Exhibit 10.25
Fleet Fleet Bank
-----
as of December 1, 1996
Medallion Financial Corporation
205 East 42nd Street
New York, New York 10017
Att: Daniel Baker, Treasurer and CFO
Gentlemen:
We are pleased to advise you that Fleet Bank, N.A. (formerly NatWest Bank N.A.)
(the "Bank") has approved for the use of Medallion Financial Corporation (the
"Borrower") a revolving line of credit in the amount of $5,000,000 evidenced by
a certain Revolving Credit Note of even date herewith made by the Borrower to
the Bank in the form attached hereto as Exhibit A (as it may be amended from
time to time, the "Note"; unless otherwise defined herein, capitalized terms
shall be used as defined in the Note), upon the following terms and conditions:
1. Borrowing Base Limitation. (a) The revolving line of credit (the
-------------------------
"Line") shall consist of short-term loans ("Loans"). The aggregate principal
amount of Loans at any time outstanding under the Line shall not exceed the
lesser of $5,000,000 or the Borrowing Base Amount (hereinafter defined).
The "Borrowing Base" shall be the sum of (1) 100% of the aggregate outstanding
principal amount of the Borrower Loans, less (2) 100% of the aggregate
outstanding principal amount of any Borrower Loans that are secured in whole or
in part by real property or fixtures, less (and without double counting) (3)
100% of the aggregate outstanding principal amount of any Borrower Loans that
are made to an ongoing business concern for the purchase or finance of equipment
or fixtures to which the Borrower also retains a mortgage interest in real
property, less (4) the portion, if any, of the remaining Borrower Loans which
are more than 60 days past due.
2. Documentation. There shall be no extension of credit hereunder and
-------------
under the Note until there shall have been executed documentation acceptable to
the Bank, including without limitation the Note, a Security Agreement, and
appropriate UCC-1 financing statements.
3. Expenses. The Borrower will promptly pay all reasonable costs of the
--------
Bank in preparing this Line Letter, the Note, the Security Agreement and all
documents delivered in connection herewith and therewith including, without
limitation, the fees and expenses of counsel to the Bank in connection with the
preparation, execution and delivery, administration, interpretation and
enforcement hereof and thereof, and any amendments, consents and waivers
delivered or requested in connection herewith or therewith.
4. Governing Law. This letter agreement and each extension of credit
-------------
hereunder and under the Note shall be governed by and construed in accordance
with the laws of the State of New York and the Borrower hereby submits to the
jurisdiction of the United States federal courts and the courts of the State of
New York located in the Southern District of New York.
5. Acceptance. If the foregoing is acceptable, please have the enclosed
----------
copy of this letter, together with the Note, the Security Agreement and enclosed
UCC financing statements, signed by a duly authorized officer of the Borrower in
the spaces provided and returned to the Bank on or before December 11, 1996.
This letter shall be of no force or effect and shall be unenforceable against
the Bank unless signed and returned to the Bank together with such other
documents by such date.
Very truly yours,
FLEET BANK, N.A.
By: /s/ Michael B. Moschetta
-------------------------
(title)
Accepted and Agreed:
MEDALLION FINANCIAL CORPORATION
By: /s/ Daniel Baker, Treasurer
---------------------------
(title)
Exhibit A
FLEET BANK, N.A.
REVOLVING CREDIT NOTE
Office 175 Water Street
$5,000,000 Address: New York, NY 10038 as of December 1, 1996
FOR VALUE RECEIVED, MEDALLION FINANCIAL CORPORATION (the "Borrower")
promises to pay to the order of FLEET BANK, N.A. (formerly NATWEST BANK N.A.)
(the "Bank") on December 1, 1997 (the "Maturity Date") at the office of the Bank
located at the place first above stated or such other place as the holder hereof
may from time to time appoint in writing, in lawful money of the United States
of America in immediately available funds, the principal sum of FIVE MILLION
DOLLARS ($5,000,000) or such lesser amount as may then be the aggregate unpaid
principal balance of all loans made by the Bank to the Borrower hereunder and
under that certain Letter Agreement of even date herewith between the Bank and
the Borrower (as it may be amended from time to time, the "Letter Agreement") as
indicated on the schedule annexed hereto (each a "Loan" and collectively the
"Loans"). The Borrower also promises to pay interest (computed on the basis of a
360 day year for actual days elapsed) at said office in like money on the unpaid
principal amount hereof from time to time outstanding from the date hereof until
maturity at the rate set forth in Section 1(d) below.
In consideration of the granting of the Loans evidenced by this Note, the
Borrower hereby agrees as follows:
1. Revolving Credit Commitment.
----------------------------
(a) The loans evidenced by this Note may be procured in one or more
advances (each a "Loan" and collectively the "Loans") during the period (the
"Credit Period") which commences on the date hereof and ends on December 1, 1997
(the "Termination Date") in an aggregate principal amount up to, but not
exceeding at any time outstanding, the said principal sum of $5,000,000 (the
"Commitment"). During the Credit Period the Borrower may use the Commitment by
borrowing, prepaying in whole or in part and reborrowing, on a revolving basis,
all in accordance with the terms and conditions hereof provided, however, that
each such Loan or prepayment be in an amount not less than $50,000. Interest
shall be paid on the unpaid principal amount of each Loan from time to time
outstanding at a rate per annum, to be elected by the Borrower at the time each
Loan is made, which shall be either (i) a fluctuating rate equal to the Prime
Rate (the rate established from time to time by the Bank as its "prime rate")
which interest rate shall change when and as the Prime Rate changes (Loans
bearing interest at such fluctuating rate are hereinafter specifically called
"Prime Rate Loans"), (ii) a fixed rate of 1.30% plus the Eurodollar Rate for an
Interest Period of 1, 2, 3 or 6 months (a Loan bearing interest at this rate is
sometimes hereinafter
2
called a "Eurodollar Loan"), or (iii) such other fixed rate as may be agreed
upon between the Borrower and the Bank for an Interest Period which is also then
agreed upon (a Loan bearing interest at this rate is sometimes hereinafter
called an "Agreed Rate Loan" - Agreed Rate Loans and Eurodollar Loans are
sometimes collectively referred to as "Fixed Rate Loans"); provided, however,
that no interest period with respect to a Fixed Rate Loan shall extend beyond
the Maturity Date; and provided, further, that if prior to the end of any such
interest period the Borrower and the Bank fail to agree upon a new interest
period therefor so as to maintain such Loan as a Eurodollar Loan or an Agreed
Rate Loan within the pertinent time set forth in Section l(c)(i) hereof, such
Fixed Rate Loan shall automatically be converted into a Prime Rate Loan at the
end of such interest period and shall be maintained as such until a new Fixed
Rate and a new interest period therefor are agreed upon. Interest on each Loan
shall be payable monthly on the first day of each month commencing the first
such day to occur after a Loan is made hereunder and, together with principal,
on the maturity thereof. Interest on Fixed Rate Loans shall also be payable on
the last day of each Interest Period applicable thereto, and in the case of any
Interest Period exceeding three months, on each three month anniversary thereof.
(b) The date and amount of each Loan and of each prepayment of principal
shall be recorded by the Bank at the time of each Loan or prepayment on the
schedule annexed hereto. All such notations shall be presumed to be correct and
the aggregate net unpaid amount of Loans set forth in such schedule shall be
presumed to be the principal balance hereof.
(c) Each request for a Loan shall be subject to the satisfaction of the
following conditions precedent:
(i) Loan Requests. Requests for Eurodollar Loans, and for Interest
-------------
Periods subsequent to the initial Interest Period applicable thereto, shall be
made not less than three Business Days prior to the first day of each Interest
Period for each such Loan. Requests for Agreed Rate Loans and Prime Loans may be
made up until 1 p.m. on the date the Loan is to be made. Any request for a Loan
may be written or oral, but if oral, written confirmation thereof must be
received by the Bank within 3 Business Days thereafter.
(ii) No Event of Default, or event which would be an Event of Default
but for the giving of notice or the passage of time or both, has occurred and is
continuing; and all of the representations and warranties made by the Borrower
in Section 4 hereof shall be true and correct on and as of the date of such
request as if made on and as of such date.
(d) If any payment of principal and interest becomes due on a day on which
the banks in New York, New York, are required or permitted by law to remain
closed, such payment may be made on the next succeeding day on which such banks
are open, and such extensions shall be included in computing interest in
connection with such payment; provided, however, that if the result of any such
extension would be to extend the maturity date of any Eurodollar Loan into
another calendar month the payment shall be made on the
3
immediately preceding Business Day. The Borrower further agrees that after the
stated or any accelerated maturity of the Loans, Prime Rate Loans shall bear
interest (computed daily) at a rate of 2% per annum in excess of the rate
hereinbefore provided for Prime Rate Loans and Fixed Rate Loans shall bear
interest (computed daily) at a rate which shall be the greater of 2% per annum
in excess of the rate for Prime Rate Loans hereinbefore provided for or 2% per
annum in excess of the applicable Fixed Rate in effect at the time of such
maturity. In no event shall interest payable hereunder be in excess of the
maximum rate of interest permitted under applicable law.
(e) After the occurrence and during the continuation of any Event of
Default, no outstanding Loan may be converted into, or continued as, a Fixed
Rate Loan; accordingly, during such period, any outstanding Fixed Rate Loan
shall be automatically converted at the end of the Interest Period in effect for
such Fixed Rate Loan into a Prime Rate Loan.
2. Prepayment: Subject to the indemnity set forth in Section 3 hereof
-----------
with respect to Fixed Rate Loans, the Borrower may prepay any Loan at any time
in whole or in part without premium or penalty. Each prepayment shall be made
together with interest accrued thereon to and including the date of prepayment.
3. Indemnity and Yield Protection. The Borrower hereby agrees to
------------------------------
indemnify the Bank against any loss or expense which the Bank may sustain or
incur as a consequence of any of the following:
(a) the failure of the Borrower to borrow a Fixed Rate Loan after agreement
shall have been reached on the amount, interest rate and Interest Period
thereof;
(b) the receipt or recovery by the Bank, whether by voluntary prepayment,
acceleration or otherwise, of all or any part of a Fixed Rate Loan prior to the
last day of an Interest Period applicable thereto; or
(c) the conversion, prior to the last day of an applicable Interest Period,
of one type of Fixed Rate Loan into another type of Fixed Rate Loan or into a
Prime Loan.
