggregate
unpaid amount of all outstanding Notes then held by all of the Lenders, and all
other obligations of the Borrower to the Lenders under the terms hereof and the
other Loan Documents; provided that if all or any portion of such excess amount
is thereafter recovered from such Lender, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
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10.12 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and to the Borrower. Upon any such resignation,
the Lenders shall have the right to appoint a successor Agent (which shall be
the Other Lender if the Other Lender wishes to assume such role). If no
successor Agent shall have been so appointed, and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a commercial bank organized under the laws of the
United States of America or any State thereof and having a combined capital and
surplus of at least $100,000,000. Upon the acceptance by a successor Agent of
its appointment as Agent under this Agreement, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties under this Agreement. After any retiring Agent's resignation
under this Agreement as Agent, the provisions of this Section 10 and Section
11.27 shall inure to its benefit as to any actions taken or omitted by it while
it was Agent under this Agreement.
10.13 Direction to Agent to Close Initial Loans. The execution and
delivery of this Agreement by BOS constitutes the irrevocable consent and
direction of BOS to ANB executing and delivering as Agent on behalf of Lenders
those Loan Documents to be executed by or on behalf of Lenders, accepting
delivery of those Loan Documents to be delivered to Lenders, including, without
limitation, the Loan Documents to be delivered pursuant to Section 6 of this
Agreement, and to funding the Term Loans.
11. GENERAL
11.1 Settlement. Any check, draft or similar item of payment by or for
the account of Borrower delivered to Agent on account of Borrower's Liabilities
shall, provided the same is honored and final settlement thereof is reflected by
irrevocable credit to Agent, be applied by Agent on account of Borrower's
Liabilities on the second day after the date Agent actually receives the same.
11.2 Reaffirmation of Responsibilities. Borrower covenants, warrants and
represents to Lenders that all representations and warranties of Borrower
contained in this Agreement and the other Loan Documents shall be true at the
time of Borrower's execution of this Agreement and the Other Agreements, shall
survive the execution, delivery and acceptance thereof by the parties thereto
and the closing of the transactions described therein or related thereto and
shall be true from the time of Borrower's execution of this Agreement to the end
of the term hereof.
11.3 Service Fees. Borrower acknowledges that, in addition to the fees
set forth at Section 2.12 above, Agent will charge Borrower monthly service
charges for various services
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performed by Agent in connection with the Loans and/or any other aspects of the
relationship between Borrower and Agent, and Borrower hereby agrees with Agent
that if such service charges arising in any one month exceed the credit to
Borrower in that month arising from earnings attributable to funds on deposit
with Agent in demand deposit accounts, such service charge deficiency shall be
charged by Agent against Borrower's operating account.
11.4 Statement. Each statement of account by Agent delivered to Borrower
relating to Borrower's Liabilities shall be presumed correct and accurate and
shall constitute an account stated between Borrower and Agent unless Agent
subsequently corrects such statement of its own volition or, within thirty (30)
days after Borrower's receipt of said statement, Borrower delivers to Agent, by
registered or certified mail addressed to Agent at the address specified in
Section 11.5, written objection thereto specifying the error or errors, if any,
which Borrower asserts are contained in any such statement.
11.5 Notices. Any and all notices given in connection with this Agreement
shall be deemed adequately given only if in writing (which term, for all
purposes of this Agreement and the other Loan Documents, shall include telecopy)
and addressed to the party for whom such notices are intended at the address set
forth below. All notices shall be sent by personal delivery, Federal Express or
other over-night messenger service, first class registered or certified mail,
postage prepaid, return receipt requested or by other means at least as fast and
reliable as first class mail. A written notice shall be deemed to have been
given to the recipient party on the earlier of (a) the date it shall be
delivered to the address required by this Agreement; (b) the date delivery shall
have been refused at the address required by this Agreement; or (c) with respect
to notices sent by mail, the date as of which the postal service shall have
indicated such notice to be undeliverable at the address required by this
Agreement. Any and all notices referred to in this Agreement, or which either
party desires to give to the other, shall be addressed as follows:
IF TO BORROWER: Diversified Financial Systems, Inc.
