-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bn64ZlH6kEd/pKMkenFFsI1Sc1xqjScWYvfUKjd9Jc2qcMI/9JlCcbTrfGedf3wa s1YL4Uy3lrUg8DL8aN60ow== 0000950130-01-503905.txt : 20010815 0000950130-01-503905.hdr.sgml : 20010815 ACCESSION NUMBER: 0000950130-01-503905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDALLION FINANCIAL CORP CENTRAL INDEX KEY: 0001000209 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 043291176 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 814-00188 FILM NUMBER: 1713156 BUSINESS ADDRESS: STREET 1: 205 E 42ND ST STREET 2: STE 2020 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126823300 MAIL ADDRESS: STREET 1: 205 E 42ND ST STREET 2: STE 2020 CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 d10q.txt FORM 10-Q ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-27812 MEDALLION FINANCIAL CORP. (Exact name of registrant as specified in its charter) DELAWARE No. 04-3291176 (State of Incorporation) (IRS Employer Identification No.) 437 Madison Ave, New York, New York 10022 (Address of principal executive offices) (Zip Code) (212) 328-2100 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of Common Stock outstanding at the latest practicable date, August 10, 2001: Class Outstanding Par Value Shares Outstanding ----------------- --------- ------------------ Common Stock..................................... $.01 ........ 18,182,035 ================================================================================ 1 MEDALLION FINANCIAL CORP. FORM 10-Q INDEX PART I..................................................................................................3 FINANCIAL INFORMATION.........................................................................................3 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS...............................................................3 CONSOLIDATED BALANCE SHEETS..........................................................................4 CONSOLIDATED STATEMENTS OF OPERATIONS................................................................5 CONSOLIDATED STATEMENTS OF CASH FLOWS................................................................6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................................................7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........14 PART II................................................................................................30 OTHER INFORMATION............................................................................................30 ITEM 1. Legal Proceedings..............................................................................30 ITEM 2. Changes in Securities and Use of Proceeds......................................................30 ITEM 3. Defaults Upon Senior Securities................................................................30 ITEM 4. Submission of Matters to a Vote of Security Holders............................................30 ITEM 5. Other Information..............................................................................30 ITEM 6. Exhibits and reports on form 8-K...............................................................30 SIGNATURES.............................................................................................32
2 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS Basis of Preparation Medallion Financial Corp. (the Company) is a closed-end management investment company organized as a Delaware corporation. The Company has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the 1940 Act). The Company conducts its business through various wholly owned subsidiaries including its primary operating company, Medallion Funding Corp. (MFC). As an adjunct to the Company's taxicab medallion finance business, the Company operates a taxicab rooftop advertising business, Medallion Taxi Media, Inc. (Media). The financial information is divided into two sections. The first section, Item 1, includes the unaudited consolidated financial statements of the Company including related footnotes. The second section, Item 2, consists of Management's Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended June 30, 2001. The consolidated balance sheets of the Company as of June 30, 2001, the related consolidated statements of operations for the three and six months ended June 30, 2001, and the consolidated statements of cash flows for the six months ended June 30, 2001 included in Item 1 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the three and six months ended June 30, 2001 or for any other interim period may not be indicative of future performance. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. 3 MEDALLION FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
============================================================================================================= June 30, 2001 December 31, 2000 ============================================================================================================= Assets Medallion loans $272,971,622 $299,302,548 Commercial loans 198,584,956 212,721,373 Equity investments 2,089,465 2,129,685 ------------------------------------------------ Net investments 473,646,043 514,153,606 Investment in and loans to unconsolidated subsidiary 4,352,183 1,856,421 ------------------------------------------------ Total investments 477,998,226 516,010,027 ------------------------------------------------ Cash 81,812,352 15,652,878 Accrued interest receivable 9,250,886 8,701,981 Servicing fee receivable 6,019,796 6,632,516 Fixed assets, net 2,018,755 2,050,808 Goodwill, net 5,384,992 5,650,045 Other assets, net 5,731,489 6,016,747 ------------------------------------------------ Total assets $588,216,496 $560,715,002 - ------------------------------------------------------------------------------------------------------------- Liabilities Accounts payable and accrued expenses $ 7,426,846 $ 7,723,812 Dividends payable - 5,244,281 Accrued interest payable 1,411,085 3,887,589 Commercial paper 237,128 24,066,269 Notes payable to banks 314,720,000 305,700,000 Senior secured notes 45,000,000 45,000,000 SBA debentures payable 31,860,000 21,360,000 ------------------------------------------------ Total liabilities 400,655,059 412,981,951 - ------------------------------------------------------------------------------------------------------------- Shareholders' Equity Preferred stock (1,000,000 shares of $.01 par value stock - - authorized - none outstanding) Common stock (50,000,000 shares of $.01 par value stock 181,822 145,467 authorized - 18,182,035 and 14,546,637 shares outstanding at June 30, 2001 and December 31, 2000, respectively) Capital in excess of par value 183,561,561 146,379,377 Accumulated undistributed net investment income 3,818,054 1,208,207 ------------------------------------------------ Total shareholders' equity 187,561,437 147,733,051 ------------------------------------------------ Total liabilities and shareholders' equity $588,216,496 $560,715,002 ============================================================================================================= Number of common shares 18,182,035 14,546,637 Net asset value per share $10.32 $10.16 - -------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
==================================================================================================================== Three Months Ended June 30, Six Months Ended June 30, -------------------------------------------------------------------- 2001 2000 2001 2000 ==================================================================== Interest and dividend income on investments $11,413,800 $13,726,862 $24,742,979 $28,177,934 Interest income on short-term investments 204,357 59,759 249,309 139,636 -------------------------------------------------------------------- Total investment income 11,618,157 13,786,621 24,992,288 28,317,570 Notes payable to banks 5,694,719 3,468,060 11,485,191 6,772,616 Commercial paper 27,287 2,223,077 182,816 4,504,236 Senior secured notes 838,927 821,865 1,660,792 1,643,730 SBA debentures 451,583 402,768 884,755 812,186 -------------------------------------------------------------------- Total interest expense 7,012,516 6,915,770 14,213,554 13,732,768 -------------------------------------------------------------------- Net interest income 4,605,641 6,870,851 10,778,734 14,584,802 Gain on sale of loans 278,857 818,198 712,037 1,504,296 Equity in earnings (losses) of 116,989 146,865 (310,195) (172,484) unconsolidated subsidiary Accretion of negative - 169,916 -0- 350,516 goodwill Other income 1,017,496 979,249 1,988,742 1,779,156 -------------------------------------------------------------------- Total non-interest income 1,413,342 2,114,228 2,390,584 3,461,484 Salaries and benefits 2,159,230 2,404,565 4,836,306 4,860,546 Professional fees 586,336 478,231 981,583 894,848 Amortization of goodwill 135,095 105,357 267,621 241,935 Administrative and advisory fees 1,882 42,659 5,017 104,200 Other operating expenses 537,805 1,704,205 2,148,662 3,328,634 ------------------------------------------------------------------------- Total non-interest expenses 3,420,348 4,735,017 8,239,189 9,430,163 ------------------------------------------------------------------------- Net investment income 2,598,635 4,250,062 4,930,129 8,616,123 Net realized losses on investments (602,548) (1,063,151) (1,500,961) (816,402) Net change in unrealized appreciation 382,928 1,013,689 1,276,192 900,978 ------------------------------------------------------------------------- Net realized/unrealized income (loss) (219,620) (49,462) (224,769) 84,576 Income tax provision (benefit) 14,757 (59,883) 51,873 (59,729) ------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 2,364,258 $ 4,260,483 $ 4,653,487 $ 8,760,428 - -------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations per share Basic $0.16 $0.29 $0.31 $0.60 Diluted 0.16 0.29 0.31 0.60 - -------------------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding Basic 15,215,002 14,533,384 14,895,144 14,528,906 Diluted 15,220,407 14,581,668 14,903,764 14,586,510 - --------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
================================================================================================================ Six Months Ended June 30, ------------------------------------------------ 2001 2000 ================================================================================================================ CASH FLOWS FROM OPERATING ACTIVITIES Net increase in net assets resulting from operations $ 4,653,487 $ 8,760,429 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Depreciation and amortization 246,865 416,099 Amortization of goodwill 270,190 241,935 Amortization of origination costs 588,842 563,404 Accretion of negative goodwill - (350,516) Net change in unrealized appreciation (1,276,192) (900,978) Net realized loss on investments 1,500,961 816,402 Gain on sale of loans (712,037) (1,504,296) Equity in losses of unconsolidated subsidiary 310,195 172,484 Increase in accrued interest receivable (548,905) (2,686,837) Decrease in receivable from sale of loans - 5,862,843 Decrease (increase) in servicing fee receivable 612,720 (1,722,659) Decrease (increase) in other assets, net 285,258 (415,121) Decrease in accounts payable and accrued expenses (486,839) (899,547) Decrease in accrued interest payable (2,476,504) (2,073,691) ------------------------------------------------ Net cash provided by operating activities 2,968,041 6,279,951 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Originations of investments (48,173,509) (116,039,263) Proceeds from sales and maturities of investments 88,579,498 94,136,991 Investment in and loans to unconsolidated subsidiary, net (2,805,957) 24,520 Capital expenditures (214,813) (188,537) ------------------------------------------------ Net cash provided by (used in) investing activities 37,385,219 (22,066,289) - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from (repayments of) notes payable to banks 9,020,000 (15,300,000) Proceeds from issuance of SBA debentures 10,500,000 - Net proceeds from (repayments of) issuances of commercial paper (23,829,141) 43,093,939 Proceeds from exercise of stock options - 185,996 Net proceeds from issuance of stock 37,403,275 - Payment of declared dividends to current stockholders (7,287,920) (10,520,203) ------------------------------------------------ Net cash provided by financing activities 25,806,214 17,459,732 - ---------------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH 66,159,474 1,673,394 Cash, beginning of period 15,652,878 7,459,284 ------------------------------------------------ Cash, end of period $ 81,812,352 $ 9,132,678 - ---------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL INFORMATION Cash paid during the period for interest $ 16,690,058 $ 15,806,458 - ----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 MEDALLION FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001 (1) Organization of Medallion Financial Corp. and Its Subsidiaries Medallion Financial Corp. (the Company) is a closed-end management investment company organized as a Delaware corporation. The Company has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the 1940 Act). The Company conducts its business through various wholly owned subsidiaries including its primary operating company, Medallion Funding Corp. (MFC). As an adjunct to the Company's taxicab medallion finance business, the Company operates taxicab rooftop advertising businesses, Medallion Taxi Media, Inc. (Media) and Medallion Media Japan Ltd. (MMJ). (See Note 3.) The Company also conducts its business through Business Lenders, LLC (BLL), licensed under the Small Business Administration (SBA) section 7(a) program, Medallion Business Credit LLC (MBC), an originator of loans to small businesses for the purpose of financing inventory and receivables, Medallion Capital, Inc. (Medallion Capital) which conducts a mezzanine financing business, and Freshstart Venture Capital Corp. (Freshstart), a Specialized Small Business Investment Company (SSBIC) which also originates and services medallion and commercial loans. During the quarter the Company completed an equity offering of 3,660,000 common shares at $11 per share raising over $40,000,000 of additional capital. (2) Summary of Significant Accounting Policies Use of Estimates The accounting and reporting policies of the Company conform with generally accepted accounting principles and general practices in the investment company industry. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reporting and disclosure of assets and liabilities, including those that are of a contingent nature, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation and Use of the Equity Method The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, except for Media. All significant intercompany transactions, balances, and profits have been eliminated in consolidation. The consolidated statements give retroactive effect to the merger with Freshstart, by retroactively combining Freshstart with the Company's financial statements as if the merger had occurred at the beginning of the earliest period presented. The Company's investment in Media and MMJ is accounted for under the equity method. All significant intercompany transactions, balances and profits have been eliminated in the use of the equity method. As non-investment companies, Media and MMJ cannot be consolidated with the Company, which is an investment company under the 1940 Act. Refer to Note 3 for the presentation of financial information for Media and MMJ. Investment Valuation The Company's loans, net of participations and any unearned discount, are considered investments under the 1940 Act and are recorded at fair value. Loans are valued at cost less unrealized depreciation. Since no ready market exists for these loans, the fair value is determined in good faith by the Board of Directors. In determining the fair value, the Company and Board of Directors consider factors such as the financial condition of the borrower, the adequacy of the collateral, individual credit risks, historical loss experience and the relationships between current and projected market rates and portfolio rates of interest and maturities. Investments in equity securities and stock warrants are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation, respectively. The fair value of investments that have no ready market, are determined by the Board of Directors based upon assets and revenues of the underlying investee company as well as general market trends for businesses in the same industry. Included in equity investments at June 30, 2001 are marketable and non-marketable securities of approximately $1,047,000 and $1,042,000, respectively. Included in equity investments at December 31, 2000 are marketable and non-marketable securities of approximately $1,490,000 and $640,000, respectively. 7 Because of the inherent uncertainty of valuations, the Board of Directors' estimates of the values of the investments may differ significantly from the values that would have been used had a ready market for the investments existed and these differences could be material. The Company's investments consist primarily of long-term loans to persons defined by SBA regulations as socially or economically disadvantaged, or to entities that are at least 50% owned by such persons. Approximately 57% of the Company's loan portfolio at June 30, 2001 and 58% at December 31, 2000, had arisen in connection with the financing of taxicab medallions, taxicabs, and related assets, of which 80% and 77%, respectively, are in New York City. These loans are secured by the medallions, taxicabs, and related assets, and are personally guaranteed by the borrowers, or in the case of corporations, personally guaranteed by the owners. A portion of the Company's portfolio represents loans to various commercial enterprises, including dry cleaners, laundromats, restaurants, garages, and gas stations. These loans are secured by various equipment and/or real estate and are generally guaranteed by the owners, and in certain cases, by the equipment dealers. These loans are made primarily in the metropolitan New York City area. The remaining portion of the Company's portfolio is from the origination of loans guaranteed by the SBA under its Section 7(a) program, less the sale of the guaranteed portion of those loans. Funding for the Section 7(a) program depends on annual appropriations by the U.S. Congress. Collateral Appreciation Participation Loans During the 2000 first half, the Company originated collateral appreciation participation loans collateralized by Chicago taxi medallions of $30 million, of which $21 million was syndicated to other financial institutions. In consideration for modifications from its normal taxi medallion lending terms, the Company offered loans at higher loan-to-value ratios and is entitled to earn additional interest income based upon any increase in the value of all $30 million of the collateral. The fair value of the Company's collateral appreciation participation loan portfolio at June 30, 2001 was $13 million, which represented approximately 3% of its total loan portfolio. Additional interest income totaled approximately $250,000 and $950,000 for the 2001 second quarter and year to date compared with $775,000 and $2,475,000 for the comparable 2000 periods, and is included in investment income on the consolidated statements of operations and in accrued interest receivable on the consolidated balance sheets. The Company believes that the additional interest income recorded is fully realizable through operation of the collateral or orderly sales in the market. As a regulated investment company, the Company is required to mark-to-market these investments on a quarterly basis, just as it does on all of its other investments. The Company feels that it has adequately calculated the fair market value on these investments and relies upon information such as recent and historical medallion sale prices. If there is a decrease in the value of taxicab medallions, the reduction in the value of the investments will be reversed against investment income. Income Recognition Interest income is recorded on the accrual basis. Loans are placed on non- accrual status, and all uncollected accrued interest is reversed, when there is doubt as to the collectibility of interest or principal or if loans are 90 days or more past due, unless management has determined that they are both well- secured and in the process of collection. Interest income on non-accrual loans is recognized when cash is received. At June 30, 2001 total non-accrual loans were approximately $17,410,872, compared to $13,601,000 in the 2001 first quarter and $13,197,000 at year-end. Loan Sales and Servicing Fee Receivable The principal portion of loans serviced for others by the Company at June 30, 2001 was $232,000,000, unchanged from the prior quarter, and up from $201,000,000 a year ago. Receivables from loans sold and gains or losses on loan sales are primarily attributable to the sale of commercial loans which have been at least partially guaranteed by the SBA. The Company recognizes gains or losses from the sale of the SBA-guaranteed portion of a loan at the date of the sales agreement when control of the future economic benefits embodied in the loan is surrendered. The estimated net servicing income is based, in part, on management's estimate of prepayment speeds, including default rates, and accordingly, there can be no assurance of the accuracy of these estimates. If the prepayment speeds occur at a faster rate than anticipated, the amortization of the servicing assets will be accelerated and its value will decline; and as a result, servicing income during that and subsequent periods would decline. If prepayments occur slower than anticipated, cash flows would exceed estimated amounts and income would increase. The constant prepayment rates utilized by the Company in estimating the lives of the loans depend on the original term of the loan, industry trends, and the Company's historical data. 8 The activity in the reserve for servicing fee receivable follows:
- --------------------------------------------------------------------------------------------------------- 2001 2000 - --------------------------------------------------------------------------------------------------------- Balance at January 1, $205,000 $ - Additions charged to operations 31,000 - - --------------------------------------------------------------------------------------------------------- Balance at March 31, 236,000 - Additions charged to operations 83,000 23,000 - --------------------------------------------------------------------------------------------------------- Balance at June 30, $319,000 $23,000 - ---------------------------------------------------------------------------------------------------------
Unrealized Appreciation/(Depreciation) and Realized Gains/(Losses) on Investments The change in unrealized appreciation/(depreciation) of investments is the amount by which the fair value estimated by the Company is greater/(less) than the cost basis of the investment portfolio. Realized gains or losses on investments are generated through sales of investments, foreclosure on specific collateral, and write-offs of loans or assets acquired in satisfaction of loans, net of recoveries. Unrealized depreciation was $6.1 million as of June 30, 2001 and March 31, 2001. The table below shows changes in the unrealized depreciation balance during 2001:
- ------------------------------------------------------------------------------------------------------ Loans Equity Investments Total - ------------------------------------------------------------------------------------------------------ Balance as of December 31, 2000 ($6,988,790) ($422,577) ($7,411,367) Change in unrealized Appreciation on investments - 176,407 176,407 Depreciation on investments (558,159) - (558,159) Realized Gains on investments (3,375) (120,389) (123,764) Losses on investments 1,384,856 - 1,384,856 Other 236,499 240,779 477,278 - ------------------------------------------------------------------------------------------------------ Balance as of March 31, 2001 (5,928,969) (125,780) (6,054,749) Change in unrealized Appreciation on investments 178,623 452,000 630,623 Depreciation on investments (716,369) (92,080) (808,449) Realized Losses on investments 323,633 - 323,633 Other (236,369) - (236,369) ------------------------------------------------- Balance as of June 30, 2001 ($6,379,451) $ 234,140 ($6,145,311) - ------------------------------------------------------------------------------------------------------
The table below summarizes components of unrealized and realized gains and losses in the investment portfolio:
- -------------------------------------------------------------------------------------------------------------------------------- Three months Six months ended ended June 30, 2001 June 30, 2001 - -------------------------------------------------------------------------------------------------------------------------------- Increase in net unrealized appreciation (depreciation) on investments Unrealized appreciation $ 630,623 $ 807,030 Unrealized depreciation (808,449) (1,366,608) Realized gain - (123,764) Realized loss 323,633 1,708,489 Other 237,121 251,045 -------------------------------------------------- Total $ 382,928 $ 1,276,192 - -------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments Realized gain ($239,355) ($105,234) Realized loss (363,193) (1,395,727) -------------------------------------------------- Total ($602,548) ($1,500,961) - --------------------------------------------------------------------------------------------------------------------------------
9 Goodwill Cost of purchased businesses in excess of the fair value of net assets acquired (goodwill) is amortized on a straight-line basis over fifteen years. The excess of fair value of net assets over cost of business acquired (negative goodwill) was accreted on a straight-line basis over approximately four years. The Company reviews its goodwill for events or changes in circumstances that may indicate that the carrying amount of the assets may not be recoverable, and if appropriate, reduces the carrying amount through a charge to income. See note 7. Federal Income Taxes The Company has elected to be treated for tax purposes as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (the Code). As a RIC, the Company will not be subject to U.S. federal income tax on any investment company taxable income (which includes, among other things, dividends and interest reduced by deductible expenses) that it distributes to its stockholders if at least 90% of its investment company taxable income for that taxable year is distributed. It is the Company's policy to comply with the provisions of the Code applicable to regulated investment companies. Media and MMJ, as non-investment companies, are taxed as regular corporations. Net Increase in Net Assets Resulting from Operations per Share (EPS) Basic earnings per share is computed by dividing net increase in net assets resulting from operations available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if option contracts to issue common stock were exercised and has been computed after giving consideration to the weighted average dilutive effect of the Company's common stock and stock options. Basic and diluted EPS for the three and six months ended June 30, 2001 and 2000 are as follows:
- ------------------------------------------------------------------------------------------------------------------------------ June 30, 2001 June 30, 2000 ----------------------------------------------------------------------------------- Three months ended # of Shares EPS # of Shares EPS - ------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from operations $2,364,258 $4,260,483 - ------------------------------------------------------------------------------------------------------------------------------ Basic EPS Income available to common shareholders 2,364,258 15,215,002 $0.16 4,260,483 14,533,384 $0.29 Effect of dilutive stock options 5,405 48,284 - ------------------------------------------------------------------------------------------------------------------------------ Diluted EPS Income available to common shareholders $2,364,258 15,220,407 $0.16 $4,260,483 14,581,668 $0.29 - ------------------------------------------------------------------------------------------------------------------------------ Six months ended - ------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $4,653,487 $8,760,428 - ------------------------------------------------------------------------------------------------------------------------------- Basic EPS Income available to common shareholders 4,653,487 14,895,144 $0.31 $8,760,428 14,528,906 $0.60 Effect of dilutive stock options 8,620 57,604 - ------------------------------------------------------------------------------------------------------------------------------- Diluted EPS Income available to common shareholders $4,653,487 14,903,764 $0.31 $8,760,428 14,586,510 $0.60 - -------------------------------------------------------------------------------------------------------------------------------
Derivatives In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes new standards regarding accounting and reporting requirements for derivative instruments and hedging activities. In June 1999, the Board issued SFAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133." The new standard deferred the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. The Company adopted SFAS 133 beginning January 1, 2001. The cumulative effect of adoption was not material. 10 The Company is party to certain interest rate cap agreements. These contracts were entered into as part of the Company's management of interest rate exposure and effectively limit the amount of interest rate risk that may be taken on a portion of the Company's outstanding debt. All interest rate caps are designated as hedges of certain liabilities, however, any hedge ineffectiveness is charged to earnings in the period incurred. Premiums paid on the interest rate caps were previously amortized over the lives of the cap agreements and amortization of these costs was recorded as an adjustment to interest expense. The amount charged to earnings was $57,000 and $82,000 for the 2001 second quarter and six months, respectively, compared to $17,000 and $34,000 for the 2000 second quarter and six months, respectively. Upon adoption of SFAS 133, the interest rate caps are recorded at fair value, which is determined based on information provided by the Company's counterparties. Interest rate settlements, if any, are recorded as a reduction of interest expense over the lives of the agreements. The fair value of the Company's interest rate caps as of June 30, 2001 was $0. Reclassifications Certain reclassifications have been made to prior year balances to conform with the current year presentation. (3) Investment in Unconsolidated Subsidiary The balance sheets at June 30, 2001 and December 31, 2000 for Media are as follows:
=============================================================================================================== June 30, December 31, ----------------------------------------- 2001 2000 =============================================================================================================== Cash $ - $ 5,259 Accounts receivable 1,683,348 2,652,055 Equipment, net 3,224,595 3,281,011 Goodwill 1,618,222 1,659,624 Prepaid signing bonuses 1,900,445 1,521,253 Other 3,147,847 2,882,750 Due from parent - 321,723 ----------------------------------------- Total assets $11,574,457 $12,323,675 - --------------------------------------------------------------------------------------------------------------- Accounts payable and accrued expenses $ 1,405,643 $ 683,369 Note payable-bank 3,300,000 3,900,000 Notes payable-parent 2,484,234 - Deferred revenue 2,408,489 5,453,550 ----------------------------------------- Total liabilities 9,598,366 10,036,919 ----------------------------------------- Equity 1,001,000 1,001,000 Retained earnings 975,091 1,285,756 ----------------------------------------- Total equity 1,976,091 2,286,756 ----------------------------------------- Total liabilities and equity $11,574,457 $12,323,675 - ---------------------------------------------------------------------------------------------------------------
The statements of operations of Media for the three months and six months ended June 30, 2001 and 2000 are as follows:
- --------------------------------------------------------------------------------------------- Three Months Ended June 30, Six Months Ended June 30, ------------------------------------------------------------------ 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------- Advertising revenue $3,862,841 $2,937,131 $ 7,218,067 $5,213,452 Cost of fleet services 2,063,831 1,260,119 4,231,447 2,423,222 ------------------------------------------------------------------ Gross profit 1,799,010 1,677,012 2,986,620 2,790,230 Other operating expenses 1,681,921 1,366,737 3,619,860 2,762,953 ------------------------------------------------------------------ Income (loss) before taxes 117,089 310,275 (633,240) 27,277 Income tax provision (benefit) 571 124,110 (322,569) 10,911 ------------------------------------------------------------------ Net income (loss) $ 116,518 $ 186,165 ($ 310,671) $ 16,366 - ---------------------------------------------------------------------------------------------
Included in advertising revenue for the 2001 first quarter was approximately $567,000 related to contracts that were cancelled in prior periods due to legislative changes and other factors. This revenue was recognized upon determination that Media had no further obligations under the contracts. 11 In July 2001, the Company acquired certain assets and assumed certain liabilities of Medallion Media Japan Ltd. (MMJ), a taxi advertising operation similar to those operated by the Company in the U.S., which has advertising rights on approximately 7,000 cabs servicing various cities in Japan. The transaction will be accounted for as a purchase for financial reporting purposes. The proforma effect of the acquisition is not material to the Company's consolidated financial position and results of operations. The terms of the agreement provide for an earn-out payment to the sellers based on average net income over the next four years. (4) Commercial Paper, Notes payable to banks, and senior secured notes Borrowings under the commercial paper, revolving credit, and senior note agreements are secured by the assets of the Company. The outstanding balances were as follows as of June 30, 2001 and December 31, 2000.
================================================================================================================== Description 2001 2000 ================================================================================================================== Commercial paper $ 237,128 $ 24,066,269 Revolving credit agreements 314,720,000 305,700,000 Senior secured notes 45,000,000 45,000,000 - ------------------------------------------------------------------------------------------------------------------ Total $359,957,128 $374,766,269 ==================================================================================================================
(a) Commercial Paper On March 13, 1998, MFC entered into a commercial paper agreement to sell up to an aggregate principal amount of $195 million in secured commercial paper through private placements, and coincident with the extension and expansion of the Revolving Credit Agreement (the Revolver), the commercial paper line was expanded to $220,000,000. The commercial paper program ranks on a pari passu basis with the Revolver. During December 2000, MFC'S outstanding commercial paper began to mature and was replaced by draws on the Revolver at a cost of 7.83%, compared to a cost of 7.10%. On November 22, 2000, Fitch IBCA placed Medallion's "BBB" senior secured debt rating and "F2" secured commercial paper rating on negative watch. In addition, in December 2000, Medallion's other rating agency, Thompson's Bankwatch, was acquired by Fitch IBCA, leaving it with only one commercial paper rating. Primarily as a result of these factors, a substantial portion of Medallion's commercial paper did not rollover and has subsequently been replaced by Medallion's bank facility. On January 18, 2001, Fitch IBCA lowered the Company's senior secured debt rating and secured commercial paper rating to "BB+" and "B", respectively, and removed them from negative watch. At June 30, 2001 and December 31, 2000, MFC had approximately $237,000 and $24,066,000 outstanding at a weighted average interest rate of 7.21% and 7.10%. MFC's weighted average borrowings related to commercial paper were $483,804 and $4,048,704 for the 2001 second quarter and year-to-date, compared to $136,867,503 and $126,089,018 for the respective 2000 periods, with weighted average interest rates of 7.30%, 7.44%, 6.51%, and 6.58%, respectively. Commercial paper outstandings are deducted from the Revolver as the Revolver acts as a liquidity facility for the commercial paper. Subsequent to quarter end, the commercial paper program matured and was terminated. (b) Revolving Credit Agreements On March 27, 1992 (and as subsequently amended), MFC entered into the Revolver with a group of banks. Effective on February 10, 2000, MFC extended the Revolver until June 30, 2001 at an aggregate credit commitment amount of $220,000,000, an increase from $195,000,000 previously, pursuant to the Loan Agreement dated December 24, 1997. Amounts available under the Revolver are reduced by amounts outstanding under the commercial paper program as the Revolver acts as a liquidity facility for the commercial paper program. As of June 30, 2001 and December 31, 2000, amounts available under the Revolver were $10,593,000 and $0. On June 29, 2001 MFC renewed the Revolver until June 30, 2002. This renewal clarified and revised certain provisions of the agreements related to business activities and financial covenants of Medallion and MFC, adjusted the rate of interest paid on the notes, and established scheduled reductions in the commitment to $170 million at June 1, 2002. The Revolver may be extended annually after June 30, 2002 upon the option of the participating banks and acceptance by MFC. Outstanding borrowings under the Revolver were $209,170,000 and $195,700,000 at weighted average interest rates of 6.75% and 7.68% at June 30, 2001 and December 31, 2000. On July 31, 1998, (and as subsequently amended) the Company and MBC entered into a committed revolving credit agreement (the Loan Agreement) with a group of banks. The aggregate credit commitment amount was $100,000,000 maturing on June 28, 2000 and was extended on September 22, 2000 to September 21, 2001 at an increased commitment level of $110,000,000. The Loan Agreement may be extended annually thereafter upon the option of the participating banks and acceptance by the Company and MBC. On March 30, 2001 the Company finalized certain amendments and was granted a waiver of compliance with certain provisions. These amendments clarified and revised certain provisions of the agreements 12 related to business activities and financial covenants of the Company and MFC, and adjusted the rate of interest paid on the notes. Outstanding borrowings under the Loan Agreement were $102,050,000 and $106,500,000 at a weighted average interest rate of 5.53% and 8.09% at June 30, 2001 and December 31, 2000. On March 6, 1997, Freshstart established a $5,000,000 line of credit with a bank at a rate of LIBOR plus 1.75%. Pursuant to the terms of the line of credit, the Company is required to comply with certain terms, covenants, and conditions, including maintaining minimum balances with the bank. The line of credit is unsecured. In connection with the Freshstart merger, the line was reduced to $3,500,000, and was subsequently paid off in July 2001. The weighted average interest rate for the Company's consolidated outstanding revolver borrowings at June 30, 2001 and December 31, 2000 was 6.35% and 7.83%. During the three months ended June 30, 2001 and 2000, the Company's weighted average borrowings were $317,219,000 and $179,363,000 with a weighted average interest rate of 6.78% and 7.78%, respectively. As of the effective date of the renewals and amendments, Medallion believes it and MFC are in compliance with the requirements of the renewed and amended credit facilities, and expect to remain in compliance with the renewed and amended credit facilities for the foreseeable future. The Company and its lenders have initiated discussions as to the next renewal of the existing Loan Agreement which matures in September, 2001. Although, there can be no assurances, the Company expects a satisfactory result from these discussions. (c) Senior Secured Notes On June 1, 1999, MFC issued $22.5 million of Series A senior secured notes that mature on June 1, 2004, and on September 1, 1999, MFC issued $22.5 million of Series B senior secured notes that mature on September 1, 2004 (together, the Notes). The Notes bear a fixed rate of interest of 7.35% and interest is paid quarterly in arrears. The Notes rank pari passu with the revolvers and commercial paper through inter-creditor agreements. (d) Interest Rate Cap Agreements On June 22, 2000, MFC entered into an interest cap agreement limiting the Company's maximum LIBOR exposure on $10,000,000 of MFC's revolving credit facility to 7.25% until June 24, 2002. On July 6, 1999, MFC entered into two interest rate cap agreements limiting the Company's maximum LIBOR exposure on a total of $20,000,000 of MFC's revolving credit facility to 6.50% until July 6, 2001. The Company is exposed to credit loss in the event of nonperformance by the counterparties on the interest rate cap agreements. The Company does not anticipate nonperformance by any of these parties. (5) SBA Debentures Payable Outstanding SBA debentures are as follows at June 30, 2001 and December 31, 2000:
========================================================================================== Due Date 2001 2000 Interest Rate ========================================================================================== June 15, 2011 $10,500,000 $ - 6.89% December 1, 2006 5,500,000 5,500,000 7.08 March 1, 2007 4,210,000 4,210,000 7.38 September 1, 2007 4,060,000 4,060,000 7.76 June 1, 2007 3,000,000 3,000,000 7.07 March 1, 2006 2,000,000 2,000,000 7.08 December 16, 2002 1,300,000 1,300,000 4.51 June 1, 2005 520,000 520,000 6.69 December 1, 2005 520,000 520,000 6.54 June 1, 2006 250,000 250,000 7.71 ---------------------------------------------------- Total SBA debentures $31,860,000 $21,360,000 7.09 - ------------------------------------------------------------------------------------------
During the 2001 second quarter, Freshstart and Medallion Capital were approved by the SBA to receive $36,000,000 each in funding over a period of 5 years. Medallion Capital drew down $10,500,000 during June 2001, and in July, 2001 Freshstart drew down $7,485,000. The rates will be set permanently for a 10 year period at the 10 Year Treasury Rate plus 13 130 basis points in September, 2001. The interim interest rates are 4.351% and 4.28% for the Medallion Capital and Freshstart draws, respectively. (6) Segment Reporting The Company has two reportable business segments, lending and taxicab rooftop advertising. The lending segment originates and services secured taxicab medallion and commercial loans. The taxicab rooftop advertising segment sells advertising space to advertising agencies and companies in several major markets across the United States. The segment represents the unconsolidated subsidiaries Medallion Taxi Media, Inc. and Medallion Media Japan, Ltd. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The lending segment is presented in the consolidated financial statements of the Company. Financial information relating to the taxicab rooftop advertising segment is presented in Note 3, and represents an immaterial part of total Company revenues, expenses, income, assets and liabilities. (7) NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) has adopted Statements of Financial Accounting Standards (SFAS) 141, "Business Combinations" and SFAS 142, "Goodwill and Intangible Assets" which the Company intends to adopt January 1, 2002 as required. The new standards prohibit pooling accounting for mergers and requires the use of the purchase method of accounting for all prospective acquisitions, which requires that all assets acquired and liabilities assumed in a business combination be recorded at fair value with any excess amounts recorded as goodwill. The standard further requires that amortization of all goodwill cease, and in lieu of amortization, goodwill must be evaluated for impairment in each reporting period. Management intends to evaluate its goodwill for impairment quarterly, and does not believe that such valuation will have a material impact on the Company's consolidated results of operations or financial position. (8) SUBSEQUENT EVENTS On August 7, 2001, the Company's Board of Directors declared a common stock dividend of $0.15 per share payable September 10, 2001 to shareholders' of record on August 31, 2001. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our financial statements and the notes to those statements and other financial information appearing elsewhere in this report. This report contains forward-looking statements relating to future events and future performance of the Company within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of The Securities Exchange Act of 1934, including, without limitation, statements regarding the Company's expectations, beliefs, intentions or future strategies that are signified by the words "expects," "anticipates," "intends," "believes" or similar language. Actual results could differ materially from those anticipated in such forward-looking statements. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any forward-looking statements. The Company cautions investors that its business and financial performance are subject to substantial risks and uncertainties. In evaluating the Company's business, prospective investors should carefully consider the information set forth in our annual report on Form 10-K for the year for the year ended December 31, 2000 under the caption "Investment Considerations" in addition to the other information set forth herein. General We are a specialty finance company that originates and services loans that finance taxicab medallions and various types of commercial loans. We have a leading position in taxicab medallion financing. Since 1996, we have increased our medallion loan portfolio at a compound annual growth rate of approximately 16% and our commercial loan portfolio at a compound annual growth rate of approximately 35%. Our total assets under our management at June 30, 2001 was approximately $820 million and has grown from $215 million at the end of 1996, a compound annual growth rate of approximately 30%. 14 The Company's loan related earnings depend primarily on its level of net interest income. Net interest income is the difference between the total yield on the Company's loan portfolio and the average cost of funds. The Company funds its operations through a wide variety of interest-bearing sources, such as revolving bank facilities, senior secured notes, and debentures issued to and guaranteed by the SBA. Net interest income fluctuates with changes in the yield on Medallion's loan portfolio and changes in the cost of funds, as well as changes in the amount of interest-bearing assets and interest-bearing liabilities held by the Company. Net interest income is also affected by economic, regulatory, and competitive factors that influence interest rates, loan demand, and the availability of funding to finance the Company's lending activities. Medallion, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets reprice on a different basis than its interest-bearing liabilities. The Company also invests in small businesses in selected industries through its subsidiary Medallion Capital. Medallion Capital's investments are typically in the form of secured debt instruments with fixed interest rates accompanied by warrants to purchase an equity interest for a nominal exercise price (such warrants are included in "Equity Investments"). Interest income is earned on the debt investments. Realized gains or losses on investments are recognized when the investments are sold or written-off. The realized gains or losses represent the difference between the proceeds received from the disposition of portfolio assets, if any, and the cost of such portfolio assets. In addition, changes in unrealized appreciation or depreciation of investments are recorded and represent the net change in the estimated fair values of the portfolio assets at the end of the period as compared with their estimated fair values at the beginning of the period. Generally, "realized gains (losses) on investments" and "changes in unrealized appreciation (depreciation) of investments" are inversely related. When an appreciated asset is sold to realize a gain, a decrease in the previously recorded unrealized appreciation occurs. Conversely, when a loss previously recorded as an unrealized loss is realized by the sale or other disposition of a depreciated portfolio asset, the reclassification of the loss from "unrealized" to "realized" causes an increase in net unrealized appreciation and an increase in realized loss. The Company's income from the taxicab rooftop advertising business, primarily operated by Media, is reflected on Medallion's books as earnings from an unconsolidated subsidiary. The Company continues to explore other opportunities in the taxicab and lending industries, including possible strategies to participate directly and/or indirectly in the appreciation of taxicab medallions. TREND IN LOAN PORTFOLIO The Company's investment income is driven by the principal amount of and yields on its loan portfolio. To identify trends in the yields, the portfolio is grouped by medallion loans, commercial loans, and equity investments. Since December 31, 1998, medallion loans, while still making up a significant portion of the total portfolio, have decreased in relation to the total portfolio composition and commercial loans have increased. 15 The following table illustrates the Company's investments at fair value and the weighted average portfolio yields calculated using the contractual interest rates of the loans at the dates indicated:
============================================================================================================================= Dollars in thousands 6/30/2001 3/31/2001 12/31/2000 6/30/2000 ------------------------------------------------------------------------------------------- Interest Principal Interest Principal Interest Principal Interest Principal Rate Balance Rate Balance Rate Balance Rate Balance ============================================================================================================================= Medallion Loans New York 8.47% $201,686 8.62% $211,103 8.67% $215,607 8.39% $222,125 Freshstart-New York 9.46 15,437 9.17 15,088 9.10 12,851 8.97 14,967 Boston 11.06 14,873 11.16 15,612 11.21 17,279 10.76 14,248 Cambridge 11.82 1,766 11.78 1,742 10.58 927 10.30 1,439 Chicago 9.58 23,653 10.38 24,825 10.47 32,621 11.32 35,812 Newark 11.40 7,483 11.54 9,783 11.59 11,092 11.30 13,916 Other 11.43 7,397 11.42 6,477 11.16 8,230 10.86 7,698 - ----------------------------------------------------------------------------------------------------------------------------- Total Medallion Loans 8.95 272,295 9.12 284,630 9.22 298,607 9.07 310,205 Add: FASB 91 744 712 697 839 Less: Reserve (67) - - - - ----------------------------------------------------------------------------------------------------------------------------- Medallion Loans, net 272,972 285,342 299,304 311,044 - ----------------------------------------------------------------------------------------------------------------------------- Commercial Loans Dry Cleaning 12.91 6,117 13.14 6,597 13.26 7,438 13.19 10,173 Laundromat 12.27 7,785 12.23 9,041 12.37 9,844 12.48 12,786 Commercial Secured 11.60 80,677 12.16 88,087 12.84 86,216 12.49 77,380 7 a Loans 9.71 61,079 11.05 60,573 11.50 66,058 11.94 60,584 Asset based receivable 11.38 44,000 12.06 40,611 12.98 43,120 12.38 37,359 Freshstart 9.50 4,104 10.00 5,429 11.00 5,927 11.25 6,025 - ----------------------------------------------------------------------------------------------------------------------------- Total Commercial Loans 11.01 203,762 11.80 210,338 12.41 218,603 12.30 204,307 Add: FASB 91 1,135 974 1,107 1,886 Less: Reserve (6,312) (5,929) (6,989) (7,273) - ----------------------------------------------------------------------------------------------------------------------------- Commercial loans, net 198,585 205,383 212,721 198,920 - ----------------------------------------------------------------------------------------------------------------------------- Equity investments 1,855 1,855 2,552 3,087 Less: Unrealized appreciation (depreciation) 234 (125) (423) (725) ------------------------------------------------------------------------------------------- 2,089 1,730 2,129 2,362 - ----------------------------------------------------------------------------------------------------------------------------- Total investments at cost 9.83% 477,912 10.26% 496,823 10.56% 519,762 10.29% 517,599 - ----------------------------------------------------------------------------------------------------------------------------- Add: FASB 91 1,879 1,686 1,804 2,725 Less: Net appreciation (depreciation) on equities 234 (125) (423) (725) Less: Reserve (6,379) (5,929) (6,989) (7,273) - ----------------------------------------------------------------------------------------------------------------------------- Total investments, net $473,646 $492,455 $514,154 $512,326 - -----------------------------------------------------------------------------------------------------------------------------
Portfolio Summary Total Portfolio Yield The weighted average yield of the total portfolio at June 30, 2001 was 9.83%, a decrease of 43 basis points from 10.26% at March 31, 2001 and a decrease of 46 basis points from 10.29% at June 30, 2000 and down 73 basis points from year end, primarily due to the decrease in the yields of the medallion and commercial loan portfolios resulting from the Federal Reserve's lowering of interest rates during the quarter. The Company expects to try to continue increasing both the percentage of commercial loans in the total portfolio and originating floating and adjustable-rate loans and non-New York medallion loans. 16 Medallion Loan Portfolio Medallion loans comprised 57.6% of the total portfolio of $474 million at June 30, 2001, 58.2% of the $514 million portfolio at December 31, 2000, and 60.2% of the $512 million portfolio of at June 30, 2000. The medallion loan portfolio decreased by $12 million or 4% from the prior quarter and $23 million or 8% from a year ago, reflecting a decrease in medallion loan originations in most markets, and the Company's execution of participation agreements with third parties of low yielding New York medallion loans. The Company retains a portion of most of these participating loans and earns a fee for servicing the loans for the third parties. The weighted average yield of the medallion loan portfolio at June 30, 2001 was 8.95%, a decrease of 17 basis points from 9.12% at March 31, 2001 and 12 basis points from 9.07% at June 30, 2000. The decreases primarily reflected the reduction in interest rates during the quarter. At June 30, 2001, 20% of the medallion loan portfolio represented loans outside New York compared to 21% at March 31, 2001 and 20% a year ago. Collateral Appreciation Participation Loans During the 2000 first half, the Company originated collateral appreciation participation loans collateralized by Chicago taxi medallions of $30 million, of which $21 million was syndicated to other financial institutions. In consideration for modifications from its normal taxi medallion lending terms, the Company offered loans at higher loan-to-value ratios and is entitled to earn additional interest income based upon any increase in the value of all $30 million of the collateral. The fair value of the Company's collateral appreciation participation loan portfolio at June 30, 2001 was $13 million, which represented 3% of its total loan portfolio. Additional interest income totaled approximately $250,000 and $950,000 for the second quarter and year to- date, compared with $775,000 and $2,475,000 for the comparable periods in 2000, and is included in investment income on the consolidated statements of operations and in accrued interest receivable on the consolidated balance sheets. The Company believes that the additional interest income recorded is fully realizable through operation of the collateral or orderly sales in the market. As a regulated investment company, the Company is required to mark-to- market these investments on a quarterly basis, just as it does on all of its other investments. The Company feels that it has adequately calculated the fair market value on these investments and relies upon information such as recent and historical medallion sale prices. If there is a decrease in the value of taxicab medallions, the reduction in the value of the investments will be reversed against investment income. The additional interest income is not reflected in the yield calculations shown in the table above. Commercial Loan Portfolio Since 1997, the Company has continued to shift the total portfolio mix toward a higher percentage of commercial loans, which historically have had higher yields than its medallion loans. Commercial loans were 42.0% of the total portfolio at June 30, 2001 compared to 41.7% and 39.3% at March 31, 2001 and June 30, 2000. The increase in the commercial loan portfolio was primarily due to strong growth in the asset-based lending portfolio and in the SBA Section 7(a) loan program. The weighted average yield of the commercial loan portfolio at June 30, 2001 was 11.01%, a decrease of 79 basis points from 11.80% in the 2001 first quarter and 129 basis points from 12.30% in the 2000 second quarter. The decreases primarily reflected the 275 basis point drop in the prime rate during 2001, and to lesser extent, a shift in the mix within the commercial portfolio from fixed-rate loans to floating-rate or adjustable-rate loans tied to the prime rate, and the corresponding sensitivity of the yield to movements in the prime rate. The Company continues to originate adjustable-rate and floating- rate loans tied to the prime rate to help mitigate its interest rate risk. At June 30, 2001, floating-rate loans represented approximately 78% of the commercial portfolio compared to 77% at March 31, 2001 and year end. Although this strategy initially produces a lower yield, we believe that this strategy mitigates interest rate risk by better matching our earning assets to their adjustable-rate funding sources. 17 Delinquency Trends The following table shows the trend in loans 90 days or more past due:
===================================================================================================================== June 30, 2001 March 31, 2001 December 31, 2000 -------------------------------------------------------------------------------------------------- $ % (1) $ % (1) $ % (1) ===================================================================================================================== Medallion Loans $ 8,530,322 1.79% $11,139,490 2.34% $14,026,909 2.95% Commercial Loans SBA Section 7(a) Loans 11,023,426 2.32 10,837,981 2.28 11,125,653 2.34 Asset based loans - - - - - - Secured mezzanine loans 3,803,336 0.80 2,986,829 0.63 3,205,793 0.67 Other commercial secured loans 6,833,517 1.44 6,895,927 1.45 7,354,045 1.54 -------------------------------------------------------------------------------------------------- Total commercial loans 21,660,279 4.55 20,720,737 4.35 21,685,491 4.56 - --------------------------------------------------------------------------------------------------------------------- Total loans 90 days or more past due $30,190,601 6.34% $31,860,227 6.69% $35,712,400 7.50% - ---------------------------------------------------------------------------------------------------------------------
(1) Percentage is calculated against the total investment portfolio. The increase in delinquencies in the SBA section 7(a) portfolio primarily reflects the deterioration in the economy and its impact on the small businesses which constitute the majority of this portfolio. In addition, this business segment has undergone management changes and staffing losses which exacerbated the situation. The Company has addressed these concerns by stabilizing management of the portfolio and refocusing collection efforts. Included in the SBA Section 7(a) delinquency figures are $5,368,171, $5,391,042 and $6,823,069 at June 30, 2001, March 31, 2001 and December 31, 2000, respectively, which represent loans repurchased for the purpose of collecting on the SBA guarantee. Although there can be no assurances as to changes in the trend rate, management believes that any loss exposures are properly reflected in reported asset values. Equity Investments Equity investments were 0.4%, 0.4%, and 0.5% of Medallion's total portfolio at June 30, 2001, March 31, 2001 and June 30, 2000. Equity investments are comprised of common stock and warrants. Trend in Interest Expense The Company's interest expense is driven by the interest rate payable on its LIBOR-based short-term credit facilities with bank syndicates, long-term notes payable and, to a lesser degree, secured commercial paper and fixed-rate, long-term debentures issued to or guaranteed by the SBA. The following table provides the interest rates and interest expense of Company's major credit facilities for the three months and six months ended June 30, 2001 and June 30, 2000:
==================================================================================================================== Three months ending Six months ending ------------------------------------------------------------------------------------ Average Cost of Funds Interest Expense Average Cost of Funds Interest Expense ==================================================================================================================== June 30, 2001 Notes payable to banks 6.78% $5,694,719 6.92% $11,485,191 Commercial paper 7.30 27,287 7.44 182,816 Senior secured notes 7.45 838,927 7.26 1,660,792 SBA debentures 7.89 451,583 7.05 884,755 - -------------------------------------------------------------------------------------------------------------------- Total 6.93 $7,012,516 6.97 $14,213,554 ==================================================================================================================== June 30, 2000 Notes payable to banks 7.77% $3,468,060 7.56% $ 6,772,616 Commercial paper 6.51 2,223,077 6.58 4,504,236 Senior secured notes 7.33 821,865 7.31 1,643,730 SBA debentures 7.23 402,768 7.13 812,186 - -------------------------------------------------------------------------------------------------------------------- Total 7.28 $6,915,770 7.19 $13,732,768 ====================================================================================================================
The Company will continue to seek SBA funding to the extent it offers attractive rates. SBA financing subjects its recipients to limits on the amount of secured bank debt they may incur. The Company uses SBA funding to fund loans that qualify under the SBIA and SBA regulations. Further, the Company believes that its transition to financing operations primarily with short-term LIBOR- based secured bank debt and secured commercial paper has generally decreased its interest expense, but has also increased the Company's exposure to the risk of increases in market interest rates, which Medallion 18 attempts to mitigate with certain hedging strategies. At June 30, 2001, December 31, 2000 and June 30, 2000, short-term LIBOR-based debt including commercial paper constituted 80.4%, 83.2%, and 82.4% of total debt, respectively. Medallion's cost of funds is primarily driven by the rates paid on its various debt instruments and their relative mix and changes in the levels of average borrowings outstanding. Medallion incurs LIBOR-based debt for terms generally ranging from 30-90 days. Medallion's debentures issued to or guaranteed by the SBA typically have initial terms of ten years. Medallion's cost of funds reflects changes in LIBOR to a greater degree than in the past because LIBOR-based debt represents a greater proportion of Medallion's debt. Medallion measures its cost of funds as its aggregate interest expense for all of its interest-bearing liabilities divided by the face amount of such liabilities. Medallion analyzes its cost of funds in relation to the average of the 90 day LIBOR (the LIBOR Benchmark). Medallion's average cost of funds was 6.93% for the 2001 second quarter, compared to 7.44% in the 2001 first quarter and 7.28% in the 2000 second quarter. The decrease in the second quarter reflects the lower rate environment resulting from the series of rate drops initiated by the Federal Reserve Board during 2001, and generally higher spreads charged on bank debts as a result of the recent credit facility renewals and amendments, partially offset by the impact of the December 31, 2000 shift from commercial paper to bank debt. During the six months in 2001, Medallion's outstanding commercial paper began to mature and was replaced by draws on bank credit facilities, at higher costs than if the commercial paper program had been maintained. The commercial paper was not renewed, partially as a result of the loss of a credit rating due to the merger of the two rating agencies providing credit ratings to Medallion, and due to the remaining rating agency placing Medallion's rating on negative credit watch. Taxicab Advertising In addition to its finance business, Medallion also conducts taxicab rooftop advertising businesses through Media. Taxicab advertising revenue is affected by the number of taxicab rooftop advertising displays currently showing advertisements and the rate charged customers for those displays. At June 30, 2001, Media had approximately 10,500 installed displays. Although Media is a wholly owned subsidiary of Medallion, its results of operations are not consolidated with Medallion's operations because the Securities and Exchange Commission regulations prohibit the consolidation of non-investment companies with investment companies. Medallion expects that Media will continue to expand its operations by entering new markets on its own or through acquisition of existing taxicab rooftop advertising companies. In July 2001, the Company acquired certain assets and assumed certain liabilities of MMJ, a taxi advertising operation similar to those operated by the Company in the U.S., which has advertising rights on approximately 7,000 cabs servicing various cities in Japan. The terms of the agreement provide for an earn-out payment to the sellers based on average net income over the next four years. On August 30, 2000, Media purchased all the assets of Out There Media L.L.C. (Out There), a privately held company headquartered in Cleveland. Out There has the right to place an advertisement on top of more than 250 taxis in Cleveland, Columbus, and Toledo, and has contracts with some of the largest taxi fleets in these cities. On August 7, 2000, Media entered into an agreement for up to ten years with Yellow Cab Service Corp., the taxi division of Coach USA, the leading taxi and bus charter company in the U.S., to sell advertising space on the top of over 2,300 taxicabs throughout the United States. Going forward, as Coach USA acquires taxi companies around the U.S., Media will have the right to place advertisements on top of those taxis as well. Factors Affecting Net Assets Factors that affect Medallion's net assets include, net realized gain or loss on investments and change in net unrealized appreciation or depreciation of investments. Net realized gain or loss on investments is the difference between the proceeds derived upon sale or foreclosure of a loan or an equity investment and the cost basis of such loan or equity investment. Change in net unrealized appreciation or depreciation of investments is the amount, if any, by which Medallion's estimate of the fair value of its investment portfolio is above/below the previously established fair value or the cost basis of the portfolio. Under the 1940 Act and the SBIA, Medallion's loan portfolio and other investments must be recorded at fair value. Unlike certain lending institutions, Medallion is not permitted to establish reserves for loan losses, but adjusts quarterly the valuation of its loan portfolio to reflect Medallion's estimate of the current value of the total loan portfolio. Since no ready market exists for Medallion's loans, fair value is subject to the good faith determination of Medallion. In determining such fair value, Medallion and its Board of Directors takes into consideration factors such as the financial condition of its borrowers and the adequacy of its collateral. Any change in the fair value of portfolio loans or other investments as determined by Medallion is reflected in net unrealized depreciation or appreciation of investments and affects net increase in net assets resulting from operations, but has no impact on net investment income or distributable income. 