Without limiting the effect of the foregoing, the amount to be paid by the
Borrower to the Bank in order to so indemnify the Bank for any loss occasioned
by any of the events described in the preceding paragraph, and as liquidated
damages therefor, shall be equal to the excess,discounted to its present value
as of the date paid to the Bank, of (i) the amount of interest which otherwise
would have accrued on the principal amount so received, recovered, converted or
not borrowed during the period (the "Indemnity Period") commencing with the date
of such receipt, recovery, conversion, or failure to borrow to the last day of
the applicable Interest Period for such Fixed Rate Loan at the rate of interest
applicable to such Loan (or the rate of interest agreed to in the case of a
failure to borrow) provided for herein (prior to default) over (ii) the amount
of interest which would be earned by the Bank during the Indemnity Period if it
invested the principal amount so received, recovered, converted or
4
not borrowed at the rate per annum determined by the Bank as the rate it would
bid in the London interbank market for a deposit of Eurodollars in an amount
approximately equal to such principal amount for a period of time comparable to
the Indemnity Period.
A certificate as to any additional amounts payable pursuant to this Section 3
setting forth the basis and method of determining such amounts shall be
conclusive, absent manifest error, as to the determination by the Bank set forth
therein if made reasonably and in good faith. The Borrower shall pay any amounts
so certified to it by the Bank within 10 days of receipt of any such
certificate. For purposes of this Section 3, all references to the "Bank" shall
be deemed to include any participant in the Commitment and/or Loans.
The indemnities set forth herein shall survive payment in full of all Fixed
Rate Loans and all other Loans made pursuant to this Note and the Letter
Agreement (as defined below).
4. Increased Costs. If the Bank determines that the effect of any
---------------
applicable law or government regulation, guideline or order or the
interpretation thereof by any governmental authority charged with the
administration thereof (such as, for example, a change in official reserve
requirements which the Bank is required to maintain in respect of loans or
deposits or other funds procured for funding such loans) is to increase the cost
to the Bank of making or continuing Fixed Rate Loans hereunder or to reduce the
amount of any payment of principal or interest receivable by the Bank thereon,
then the Borrower will pay to the Bank on demand such additional amounts as the
Bank may determine to be required to compensate the Bank for such additional
costs or reduction. Any additional payment under this section will be computed
from the effective date at which such additional costs have to be borne by the
Bank. A certificate as to any additional amounts payable pursuant to this
Section 4 setting forth the basis and method of determining such amounts shall
be conclusive, absent manifest error, as to the determination by the Bank set
forth therein if made reasonably and in good faith. The Borrower shall pay any
amounts so certified to it by the Bank within 10 days of receipt of any such
certificate.
5. Alternate Rate of Interest. In the event, and on each occasion, that
--------------------------
on the day two Business Days prior to the commencement of any Interest Period
for a Eurodollar Loan, the Bank shall have determined (a) that dollar deposits
in the amount of the requested principal amount of such Eurodollar Loan are not
generally available in the London interbank market, (b) that the rate at which
such dollar deposits are being offered will not adequately and fairly reflect
the cost to the Bank of making or maintaining such Eurodollar Loan during such
Interest Period, or (c) that reasonable means do not exist for ascertaining the
Eurodollar Rate, the Bank shall, as soon as practicable thereafter, give written
or telex notice of such determination to the Borrower. In the event of any such
determination, until the circumstances giving rise to such notice no longer
exist, no Eurodollar Loans will be made hereunder. Each determination by the
Bank hereunder shall be conclusive absent manifest error.
5
6. Change in Legality.
-------------------
(a) Notwithstanding anything to the contrary herein contained, if any
change in any law or regulation or in the interpretation thereof by any
governmental authority charged with the administration or interpretation thereof
shall make it unlawful for the Bank to make or maintain any Eurodollar Loan,
then, by written notice to the Borrower, the Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by the
Bank hereunder, whereupon the Borrower shall be prohibited from requesting
Eurodollar Loans from the Bank hereunder unless such declaration is subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to Prime Loans, in which event (x) all such Eurodollar Loans shall be
automatically converted to Prime Loans as of the effective date of such notice
as provided in paragraph (b) below and (y) all payments and prepayments of
principal which would otherwise have been applied to repay the converted
Eurodollar Loans shall instead be applied to repay the Prime Loans resulting
from the conversion of such Eurodollar Loans.
(b) For purposes of this Section 6, a notice to the Borrower by the Bank
pursuant to paragraph (a) above shall be effective, if lawful, on the last day
of the then current Interest Period; in all other cases, such notice shall be
effective on the day of receipt by the Borrower.
7. Facility Fee. As additional compensation for providing the Loans
------------
described herein, the Borrower agrees to pay to the Bank a non-refundable
facility fee in an amount equal to 1/4 of 1% of the Commitment, payable
quarterly in arrears.
8. Representations And Warranties. The Borrower hereby represents and
------------------------------
warrants to the Bank that:
(a) The Borrower is duly organized, validly existing and in good standing
under the laws of the state of its incorporation and is qualified to do business
and in good standing under the laws of each state where its failure to so
qualify would have a material adverse effect on the business, operations,
property or other condition of the Borrower. The Borrower is a closed-end
management investment company duly registered under the Investment Company Act
of 1940, as amended, and is duly licensed as a small business investment company
established under and operating in compliance with Title III of the Small
Business Investment Act of 1958, as amended, ( 15 U.S.C. 681 et seq.), and the
-- ---
regulations promulgated thereunder.
(b) This Note has been duly authorized, executed and delivered and
constitutes
the valid and legally binding obligation of the Borrower, enforceable in
accordance with its terms.
6
(c) The execution and delivery of this Note, and performance hereunder,
will
not violate any provision of law.