5015 Speedway Drive
Fort Wayne, Indiana 46825
Attn: President
Telecopy: 219-482-2439
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WITH A COPY TO: Vander Woude Malone & Istre, P.C.
510 N. Valley Mills Drive
Suite 308
Waco, Texas 76710
Attn: F. John Istre, III, Esq.
Telecopy: 817-751-7725
IF TO LENDERS: Bank of Scotland
565 Fifth Avenue
New York, New York 10017
Attn: Loans Administration
Telecopy: 212-557-9460
and to
American National Bank and
Trust Company of Chicago
33 N. LaSalle Street
Chicago, Illinois 60690
Attn: Paul Carlisle, Vice President
Telecopy: 312-661-3566
WITH A COPY TO: Sachnoff & Weaver, Ltd.
Suite 2900
30 South Wacker Drive
Chicago, Illinois 60606
Attn: Frank Ballantine, Esq.
Telecopy: 312-207-6400
and to
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Sullivan & Worcester LLP
767 Third Avenue
New York, New York 10017
Attn: Mark Levine, Esq.
Telecopy: 212-758-2151
and to
Bank of Scotland
Chicago Representative Office
181 West Madison Street
Suite 4710
Chicago, Illinois 60602
Attn: Colin Ferguson
Telecopy: 312-263-1143
IF TO AGENT: American National Bank and Trust Company of
Chicago
33 N. LaSalle Street
Chicago, Illinois 60690
Attn: Paul Carlisle, Vice President
Telecopy: 312-661-3566
The above addresses may be changed by notice of such change, mailed as provided
herein, to the last address designated.
11.6 Reaffirmation of Warranties and Representations. Each request for an
Advance made by Borrower pursuant to this Agreement or the Other Agreements
shall constitute (i) an automatic warranty and representation by Borrower to
Lenders that there does not then exist an Event of Default or an Unmatured
Default, and (ii) a reaffirmation as of the date of said request for Advance
that each and every warranty and representation of Borrower contained in this
Agreement and in the Other Agreements is true and correct in all material
respects, except where such representation or warranty specifically relates to
an earlier date.
11.7 Survival of Warranties and Representations. Borrower covenants,
warrants and represents to Lenders that all representations and warranties of
Borrower contained in this Agreement and the Other Agreements shall be true at
the date hereof, and shall survive the execution, delivery and acceptance hereof
and thereof by the parties thereto and the closing of the transactions described
herein and therein or related hereto or thereto.
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11.8 Modification. This Agreement and the Other Agreements may not be
modified, altered or amended except by an agreement in writing signed by
Borrower and Lenders, or in accordance with the provisions of Section 10.4 by
Agent. Borrower may not sell, assign or transfer this Agreement or the Other
Agreements or any portion thereof, including, without limitation, Borrower's
rights, titles, interests, remedies, powers and/or duties hereunder or
thereunder. Borrower hereby consents to Lenders' sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or the Other Agreements, or of any portion thereof or participation
therein, including, without limitation, Lenders' rights, titles, interests,
remedies, powers and/or duties. However, as between ANB and BOS, neither
(without the prior written consent of the other) shall take any action referred
to in the previous sentence if the effect thereof would be to cause any such
purchaser, assignee or other transferee to become a "Lender" under this
Agreement.
11.9 No Waiver. Agent's or any Lender's failure at any time or times
hereafter to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Lenders or Agent of an Event
of Default or an Unmatured Default by Borrower under this Agreement or the Other
Agreements shall not suspend, waive or affect any other Event of Default or
Unmatured Default by Borrower under this Agreement or the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or the Other Agreements
and no Event of Default or Unmatured Default by Borrower under this Agreement or
the Other Agreements shall be deemed to have been suspended or waived by either
Agent or Lenders unless such suspension or waiver is by an instrument in writing
signed by an officer of each Lender and directed to Borrower specifying such
suspension or waiver.