19 Consolidated Results of Operations For the three and six months ended June 30, 2001 and June 30, 2000. Net increase in net assets resulting from operations was $2.4 million or $0.16 per diluted common share and $4.7 million or $0.31 per share in the 2001 second quarter and six months, a decrease of $1.9 million or 45% and $4.1 million or 47% from $4.3 million or $0.29 per share and $8.8 million and $0.60 per share in the 2000 periods, primarily reflecting decreased net interest and non-interest income, partially offset by reduced operating expenses. Investment income was $11.6 million in the quarter and $25.0 million in the six months, down $2.2 million or 16% and $3.3 million or 12% from $13.8 million and $28.3 million in 2000. The decreases compared to 2000 reflected a decreased level of loans, reduced additional interest income recorded on the collateral appreciation participation loans, lower yields on the portfolios, and a higher level of nonaccrual loans. Total net investments at quarter end were $474 million, down $18 million or 4% from the 2001 first quarter and $41 million or 13% from the 2000 second quarter. The yield on the total portfolio at June 30, 2001 was 9.83% and 9.97% in the 2001 second quarter and six months, compared to 10.29% and 10.14 in the comparable 2000 periods. The 2001 decreases primarily reflect the series of rate drops initiated by the Federal Reserve bank during late 2000 and continuing through most of 2001, which reduced the prime lending rate by 275 basis points. Partially offsetting the decreased yield was the continuing movement of portfolio composition towards higher-yielding commercial loans from lower- yielding medallion loans. Commercial loans represented 34% of the investment portfolio at December 31, 1999, compared to 42% at June 30, 2001. Yields on medallion loans were 8.95% and 9.04% for the 2001 second quarter and six months compared to 9.07% and 8.96% for the comparable 2000 periods. Yields on commercial loans were 11.01% and 11.22% for the 2001 second quarter and six months compared to 12.30% and 12.07% for the 2000 periods. As rates began to rise, management made a conscious effort to sell or not renew its fixed, lower- rate medallion loans, and replaced them with floating, higher-rate commercial loans. Medallion loans were $273.0 million at June 30, 2001, down $38.1 million or 12.3% from $311.0 million, and were down $12.3 million or 4% from $285.3 million at March 31, 2001, primarily reflecting reductions in most markets. The commercial loan portfolio was $198.6 million at quarter end, compared to $193.1 million a year earlier, an increase of $5.5 million or 3%, but was down $6.8 million or 3% from $205.4 million at March 31, 2001. The increase compared to a year ago was in most commercial lending categories, including $6.7 million in the asset-based lending business, $5.8 million in other commercial services, and $2.4 million in the SBA section 7(a) lending program, partially offset by a $9.1 million decrease in dry cleaning and laundromat loans. The decrease compared to the preceding quarter primarily reflected the maturities and collection efforts in the secured commercial portfolio, partially offset by an increase of $3.4 million in the asset-based lending business. During the 2000 first half, we originated collateral appreciation participation loans collateralized by Chicago taxi medallions of $30.0 million, of which $21.0 million was syndicated to other financial institutions. In consideration for modifications from our normal taxi medallion lending terms, we offered loans at higher loan-to-value ratios, and we are entitled to earn additional interest income based upon any increase in the value of the taxi medallion collateral on the entire $30.0 million portfolio. Management's valuation of the collateral appreciation participation loans increased during 2001 and 2000, and accordingly, additional interest of $250,000 and $950,000 was recorded as investment income during the 2001 second quarter and six months compared to $775,000 and $2,475,000 recorded during the 2000 second quarter and six months. Interest expense was $7.0 million and $14.2 million the 2001 second quarter and six months, up $97,000 or 1% and $481,000 or 4% compared to the 2000 periods, primarily reflecting a mix switch from lower cost commercial paper to higher cost bank debt, an increased level of outstandings which averaged $392 million in the 2001 six months compared to $375 million in the 2000 six months, and higher bank fees and charges related to the renewals and amendments of the Revolver, partially offset by lower rates. Medallion's debt is primarily tied to floating rate indexes, which rose during most of 2000, and began declining thereafter. The Company's average cost of funds was 6.93% in the quarter and 6.97% year to-date, compared to 7.28% and 7.19% a year ago. Approximately 80% of Medallion's debt is short-term and floating rate, compared to 82% a year ago. Net interest income was $4.6 million and $10.8 million for the 2001 second quarter and six months, down $2.3 million or 33% and $3.8 million or 26% from 2000, primarily reflecting the decrease in the loan portfolio, the additional interest recorded on the collateral appreciation participation loans in 2000 and higher borrowing costs in 2001. Medallion had gains on the sale of the guaranteed portion of SBA 7(a) loans of $279,000 and $712,000 for the 2001 second quarter and six months, down $539,000 or 66% and $792,000 or 53% from $818,000 and $1.5 million in the 2000 periods. During 2001, $11.0 million of loans were sold under the SBA program compared to $31.2 million during 2000. The decline in gains on sale reflected the decrease in loans sold of $20.2 million or 65%, partially offset by an increase in the level of market-determined premiums received on the sales. Negative goodwill was fully accreted during 2000, and accordingly, accretion was $170,000 in the 2000 second quarter and $351,000 in the 2000 six months, compared to $0 in 20 2001. Other income of $1.0 million in the quarter and $2.0 million in the six months increased $38,000 or 4% and $210,000 or 12% from 2000, primarily reflecting an increase in servicing fee income, prepayment fees, late charges, and other miscellaneous income. Also included in non-interest income is equity in earnings (losses) of unconsolidated subsidiary which reflects the operations of the Media division of Medallion. Media generated $116,000 of net income in the 2001 second quarter and a ($310,000) loss year-to-date, compared to net income of $147,000 for the 2000 second quarter and a loss of ($172,000) in the 2000 six months. The decline in profits in the 2001 periods reflected the greater costs associated with the rapid increase in tops under contract and cities serviced, which outpaced the increase in revenue, which grew $926,000 or 32% in the quarter and $2.0 million or 38% in the six months to $3.9 million and $7.2 million, respectively. During the 2001 second quarter, Media exerted a greater effort to reduce the amount of deferred revenue by increasing capacity utilization, resulting in a drop of $3.0 million in deferred revenue. Also included in advertising revenue for the quarter ended March 31, 2001 was $567,000 related to contracts that were cancelled in prior periods due to legislative changes and other factors. This revenue was recognized upon determination that Media had no further continued obligations under the contract. During 2001, vehicles under contract increased 2,700 or 35% to 10,500 from 7,800 a year ago. As a result of the substantial growth in tops inventory, Media's fleet payment costs and related operating expenses to service those tops increased at a greater rate than the growth in revenue, resulting in lower profits in the 2001 periods compared to 2000. Non-interest expense was $3.4 million and $8.2 million in the 2001 second quarter and six months, down $1.3 million or 28% and $1.2 million or 13%, from the 2000 periods. Salaries and benefits expense of $2.2 million and $4.8 million were down $245,000 or 10% and $24,000 or 1% from the comparable 2000 periods, primarily reflecting reduction in headcount and the reduction of certain incentive compensation accruals. Professional fees of $586,000 and $982,000 were up $108,000 or 23% and $87,000 or 10% compared with 2000, primarily reflecting the costs of tax and legal advisory services on various transactions-related matters. Rent expense of $191,000 in the quarter and $447,000 in the six months was down $85,000 or 31% and $73,000 or 14% compared to the 2000 periods, reflecting fewer office locations in 2001 and a lower level of accrued rent obligations. Amortization of goodwill was $135,000 and $268,000 in the 2001 periods compared to $105,000 and $242,000 a year-ago. The increased amortization primarily reflects acquisitions recorded in late 2000. Administration and advisory fees were $2,000 in the quarter and $5,000 in the six months compared to $43,000 and $104,000 in the 2000 periods, reflecting the completion of the advisory services contract in early 2000. Other operating expenses of $538,000 and $2.1 million in the 2001 second quarter and six months were down $1.2 million compared to both 2000 periods, primarily reflecting the continued cleanups of financial records and operations, and a general effort to control expenses. The level of operating expenses recorded in the 2001 second quarter and six months may not be indicative of the levels for the rest of 2001. Net unrealized appreciation on investments was $383,000 in the 2001 second quarter and $1.3 million in the six months, compared to net unrealized appreciation of $1.0 million and $901,000 for the comparable 2000 periods. Unrealized appreciation/(depreciation) arises when Medallion makes valuation adjustments to the investment portfolio. When investments are sold or written- off, any resulting realized gain/(loss) is grossed up to reflect previously recorded unrealized components. As a result, movement between periods can appear distorted. The 2001 second quarter activity resulted from the reversal of reserves associated with fully reserved loans which were charged off of $562,000, the increase in valuation of equity portfolio securities of $452,000, and the reversal of reserves previously established against certain loans of $179,000, partially offset by the additional reserves of $808,000. Net realized loss on investments was $603,000 and $1.5 million in the 2001 second quarter and six months compared to losses of $1.1 million and $816,000 in the 2000 periods, primarily reflecting the charge-off of fully reserved commercial loans of $561,000. The balance of the increase in the 2001 second quarter net realized loss of $42,000 represented the direct write-off of various other commercial loans. Medallion's net realized/unrealized loss on investments was $220,000 and $225,000 in the 2001 quarter and six months compared to a net loss of $49,000 and a net gain of $85,000 for the comparable 2000 periods, which primarily reflected the above. ASSET/LIABILITY MANAGEMENT Interest Rate Sensitivity Medallion, like other financial institutions, is subject to interest rate risk to the extent its interest-earning assets (consisting of medallion loans and commercial loans) reprice on a different basis over time in comparison to its interest-bearing liabilities (consisting primarily of credit facilities with bank syndicates, secured commercial paper, senior secured notes and subordinated SBA debentures). 21 Having interest-bearing liabilities that mature or reprice more frequently on average than assets may be beneficial in times of declining interest rates, although such an asset/liability structure may result in declining net earnings during periods of rising interest rates. Abrupt increases in market rates of interest may have an adverse impact on our earnings until we are able to originate new loans at the higher prevailing interest rates. Conversely, having interest-earning assets that mature or reprice more frequently on average than liabilities may be beneficial in times of rising interest rates, although this asset/liability structure may result in declining net earnings during periods of falling interest rates. This mismatch between maturities and interest rate sensitivities of our interest-earning assets and interest-bearing liabilities results in interest rate risk. The effect of changes in interest rates is mitigated by regular turnover of the portfolio. Based on past experience, Medallion anticipates that approximately 40% of the portfolio will mature or be prepaid each year. Medallion believes that the average life of its loan portfolio varies to some extent as a function of changes in interest rates. Borrowers are more likely to exercise prepayment rights in a decreasing interest rate environment because the interest rate payable on the borrower's loan is high relative to prevailing interest rates. Conversely, borrowers are less likely to prepay in a rising interest rate environment. Interest Rate Cap Agreements Medallion seeks to manage the exposure of the portfolio to increases in market interest rates by entering into interest rate cap agreements to hedge a portion of its variable-rate debt against increases in interest rates and by incurring fixed-rate debt consisting primarily of subordinated SBA debentures. The Company entered into interest rate cap agreements limiting our maximum LIBOR exposure on our revolving credit facility in accordance with the terms shown in the following table:
===================================================================================================== LIBOR Effective Maturity Amount Rate Date Date - ----------------------------------------------------------------------------------------------------- $10,000,000 6.5 7/6/99 7/6/01 10,000,000 6.5 7/6/99 7/6/01 10,000,000 7.25 6/22/00 6/24/02 - -----------------------------------------------------------------------------------------------------
Medallion will seek to manage interest rate risk by originating adjustable- rate loans, by incurring fixed-rate indebtedness, by evaluating and purchasing, if appropriate, additional derivatives, and by revising, if appropriate, its overall level of asset and liability matching. In addition, Medallion manages its exposure to increases in market rates of interest by incurring fixed-rate indebtedness, such as five year senior secured notes and subordinated SBA debentures. Medallion currently has outstanding $45 million of senior secured notes, half of which mature June 1, 2004, with the balance maturing on September 1, 2004, at a fixed interest rate of 7.35%, and SBA debentures in the principal amount of $31.9 million with a weighted average interest rate of 7.55%. At June 30, 2001, these notes and debentures constituted 11.5% and 8.1% of Medallion's total indebtedness, respectively. Liquidity and Capital Resources Our sources of liquidity are credit facilities with bank syndicates, senior secured notes, long-term SBA debentures that are issued to or guaranteed by the SBA, and loan amortization and prepayments. As a RIC, we are required to distribute at least 90% of our investment company taxable income; consequently, we primarily rely upon external sources of funds to finance growth. At June 30, 2001, our $391.8 million of outstanding debt was comprised as follows: 80.3% bank debt, substantially all of which was at variable effective interest rates with a weighted average interest rate of 6.35%, 11.5% long-term senior secured notes fixed at an interest rate of 7.35%, 8.1% subordinated SBA debentures, with fixed-rates of interest with an annual weighted average rate of 7.55%, and 0.01% secured commercial paper with an annual weighted average interest rate of 7.21%. Medallion is eligible to seek SBA funding and will seek such funding when the rates presented are advantageous. In March 2001, we applied and received a commitment for $72.0 million of additional funding with the SBA ($108.0 million to be committed by the SBA, subject to the infusion of additional equity capital into the respective subsidiaries.) Since SBA financing subjects its recipients to certain regulations, Medallion will seek funding at the subsidiary level. In June 2001, Medallion Capital drew $10.5 million under these commitments, and in July 2001, Freshstart Venture Capital Corp. drew $7.5 million. Currently, Medallion has $18.5 million available under its existing bank lines of credit. Medallion has observed a practice of minimizing credit facility fees associated with the unused component of credit facilities by keeping the unused component as small as possible and periodically increasing the amounts available under such credit facilities only when 22 necessary to fund portfolio growth. Additionally, Medallion's lead member in the lending syndicate has approximately doubled its exposure to Medallion and MFC to $95 million as a result of a merger between such lead member and another bank in the lending syndicate in September 2000. This bank has asked Medallion to find an additional participant to reduce its exposure. Medallion is actively seeking new members for the lending syndicate. As a result, Medallion is currently unable to expand its borrowing lines until new banks join the lending syndicate or until other financing initiatives are completed. Medallion's bank and commercial paper facilities are subject to periodic reviews by the lending syndicate funding the borrowings and are also subject to certain covenants and restrictions. On June 29, 2001, MFC renewed its existing Revolver and on March 30, 2001 Medallion finalized certain amendments and was granted a waiver of compliance with certain provisions. These renewals and amendments clarified and revised certain provisions of the agreements related to business activities and financial covenants of Medallion and MFC, and adjusted the rate of interest paid on the notes. The Company is in compliance with all provisions of the note agreement. Medallion and its lenders have initiated discussions as to the next renewal of the existing bank loans which mature in September 2001. Although, there can be no assurances, the Company expects a satisfactory result from these discussions. On November 22, 2000, Fitch IBCA placed Medallion's "BBB" senior secured debt rating and "F2" secured commercial paper rating on negative watch. In addition, in December 2000, Medallion's other rating agency, Thompson's Bankwatch was acquired by Fitch IBCA, leaving it with only one commercial paper rating. Primarily as a result of these factors, a substantial portion of Medallion's commercial paper did not rollover and has subsequently been replaced by Medallion's bank facility. On January 18, 2001, Fitch IBCA lowered our senior secured debt rating and secured commercial paper rating to "BB+" and "B", respectively, and removed them from negative watch. Subsequent to quarter end, the commercial paper program matured and was terminated. Medallion believes that its bank credit facilities and cash flow from operations (after distributions to stockholders) will be adequate to fund the continuing operations of Medallion's loan portfolio and advertising business. Nevertheless, Medallion continues to explore additional options, which may increase available funds for Medallion's growth and expansion strategy. In addition, to the application for SBA funding described above, these financing options would provide additional sources of funds for both external expansion and continuation of internal growth. During the quarter the Company completed an equity offering of 3,660,000 common shares at $11 per share raising over $40,000,000 of additional capital. Medallion continues to work with investment banking firms to investigate the viability of a number of other financing options which include, among others, the sale or spin-off of certain assets or divisions, and the development of a securitization conduit program. These financing options would also provide additional sources of funds for both external expansion and continuation of internal growth. If none of these financing options occur, management believes liquidity would still be adequate to fund the continuing operations of Medallion's loan portfolio and advertising business. Deferred costs related to these financing options were $395,000 as of June 30, 2001 and were included in other assets on Medallion's consolidated balance sheets. 23 The following table illustrates sources of available funds for Medallion and each of the subsidiaries, and amounts outstanding under credit facilities and their respective end of period weighted average interest rate at June 30, 2001:
============================================================================================================================= (Dollars in thousands) Medallion Financial MFC BLL MCC MBC FSVC Total ============================================================================================================================= Cash $ 36,101 $ 31,027 $3,014 $ 6,294 $3,230 $ 2,146 $ 81,812 Revolving credit lines (1) 110,000 220,000 3,500 333,500 Amounts undisbursed 7,950 10,593 18,543 Amounts outstanding 102,050 209,170 3,500 314,720 Average interest rate 5.53% 6.75% 6.10% 6.35% Maturity 9/21/01 6/30/02 On Demand 9/01-6/02 Commercial paper 237 237 Average interest rate 7.21% 7.21% Maturity 7/30 7/30/01 SBA debentures 21,000 10,860 31,860 Average interest rate 7.39% 7.86% 7.55% Maturity 3/06 - 6/11 12/02 - 9/07 12/02-6/11 Senior secured notes 45,000 45,000 Average interest rate 7.35% 7.35% Maturity 6/04 - 9/04 7/30/01 - ----------------------------------------------------------------------------------------------------------------------------- Total cash and remaining amounts undisbursed under credit facilities 44,051 41,620 3,014 6,294 3,230 2,146 100,355 - ----------------------------------------------------------------------------------------------------------------------------- Total debt outstanding $102,050 $ 254,407 $ 0 $ 21,000 $ 0 $ 14,360 $ 391,817 =============================================================================================================================