(d) There are no actions or proceedings pending before any court or
governmental authority, bureau or agency, with respect to or threatened against
or affecting the Borrower, which if determined adversely would have a material
adverse effect on the business, the assets or the financial condition of the
Borrower.
(e) The Borrower is not in default under, or in violation of, any term of
any agreement, ordinance, resolution, decree, bond, note, indenture, order or
judgment to which it is a party or by which it is bound, or by which any of the
properties or assets owned by it or used in the conduct of its business is
affected, which default or violation may have a material adverse effect on the
business, the assets or the financial condition of the Borrower. The operations
of the Borrower comply in all respects with all laws, ordinances and regulations
applicable to it.
(f) The Borrower is not a party to or bound by, nor are any of the
properties or assets owned by it or used in the conduct of its business affected
by, any agreement, ordinance, resolution, decree, bond, note, indenture, order
or judgment, or subject to any charter or other corporate restriction, which
materially and adversely affects the business, assets or financial condition of
the Borrower.
(g) All balance sheets, profit and loss statements and other financial
information heretofore furnished to the Bank are true, correct and complete and
present fairly the financial condition of the Borrower as at the dates thereof
and for the periods covered thereby, including contingent liabilities of every
kind, which financial condition has not materially adversely changed since the
date of the most recently dated balance sheet of the Borrower heretofore
furnished to the Bank.
(h) No part of the proceeds of the Loans will be used directly or
indirectly for the purpose of purchasing or carrying, or for payment in full or
in part of indebtedness which was incurred for the purpose of purchasing or
carrying, any margin stock as such term is defined in Sec. 221.2 of Regulation U
of the Board of Governors of the Federal Reserve System.
(i) The Borrower and its Subsidiaries are in compliance in all material
respects with the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and all rules and regulations thereunder. Neither the Borrower nor any
of its Subsidiaries has any unfunded vested liability under any type of plan
described in Section 4021(a) of ERISA ("Plan") and no reportable event, as set
forth in Section 4043(c) of ERISA, has occurred or is continuing with respect to
any Plan.
(j) None of the real property owned or leased by the Borrower or any of its
Subsidiaries that is a location of collateral pledged to the Bank (the "Real
Property")
7
contains, or to the best knowledge of the Borrower has previously contained, any
hazardous or toxic waste or substances or underground storage tanks in violation
of any applicable environmental law; the Real Property is in compliance with all
applicable environmental law; the Real Property is in compliance with all
applicable federal, state and local environmental standards and requirements
affecting such Real Property, and there are no environmental conditions which
could interfere with the continued use of the Real Property; the Borrower has
not received any notices of violations or advisory action by regulatory agencies
regarding environmental control matters or permit compliance; hazardous waste
has not been transferred from any of the Real Property to any other locations
which is not in compliance with all applicable environmental laws, regulations
or permit requirements; and with respect to the Real Property, there are no
proceedings, governmental administrative actions or judicial proceedings pending
or, to the best knowledge of the Borrower, contemplated under any federal, state
or local law regulating the discharge of hazardous or toxic materials or
substances into the environment, to which the Borrower is named as a party.
9. Financial Statements. The Borrower shall deliver to the Bank:
--------------------
(a) Annually, as soon as available, but in any event within 95 days after
the last day of each of its fiscal years, a copy of the Borrower's annual
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at such last day of the fiscal year, and consolidated and
consolidating statements of income and retained earnings and cash flows, for
such fiscal year, each prepared on a consolidating and consolidated basis in
accordance with generally accepted accounting principles consistently applied
and certified without qualification by a firm of independent certified public
accountants satisfactory to the Bank;
(b) At the same time as it delivers the certified financial statements
required by Section 5(a), the Borrower shall use its best efforts to deliver, a
certificate of the independent certified public accountants of the Borrower
addressed specifically to both the Borrower and the Bank to the effect that
during the course of their audit of the operations of the Borrower and its
condition as of the end of the fiscal year, nothing has come to their attention
which would indicate that an Event of Default hereunder, or an event with the
giving of notice or the lapse of time or both would constitute such an Event of
Default, has occurred or that there was any violation of the covenants of the
Borrower contained in this Note or the Letter Agreement, or, if such cannot be
so certified, specifying in reasonable detail the exceptions, if any, to such
statement, and stating that it is aware that the Bank is relying on such
financial statements;
(c) Promptly upon receipt thereof, copies of all other reports submitted to
the Borrower by its independent accountants in connection with any annual or
interim audit or review off the books of the Borrower made by such accountants;
(d) As soon as available but in any event within 50 days of the close of
each fiscal quarter of the Borrower, the consolidated and consolidating balance
sheets of the Borrower
8
as of the last day of such quarter, and consolidated and consolidating
statements of income and retained earnings and cash flows of the Borrower as of
the last day of and for such quarter and for the portion of the fiscal year then
elapsed, each such statement to be certified by the chief financial or
accounting officer of the Borrower, in each case as having been prepared in
accordance with generally accepted accounting principles consistently applied;
(e) copies of all notices, filings and other communications as and when
distributed to shareholders of the Borrower; and
(f) registration statements and any amendments and supplements thereto, and
any regular and periodic reports filed by the Borrower or any of its
Subsidiaries with any securities exchange or with the Securities and Exchange
Commission or any governmental authority succeeding to any or all of the
functions of the said Commission;
(g) monthly, and not later than the 15th day of each month, (i) an aging of
--
the accounts receivable of the Borrower displayed on a 30/60/90 day basis, and
(ii) a borrowing base certificate (in a format satisfactory to the Bank) for the
Borrower with a breakout indicating what percentage of aggregate Borrower Loans
(as defined below) constitute Medallion Loans and.what percentage constitutes
Commercial Loans (as such terms are defined below), each as of the last day of
the immediately preceding month. To the extent that any such document reveals
that, or at any time the Borrower has knowledge that, the aggregate obligations
then outstanding under this Note and the Letter Agreement are in excess of the
borrowing limitations set forth in Paragraph 1 of the Letter Agreement, the
Borrower shall then pay such excess to the Bank to be applied against its
obligations then outstanding to the Bank in such manner as the Bank in its sole
discretion may determine;
(h) such other statements and reports as shall be reasonably requested by
the Bank;
(i) At the same time as it delivers the financial statements required under
the provisions of Subsections 6(a) and 6(b), a certificate signed by the
president and the chief financial, or accounting, officer of the Borrower, to
the effect that no Event of Default hereunder or under any other agreement to
which the Borrower is a party or by which it is bound, or by which any of its
properties or assets may be affected, and no event which, with the giving of
notice or the lapse of time, or both, would constitute such an Event of Default,
has occurred.