11.10 Severability. If any provision of this Agreement or the Other
Agreements or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Agreements and the application of such provision to other Persons or
circumstances will not be affected thereby and the provisions of this Agreement
and the Other Agreements shall be severable in any such instance. In no event
shall interest be due under any of the Loans at a rate in excess of the highest
lawful rate. It is not the intention of the parties hereto to make any agreement
which shall violate the applicable laws of the State of Illinois, the United
States of America or any other state thereof relating to usury. In no event
shall Borrower pay or Lenders accept or charge any interest which, together with
any other charges upon the principal or any portion thereof howsoever computed,
shall exceed the maximum legal rate of interest allowable under the applicable
laws of the State
65
of Illinois, the United States of America or any state thereof. Should any
provisions of this Agreement or any of the Other Agreements be construed to
require the payment of interest which, together with any other charges upon the
principal, or any portion thereof, exceed such maximum legal rate of interest,
then any such excess shall be and is hereby expressly waived as interest and
shall be credited to the outstanding principal balance.
11.11 Successors or Assigns. This Agreement and the Other Agreements
shall be binding upon and inure to the benefit of the successors and assigns of
Borrower and Agent or Lenders. This provision, however, shall not be deemed to
modify Section 11.8.
11.12 Incorporation of Other Agreements. The provisions of the Other
Agreements are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in this Agreement and except as otherwise provided in the
Other Agreements by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the Other Agreements or the other Loan
Documents , Lenders shall have the right to elect, in their sole and absolute
discretion, which provision shall govern and control. Except to the extent
provided to the contrary in this Agreement and in the Other Agreements or the
other Loan Documents, no termination or cancellation (regardless of cause or
procedure) of this Agreement or the Other Agreements shall in any way affect or
impair the powers, obligations, duties, rights and liabilities of Borrower or
Lenders or Agent in any way or respect relating to (a) any transaction or event
occurring prior to such termination or cancellation, (b) the Collateral and/or
(c) any of the undertakings, agreements, covenants, warranties and
representations of Borrower contained in this Agreement or the Other Agreements.
All such undertakings, agreements, covenants, warranties and representations
shall survive such termination or cancellation.
11.13 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY LAW, BORROWER,
LENDERS AND AGENT EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER AGREEMENTS OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION HEREWITH. BORROWER HEREBY
EXPRESSLY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDERS TO
MAKE THE LOANS.
11.14 Designated Person. Until Lenders are notified by Borrower to
the contrary in accordance with Section 11.5, the signature upon this Agreement
or upon any of the Other
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Agreements of any officer, partner, manager, employee or agent of Borrower, or
of any other Person designated in writing to Agent by any of the foregoing, or
of a "DESIGNATED PERSON" (as that term is defined in Borrower's Secretary's
Certificate of even date herewith, constituting one of the Other Agreements)
shall bind Borrower and be deemed to be the duly authorized act of Borrower.
11.15 Attorney-in-Fact. Borrower hereby appoints Agent as Borrower's
agent and attorney-in-fact for the purpose of carrying out the provisions of
this Agreement and the Other Agreements, and taking any action and executing any
agreement, instrument or document which Agent or any Lender may deem necessary
or advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. All monies paid for the purposes herein, and all
costs, fees and expenses paid or incurred in connection therewith, shall be part
of the Secured Obligations, payable by Borrower on demand.
11.16 Attorneys' Fees and Expenses; Agent's Expenses. Borrower hereby
agrees that it shall reimburse Lenders, as part of the Secured Obligations, for
any and all reasonable costs and expenses (including, without limitation, the
reasonable fees and expenses of any counsel, accountants, appraisers or other
professionals) incurred by Lenders or any of them at any time, in connection
with: (a) the preparation, negotiation and execution of this Agreement, and all
Other Agreements and the other Loan Documents; (b) the preparation, negotiation
and execution of any amendment of or modification of this Agreement or the Other
Agreements and the other Loan Documents; (c) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Lenders, Borrower or any other
Person) in any way relating to the Collateral, any Collateral under the other
Loan Documents, this Agreement, the Other Agreements, and the other Loan
Documents, the Secured Obligations, or any Corporate Credit Party's affairs; (d)
any attempt to enforce any rights of Lenders against Borrower or any other
Person which may be obligated to Lenders by virtue of this Agreement or the
Other Agreements and the other Loan Documents, including, without limitation,
the Obligor and Guarantors; (e) any inspection, verification or audit of any of
the Collateral in accordance with this Agreement; (f) any action to protect,
collect, sell, liquidate or otherwise dispose of the Collateral or any
collateral under any of the other Loan Documents; and (g) performing any of the
obligations relating to or payment of any Borrower's Liabilities or Borrower's
Obligations hereunder in accordance with the terms hereof.
