CREDIT AGREEMENT
among
AMERICAN BUSINESS LEASING, INC.
FEDERAL LEASING CORP.
and
FIRST UNION NATIONAL BANK
dated
September 28, 1998
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Table of Contents
1. Certain Definitions............................................................................................2
1.1. Definitions.............................................................................................2
1.2. Accounting Terms.......................................................................................10
2. The Credit....................................................................................................10
2.1. The Loans..............................................................................................10
2.2. The Note...............................................................................................10
2.3. Funding Procedures.....................................................................................11
(a) Requests for Advance...............................................................................11
(b) Irrevocability.....................................................................................11
(c) Availability of Funds..............................................................................11
(d) Funding of Net Amount..............................................................................11
2.4. Interest...............................................................................................11
(a) Prime Rate.........................................................................................11
(b) LIBO Rate..........................................................................................11
(c) Renewals and Conversions of Loans..................................................................12
(d) Automatic Reinstatement............................................................................12
2.5. Fees...................................................................................................12
(a) Structuring and Arranging Fee......................................................................12
(b) Commitment Fee.....................................................................................12
2.6. Voluntary Prepayments..................................................................................13
(a) Prime Rate Loans...................................................................................13
(b) LIBO Rate Loans....................................................................................13
2.7. Payments................................................................................................13
(a) Prime Rate Loans...................................................................................13
(b) LIBO Rate Loans....................................................................................13
(c) Form of Payments, Application of Payments, Payment Administration, Etc.............................13
(d) Net Payments.......................................................................................13
(e) Prepayment of LIBO Rate Loans......................................................................14
2.8. Changes in Circumstances; Yield Protection..............................................................14
2.9. Illegality..............................................................................................15
3. Representations and Warranties................................................................................16
3.1. Organization, Standing.................................................................................16
3.2. Corporate Authority, Validity, Etc.....................................................................16
3.3. Litigation.............................................................................................16
3.4. ERISA..................................................................................................17
3.5. Financial Statements...................................................................................17
3.6. Not in Default, Judgments, Etc.........................................................................17
3.7. Taxes..................................................................................................17
3.8. Permits, Licenses, Etc.................................................................................17
3.9. No Materially Adverse Contracts, Etc...................................................................17
3.10. Compliance with Laws, Etc.............................................................................18
3.11. Solvency..............................................................................................18
3.12. Subsidiaries, Etc.....................................................................................18
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3.13. Title to Properties, Leases...........................................................................18
3.14. Public Utility Holding Company; Investment Company....................................................18
3.15. Margin Stock..........................................................................................19
3.16. Use of Proceeds.......................................................................................19
3.17. Year 2000 Problem.....................................................................................19
3.18. Disclosure Generally..................................................................................19
3.19. Prudential Securities Credit Corporation..............................................................19
4. Conditions Precedent..........................................................................................19
4.1. All Loans..............................................................................................19
(a) Documents..........................................................................................19
(b) Covenants; Representations.........................................................................19
(c) Defaults...........................................................................................20
(d) Material Adverse Change............................................................................20
(e) Borrowing Base Certificate.........................................................................20
(f) Restricting Event..................................................................................20
4.2. Conditions to First Loan...............................................................................20
(a) Articles, Bylaws...................................................................................20
(b) Evidence of Authorization..........................................................................20
(c) Legal Opinions.....................................................................................20
(d) Incumbency.........................................................................................20
(e) Note...............................................................................................20
(f) Guaranty Agreement.................................................................................20
(g) Documents..........................................................................................21
(h) Consents...........................................................................................21
(i) Other Agreements...................................................................................21
(j) Fees...............................................................................................21
5. Affirmative Covenants.........................................................................................21
5.1. Financial Statements and Reports.......................................................................21
(a) Annual Statements..................................................................................21
(b) Quarterly Statements...............................................................................21
(c) Compliance Certificate.............................................................................22
(d) ERISA..............................................................................................22
(e) Material Changes...................................................................................22
(f) Other Information..................................................................................22
(g) Borrowing Base Certificates........................................................................22
(h) Lease Receivables Report...........................................................................22
5.2. Corporate Existence.....................................................................................22
5.3. ERISA...................................................................................................22
5.4. Compliance with Regulations.............................................................................23
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws........................................23
5.6. Maintenance of Insurance................................................................................23
5.7. Payment of Debt; Payment of Taxes, Etc..................................................................23