10. Affirmative Covenants. So long as the Commitment remains in effect or
---------------------
there are any Obligations (as defined below) owing to the Bank, the Borrower
will:
(a) with respect to its properties, assets and business, maintain insurance
against loss or damage, to the extent that property, assets and businesses of
similar character are usually so insured by companies similarly situated and
operating like properties, assets or businesses with insurance companies
believed by the Borrower to be responsible;
9
(b) duly pay and discharge all taxes or other claims which might become a
lien upon any of its property except to the extent that such items are being in
good faith appropriately contested;
(c) maintain, preserve and keep its properties in good repair, working
order
and condition, and make all reasonable repairs, replacements, additions,
betterments and
improvements thereto;
(d) conduct its business in substantially the same manner and in
substantially the same fields as such business is now carried on and conducted;
it being expressly understood that the Borrower will deliver 60 days advance
written notice to the Bank of any material change to the conduct of the
Borrower's business, and the Bank shall, as a result of such impending change,
have the right, in its sole discretion, to make unilateral adjustments to the
calculation of the Borrowing Base Amount (as defined in the Letter Agreement)
without further notice to, or the consent of, the Borrower;
(e) comply with all statutes, rules and regulations and maintain its
corporate existence;
(f) permit the Bank to make or cause to be made (by a third party), at the
Borrower's sole cost and expense, (i) field audits of the Borrower on an annual
basis, and (ii) inspections and audits of any books, records and papers of the
Borrower and to make extracts therefrom at all such reasonable times and as
often as the Bank may reasonably require;
(g) use the proceeds of the Loans for the following purposes and for no
other purpose: for working capital purposes, including without limitation, for
the Borrower to make Medallion Loans and Commercial Loans (as such terms are
defined below);
(h) maintain at all times a ratio of the total Borrowing Base Amount (as
defined in the Letter Agreement) to outstanding debt of not less than 1.5 to
1.0;
(i) with respect to the Real Property, (1) indemnify the Bank against any
liability, loss, cost, damage, or expense (including, without limitation,
reasonable attorney's fees) arising from (i) the imposition or recording of a
lien by any local, state, or federal government or governmental agency or
authority pursuant to any federal, state or local statute or regulation relating
to hazardous or toxic wastes or substances or the removal thereof (an
"Environmental Law"); (ii) claims of any private parties regarding violations of
any Environmental Law; and (iii) costs and expenses (including, without
limitation, reasonable attorneys fees and fees incidental to the securing of
repayment of such costs and expenses) incurred by Borrower or any of its
Subsidiaries or the Bank in connection with compliance by Borrower or any of its
Subsidiaries or the Bank with any statute, regulation or order issues pursuant
to any Environmental Law by any local, state or federal government or
governmental agency or authority, (2) at any time the Borrower has knowledge
that it has
10
violated, has incurred liability under, or any of the Real Property has any lien
or exposure of lien under, any federal, state or local environmental law, the
Borrower shall furnish to the Bank a certificate as to the action the Borrower
is taking or proposes to take with respect thereto and (3) at the request of the
Bank, which request will not be made on more than one occasion during any twelve
month period, the Borrower shall undertake, at its sole expense, any
environmental investigation and examination of the Real Property which the Bank
may require, including, without limitation, an environmental investigation and
examination of the Real Property by a consultant satisfactory to the Bank; and
(j) immediately give notice to the Bank that an Event of Default has
occurred or that an event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, has occurred and specifying the
action which the Borrower has taken and proposes to take with respect thereto.