(1) Commercial paper outstanding is deducted from revolving credit lines available as the line of credit acts as a liquidity facility for the commercial paper. - ------------------------------------------------------------------------------- Loan amortization, prepayments, and sales also provide a source of funding for Medallion. Prepayments on loans are influenced significantly by general interest rates, medallion loan market rates, economic conditions, and competition. Medallion loan prepayments have slowed since early 1994, initially because of increases, and then stabilization, in the level of interest rates. More recently loan prepayments have slowed due to an increase in the percentage of medallion loans, which are refinanced with Medallion rather than through other sources of financing. Loan sales are a major focus of the SBA Section 7(a) loan program conducted by BLL, which is primarily set up to originate and sell loans. Increases in SBA 7(a) loan balances in any given period generally reflect timing differences in selling and closing transactions. On June 1, 1999, MFC issued $22.5 million of Series A senior secured notes that mature on June 1, 2004, and on September 1, 1999, MFC issued $22.5 million of Series B senior secured notes that mature on September 1, 2004 (together, the Notes). The Notes bear a fixed rate of interest of 7.35% and interest is paid quarterly in arrears. The Notes rank pari passu with the revolvers and commercial paper through inter-creditor agreements. The proceeds of the Notes were used to prepay certain of the Company's outstanding SBA debentures. See also a description of amendments referred to above. Media funds its operations through internal cash flow and inter-company debt. Media is not a RIC and, therefore, is able to retain earnings to finance growth. INVESTMENT CONSIDERATIONS Interest rate fluctuations may adversely affect the interest rate spread we receive on our taxicab medallion and commercial loans. Because we borrow money to finance the origination of loans, our income is dependent upon the difference between the rate at which we borrow funds and the rate at which we loan funds. While the loans in our portfolio in most cases bear interest at fixed-rates or adjustable-rates, we finance a substantial portion of such loans by incurring indebtedness with floating interest rates (which adjust at various intervals). As a result, our debt may adjust to a change in interest rates more quickly than the loans in our portfolio. In periods of sharply rising interest rates, our costs of funds would increase, which would reduce our portfolio income before net realized and unrealized gains. Accordingly, we, like most financial services companies, face the risk of interest rate fluctuations. Although we intend to continue to manage our interest rate risk through asset and liability management, including the use of interest rate caps, general rises in interest rates will tend to reduce our 24 interest rate spread in the short term. In addition, we rely on our counterparties to perform their obligations under such interest rate caps. A decrease in prevailing interest rates may lead to more loan prepayments, which could adversely affect our business. Our borrowers generally have the right to prepay their loans upon payment of a fee ranging from 30 to 120 days interest. A borrower is likely to exercise prepayment rights at a time when the interest rate payable on the borrower's loan is high relative to prevailing interest rates. In a lower interest rate environment, we will have difficulty re-lending prepaid funds at comparable rates, which may reduce the net interest spread we receive. Because we must distribute our income, we have a continuing need for capital. We have a continuing need for capital to finance our lending activities. Our current sources of liquidity are the following: . bank credit facilities; . senior secured notes; . sales of participations in loans; . fixed-rate, long-term SBA debentures that are issued to or guaranteed by the SBA; . a secured commercial paper program; and . loan amortization and prepayments. As a RIC, we are required to distribute at least 90% of our investment company taxable income. Consequently, we primarily rely upon external sources of funds to finance growth. At June 30, 2001, we had $13,266,000 available under our $334 million bank credit facilities at variable effective rates of interest averaging below the prime rate. We minimize credit facility fees associated with the unused component of credit facilities by keeping the unused component as small as possible and periodically increasing the amounts available under the credit facilities only when necessary to fund portfolio growth. In addition, we are eligible to seek SBA funding. In the event that we seek SBA funding, no assurance can be given that the funding will be obtained. We may have difficulty raising capital to finance our planned level of lending operations. We may have difficulty raising the capital necessary to finance our planned level of lending operations. During December 2000, our outstanding commercial paper began to mature and was replaced by draws on the notes payable to our bank facility. The commercial paper was not renewed as a result of the loss of a credit rating due to the merger of our rating agencies and due to the remaining rating agency lowering our rating. In addition, we are currently unable to expand our borrowing lines until new banks join the lending syndicate or a debt offering is completed. Recently the lead bank in our lending syndicate has recently approximately doubled its exposure to Medallion and MFC to $95 million as a result of a merger between the lead bank and another member of the lending syndicate. In September 2000, this bank asked us to find an additional participant to reduce its exposure. We are actively seeking new members for the lending syndicate. Lending to small businesses involves a high degree of risk and is highly speculative. Our commercial loan activity has increased in recent years. Lending to small businesses involves a high degree of business and financial risk, which can result in substantial losses and should be considered speculative. Our borrower base consists primarily of small business owners that have limited resources and that are generally unable to achieve financing from traditional sources. There is generally no publicly available information about these small business owners, and we must rely on the diligence of our employees and agents to obtain information in connection with our credit decisions. In addition, these small businesses often do not have audited financial statements. Some smaller businesses have narrower product lines and market shares than their competition. Therefore, they may be more vulnerable to customer preferences, market conditions or economic downturns, which may adversely affect the return on, or the recovery of, our investment in these businesses. Our borrowers may default on their loans. We primarily invest in and lend to companies that may have limited financial resources. Numerous factors may affect a borrower's ability to repay its loan, including: . the failure to meet its business plan; . a downturn in its industry or negative economic conditions; 25 . the death, disability or resignation of one or more of the key members of management; or . the inability to obtain additional financing from traditional sources. Deterioration in a borrower's financial condition and prospects may be accompanied by deterioration in the collateral for the loan. Expansion of our portfolio and increases in the proportion of our portfolio consisting of commercial loans could have an adverse impact on the credit quality of the portfolio. We borrow money, which may increase the risk of investing in our common stock. We use financial leverage through bank syndicates, our senior secured notes, our commercial paper and our long-term, subordinated SBA debentures. Leverage poses certain risks for our stockholders: . it may result in higher volatility of both our net asset value and the market price of our common stock; . since interest is paid to our creditors before any income is distributed to our stockholders, fluctuations in the interest payable to our creditors may decrease the dividends and distributions to our stockholders; and . in the event of a liquidation of Medallion, our creditors would have claims on our assets superior to the claims of our stockholders. Our failure to remedy certain internal control deficiencies could have an adverse affect on our business operations. In performing their audit of our financial statements for the year ended December 31, 2000, our independent auditors found conditions that they believed to be significant deficiencies in our internal accounting control structure. They did not believe that these conditions were material weaknesses. These conditions arose in part from our conversion of our loan accounting system in advance of the year 2000. While we believe that we can and will remedy these conditions in a timely fashion, failure to do so could have an adverse effect on business operations. These matters were considered by our independent auditors during their audit and did not modify their unqualified opinion, dated April 2, 2001, that our consolidated financial statements present fairly, in all material respects, the financial position of Medallion and its subsidiaries as of December 31, 2000 and 1999, and the results of our operations and cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. We have demonstrated improvements in our internal controls and levels of operation, and have hired additional senior management. We continue to take active steps to achieve further improvements to our operating policies and procedures. Consistent with the Company's on-going focus on improving its operations and growth, and at the request of BLL's regulatory authority, the Connecticut Banking Department (the "Department"), the Board of Directors of BLL is currently adopting plans to improve its financial operations. The Company feels these plans will be viewed favorably by the Department. If we are unable to continue to diversify geographically, our business may be adversely affected if the New York taxicab industry experiences an economic downturn. Although we are diversifying from the New York City area, a significant portion of our taxicab advertising and loan revenue is derived from New York City taxicabs and medallion loans collateralized by New York City taxicab medallions. An economic downturn in the New York City taxicab industry could lead to an increase in defaults on our medallion loans and may also adversely affect the operation of our taxicab rooftop advertising business. There can be no assurance that we will be able to sufficiently diversify our operations geographically. The loss of certain key members of our senior management could adversely affect us. Our success is largely dependent upon the efforts of senior management. The death, incapacity or loss of the services of certain of these individuals could have an adverse effect on our operation and financial results. There can be no assurance that other qualified officers could be hired. Acquisitions may lead to difficulties that could adversely affect our operations. By their nature, corporate acquisitions entail certain risks, including those relating to undisclosed liabilities, the entry into new markets and personnel matters. We may have difficulty integrating the acquired operations or managing problems due to sudden increases in the size of our loan portfolio. In such instances, we might be required to modify our operating systems and procedures, hire additional staff, obtain and integrate new equipment and complete other tasks appropriate for the assimilation of new and increased business activities. There can be no assurance that we would be successful, if and when necessary, in minimizing these inherent risks or in establishing systems and procedures which will enable us to effectively achieve our desired results in respect of any of these or any future acquisitions. 26 Competition from entities with greater resources and less regulatory restrictions may decrease our profitability. We compete with banks, credit unions and other finance companies, some of which are Small Business Investment Companies, or SBICs, in the origination of taxicab medallion loans and commercial loans. We also compete with finance subsidiaries of equipment manufacturers. Many of these competitors have greater resources than Medallion and certain competitors are subject to less restrictive regulations than Medallion. As a result, there can be no assurance that we will be able to continue to identify and complete financing transactions that will permit us to continue to compete successfully. Our taxicab rooftop advertising business competes with other taxicab rooftop advertisers as well as with all segments of the out-of-home advertising industry. We also compete with other types of advertising media, including cable and network television, radio, newspapers, magazines and direct mail marketing. Certain of these competitors have also entered into the rooftop advertising business. Many of these competitors have greater financial resources than Medallion and offer several forms of advertising as well as production facilities. There can be no assurance that we will continue to compete with these businesses successfully. The valuation of our loan portfolio is subjective and we may not be able to recover our estimated value in the event of a foreclosure. Under the 1940 Act, our loan portfolio must be recorded at fair value or "marked to market." Unlike other lending institutions, we are not permitted to establish reserves for loan losses. Instead, we adjust quarterly the valuation of our portfolio to reflect our estimate of the current realizable value of our loan portfolio. Since no ready market exists for this portfolio, fair value is subject to the good faith determination of our management and the approval of our board of directors. Because of the subjectivity of these estimates, there can be no assurance that in the event of a foreclosure or the sale of portfolio loans we would be able to recover the amounts reflected on our balance sheet. In determining the value of our portfolio, the board of directors may take into consideration various factors such as the financial condition of the borrower and the adequacy of the collateral. For example, in a period of sustained increases in market interest rates, our board of directors could decrease its valuation of the portfolio if the portfolio consists primarily of fixed-rate loans. Our valuation procedures are designed to generate values which approximate the value that would have been established by market forces and are therefore subject to uncertainties and variations from reported results. Considering these factors, we have determined that the fair value of our portfolio is below its cost basis. At June 30, 2001, our net unrealized depreciation on investments was approximately $6.1 million. Based upon current market conditions and current loan-to-value ratios, our board of directors believes that the net unrealized depreciation of investments is adequate to reflect the fair value of the portfolio. Changes in taxicab industry regulations that result in the issuance of additional medallions could lead to a decrease in the value of our medallion loan collateral. Every city in which we originate medallion loans, and most other major cities in the United States, limits the supply of taxicab medallions. This regulation results in supply restrictions that support the value of medallions. Actions that loosen these restrictions and result in the issuance of additional medallions into a market could decrease the value of medallions in that market. If this were to occur, the value of the collateral securing our then outstanding medallion loans in that market could be adversely affected. We are unable to forecast with any degree of certainty whether any potential increases in the supply of medallions will occur. In New York City, Chicago and Boston, and in other markets where we originate medallion loans, taxicab fares are generally set by government agencies. Expenses associated with operating taxicabs are largely unregulated. As a result, the ability of taxicab operators to recoup increases in expenses is limited in the short term. Escalating expenses can render taxicab operations less profitable, and could cause borrowers to default on loans from Medallion, and could potentially adversely affect the value of Medallion's collateral. A significant portion of our taxicab advertising and loan revenue is derived from loans collateralized by New York City taxicab medallions. According to New York City Taxi and Limousine Commission data, over the past 20 years New York City taxicab medallions have appreciated in value an average of 10.2% each year. However, for sustained periods during that time, taxicab medallions have declined in value. During the year, the value of New York City taxicab medallions has declined by approximately 9%. Our failure to maintain our Subchapter M status could lead to a substantial reduction in the amount of income distributed to our shareholders. We, along with some of our subsidiaries, have qualified as regulated investment companies under Subchapter M of the Internal Revenue Code. Thus, we will not be subject to federal income tax on investment company taxable income (which includes, among other things, dividends and interest reduced by deductible expenses) distributed to our shareholders. If we or those of our subsidiaries that are also regulated investment companies were to fail to maintain Subchapter M status 27 for any reason, our respective incomes would become fully taxable and a substantial reduction in the amount of income available for distribution to us and to our shareholders would result. To qualify under Subchapter M, we must meet certain income, distribution and diversification requirements. However, because we use leverage, we are subject to certain asset coverage ratio requirements set forth in the 1940 Act. These asset coverage requirements could, under certain circumstances, prohibit us from making distributions that are necessary to maintain our Subchapter M status or require that we reduce our leverage. In addition, the asset coverage and distribution requirements impose significant cash flow management restrictions on us and limit our ability to retain earnings to cover periods of loss, provide for future growth and pay for extraordinary items. Certain of our loans, including the medallion collateral appreciation participation loans, could also be re-characterized in a manner that would generate non-qualifying income for purposes of Subchapter M. In this event, if such income exceeds the amount permissible, we could fail to satisfy the requirement that a regulated investment company derive at least 90% of its gross income from qualifying sources, with the result that we would not meet the requirements of Subchapter M for qualification as a regulated investment company. Qualification as a regulated investment company under Subchapter M is made on an annual basis and, although we and some of our subsidiaries are qualified as regulated investment companies, no assurance can be given that we will each continue to qualify for such treatment. Failure to qualify under Subchapter M would subject us to tax on our income and would have material adverse effects on our financial condition and results of operations. Our SBIC subsidiaries may be unable to meet the investment company requirements, which could result in the imposition of an entity-level tax. The Small Business Investment Act of 1958 regulates some of our subsidiaries. The Small Business Investment Act restricts distributions by an SBIC. Our SBIC subsidiaries that are also regulated investment companies could be prohibited by SBA regulations from making the distributions necessary to qualify as a regulated investment company. Each year, in order to comply with the SBA regulations and the regulated investment company distribution requirements, we must request and receive a waiver of the SBA's restrictions. While the current policy of the SBA's Office of SBIC Operations is to grant such waivers if the SBIC makes certain offsetting adjustments to its paid-in capital and surplus accounts, there can be no assurance that this will continue to be the SBA's policy or that our subsidiaries will have adequate capital to make the required adjustments. If our subsidiaries are unable to obtain a waiver, compliance with the SBA regulations may result in loss of regulated investment company status and a consequent imposition of an entity-level tax. The Internal Revenue Code's diversification requirements may limit our ability to expand our taxicab rooftop advertising business and our medallion collateral appreciation participation loan business. We intend to continue to pursue an expansion strategy in our taxicab rooftop advertising business. We believe that there are growth opportunities in this market. However, the asset diversification requirements under Subchapter M could restrict such expansion. These requirements provide that, as a RIC, not more than 25% of the value of our total assets may be invested in the securities (other than U.S. Government securities or securities of other RIC's) of any one issuer. While our investments in our RIC subsidiaries are not subject to this diversification test so long as these subsidiaries are RIC's, our investment in Media is subject to this test. At the time of our original investment, Media represented approximately 1% of our total assets, which is in compliance with the diversification test. The subsequent growth in the value of Media by itself will not re-trigger the test even if Media represents in excess of 25% of our assets. However, under Subchapter M, the test must be reapplied in the event that we make a subsequent investment in Media, lend to it or acquire another taxicab rooftop advertising business. If we were to fail a subsequent test, we would lose our RIC status. As a result, our maintenance of RIC status could limit our ability to expand our taxicab rooftop advertising business. It will be our policy to expand our advertising business through internally generated growth. We will only consider an acquisition in this area if we will be able to meet Subchapter M's diversification requirements. The fair value of the collateral appreciation participation loan portfolio at June 30, 2001 was $13.05 million, which represented approximately 3% of the total loan portfolio. We will continue to monitor the levels of these asset types in conjunction with the diversification tests. We depend on cash flow from our subsidiaries to make dividend payments and other distributions to our shareholders. We are a holding company and we derive most of our operating income and cash flow from our subsidiaries. As a result, we rely heavily upon distributions from our subsidiaries to generate the funds necessary to make dividend payments and other distributions to our shareholders. Funds are provided to us by our subsidiaries through dividends and payments on intercompany indebtedness, but there can be no assurance that our subsidiaries will be in a position to continue to make these dividend or debt payments. 28 We operate in a highly regulated environment. We are regulated by the Securities Exchange Commission and the SBA. In addition, changes in the laws or regulations that govern business development companies, RIC's or SBIC's may significantly affect our business. Laws and regulations may be changed from time to time, and the interpretations of the relevant laws and regulations also are subject to change. Any change in the laws or regulations that govern our business could have a material impact on our operations. 29 PART II OTHER INFORMATION ITEM 1. Legal Proceedings From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. The Company is not currently aware of any legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company's financial position or results of operations. ITEM 2. Changes in Securities and Use of Proceeds None ITEM 3. Defaults Upon Senior Securities None ITEM 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of stockholders on May 22, 2001 (the "Annual Meeting"). The Company's stockholders were asked to take the following actions at the meeting: (1) Elect three Class II Directors to serve until the 2004 annual meeting of stockholders or until their successors shall otherwise be elected (the "Board Proposal"). With respect to the Board Proposal, the three individuals nominated for director were elected by the affirmative vote of a majority of shares of common stock present at the Annual Meeting. The nominees and the votes received by each are as follows:
- --------------------------------------------------------------------------------------------------------------- Votes for Votes withheld ---------------------------------------------------------------------------- Mario M. Cuomo 12,521,311 252,618 Andrew M. Murstein 12,306,008 467,921 Frederick S. Hammer 11,604,203 1,169,726 - ---------------------------------------------------------------------------------------------------------------
The other members of the Board of Directors are Stanley Kreitman, David L. Rudnick, Alvin M. Murstein, and Benjamin Ward. ITEM 5. Other Information None ITEM 6. Exhibits and reports on form 8-K (a) Exhibits 30 10.1 Amendment No. 5 to the Amended and Restated Loan Agreement, Limited Waiver and Consent, dated as of June 29, 2001, among Medallion Funding Corp., the Lenders thereto, Fleet National Bank and Swing Line Lender. Filed herewith. 10.2 Amendment No. 2 to the Second Amended and Restate Loan Agreement, Limited Waiver and Consent, dated as of June 29, 2001, among the Company, Medallion Business Credit, LLC, Fleet National Bank and Swing Line Lenders. Filed herewith. 10.3 Second Amendment Agreement, dated as of June 29, 2001, to the Note Purchase Agreements dated as of June 1, 1999 between the Company and the Noteholders thereto. Filed herewith. 10.4 Amendment No. 4 to the Amended and Restated Loan Agreement and Consent, dated as of March 30, 2001, among Medallion Funding Corp., the Banks thereto and Fleet National Bank. Filed herewith. 10.5 Amendment No. 1 to the Second Amended and Restated Loan Agreement and Limited Waiver, dated March 30, 2001, among the Company, Medallion Business Credit, LLC, Fleet National Bank and Swing Line Lenders. Filed herewith. 10.6 First Amendment Agreement, dated as of March 30, 2001, to the Note Purchase Agreements dated as of June 1, 1999 between the Company and the Noteholders thereto. Filed herewith. 10.7 Guaranty, dated as of April 30, 2001, by Medallion Taxi Media in favor of Fleet National Bank. Filed herewith. 10.8 Guaranty, dated as of April 30, 2001, by Medallion Taxi Media in favor of the Noteholders thereto. Filed herewith. 10.9 Guaranty, dated April 30, 2001, Medallion Taxi Media in favor of Fleet National Bank Filed herewith. 31 MEDALLION FINANCIAL CORP. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDALLION FINANCIAL CORP.