11.17 Acceptance. This Agreement and the Other Agreements are submitted
by Borrower to Lenders (for Lenders' acceptance or rejection thereof) at
Lenders' principal place of business as an offer by Borrower to borrow monies
from Lenders now and from time to time hereafter and shall not be binding upon
Lenders or become effective until and unless accepted by Lenders, in writing, at
said place of business. If so accepted by Lenders, this
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Agreement and the Other Agreements and the other Loan Documents shall be deemed
to have been made at said place of business. This Agreement and the Other
Agreements and the other Loan Documents shall be governed and controlled by the
laws of the State of Illinois as to interpretation, enforcement, validity,
construction, effect and in all other respects including, but not limited to,
the legality of the interest rate and other charges, but excluding choice of law
provisions and perfection of security interests which shall be governed and
controlled by the laws of the relevant jurisdiction.
11.18 Release of Collateral. Agent is hereby authorized and directed to
release the lien and security interest granted pursuant to the terms hereof and
in the Other Agreements (a) as to all Collateral, upon payment and performance
in full of all Secured Obligations, after notice to each of the Lenders, and (b)
as to any individual Loan Account or Loan Portfolio, upon receipt of 87.5% (100%
if an Event of Default or Unmatured Default then exists) of the proceeds from
sale, settlement or other final disposition of a Loan Portfolio, a Loan Account
and all collateral pledged therefor, without deduction therefrom of any
servicing or other fees, costs or expenses, and (c) any individual Loan Account
as to which the Book Value has been paid in full.
11.19 Knowledge. As used herein the phrase "TO THE BEST OF BORROWER'S
KNOWLEDGE" or words of such import shall mean all knowledge, including, actual
knowledge and knowledge of matters which any reasonable person in such position
knew or should have known, of the respective officers, directors and managers of
Borrower.
11.20 Waiver by Borrower. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT OR REQUIRED BY LAW, BORROWER WAIVES (A) PRESENTMENT, DEMAND AND
PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDERS AND/OR AGENT ON WHICH BORROWER
MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDERS
AND/OR AGENT MAY DO IN THIS REGARD; (B) ALL RIGHTS TO NOTICE AND A HEARING PRIOR
TO LENDERS' AND/OR AGENT'S TAKING POSSESSION OR CONTROL OF, OR TO LENDERS'
AND/OR AGENT'S REPLEVY, ATTACHMENT OR LEVY UPON THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDERS AND/OR
AGENT TO EXERCISE ANY OF LENDERS AND/OR AGENT'S REMEDIES; AND (C) THE BENEFIT OF
ALL VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.
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11.21 Governing Law. THIS AGREEMENT HAS BEEN DELIVERED FOR ACCEPTANCE BY
LENDERS IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF ILLINOIS. BORROWER HEREBY (a) IRREVOCABLY SUBMITS,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS OVER ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT; (b)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT; (c) AGREES THAT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT
ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (d) TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST ANY LENDER AND/OR AGENT OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED IN COOK COUNTY,
ILLINOIS. NOTHING IN THIS SECTION 11.21 SHALL AFFECT OR IMPAIR LENDERS' AND/OR
AGENT'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR LENDERS'
AND/OR AGENT'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR
BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
11.22 Service of Process. Borrower hereby irrevocably appoints and
designates CT Corporation System, Inc, 208 S. LaSalle Street, Chicago, Il 60604
as its true and lawful attorney-in-fact and duly authorized agent for service of
legal process and agrees that service of such process upon such agent and
attorney-in- fact shall constitute personal service of such process upon
Borrower.