5.8. Notice of Events........................................................................................23
5.9. Inspection Rights.......................................................................................24
5.10. Generally Accepted Accounting Principles...............................................................24
5.11. Compliance with Material Contracts.....................................................................24
5.12. Use of Proceeds........................................................................................24
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5.13. Management.............................................................................................24
5.15. Year 2000 Program......................................................................................24
5.16. Further Assurances.....................................................................................24
5.17. Restrictive Covenants in Other Agreements..............................................................25
5.18. Intercreditor Agreement. .............................................................................25
6. Negative Covenants............................................................................................25
6.1. Consolidation and Merger...............................................................................25
6.3. Liens..................................................................................................25
6.4. Guarantees.............................................................................................25
6.5. Margin Stock...........................................................................................25
6.6. Acquisitions and Investments...........................................................................26
6.7. Transfer of Assets; Nature of Business.................................................................26
6.8. Accounting Change......................................................................................26
6.9. Transactions with Affiliates...........................................................................26
6.10. Restriction on Amendment of This Agreement.............................................................26
7. Financial Covenants...........................................................................................27
7.1. Borrowing Base.........................................................................................27
7.2. Minimum Tangible Net Worth.............................................................................27
7.3. Total Liabilities to Net Worth.........................................................................27
8. Default.......................................................................................................27
8.1. Events of Default......................................................................................27
(a) Payments...........................................................................................27
(b) Covenants..........................................................................................27
(c) Representations, Warranties........................................................................27
(d) Bankruptcy.........................................................................................28
(e) Certain Other Defaults.............................................................................28
(f) Judgments.........................................................................................28
(g) Attachments........................................................................................28
(h) Change in Control..................................................................................28
(i) Security Interests................................................................................28
(j) Receivables Purchase Agreement....................................................................28
(k) Material Adverse Change............................................................................29
9. Collateral....................................................................................................29
9.1. Collateral..............................................................................................29
10. Miscellaneous................................................................................................29
10.1. Waiver................................................................................................29
10.2. Amendments............................................................................................29
10.3. Governing Law.........................................................................................29
10.4. Participations and Assignments........................................................................29
10.5. Captions..............................................................................................30
10.6. Notices...............................................................................................30
10.7. Expenses; Indemnification.............................................................................30
10.8. Survival of Warranties and Certain Agreements.........................................................30
10.9. Severability..........................................................................................30
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10.10. No Fiduciary Relationship............................................................................31
10.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.......................................................31
10.12. WAIVER OF JURY TRIAL.................................................................................31
10.13. Counterparts; Effectiveness..........................................................................31
10.14. Use of Defined Terms.................................................................................32
10.15. Offsets..............................................................................................32
10.16. Entire Agreement.....................................................................................32
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EXHIBIT A NOTE EXHIBIT B BORROWING BASE CERTIFICATE EXHIBIT C COMPLIANCE CERTIFICATE EXHIBIT D GUARANTY AGREEMENT EXHIBIT E SECURITY AGREEMENT
SCHEDULE 1 MISCELLANEOUS INFORMATION
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Credit Agreement
This Credit Agreement, dated September 28, 1998 (this "Agreement"), is entered into by and among AMERICAN BUSINESS LEASING, INC., a Pennsylvania corporation ("ABL") and FEDERAL LEASING CORP., a New Jersey corporation ("FLC"), jointly and severally, and FIRST UNION NATIONAL BANK, a national banking association (the "Bank").
Preliminary Statement
WHEREAS, ABL and FLC desire to have available to them a credit facility the proceeds of which may be used for the purchase of new or used equipment for lease to unaffiliated persons and the initial lease of that equipment.
WHEREAS, ABL and FLC have requested that the Bank establish such credit facility and make loans to ABL and FLC under the terms and conditions hereinafter set forth.
WHEREAS, American Business Financial Services, Inc., a Delaware corporation ("ABFS"), owns, of record and beneficially, all the capital stock of American Business Credit, Inc., a Pennsylvania corporation ("ABC").
WHEREAS, ABC owns all of the capital stock of (i) ABC Holdings Corp., a Pennsylvania corporation ("ABC Holdings"), (ii) American Business Finance Corp., a Delaware ("ABFC"), (iii) ABL, (iv) HomeAmerican Consumer Discount Company, a Pennsylvania corporation ("Discount"), (v) HomeAmerican Credit, Inc., a Pennsylvania corporation ("HAC"), (vi) New Jersey Mortgage & Investment Corp., a New Jersey corporation ("NJMI"), and (vii) Processing Service Center, Inc., a Pennsylvania corporation ("Processing").
WHEREAS, NJMI owns all of the capital stock of FLC.
WHEREAS, it is in the best interests of ABFS, ABC, ABC Holdings, ABFC, ABL, Discount, FLC, HAC, NJMI and Processing that the credit facilities available to them be restructured with certain of them borrowers or co-borrowers under certain facilities and ABL and FLC as borrowers under the credit facility contemplated hereby with ABFS, ABC, ABC Holdings, ABFC, Discount, HAC, NJMI and Processing as guarantors (individually, a "Guarantor", and collectively, the "Guarantors") of the obligations of ABL and FLC hereunder.
WHEREAS, it is condition of all Loans made pursuant to this Agreement that each of the Guarantors unconditionally guarantee the prompt and punctual performance of all liabilities and obligations of ABL and FLC hereunder and under any other Loan Document (as defined herein).
WHEREAS, the Bank is willing to establish such credit facility and to make loans to ABL and FLC under the terms and conditions hereinafter set forth, including but not limited to said guarantees.
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NOW, THEREFORE, in consideration of the premises and promises hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions
1.1. Definitions.
"Account Receivable" shall have the meaning ascribed to "Accounts" in
the Security Agreement.
"Additional Amount" shall have the meaning set forth in (Section)
2.7.(e).