11. Negative Covenants. So long as the Commitment remains in effect or
------------------
there are any Obligations (as defined below) owing to the Bank, the Borrower
will not:
(a) consummate any merger or consolidation or liquidate, windup or dissolve
itself or sell, transfer or lease or otherwise dispose of all or any substantial
part of its assets (other than sales in the ordinary course of business); except
that any Subsidiary which is wholly-owned by the Borrower may merge with or
consolidate into the Borrower provided that the Borrower is the surviving
corporation;
(b) except for Obligations owing to the Bank, not assume, endorse, be or
become liable for or guarantee the obligations of any corporation, partnership,
limited liability company, individual or other entity that is a Subsidiary or
affiliate, whether now existing or hereafter created;
(c) create, assume or permit to exist, any mortgage, pledge, lien or
encumbrance of or upon or security interest in, any of its property or assets
now owned or hereafter acquired except (i) mortgages, liens, pledges and
security interests in favor of the Bank; (ii) liens in existence on the date
hereof; (iii) other liens, charges and encumbrances incidental to the conduct of
its business or the ownership of its property and assets which were not incurred
in connection with the borrowing of money or the obtaining of advances or credit
and which do not materially impair the use thereof in the operation of its
business; and (iv) liens for taxes or other governmental charges which are not
delinquent or which are being contested in good faith and for which a reserve
shall have been established in accordance with generally accepted accounting
principles; and
(d)(i) terminate any Plan so as to result in any material liability to The
Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title
IV of ERISA (the"PBGC"), (ii) engage in or permit any person to engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1954, as amended) involving any Plan which would
subject the Borrower to any material tax,
11
penalty or other liability, (iii) incur or suffer to exist any material
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, involving any Plan, or (iv) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material liability to
the PBGC by reason of termination of any Plan.
12. Collateral Security.
-------------------
(a) As collateral security for the payment of any and all sums owing under
this Note and the Letter Agreement and all other obligations, direct or
contingent, joint, several or independent, of the Borrower and each endorser or
guarantor hereof now or hereafter existing, due or to become due to, or held, or
to be held by, the Bank (including without limitation obligations to the Bank in
connection with the Borrower's exposure to the Bank under any now existing or
hereafter arising interest rate hedging agreement), whether created directly or
acquired by assignment or otherwise (all of such obligations, including this
Note, are hereinafter called the "Obligations"), the Borrower hereby grants to
the Bank a lien on and security interest in any and all deposits or other sums
at any time credited by or due from the Bank to the Borrower, whether in regular
or special depository accounts or otherwise, and any and all monies, securities
and other property of the Borrower, and the proceeds thereof, now or hereafter
held or received by or in transit to the Bank from or for the Borrower, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and any
such deposits, sums, monies, securities and other property, may at any time
after the occurrence of any Event of Default be set-off, appropriated and
applied by the Bank against any of the Obligations whether or not such
Obligations are then due or are secured by any collateral, or, if they are so
secured, whether or not such collateral held by the Bank is considered to be
adequate and with respect to all collateral security the Bank shall have all the
rights and remedies available to it under the Uniform Commercial Code of New
York and other applicable law.
(b) In addition to the collateral described in Section 9(a) hereof, payment
of the Obligations is also secured by a first priority security interest in all
personal property and fixtures of the Borrower wherever located and whether now
owned or hereafter acquired, and including without limitation the notes,
instruments and documents evidencing the Borrower Loans, and all property and
rights, including without limitation Underlying Collateral, which now or
hereafter secure Borrower Loans and all rights and remedies of Borrower with
respect thereto, all as described in one or more security agreements (the
"Security Agreement") executed by the Borrower in favor of the Bank.
13. Events of Default. If any one or more of the following events
-----------------
("Events of Default") shall occur, the entire unpaid balance of the principal of
and interest on the Obligations shall immediately become due and payable:
(a) Failure to make any payment of principal or interest in respect of any
of the
Obligations when due; or,
12
(b) Failure to observe any of the agreements of the Borrower contained in
Sections 10 or 11 hereof or under the Letter Agreement; or,
(c) Failure by the Borrower to perform any other term, condition or
covenant of this Note or the Letter Agreement, the Security Agreement, or any
other agreement, instrument or document delivered pursuant hereto or in
connection herewith or therewith, which shall remain unremedied for a period of
15 days after notice thereof shall have been given by the Bank to the Borrower;
or,
(d) (i) Failure to perform any term, condition or covenant of any bond,
note, debenture, loan agreement, indenture, guaranty, trust agreement, mortgage
or other instrument or agreement in connection with the borrowing of money or
the obtaining of advances or credit to which the Borrower is a party or by which
it is bound, or by which any of its properties or assets may be affected (a
"Debt Instrument"), so that, as a result of any such failure to perform
(regardless of the satisfaction of any requirement for the giving of appropriate
notice thereof or the lapse of time), the indebtedness included therein or
secured or covered thereby may be declared due and payable prior to the date on
which such indebtedness would otherwise become due and payable; or,
(ii) any event or condition referred to in any Debt Instrument shall
occur or fail to occur, so that, as a result thereof (regardless of the
satisfaction of any requirement for the giving of appropriate notice thereof or
the lapse of time), the indebtedness included therein or secured or covered
thereby may be declared due and payable prior to the date on which such
indebtedness would otherwise become due and payable; or,
(iii) any indebtedness included in any Debt Instrument or secured or
covered thereby is not paid when due; or
(e) Any representation or warranty made in writing to the Bank in this
Note, the Letter Agreement, or the Security Agreement or in connection with the
making of the loan evidenced hereby or any certificate, statement or report made
in compliance with this Note or such other agreement, shall have been false in
any material respect when made; or
(f) An order for relief under the Federal Bankruptcy Code as now or
hereafter in effect, shall be entered against the Borrower, or any Subsidiary;
or the Borrower, or any Subsidiary shall become insolvent, generally fail to pay
its debts as they become due, make an assignment for the benefit of creditors,
file a petition in bankruptcy, be adjudicated insolvent or bankrupt, petition or
apply to any tribunal for the appointment of a receiver or any trustee for it or
a substantial part of its assets, or shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or if there shall have been filed any such petition or application, or
any such proceeding shall have been commenced against it, which remains
undismissed for a period of thirty days or more; or the Borrower, or any
Subsidiary or endorser or guarantor hereof by any act or omission shall
13
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or the appointment of a receiver of or any trustee for
it or any substantial part of any of its properties, or shall suffer any such
receivership or trusteeship to continue undischarged for a period of thirty days
or more; or,
(g) Any judgment against the Borrower, or any Subsidiary or any attachment,
levy or execution against any of its properties for any amount shall remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of sixty days or more; or,
(h) The Bank shall have determined, in its sole discretion, that one or
more conditions exist or events have occurred which may result in a material
adverse change in the business, properties or financial condition of the
Borrower.