11.23 Representation by Counsel. Borrower hereby represents that it has
been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the Other Agreements; that it has read and fully
understood the terms hereof; Borrower and its counsel have been afforded an
opportunity to review, negotiate and modify the terms of this Agreement, and
that it intends to be bound hereby. In accordance with the foregoing, the
general rule of construction to the effect that any ambiguities in a contract
are to
69
be resolved against the party drafting the contract shall not be employed in the
construction and interpretation of this Agreement.
11.24 Release of Lender. Borrower releases Lenders and Agent from any and
all causes of action or claims which Borrower may now or hereafter have for any
asserted loss or damage to Borrower claimed to be caused by or arising from: (a)
any failure of Agent and/or Lenders to protect, enforce or collect in whole or
in part any of the Collateral, including, without limitation, Lenders' and/or
Agent's failure to receive, review the contents of, to observe the absence of,
or to maintain or safely deliver all or any portion of the Loan Account
Documentation; (b) Lenders' and/or Agent's notification to any Obligor of
Agent's security interests in the Accounts and Special Collateral; (c) Lenders'
and/or Agent's directing any Obligor to pay any sums owing to Borrower directly
to Lenders; and (d) any other act or omission to act on the part of Lenders
and/or Agent, its officers, agents or employees, except for willful misconduct.
11.25 Invalidated Payments. To the extent that either Agent and/or
Lenders receives any payment on account of Borrower's Liabilities, or any
proceeds of Collateral are applied on account of Borrower's Liabilities, and any
such payment(s) and/or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, subordinated
and/or required to be repaid to a trustee, receiver or any other Person under
any bankruptcy act, state or federal law, common law or equitable cause, then,
to the extent of such payment(s) or proceeds received, Borrower's Liabilities or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment(s) and/or proceeds had not been received by
Agent and/or Lenders and applied on account of Borrower's Liabilities.
11.26 Superseded Prior Agreements. Upon payment by the Borrower of all
amounts owing to the Lenders in connection with the Prior Loan Agreement, this
Agreement and the Other Agreements supersede in their entirety any other
agreement or understanding between Lenders and Borrower with respect to loans
and advances made or to be made by Lenders, or either one or more of them and
all commitments of Lenders in connection therewith.
11.27 Reimbursement and Indemnification. Borrower agrees to reimburse and
indemnify the Agent (on behalf of itself) and each Lender from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against one or more
of the Agent, in its capacity as such, and any of Lenders in any way relating to
or arising out of this Agreement or any of the other Loan Documents or any
actions taken or omitted by the Agent or such Lenders under this Agreement or
any of the
70
other Loan Documents, provided that Borrower shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements if the same results from the
gross negligence or willful misconduct of the indemnified party. Without
limitation of the foregoing, Borrower agrees to reimburse the Agent (on behalf
of Lenders) promptly upon demand for any out-of-pocket expenses (including
attorney's fees) incurred by the Agent or one or more of Lenders in connection
with the preparation, execution, administration or enforcement of, or the
preservation of any rights under, this Agreement and the other Loan Documents.
11.28 Direction to Charge Borrower Accounts. The Borrower hereby
authorizes and directs the Agent and each Lender to charge any account of the
Borrower maintained at any office of the Agent or such Lender with the amount of
any principal, interest or fee when the same becomes due and payable under the
terms hereof or of the Notes; provided, however, that neither the Agent nor any
Lender shall be under any obligation to charge any such account.
11.29 Headings. The descriptive headings of the various provisions of
this Agreement and the other Loan Documents are inserted for convenience of
reference only and shall not be deemed to affect the meaning or construction of
any of the provisions hereof.
11.30 Computations of Interest. All computations of interest on the loans
shall be computed on the basis of a thirty (30) day month and a three hundred
sixty (360) day year.
11.31 Counterparts; Telecopies. This Agreement and the other Loan
Documents may be executed in any number of counterparts, and by the different
parties hereto and thereto on the same or separate counterparts, each of which
when so executed and delivered shall be deemed to be an original; all the
counterparts for each such Loan Document shall together constitute one and the
same agreement. Telecopied signatures hereto and to the other Loan Documents
shall be of the same force and effect as an original of a manually signed copy.