"Advance Funding Eligible Lease Receivables" shall mean accounts
receivable by ABL or FLC which meet all of the criteria of Eligible
Lease Receivables but not all of the equipment to be leased under the
applicable lease contract has been delivered to and accepted by the
lessee provided that the lessee shall have executed and delivered to
ABL or FLC, as applicable, an Advance Funding Addendum to the lease
contract in the form and substance reasonably satisfactory to the Bank.
The account receivable by ABL or FLC shall be, in each instance, the
"Advance Payment" amount set forth in each Advance Funding Addendum.
"Affiliate" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with ABL; (2)
which directly or indirectly beneficially owns or holds ten percent
(10%) or more of any class of voting stock of ABL; or (3) ten percent
(10%) or more of whose voting stock of which is directly or indirectly
beneficially owned or held by ABL. The term "control" means 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 voting securities, by contract, or otherwise.
"Agreement" shall mean this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and
all exhibits and schedules attached hereto.
"Borrowing Base" shall mean the lesser of (a) 92% of the present value
of each Eligible Lease Receivable included in the Collateral or (b)
100% of the invoice purchase price of the equipment underlying each
such Eligible Lease Receivable. Present value shall be determined by
discounting the Eligible Lease Receivable at the rate applicable to
United States Treasury certificates with a maturity of two years in
effect on the date of the calculation plus 2.00%. Eligible Lease
Receivables pertaining to the lease of equipment which was not new at
the time of purchase by ABL or FLC, as applicable, which are included
in the Borrowing Base shall not exceed $1,000,000 in the aggregate at
any time. Advance Funding Eligible Lease Receivables included in the
Borrowing Base shall not exceed $2,000,000 in the aggregate at any
time. Further, no Advance Funding Eligible Lease Receivable shall be
included in the calculation of the Borrowing Base if 60 days or more
shall have elapsed from the date of the first advance made pursuant to
an Advance Funding Addendum relating to the applicable equipment lease
agreement.
"Borrowing Base Certificate" shall mean a certificate in substantially
the form attached hereto as Exhibit B hereto which shall be signed by
the Presidents of ABL and FLC.
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"Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia are authorized or
required to close under the laws of the Commonwealth of Pennsylvania
and, if the applicable day relates to a LIBO Rate Loan, or notice with
respect to a LIBO Rate Loan, a day on which dealings in Dollar deposits
are also carried on in the London interbank market and banks are open
for business in London ("London Business Day").
"Capitalized Lease" shall mean all lease obligations of any Person for
any property (whether real, personal or mixed) which have been or
should be capitalized on the books of the lessee in accordance with
General Accepted Accounting Principles.
"Capitalized Lease Obligations" with respect to any Person, shall mean
the aggregate amount which, in accordance with GAAP, is required to be
reported as a liability on the balance sheet of such Person at such
time in respect of such Person's interest as lessee under a Capital
Lease.
"Closing Date" shall mean the date closing shall occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and all rules and regulations with respect thereto in
effect from time to time.
"Collateral" shall have the meaning set forth in (Section) 9.1.
"Commitment" shall have the meaning set forth in (Section) 2.1.
"Commitment Fee" shall have the meaning set forth in (Section) 2.5.(b)
"Compliance Certificate" shall mean a certificate in substantially the
form attached hereto as Exhibit C which shall be signed by the
Presidents of ABL and FLC.
"Credit Termination Date" shall have the meaning set forth in (Section)
2.2.
"Debt" shall mean, as of any date of determination with respect to ABFS
and its consolidated subsidiaries, without duplication, (i) all items
which in accordance with Generally Accepted Accounting Principles would
be included in determining total liabilities as shown on the liability
side of a balance sheet such person as of the date on which Debt is to
be determined, (ii) all indebtedness of others with respect to which
ABL or FLC, as applicable, has become liable by way of a guarantee or
endorsement (other than for collection or deposit in the ordinary
course of business), (iii) all contingent liabilities, and (iv) lease
obligations that, in conformity with GAAP, have been capitalized.
"Default Rate" on any Loan shall mean 2% per annum above the Prime
Rate.
"Dollars" shall mean the lawful currency of the United States of
America.
"Eligible Lease Receivables" shall mean accounts receivable and general
intangibles of ABL or FLC in connection with the lease of equipment
each of which have the following characteristics: (i) ABL or FLC, as
applicable, is the sole lessor, (ii) the lease and the account
receivable arose in the ordinary course of business of ABL or FLC, as
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applicable, (iii) all of the Equipment to be leased pursuant to the
lease has been delivered to, and accepted by, the lessee (except in the
case of accounts receivable relating to Advance Funding Eligible Lease
Receivables) and is currently subject to a lease, (iv) none of the
lease, the account receivable or the Equipment is subject to any prior
assignment, claim, lien, security interest or other limitation on the
absolute title of ABL or FLC, as applicable, thereto, (v) neither the
lease nor the account receivable is not more than 61 days past due with
respect to any payment required thereby, (vi) the lease and the account
receivable is freely assignable, (vii) neither the lease nor the
account receivable is questionable as to collectibility, (vii) the
lessee/account debtor is not located outside of the United States of
America (except as specifically ...
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