14. Payments. All payments by the Borrower on account of principal,
--------
interest, or any other sum due hereunder, shall be made in lawful money of the
United States of America in immediately available funds. The Bank may charge any
account of the Borrower maintained at any office of the Bank for any such amount
due hereunder. If any payment of principal or interest becomes due on a day on
which the banks in New York, New York, are required or permitted by law to
remain closed, such payment may be made on the next succeeding business day on
which such banks are open, and such extensions shall be included in computing
interest in connection with such payment.
15. Notices. All notices, requests and other communications pursuant to
-------
this Note shall be in writing, either by letter (delivered by hand or sent by
certified mail, return receipt requested) or telegram, addressed as follows:
(a) if to the Borrower:
Medallion Financial Corporation
205 East 42nd Street
New York, New York 10017
Attn: Daniel Baker, Treasurer and CFO
and,
(b) if to the Bank:
Fleet Bank, N.A.
175 Water Street
New York, New York 10036
Attn: Michael Moschetta, Assistant Vice President
14
Any notice, request or communication hereunder shall be deemed to have been
given when deposited in the mails, postage prepaid, or in the case of
telegraphic notice, when delivered to the telegraph Borrower, addressed as
aforesaid. Any party may change the person or address to whom or which the
notices are to be given hereunder, but any such notice shall be effective only
when actually received by the party to whom it is addressed.
16. Governing Law; Severability. This Note and the rights and obligations
---------------------------
of the parties shall be construed and interpreted in accordance with the laws of
the State of New York and the Borrower consents to the jurisdiction of the
courts of New York in any action brought to enforce any rights of the Bank under
this Note. The provisions of this Note are severable and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
Jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in this Note in any jurisdiction.
17. Definitions. As used herein:
-----------
"Borrower Loan" shall mean any loan or advance made in the ordinary course
-------------
of business by Borrower to or for the account of any client or customer of
Borrower resident in the United States of America. Any loan, advance or
extension of credit made at a different point in time than another loan, advance
or extension of credit shall be deemed to be separate and distinct Borrower
Loans.
"Business Day" means any day other than a day on which the Banks in New
------------
York, New York are required or permitted by law to remain closed.
"Commercial Loans" shall mean Borrower Loans that are secured in whole or
----------------
in part by real property and that are not Medallion Loans.
"Eurodollar Rate" means with respect to any Eurodollar Loan Interest
---------------
Period, the rate per annum determined by the Bank to be the rate at which
deposits in U.S. dollars are offered by a Reference Bank (selected by the Bank)
in the London interbank market at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Eurodollar Loan to which such
Interest Period is to apply and for a period of time comparable to such Interest
Period divided by one minus the Eurodollar Reserve Percentage.
-----
"Eurodollar Reserve Percentage" means for any day that percentage
-----------------------------
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding one billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest
15
rate on Eurodollar Loans is determined or any category of extensions of credit
or other assets which includes loans by a non-United States office of the Bank
to United States residents). The Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in the Eurodollar Reserve
Percentage.
"Fixed Rate" means either the Eurodollar Rate or the Agreed Rate plus the
----------
applicable margin.
"Interest Period" means that period selected by the Borrower, within the
---------------
limitations of the first paragraph of this Note, during which a Fixed Rate Loan
may bear interest at the applicable Fixed Rate.
"Medallion" shall mean the metal plate which displays the license number of
---------
a licensed Taxicab on the outside of the vehicle and which is issued by the New
York City Taxi and Limousine Commission, or by any other similar governmental
authority for a jurisdiction other than New York City charged with the authority
to issue licenses for the operation of Taxicabs.
"Medallion Loans" shall mean Borrower Loans secured in whole or in part by
---------------
Medallion Rights.
"Medallion Rights" shall mean all license, operating and/or subscription
----------------
rights to Taxicab Medallion(s), and all license, operating and/or subscription
rights evidenced by such Medallions, and all renewals thereof, in which a
perfected security interest has been obtained by Borrower to secure the Borrower
Loan made by Borrower to such Person, and assigned to the Bank, pursuant to the
Security Agreement.
"Reference Banks" means banks appearing in the display designated as page
---------------
"LIBOR" on the Reuters' Monitor Money Rates Service (or such other page as may
replace the LIBOR page on that service for the purpose of displaying London
Interbank Offered Rates of major banks); provided that if no such offered rate
shall appear on such display, "Reference Banks" shall mean one or more major
banks in the London interbank market as selected by the Bank.