Date: August 14, 2001 By: /s/ James E. Jack By: /s/ Larry D. Hall --------------------------------- --------------------------------- James E. Jack Larry D. Hall Executive Vice President and Chief Senior Vice President and Chief Financial Officer Accounting Officer Signing on behalf of the registrant as Signing on behalf of the registrant as principal financial officer. principal accounting officer.
32 EX-10.1 3 dex101.txt AMENDMENT NO. 5 TO THE AMENDED AND RESTATED LOAN EXHIBIT 10.1 AMENDMENT NO. 5 TO AMENDED AND ------------------------------ RESTATED LOAN AGREEMENT, ------------------------ LIMITED WAIVER AND CONSENT -------------------------- AMENDMENT NO. 5 TO AMENDED AND RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT dated as of June 29, 2001 (this "Amendment"), by and among MEDALLION --------- FUNDING CORP., a New York corporation (the "Borrower"), the banks that from time -------- to time are signatories thereto, collectively, the "Banks" and each ----- individually, a "Bank"), FLEET NATIONAL BANK (f/k/a Fleet Bank, National ---- Association), as a Bank ("Fleet"), as Swing Line Lender (the "Swing Line ----- ---------- Lender"), as Arranger and as Agent for the Banks (including any successor, the - ------ "Agent"). ----- WHEREAS, the Borrower, the Banks, the Agent and the Swing Line Lender are parties to an Amended and Restated Loan Agreement dated as of December 24, 1997 (as amended and in effect from time to time, the "Loan Agreement," capitalized -------------- terms defined therein having the same meanings herein as therein), pursuant to which the Banks have extended credit to the Borrower on the terms and subject to the conditions set forth therein; WHEREAS, Section 7.4 of the Loan Agreement requires the Borrower to ensure that the ratio of the sum of Net Income plus Interest Expense to Interest ---- Expense is not less than 1.35:1, and as of March 31, 2001, the ratio of the sum of Net Income plus Interest Expense to Interest Expense was 1.28:1; ---- WHEREAS, the Borrower has requested that the Agent and the Banks (a) waive the Borrower's compliance with Section 7.4 of the Loan Agreement for the fiscal period ending March 31, 2001, and (b) amend the Loan Agreement so as to make certain revisions; WHEREAS, subject to the terms and conditions hereof, the Banks are willing to waive such compliance with the Loan Agreement and permit such revisions; and WHEREAS, subject to the terms and conditions set forth herein, the Borrower, the Banks, the Agent and the Swing Line Lender have agreed to amend the Loan Agreement as set forth herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to waive such compliance and to amend the Loan Agreement as follows: 1. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by: (a) deleting the following definitions in their entirety and substituting in lieu thereof the following new definitions: "Aggregate Revolving Credit Commitment" shall mean $220,000,000, as ------------------------------------- the same may (or, in the case of Section 2.4, shall) be -2- reduced or terminated from time to time pursuant to Sections 2.4, 2.10 or 9.1 hereof. "Applicable Commitment Percentage" shall mean 0.20% per annum. -------------------------------- "Applicable LIBO Margin" shall mean, for any Payment Period (as ---------------------- defined under the definition of "Pricing Level"), the respective rates indicated below for Revolving Credit Loans and Term Loans which are LIBO Rate Loans opposite the applicable Pricing Level indicated below for such Payment Period (or as provided in the final paragraph of this definition, for part of a Payment Period): Pricing Level Applicable LIBO ------------- --------------- Margin (percent per annum) ------ 1 2.00% 2 2.25% 3 2.50% provided that (1) upon the Borrower obtaining either (a) an F3 (or better) -------- rating from Fitch Investor's Services (or the equivalent rating from either Standard & Poor's Ratings Services or Moody's Investors Service, Inc.) for the Borrower's commercial paper, or (b) a BBB- (or better) rating from Fitch Investor's Services (or the equivalent rating from either Standard & Poor's Ratings Services or Moody's Investors Service, Inc.) for the Borrower's long term debt rating, the Applicable LIBO Margin shall decrease by 25 basis points at each Pricing Level, provided that in the event that -------- the Applicable LIBO Margin is decreased by 25 basis points pursuant to clauses (1)(a) or (b) of this definition and following such decrease in the Applicable LIBO Margin, the Borrower's commercial paper rating decreases below F3 (or its equivalent) or the Borrower's long term debt rating decreases below BBB- (or its equivalent), the Applicable LIBO Margin shall increase by 25 basis points until such time as the Borrower satisfies the ratings required in clauses (1)(a) or (b) again; and (2) upon the earlier of (x) the delivery of the certificate of a Financial Officer of the Borrower required by Section 6.1(f) demonstrating the ratio of EBIT to Interest Expense set forth in Section 7.3 being greater than or equal to 1.35:1 for two (2) consecutive fiscal quarters (the "Required Ratio Level"), and (y) the permanent reduction of the Aggregate Revolving Credit Commitment to $190,000,000 or less (the "Required Commitment Reduction"), the Applicable LIBO Margin shall decrease by 25 basis points at each Pricing Level; provided further, that in the event that the Applicable LIBO -------- Margin is decreased by 25 basis points prior to the occurrence of the Required Commitment Reduction due to the Borrower meeting the Required Ratio Level, and -3- following such decrease in the Applicable LIBO Margin, the ratio of EBIT to Interest Expense set forth in Section 7.3 becomes less than 1.35:1, the Applicable LIBO Margin shall increase by 25 basis points until the earlier to occur of the Required Commitment Reduction and the Borrower meeting the Required Ratio Level again. Subject to and in accordance with the final paragraph of this definition, the Applicable LIBO Margin shall be effective as of the first date of each Payment Period (or in the circumstances described in the final paragraph of this definition, such portion of a Payment Period) or as of the Third Revolver Reduction Date (as defined in Section 2.4(b)(iii)) if the Required Commitment Reduction has not occurred prior thereto, provided that any -------- change in the Applicable LIBO Margin as a result of the circumstances described in clauses (1)(a), (1)(b) or (1)(y) above other than as a result of the occurrence of the Third Revolver Reduction Date, shall be effective upon the Agent receiving written notice from the Borrower that such condition has been met, whether or not such Payment Period coincides with an Interest Period for a LIBO Rate Loan; provided further that any change -------- in the Applicable LIBO Margin as a result of the circumstances described in the proviso to clauses (1)(a) and (1)(b) shall be effective upon the decrease of the applicable rating of the Borrower. Anything in this Agreement to the contrary notwithstanding, the Applicable LIBO Margin for a Payment Period shall be the highest rate provided for above if the certificate of the Borrower shall not be delivered when required by Section 6.1(f) with respect to the portion of such Payment Period to which such certificate relates. "Borrowing Base Certificate" shall mean a certificate substantially in -------------------------- the form of Exhibit A to Amendment No. 5. --------- "Senior Debt" shall mean the sum of (a) all Indebtedness of the ----------- Borrower under this Agreement, plus (b) all CP Debt of the Borrower, plus ---- ---- (c) all Senior Note Debt of the Borrower, plus (d) all Indebtedness of the ---- Borrower incurred in accordance with Section 8.2(g). "Term-Out Date" shall mean, with respect to each Revolving Credit ------------- Loan, June 28, 2002, subject, however, in each case, to the renewal provisions set forth in Section 2.10. (b) deleting the first parenthetical of clause (i) of the definition of "Restricted Payment" in its entirety, and substituting in lieu thereof the following new parenthetical: "(other than the payment of the sum of (a) the minimum amount of Dividends required to be paid for the Borrower to retain its status as a regulated investment company pursuant to Section 851(a) of the Code, plus ---- (b) the payment of Dividends required to be paid in order to avoid the imposition of income taxes pursuant to the Code)". -4- (c) deleting the date "June 30, 2001" in the definition of "Initial Term", and substituting in lieu thereof the date "June 28, 2001." (d) inserting, in the places required by alphabetical order, the following new definitions: "Adjusted Net Investment Income" shall mean, with respect to the ------------------------------ Borrower, the aggregate income (or loss), after realized gains on investments have been added thereto and realized losses on investments have been subtracted therefrom and net of unrealized appreciation or depreciation on investments, of the Borrower for such period, which shall be an amount equal to net revenues and other proper items of income less the aggregate for the Borrower of any and all items that are treated as expenses under GAAP and, to the extent applicable thereto, the regulations of the SEC applicable to investment companies, after realized gains on investments have been added thereto and realized losses on investments have been subtracted therefrom and net of unrealized appreciation or depreciation on investments. "Advance Amounts" shall mean, as of any date of calculation, an amount --------------- equal to the sum of: (i) the aggregate amount of all Eligible Yellow Cab Loans shown on Borrower's balance sheet as of the last day of the most recent month, minus ----- (ii) the portion, if any, of the Eligible Yellow Cab Loans that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus ----- (iii) the Eligible Yellow Cab Loans which are more than 60 days past due, provided, that if all or any part of any Eligible Yellow Cab Loan would be -------- excluded under any of the provisions set forth above, then the entire amount of such Eligible Yellow Cab Loan shall be excluded. "Amendment No. 5" shall mean Amendment No. 5 to Amended and Restated --------------- Loan Agreement, Limited Waiver and Consent dated as of June 29, 2001 among the Borrower, the Agent, the Swing Line Lender and the Banks. "Amendment No. 5 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 5. "Borrowing Base" shall mean, as of any date of calculation, an amount -------------- equal to the sum of: (i) cash of up to $5,000,000 and Short Term Investments shown on the Borrower's balance sheet as of such date, plus ---- (ii) 83.33% of the sum, without duplication, of (A) the aggregate outstanding principal balances of, plus accrued interest -5- (excluding deferred interest) on, all Eligible Medallion Loans and Eligible Commercial Loans shown on Borrower's balance sheet as of the last day of the most recent month, minus (B) the portion, if any, of ----- the Loans, plus accrued interest (excluding deferred interest) thereon, that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus ----- (C) the Eligible Loans, plus accrued interest (excluding deferred interest) thereon, which are more than 60 days past due, plus ---- (iii) 83.33% of 75% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due, plus ---- (iv) 83.33% of 65% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due; plus ---- (v) through August 31, 2001, 83.33% of up to $4,000,000 of the Advance Amounts of Eligible Yellow Cab Loans; provided, that if all or any part of any Loan would be excluded under any -------- of the provisions set forth above, then the entire outstanding principal amount of, plus accrued interest (including deferred interest) on, such Loan shall be excluded. "Debt Offering" shall mean the sale or issuance by the Borrower or any ------------- of its Subsidiaries of any Indebtedness. "EBIT" shall mean, with respect to the Borrower for any period, the ---- sum of (i) Adjusted Net Investment Income, plus (ii) Interest Expense, plus ---- ---- (iii) federal, state and local income taxes, if any, of the Borrower for such period, computed in accordance with GAAP. "Eligible Yellow Cab Loan" shall mean, with respect to any Yellow Cab ------------------------ Loan, the portion of the outstanding principal balance of, plus accrued interest (excluding deferred interest) on, such Yellow Cab Loan, in each case owed to the Borrower and attributable to the portion of such Yellow Cab Loan made by the Borrower. "Equity Offering" shall mean the sale or issuance by the Borrower or --------------- any of its Subsidiaries of any of its Capital Stock or other equity interests or any warrants, rights or options to acquire its Capital Stock or other equity interests (including any debt securities that are convertible into, or exchangeable for, capital stock or equity interests, but excluding any capital contributions permitted by this Agreement made by the Borrower to any of its Subsidiaries). -6- "Net Cash Proceeds" shall mean, with respect to (a) any Debt Offering ----------------- or Equity Offering, the excess of the gross cash proceeds received by the Borrower or any of its Subsidiaries from such Debt Offering or Equity Offering after deduction of reasonable and customary transaction expenses actually incurred in connection with such Debt Offering or Equity Offering, and (b) any sale, disposition or transfer of assets by the Borrower or any of its Subsidiaries or of any of the Capital Stock of the Guarantor by the Parent, the net cash proceeds received by the Borrower or any of its Subsidiaries or, in the case of any of the Capital Stock of the Guarantor, by the Parent in respect thereof, less all reasonable out-of-pocket fees, commissions and other reasonable and customary expenses actually incurred in connection with such asset sale, including the amount of income, franchise, sales and other applicable taxes required to be paid by the Borrower, such Subsidiary or the Parent in connection with such sale, disposition or transfer. "Operating Account" shall mean the Borrower's Account No. 2189006536 ----------------- with Fleet, or any successor account. "Payment Amount One" shall mean the sum of (a) $2,000,000, plus (b) ------------------ ---- $400,000, plus (c) the sum of 0.9% multiplied by the principal amount of ---- ---------- -- Indebtedness of the Borrower incurred pursuant to Section 8.2(g) outstanding at any time of reference. "Payment Amount Two" shall mean the sum of (a) four multiplied by the ------------------ ---------- -- amount of the Excess Dividends (as defined in Section 2.5(e)(iv)), plus (b) ---- 0.8 multiplied by the amount of the Excess Dividends, plus (c) the product ---------- -- ---- of the principal amount of Indebtedness of the Borrower incurred pursuant to Section 8.2(g) outstanding at any time of reference divided by ------- -- $220,000,000 multiplied by four multiplied by the amount of the Excess ---------- -- ---------- -- Dividends. "Total Intercompany Receivables" shall mean, with respect to the ------------------------------ Borrower, the sum of (a) the amount listed as "Intercompany Receivables" on the Borrower's balance sheet delivered to the Agent pursuant to Section 6.1(d), plus (b) to the extent not otherwise included, all amounts owed to ---- the Borrower by its Affiliates, plus (c) to the extent not otherwise ---- included, Investments by the Borrower in its Affiliates. "Yellow Cab Loan" shall mean any Medallion Loan made to YellowOne LLC --------------- or YellowTwo LLC, secured by Medallion Rights in respect of Chicago Medallions, that (a) satisfies subsections (b) through (f) of the Eligibility Requirements (other than, with respect to the requirement set forth in subsection (e) thereof, by virtue of the subordination provisions of such Yellow Cab Loan), provided that, with respect to the requirement -------- set forth in subsection (f) thereof, the endorsement on any promissory note evidencing such Yellow Cab Loan explicitly states that any pledge is subject to the requirements of any relevant participation agreement, (b) with respect to accrued interest thereon is guaranteed by Yellow Cab Management, Inc., its affiliate, (c) does not exceed, with respect to the portion thereof owed to the Borrower -7- and attributable to the portion of such Yellow Cab Loan made by the Borrower, an aggregate principal amount of $4,000,000, and when aggregated with all other Yellow Cab Loans does not exceed, with respect to the portion thereof owed to the Borrower and attributable to the portion of such Yellow Cab Loan made by the Borrower, an aggregate principal amount of $9,000,000, and (d) matures no later than June 30, 2005. and (e) deleting in their entirety the definitions of "Minimum Asset Coverage" and "Net Finance Assets". 