11.32 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Agent, the Lenders, the Borrower and their respective successors
and assigns (except as otherwise expressly provided herein) and nothing
contained herein shall be deemed to confer upon any Person other than the
Borrower and its successors and assigns any right to insist on or to enforce the
performance or observance of any of the obligations contained herein. All
conditions to the obligations of the Lenders to make Loans hereunder are imposed
solely and exclusively for the benefit of the Lenders and their respective
successors and assigns and no other Person shall have standing to require
satisfaction of such conditions in accordance with
71
their terms and no other Persons shall under any circumstances be deemed to be a
beneficiary of such conditions.
11.33 Domicile of Loans. Any Lender may make, maintain or transfer any of
its Loans hereunder to, or for the account of, any branch office, subsidiary or
affiliate of such Lender.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
BORROWER:
DIVERSIFIED FINANCIAL SYSTEMS, INC.,
AN INDIANA CORPORATION
By: /s/ John T. Parish
Name: John T. Parish
Title: President
LENDERS:
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Garrick L. Nielsen
Name: Garrick L. Nielsen
Title: Officer
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BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
Name: Catherine M. Oniffrey
Title: Vice President
AGENT:
AMERICAN NATIONAL BANK
TRUST COMPANY OF CHICAGO
By: /s/ Garrick L. Nielsen
Name: Garrick L. Nielsen
Title: Officer
73
EXHIBIT A
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
J-HAWK SERVICING AGREEMENT
EXHIBIT B
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
TERM LOAN PORTFOLIOS
EXHIBIT C
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
PERMITTED DISBURSEMENTS
EXHIBIT D
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
LOCATION OF ALL COLLATERAL
Borrower's Principal Place of Business:
5015 Speedway Drive
Fort Wayne, IN 46825
Other Locations where Collateral is kept, stored or located:
1. Diversified Financial Systems, Inc.
38 Pond Street, Suite 105
Franklin, MA 02038
2. Diversified Financial Systems, Inc.
1820 North Greenville Avenue, Suite 101
Richardson, TX 75081
3. American National Bank and Trust Company of Chicago
33 North LaSalle Street
Chicago, IL 60690
4. Norwest Bank Indiana, N.A.
111 East Wayne Street
Fort Wayne, IN 45502
EXHIBIT E
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
CASH COLLATERAL ACCOUNTS
EXHIBIT F
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
DOCUMENTATION CHECKLIST
EXHIBIT G
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
EXCEPTIONS TO GENERAL REPRESENTATIONS
NONE
EXHIBIT H
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
FICTITIOUS NAMES
EXHIBIT I
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
AFFILIATES
FirstCity Financial Corporation, a Delaware corporation ("FIRSTCITY"), qualified
to do business in Texas as a foreign corporation under the name of First City
Bancorporation of Texas, Inc.
DFC Asset Corporation, a Texas corporation and a wholly-owned subsidiary of
FirstCity ("DFC").
Diversified Financial Systems, Inc., an Indiana corporation and a wholly-owned
subsidiary of DFC ("DFSI").
Diversified Performing Assets, Inc., an Indiana corporation and a wholly-owned
subsidiary of DFC ("DPAI").
Diversified Financial Systems L.P., an Indiana limited partnership ("DFSLP").
The sole general partner of DFSLP is DFSI. The sole limited partner of DFSLP is
DPAI.
J-Hawk Servicing Corporation, a Texas corporation and a wholly-owned subsidiary
of FirstCity ("J-HAWK").
J-Hawk Corporation, a Texas corporation and a wholly-owned subsidiary of
FirstCity ("JHC").
All other subsidiaries of FirstCity.
EXHIBIT J
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
LEASES, OPTIONS AND REAL PROPERTY
EXHIBIT K
Attached to and Forming a
Part of Loan and Security Agreement
Dated as of
April 18, 1996
ANB and BOS, as Lenders
Diversified Financial Services, Inc., as Borrower
AGREEMENTS WITH AFFILIATES
1. J-Hawk Servicing Agreement.
2. Servicing Agreements attached hereto.