"Subsidiary" or "Subsidiaries" means any corporation or corporations of
----------------------------
which the Borrower, alone, or the Borrower and/or one or more of its
Subsidiaries, owns, directly or indirectly, at least a majority of the
securities having ordinary voting power for the election of directors.
"Taxicab" shall mean a motor vehicle carrying passengers for hire, duly
-------
licensed as a taxicab by the Taxi and Limousine Commission, or any other
Governmental Authority for a jurisdiction other than New York City, and
permitted to accept hails from passengers in the street.
16
"Underlying Collateral" shall mean all of Borrower's rights with respect
---------------------
to, or interest in, any and all present and future Medallion Rights, equipment,
Real Property, fixtures, machinery, future accounts, accounts receivable,
receivables, contracts, contract rights, general intangibles, books, desks,
notes, bills, drafts, acceptances, choses in action, chattel paper, instruments,
documents and other forms of obligations and property, real, personal or mixed,
tangible or intangible, at any item owing to or owned by any Person to whom
borrower has made a Borrower Loan, or any guarantor of such Person.
18. Miscellaneous.
-------------
(a) All agreements, representations and warranties made herein shall
survive the delivery of this Note. The Borrower waives trial by jury, set-off
and counterclaim of any nature or description in any litigation in any court
with respect to, in connection with, or arising out of, this Note or any
instrument or document delivered pursuant hereto or the validity, protection,
interpretation, collection or enforcement hereof.
(b) No modification or waiver of or with respect to any provision of this
Note, or consent to any departure by the Borrower from any of the terms or
conditions hereof, shall in any event be effective unless it shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case shall, of itself, entitle it to any other or
further notice or demand in similar or other circumstances.
(c) Each and every right granted to the Bank hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of the Bank or the holder of this Note to exercise, and no delay in
exercising, any right shall operate as a waiver thereof, nor shall any single or
partial exercise of any right preclude any other or future exercise thereof or
the exercise of any other right.
(d) In the event that this Note is placed in the hands of an attorney for
collection by reason of any default hereunder, the Borrower agrees to pay
reasonable attorney's fees so incurred. The Borrower promises to pay all
expenses of any nature as soon as incurred whether in or out of court and
whether incurred before or after this Note shall become due at its maturity date
or otherwise and costs which the Bank may deem necessary or proper in connection
with the satisfaction of the indebtedness or the administration, supervision,
preservation, protection (including but not limited to maintenance of adequate
insurance) of or the realization upon the collateral.
(e) The Borrower hereby waives presentment, demand for payment, protest,
notice of protest, notice of dishonor, and any or all other notices or demands
except as otherwise expressly provided for herein.
17
(f) All accounting terms not otherwise defined in this Note shall have the
meanings ascribed thereto under generally accepted accounting principles.
(g) This Note, the Letter Agreement, the Security Agreement and any other
agreements, documents and instruments executed and delivered pursuant to or in
connection with the Obligations contain the entire agreement between the parties
relating to the subject matter hereof and thereof. The undersigned expressly
acknowledges that the Bank has not made and the undersigned is not relying on
any oral representations, agreements or commitments of the Bank or of any
officer, employee, agent or representative thereof. To the extent there is any
inconsistency between the terms of this Note and the Letter Agreement, the terms
of this Note shall control.
(h) This Note shall supersede and replace that certain $2,000,000 Note of
Tri-Magna Corporation dated as of September 1, 1995, as amended, and all
outstanding indebtedness under such prior note shall be deemed to be evidenced
by this Note.
MEDALLION FINANCIAL CORPORATION
By
------------------------------
(Title)
LOAN AND REPAYMENT SCHEDULE
PROMISSORY NOTE DATED as of December 1, 1996
MEDALLION FINANCIAL CORPORATION
-------------------------------
to FLEET BANK, N.A.
Last Day Amount of Unpaid
Amount Rate of of Interest Principal Principal Notation
Date of Loan Interest Period Repayment Repayment Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fleet Fleet Bank
1133 Avenue of the Americas
New York, NY 10036
as of February 10, 1997
Medallion Financial Corporation
205 East 42nd Street
New York, New York 10017
Att: Daniel Baker, Treasurer and CFO
Re: Letter Agreement dated as of December 1, 1996 (the "Letter
Agreement") from Fleet Bank, N.A. (the "Bank") to Medallion
Financial Corp. (the "Borrower")
Gentlemen:
We are pleased to confirm that we have agreed to increase the amount of the
revolving line of credit available to the Borrower under the captioned Letter
Agreement and the Revolving Credit Note dated as of December 1, 1996 (the
"Revolving Credit Note") delivered in connection therewith from $5,000,000 to
$6,000,000. Accordingly, the Bank hereby agrees to amend the Letter Agreement to
substitute the amount of $6,000,000 in place of $5,000,000 as it appears in the
opening paragraph and in Section 1 thereof. All other terms and conditions as
set forth in the Letter Agreement shall remain in full force and effect.
This amendment shall be effective upon our receipt of the enclosed copy of
this letter signed by the Borrower and receipt of the enclosed Endorsement No. 1
to Revolving Credit Note, duly executed by the Borrower.
Very truly yours,
FLEET BANK, N.A.
By: /s/ Michael B. Moschetta
------------------------
Name: Michael B. Moschetta
Title: Assistant Vice President
Accepted and Agreed:
MEDALLION FINANCIAL CORPORATION
By: /s/ Daniel Baker
----------------
Name: Daniel Baker
Title: Treasurer