2. Amendment of Section 2.1 of the Loan Agreement. Section 2.1 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting Sections 2.1(a), (b) and (c)(i) in their entirety and substituting the following new Sections 2.1(a), (b) and (c)(i) in lieu thereof: "(a) Revolving Credit Loans. Subject to the terms and conditions ---------------------- hereof and relying upon the representations, warranties and covenants herein set forth, each Bank severally (and not jointly) agrees to make one or more Revolving Credit Loans to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate amount at any one time outstanding not to exceed such Bank's Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Borrower may borrow, prepay and reborrow the Revolving Credit Loans, all in accordance with the terms and conditions hereof; provided, however, that immediately after giving effect -------- ------- thereto, (i) such Bank's Revolving Credit Exposure shall not exceed such Bank's Revolving Credit Commitment, (ii) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid balance of all Revolving ---- Credit Loans plus the aggregate unpaid balance of all Term Loans shall not ---- exceed the Borrowing Base, (iii) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid balance of all Revolving Credit Loans ---- shall not exceed the Aggregate Revolving Credit Commitment, (iv) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid ---- balance of all Revolving Credit Loans made by the Swing Line Lender shall not exceed the Revolving Credit Commitment of the Swing Line Lender, and (v) the Borrowing Base shall be in an amount at least equal to the aggregate unpaid balance of all Senior Debt at such time. (b) Term Loan Commitments. Subject to the terms and conditions --------------------- hereof and relying upon the representations, warranties and covenants herein set forth, each Bank severally (and not jointly) agrees to make a Term Loan to the Borrower on the Term-Out Date in a principal amount equal to the principal amount of its Revolving Credit Loans and Swing Line Loans outstanding on such Term-Out Date to the Borrower (after which the amount of such Bank's Revolving Credit Commitment shall be permanently reduced to $0); provided, that immediately prior to making each Term Loan, the -------- Borrower executes Term Notes in favor of each Bank making a Term Loan, and immediately after making each Term Loan (i) the aggregate unpaid balance of all Term Loans to the Borrower shall not exceed the aggregate of the Term -8- Loan Commitments of all the Banks, (ii) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid balance of all Revolving Credit ---- Loans plus the aggregate unpaid balance of all Term Loans shall not exceed ---- the Borrowing Base, (iii) the aggregate unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid balance of all Revolving ---- Credit Loans to the Borrower plus the aggregate unpaid balance of all Term ---- Loans to the Borrower shall not exceed the sum of the Aggregate Revolving Credit Commitment and the aggregate unpaid balance of all outstanding Term Loans, (iv) the aggregate unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid balance of all Revolving Credit Loans to ---- the Borrower made by the Swing Line Lender plus the aggregate unpaid ---- balance of all Term Loans to the Borrower made by the Swing Line Lender shall not exceed the sum of the Revolving Credit Commitment of the Swing Line Lender and the aggregate unpaid balance of all outstanding Term Loans of the Swing Line Lender, and (v) the Borrowing Base shall be in an amount at least equal to the aggregate unpaid balance of all Senior Debt at such time. The proceeds of the Term Loan shall be made available to the Borrower by such Bank on the applicable Term-Out Date by applying such proceeds directly to the payment of the amounts owing to such Bank with respect to such Bank's Revolving Credit Loans to the Borrower and the Aggregate Revolving Credit Commitment shall be reduced by an amount equal to the aggregate principal amount of such Term Loans. Prior to each Term Loan's Maturity, the Borrower may prepay (and is required to prepay) the Term Loans made to it, only in accordance with the provisions hereof, but thereafter may not reborrow amounts so prepaid. (c) Swing Line Loans. ---------------- (i) Subject to the terms and conditions hereof, the Swing Line Lender agrees to make swing line loans (each a "Swing Line Loan" and, --------------- collectively, the "Swing Line Loans") to the Borrower in Dollars from time ---------------- to time during the Swing Line Commitment Period in an aggregate principal amount at any one time outstanding not to exceed the Swing Line Commitment Amount, provided, however, that, immediately after making each Swing Line -------- ------- Loan, (v) the aggregate unpaid balance of the Swing Line Loans to the Borrower would not exceed the Swing Line Commitment Amount, (w) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid ---- balance of all Revolving Credit Loans plus the aggregate unpaid balance of ---- all Term Loans shall not exceed the Borrowing Base, (x) the aggregate unpaid balance of all Swing Line Loans to the Borrower plus the aggregate ---- unpaid balance of all Revolving Credit Loans to the Borrower shall not exceed the Aggregate Revolving Credit Commitment, (y) the aggregate unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid ---- balance of all Revolving Credit Loans made by the Swing Line Lender to the Borrower shall not exceed the Revolving Credit Commitment of the Swing Line Lender, and (z) the Borrowing Base shall be in an amount at least equal to the aggregate unpaid balance of all Senior Debt at such time. During the Swing Line Commitment Period, -9- the Borrower may borrow, prepay in whole or in part and reborrow under the Swing Line Commitment, all in accordance with the terms and conditions of this Agreement. No Swing Line Loan shall be made prior to the making of the first Revolving Credit Loans." 3. Amendment of Section 2.2 of the Loan Agreement. Section 2.2(d) of the ---------------------------------------------- Loan Agreement is hereby amended by (a) deleting clause (ii) in its entirety and substituting the following new Section 2.2(d)(ii) in lieu thereof: "(ii) any LIBO Rate Loan, shall be a period of borrowing commencing on and including the date of advance or conversion and ending on the numerically corresponding date that is one week (solely for periods of borrowing commencing and ending during the month of June 2002), one month, two months, three months, four months, five months or six months thereafter, as set forth in the Loan Request." and (b) deleting subclause (A) in its entirety and substituting the following new Section 2.2(d)(A) in lieu thereof: "(A) (I) with respect to Interest Periods for Bank Loans other than one week LIBO Rate Loans, (1) if the numerically corresponding date in the appropriate month is not a Banking Day, such Interest Period shall be extended to the next succeeding day that is a Banking Day; provided, that, in the case of a LIBO Rate Loan, if such day falls in the next succeeding calendar month, such Interest Period shall end on the first day of such calendar month that is a Banking Day, and (2) if there is no numerically corresponding date in the appropriate month constituting such Interest Period, such Interest Period shall end on the last Banking Day in such month; and (II) with respect to Interest Periods for one week LIBO Rate Loans, if the date which is seven (7) days following the commencement of such Interest Period is not a Banking Day, such Interest Period shall be extended to the next succeeding day that is a Banking Day; provided, that if such day falls in the next succeeding calendar week, such Interest Period shall end on the first day of such calendar week that is a Banking Day," 4. Amendment of Section 2.4 of the Loan Agreement. Section 2.4(b) of the ---------------------------------------------- Loan Agreement is hereby amended by deleting Section 2.4(b) in its entirety and substituting the following new Section 2.4(b) in lieu thereof: "(b) (i) On July 1, 2001 (the "First Revolver Reduction Date"), the Aggregate Revolving Credit Commitment shall be irrevocably reduced to $208,000,000, (ii) on October 1, 2001 (the "Second Revolver Reduction Date"), the Aggregate Revolving Credit Commitment shall be irrevocably reduced to $200,000,000, (iii) on January 1, 2002 (the "Third Revolver Reduction Date"), the Aggregate Revolving Credit Commitment shall be irrevocably reduced to $190,000,000, (iv) on April 1, 2002 (the "Fourth Revolver Reduction Date"), the Aggregate Revolving Credit Commitment shall be irrevocably reduced to $180,000,000, and (v) on June 1, 2002 (the "Fifth Revolver Reduction Date", and together with the First Revolver Reduction Date, the Second Revolver Reduction Date, the Third Revolver -10- Reduction Date, and the Fourth Revolver Reduction Date, the "Revolver Reduction Dates"), the Aggregate Revolving Credit Commitment shall be irrevocably reduced to $170,000,000. Each such reduction shall be accompanied by repayment of the Revolving Credit Loans to the extent (if any) that the aggregate principal amount of the Revolving Credit Loans and Swing Line Loans outstanding exceeds the amount of the Aggregate Revolving Credit Commitment after taking into account the Aggregate Revolving Credit Commitment as then reduced, together with accrued interest thereon, of all Bank Loans then being repaid. Each reduction of the Aggregate Revolving Credit Commitment pursuant to this Section 2.4(b) shall be applied pro rata --- ---- among the Banks in proportion to their Percentages in order to reduce each Bank's Revolving Credit Commitment and to reduce the aggregate principal amount of the Revolving Credit Loans then outstanding and owing to such Bank." 5. Amendment of Section 2.5 of the Loan Agreement. Section 2.5 of the ---------------------------------------------- Loan Agreement is hereby amended by (a) (i) deleting the word "or" at the end of Section 2.5(c)(i)(B); (ii) relettering Section 2.5(c)(i)(C) as Section 2.5(c)(i)(D); and (iii) adding the following new clause (C) in proper alphabetical order therein: "(C) the aggregate unpaid balance of all Senior Debt exceeds the Borrowing Base, or" (b) deleting Section 2.5(c)(ii) in its entirety and substituting the following new Section 2.5(c)(ii) in lieu thereof: "(ii) If, at any time, (A) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid balance of all Revolving Credit Loans ---- plus the aggregate unpaid balance of all Term Loans made to the Borrower ---- shall exceed the Borrowing Base, or (B) the aggregate unpaid balance of all Senior Debt shall exceed the Borrowing Base, within five days following the first day there exists any such deficiency the Borrower shall make payment to the Agent (to be applied against the Borrower's Swing Line Loans first, then Revolving Credit Loans and then Term Loans) in an amount necessary to eliminate such excess, together with accrued interest thereon to the date of prepayment as provided in Section 2.2(c). To the extent possible, the Borrower shall, in connection with any such mandatory prepayment, prepay Prime Rate Loans first, and LIBO Rate Loans second. Any prepayment of LIBO Rate Loans shall be subject to Section 2.11." and (c) adding in proper alphabetical order therein the following new Section 2.5(e): "(e) Additional Payments and Mandatory Reductions of Outstanding Bank ---------------------------------------------------------------- Loans. ------ (i) Promptly following the occurrence of any Equity Offering or Debt Offering of the Borrower or any of its Subsidiaries (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements, including -11- the Financial Agreement, the Note Purchase Agreement and the Collateral Agency Agreement, for such Equity Offering or Debt Offering), (A) when no Term Loan is outstanding, the Borrower shall repay (or cause any of its applicable Subsidiaries to repay) outstanding Bank Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such Equity Offering or Debt Offering; and (B) when any Term Loan is outstanding (regardless of whether there are any Revolving Credit Loans or Swing Line Loans outstanding), the Borrower shall repay (or cause any of its applicable Subsidiaries to repay) (1) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment to be made to it pursuant to this Section 2.5(e)(i) and in accordance with the terms of Section 2.5(e)(v), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), (2) the principal amounts outstanding under the Senior Notes, and (3) principal amounts of Indebtedness of the Borrower incurred pursuant to Section 8.2(g), in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such Equity Offering or Debt Offering, with such Net Cash Proceeds being allocated among the Banks, the Agent, the Senior Noteholders and the holders of the Indebtedness described in clause (3) of this paragraph (e)(i)(B) on a pro rata basis in accordance with the provisions of Section 5 of the --- ---- Intercreditor Agreement. In the event that any Net Cash Proceeds remain after applying the Net Cash Proceeds in the manner contemplated above ("Excess Funding Proceeds"), such Excess Funding Proceeds shall be transferred to the Operating Account. (ii) Promptly following the occurrence of any sale, transfer or disposition of the Guarantor's Capital Stock by the Parent (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements, including the Financial Agreement, the Note Purchase Agreement and the Collateral Agency Agreement, for such sale, transfer or disposition), (A) when no Term Loan is outstanding, the Borrower shall cause the Parent to transfer to the Borrower in order to enable the Borrower to repay, if and to the extent permitted by the Financial Agreement and the Collateral Agency Agreement, outstanding Bank Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition; and (B) when any Term Loan is outstanding (regardless of whether there are any Revolving Credit Loans or Swing Line Loans outstanding), the Borrower shall cause the Parent to transfer to the Borrower in order to enable the Borrower to repay, if and to the extent permitted by the Financial Agreement and the Collateral Agency Agreement, (1) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose -12- Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment to be made to it pursuant to this Section 2.5(e)(ii) and in accordance with the terms of Section 2.5(e)(v) and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), (2) outstanding loans under the Financial Agreement, (3) the principal amounts outstanding under the Senior Notes, (4) the principal amounts outstanding with respect to the CP Debt, and (5) principal amounts of Indebtedness of the Borrower incurred pursuant to Section 8.2(g), in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition, with such Net Cash Proceeds being allocated among the Banks, the Agent, the Senior Noteholders, the CP Holders and the holders of the Indebtedness described in clause (5) of this paragraph (e)(ii)(B) on a pro rata basis in accordance with the --- ---- provisions of Section 5.3 of the Collateral Agency Agreement. (iii) Promptly following the occurrence of any sale, transfer or disposition of Loans or other assets of the Borrower or any of its Subsidiaries (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements, including the Financial Agreement, the Note Purchase Agreement and the Collateral Agency Agreement, for such sale, transfer or disposition), (A) when no Term Loan is outstanding, the Borrower shall repay outstanding Bank Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition; and (B) when any Term Loan is outstanding (regardless of whether there are any Revolving Credit Loans or Swing Line Loans outstanding), the Borrower shall repay (1) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment to be made to it pursuant to this Section 2.5(e)(iii) and in accordance with the terms of Section 2.5(e)(v), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), (2) the principal amounts outstanding under the Senior Notes, and (3) principal amounts of Indebtedness of the Borrower incurred pursuant to Section 8.2(g), in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition, with such Net Cash Proceeds being allocated among the Banks, the Agent, the Senior Noteholders and the holders of the Indebtedness described in clause (3) of this paragraph (e)(iii)(B) on a pro rata basis in accordance with the provisions of Section 5 of the --- ---- Intercreditor Agreement. In the event that any Net Cash Proceeds remain after applying the Net Cash Proceeds in the manner contemplated above -13- ("Excess Asset Proceeds"), such Excess Asset Proceeds shall be transferred to the Operating Account. (iv) In the event that the Borrower pays Dividends in excess of the minimum amount of Dividends required to be paid for the Borrower to retain its status as a regulated investment company pursuant to Section 851(a) of the Code (the amount of such excess Dividends is hereafter referred to as the "Excess Dividends"), upon 30 days prior written notice to the Agent from the Borrower and concurrently with the payment of such Excess Dividends, the Borrower shall repay (A) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of any repayment to be made to it pursuant to this Section 2.5(e)(iv) and in accordance with the terms of Section 2.5(e)(v), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), (B) the principal amounts outstanding under the Senior Notes, and (C) Indebtedness of the Borrower incurred pursuant to Section 8.2(g), in an amount equal to the greater of Payment Amount One or Payment Amount Two (the "Dividend Prepayment"), with such Dividend Prepayment being allocated among the Banks, the Agent, the Senior Noteholders and the holders of the Indebtedness described in clause (C) of this paragraph (e)(iv) on a pro rata basis in accordance with the percentage interest that each --- ---- such Person holds of the sum of the outstanding Term Loans, plus the ---- Swing Line Commitment, plus the sum of the Revolving Credit Commitment ---- for each Bank whose Revolving Credit Commitment is not $0, plus the ---- principal amounts outstanding under the Senior Notes, plus the ---- outstanding principal amount of Indebtedness of the Borrowers incurred pursuant to Section 8.2(g). (v) With respect to all payments pursuant to subsections (i) through (iv) above, each such payment shall be applied first, to outstanding Swing Line Loans, and second, to outstanding Revolving Credit Loans and Term Loans of the Borrower in accordance with the provisions of Section 2.5(d). Each payment pursuant to this Section 2.5(e) shall be applied pro rata among the Banks in proportion to --- ---- their Percentages, and, with respect to payments made pursuant to Section 2.5(e)(i)(B), Section 2.5(e)(ii)(B), Section 2.5(e)(iii)(B), and 2.5(e)(iv), with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment made to it pursuant to this Section 2.5(e) and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments -14- (if any) being made in accordance with the requirements of this Section 2.5(e)." 6. Amendment of Section 3.1 of the Loan Agreement. Section 3.1 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting Section 3.1(a) in its entirety and substituting the following new Section 3.1(a) in lieu thereof: "(a) Commitment Fees. The Borrower shall pay to the Agent, for the --------------- pro rata benefit of each Bank (based on each Bank's Percentage of the Aggregate Revolving Credit Commitment), a fee (the "Commitment Fee") equal -------------- to the Applicable Commitment Percentage of the average daily unused portion of the Aggregate Revolving Credit Commitment (Swing Line Loans shall not be deemed to be a used portion of the Aggregate Revolving Credit Commitment for purposes of the calculation of the Commitment Fee). Such fee shall be payable to the Agent for the account of the Banks for the period from the Amendment No. 5 Effective Date to and including the last day of the Revolving Credit Commitment Period, payable quarterly in arrears on the first day of each calendar quarter during the Revolving Credit Commitment Period, commencing with the first such date after the Amendment No. 5 Effective Date, and ending on the Termination Date. Fees shall be calculated for each month on the basis of a 360-day year for the actual number of days elapsed in such month." 7. Amendment of Section 5.2 of the Loan Agreement. Section 5.2 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting Section 5.2(d) in its entirety and substituting the following new Section 5.2(d) in lieu thereof: "(d) after taking into account Revolving Credit Loans and/or Term Loans and/or Swing Line Loans to be made on such date, the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid balance of all ---- Revolving Credit Loans plus the aggregate unpaid balance of all Term Loans ---- shall not exceed the Borrowing Base." 8. Amendment of Article 6 of the Loan Agreement. Article 6 of the Loan -------------------------------------------- Agreement is hereby amended by deleting Sections 6.1(i) and (j) and Section 6.18 in their entirety and substituting the following new Sections 6.1(i), (j), (k), (l), (m), (n) and (o) and Section 6.18 in lieu thereof: "(i) a Borrowing Base Certificate indicating a computation of the Borrowing Base (i) as of the last day of each month commencing with the month ending May 31, 2001 (to be delivered not later than 15 Business Days after the last day of such month), and (ii) promptly following any other date such a certificate is requested by the Agent;" (j) not later than 10 days after the last day of any month, a delinquency report listing the Loans delinquent over 60 days and detailing the top ten delinquent Loans; (k) not later than thirty (30) days after the last day of any calendar month, monthly underwater reports with respect to all -15- Medallion Loans, monthly loan loss reserve reports, monthly delinquency reports, monthly portfolio aging reports, and monthly charge off reports, in each case in form and substance acceptable to the Agent; (l) not later than 60 days after the last day of any fiscal quarter, quarterly reports detailing Total Intercompany Receivables; (m) no later than December 15, 2001, the Borrower's strategic financing plan detailing how the Borrower will achieve its financing strategy goals as presented at its May 17, 2001 meeting with the Banks; (n) no later than October 1, 2001, income and outflow quarterly cash projections for the Borrower and its Parent for October 1, 2001 through December 31, 2002; and (o) with reasonable promptness, such other information respecting the business, operations and financial condition of the Borrower as the Agent or any of the Banks from time to time may request. Section 6.18. M.R. Weiser, etc. The Borrower agrees to retain M.R. ---------------- Weiser, Inc., or another independent firm satisfactory to the Agent, to assist in the preparation of each Borrowing Base Certificate and to provide reporting requested by the Agent with respect thereto, and the Borrower shall assist and fully cooperate with M.R. Weiser, Inc., or such other independent firm satisfactory to the Agent, to provide all necessary or appropriate information promptly following any request therefor; provided -------- that if the results of the field exam dated as of May 31, 2001 are satisfactory to the Agent and the Required Banks (which results shall be deemed satisfactory to each Bank unless such Bank delivers a written notice to the Agent within ten (10) Business Days of receipt of a written report detailing such results stating that the results are unsatisfactory), the Borrower shall not be required to have M.R. Weiser, Inc. continue to assist in preparing monthly Borrowing Base Certificates, provided that M.R. -------- Weiser, Inc., or such other independent firm satisfactory to the Agent, shall continue to assist in preparing quarterly Borrowing Base Certificates." 9. Amendment of Article 7 of the Loan Agreement. Article 7 of the Loan -------------------------------------------- Agreement is hereby amended by (a) deleting Sections 7.1, 7.2 and 7.3 in their entirety and substituting the following new Sections 7.1, 7.2 and 7.3 in lieu thereof: "Section 7.1. Minimum Tangible Net Worth. -------------------------- Suffer or permit the sum of Tangible Net Worth minus up to $15,000,000 ----- of principal of Total Intercompany Receivables of the Borrower to be less than $56,000,000 at any time. Section 7.2. Maximum Liability Ratio. ----------------------- Suffer or permit the ratio of (a) Total Liabilities to (b) the sum of Tangible Net Worth minus Total Intercompany Receivables of the Borrower to ----- be more than 4.85:1 at any time. -16- Section 7.3. Borrowing Base. -------------- Suffer or permit at any time (a) the aggregate unpaid balance of all Swing Line Loans plus the aggregate unpaid balance of all Revolving Credit Loans plus the aggregate unpaid balance of all Term Loans to exceed the ---- Borrowing Base, or (b) the aggregate unpaid balance of all Senior Debt to exceed the Borrowing Base." and (b) adding in proper numerical order therein the following new Sections 7.5 and 7.6: "Section 7.5. Minimum EBIT to Interest Expense Ratio. -------------------------------------- Suffer or permit the ratio, at the end of each fiscal quarter of the Borrower set forth in the table below, of (a) for the fiscal quarter ending June 30, 2001 ("Second FQ01"), EBIT for such fiscal quarter; for the fiscal quarter ending September 30, 2001, the sum of EBIT for the Second FQ01 plus ---- EBIT for the fiscal quarter ending September 30, 2001 ("Third FQ01"); for the fiscal quarter ending December 31, 2001, the sum of EBIT for the Second FQ01 plus EBIT for the Third FQ01 plus EBIT for the fiscal quarter ending ---- ---- December 31, 2001; and for each fiscal quarter ending thereafter, EBIT for the four (4) consecutive fiscal quarters then ended, to (b) the sum of Interest Expense for such four (4) fiscal quarters or lesser period as described above to be less than the ratio set forth opposite such fiscal quarter in the table below: Fiscal Quarter Ending Ratio --------------------- ----- June 30, 2001 1.15:1 September 30, 2001 1.20:1 December 31, 2001 1.25:1 March 31, 2002 and thereafter 1.30:1 Section 7.6. Intercompany Receivables. ------------------------ Suffer or permit the aggregate principal amount of Total Intercompany Receivables to exceed $15,000,000 at any time." 10. Amendment of Article 8 of the Loan Agreement. Article 8 of the Loan -------------------------------------------- Agreement is hereby amended by (a) deleting the first paragraph of Article 8 in its entirety and substituting the following new paragraph in lieu thereof: "Borrower covenants and agrees that until the Notes together with interest and all other Indebtedness of the Borrower to the Agent, the Swing Line Lender and the Banks under this Agreement are paid in full and the Aggregate Revolving Credit Commitment, the Swing Line -17- Commitment and all Term Loan Commitments are terminated, Borrower shall not:" and (b) adding in proper numerical order therein the following new Section 8.18: "Section 8.18. Subsidiaries, etc. Form, acquire, create or otherwise ----------------- suffer to exist any Subsidiary." 11. Amendment of Section 8.2 of the Loan Agreement. Section 8.2 of the ---------------------------------------------- Loan Agreement is hereby amended by (a) deleting the word "and" at the end of subsection (e) thereof; (b) deleting the period at the end of subsection (f) and substituting in lieu thereof a semicolon (";"); and (c) adding the following new subsection (g) in proper alphabetical order therein: "(g) other pari passu Indebtedness of the Borrower, secured ratably by the Collateral, on terms and conditions acceptable to the Agent, provided that (i) the Borrower shall notify the Agent in writing three (3) -------- weeks (or such lesser period as the Agent in its sole discretion shall agree to) prior to the incurrence of any such Indebtedness, (ii) no Default or Event of Default exists on the day any such Indebtedness is incurred, or would exist as a result thereof, and the Borrower shall deliver to the Agent and each Bank pro forma financial statements and a pro forma certificate of the chief financial officer of the Borrower evidencing the Borrower's computation of compliance with each of the financial ratios, tests or covenants specified in Article VII, including the Borrowing Base, after giving effect to the incurrence of any such Indebtedness, and (iii) the Person extending such Indebtedness shall become a party to the Intercreditor Agreement and the Collateral Agency Agreement." 12. Amendment of Section 8.16 of the Loan Agreement. Section 8.16 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.16 is hereby substituted in lieu thereof: "8.16. Portfolio Purchases. Make, or obligate itself to make, any ------------------- Portfolio Purchase." 13. Amendment of Section 10.2 of the Loan Agreement. Section 10.2 of the ----------------------------------------------- Loan Agreement is hereby amended by deleting Section 10.2 in its entirety and substituting the following new Section 10.2 in lieu thereof: "Section 10.2. Modification and Waiver. ----------------------- Any consent or approval required or permitted by this Loan Agreement to be given by the Banks may be given, and any term of this Loan Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower of any terms of this Loan Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or -18- prospectively) with, but only with, the written consent of the Borrower and the written consent of the Required Banks. Notwithstanding the foregoing, no amendment, modification or waiver shall: (a) without the written consent of the Borrower and each Bank directly affected thereby: (i) reduce or forgive the principal amount of any Revolving Credit Loans, Swing Line Loans or Term Loan, or reduce the rate of interest on the Notes or the amount of the Commitment Fee; (ii) increase the amount of such Bank's Revolving Credit Commitment or extend the expiration date of such Bank's Revolving Credit Commitment; (iii) postpone or extend the Termination Date or the Term-Out Date or any other regularly scheduled dates for payments of principal of, or interest on, the Revolving Credit Loans, Swing Line Loans or Term Loan or any Fees or other amounts payable to such Bank (it being understood that (A) a waiver of the application of the default rate of interest, and (B) any vote to rescind any acceleration made pursuant to Section 9.1 of amounts owing with respect to the Revolving Credit Loans, Swing Line Loans and Term Loan shall require only the approval of the Required Banks); and (iv) other than pursuant to a transaction permitted by the terms of this Loan Agreement, release all or substantially all of the Collateral or release the Guarantor from its guaranty obligations under the Guaranty, other than in accordance with the terms thereof or the terms of the Collateral Agency Agreement (excluding, if the Borrower becomes a debtor under the federal Bankruptcy Code, the release of "cash collateral", as defined in Section 363(a) of the federal Bankruptcy Code pursuant to a cash collateral stipulation with the debtor approved by the Required Banks); (b) without the written consent of all of the Banks, amend or waive Section 8.16, this Section 10.2 or the definition of Required Banks (it being understood that the addition of one or more additional credit facilities, the allowance of the credit extensions, interest and fees thereunder to share ratably or on a subordinated basis with the Revolving Credit Loans, Swing Line Loans, Term Loan, interest and Fees in the benefits of the Loan Documents and the inclusion of the holders of such facilities in the determination of Required Banks shall require only the approval of the Required Banks); and -19- (c) without the written consent of the Agent, amend or waive provisions with respect to Swing Line Loans, Article 11, the amount or time of payment of the Agent's Fee payable for the Agent's account or any other provision applicable to the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to any other or further notice or demand in similar or other circumstances." 14. Amendment of Section 12.2 of the Loan Agreement. Section 12.2 of the ----------------------------------------------- Loan Agreement is hereby amended by deleting Section 12.2 in its entirety and substituting the following new Section 12.2 in lieu thereof: "Section 12.2. [Intentionally Omitted]." ---------------------- 15. Amendment to Exhibits and Schedules to the Loan Agreement. The --------------------------------------------------------- Exhibits to the Loan Agreement are hereby amended by deleting Exhibit A in its entirety and substituting in lieu thereof Exhibit A attached hereto. 16. Waiver of Section 7.4 of the Loan Agreement. Each of the Banks hereby ------------------------------------------- waives the Borrower's compliance with the covenant set forth in Section 7.4 of the Loan Agreement for the fiscal quarter ended March 31, 2001; provided, -------- however, that the ratio of the sum of Net Income plus Interest Expense to - ------- ---- Interest Expense for such fiscal quarter shall not be less than 1.28:1. 17. Consent to Note Purchase Agreement Amendment, etc. Each of the Banks ------------------------------------------------- hereby consents to (a) the amendment of the Note Purchase Agreement in form and substance satisfactory to the Agent for purposes of Section 2 of the Intercreditor Agreement and Section 8.17 of the Loan Agreement, and (b) the amendment of the Financial Agreement in form and substance satisfactory to the Agent for purposes of Section 2 of the Collateral Agency Agreement. 18. Amendment No. 1 to the Parent Pledge Agreement. Section 23 of the ---------------------------------------------- Parent Pledge Agreement is hereby amended by (a) deleting the word "and" at the end of subsection (b) thereof, (b) relettering subsection (c) as subsection (d), and (c) adding the following new subsection (c) in proper alphabetical order therein: "(c) consented to and agreed to be bound by the terms of Section 2.5(e) of the Loan Agreement, including 2.5(e)(ii) of the Loan Agreement, and". 19. Amendment No. 1 to the Amended and Restated Security Agreement. The -------------------------------------------------------------- Amended and Restated Security Agreement dated as of December 24, 1997, between the Borrower and the Agent for the benefit of those named therein, is hereby amended by (a) in the definition of "Collateral", (i) deleting the word "and" at the end of subsection (q) thereof, (ii) relettering subsection (r) as subsection (v), -20- and (iii) adding the following new subsections (r), (s), (t) and (u) in proper alphabetical order therein: "(r) all Receivables; (s) all Documents; (t) all Depository Accounts; (u) rights to the payment of money, insurance refund claims and all other insurance claims and proceeds, tort claims and rights to the proceeds of letters of credit, and"; (b) inserting in Section 1.1, in the places required by alphabetical order, the following new definitions: "Documents" shall have the meaning assigned to it in Section 9- --------- 105(1)(i) of the UCC. "Receivables" shall mean, with respect to any Person, all present and ----------- future rights to payment for goods sold or leased or for services rendered by such Person whether or not evidenced by an instrument or chattel paper. (c) amending Section 2.3 by adding the following new subsection (d) in proper alphabetical order therein: "(d) Upon the effectiveness of certain revisions to Article 9 of the UCC described in Section 6.14 hereof, comply with all of the requirements of and its agreements contained within such Section 6.14." and (d) adding the following new Sections 6.14 and 6.15 in proper numerical order therein: SECTION 6.14. Concerning Revised Article 9 of the Uniform Commercial Code. The parties acknowledge and agree to the following provisions of this Agreement in anticipation of the application, in one or more jurisdictions to the transactions contemplated hereby, of the revised Article 9 of the UCC in the form or substantially in the form approved by the American Law Institute and the National Conference of Commissioners on Uniform State Law and contained in the 1999 official text of Revised Article 9 ("Revised Article 9"). ----------------- 6.14.1. Attachment. In applying the law of any jurisdiction in which Revised Article 9 is in effect, the Collateral is all assets of the Borrower, whether or not within the scope of Revised Article 9. The Collateral shall include, without limitation, the following categories of assets as defined in Revised Article 9: goods (including inventory, equipment and any accessions thereto), instruments (including promissory notes), documents, accounts (including health-care-insurance receivables), chattel paper (whether tangible or electronic), -21- deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities and all other investment property, general intangibles (including payment intangibles and software), supporting obligations and any and all proceeds of any thereof, wherever located, whether now owned or hereafter acquired. If the Borrower shall at any time, whether or not Revised Article 9 is in effect in any particular jurisdiction, acquire a commercial tort claim, as defined in Revised Article 9, the Borrower shall immediately notify the Agent in a writing signed by the Borrower of the brief details thereof and grant to the Agent for the benefit of itself, the Banks and the CP Holders in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Agent. 6.14.2. Perfection by Filing. The Agent may at any time and from time to time, pursuant to the provisions of Sections 2.3(d) or 2.6 hereof, file financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of the Borrower or words of similar effect and which contain any other information required by Part 5 of Revised Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether the Borrower is an organization, the type of organization and any organization identification number issued to the Borrower. The Borrower agrees to furnish any such information to the Agent promptly upon request. Promptly upon written request by the Agent, the Borrower agrees to execute and deliver amendments to financing statements to provide for the revised definition of "Collateral" pursuant to Amendment No. 1 to this Agreement. Any such financing statements, continuation statements or amendments may be signed by the Agent on behalf of the Borrower, as provided in Section 2.6 hereof, and may be filed at any time in any jurisdiction whether or not Revised Article 9 is then in effect in that jurisdiction. 6.14.3. Other Perfection, etc. The Borrower shall at any time and from time to time, whether or not Revised Article 9 is in effect in any particular jurisdiction, take such steps as the Agent may reasonably request for the Agent (a) to obtain an acknowledgement, in form and substance satisfactory to the Agent, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the Agent for the benefit of itself, the Banks and the CP Holders, (b) to obtain "control" of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such terms are defined in Revised Article 9 with corresponding provisions in Rev. (S)(S) 9-104, 9-105, 9-106 and 9-107 relating to what constitutes "control" for such items of Collateral), with any agreements establishing control to be in form and substance satisfactory to the Agent, and (c) otherwise to insure the continued perfection and priority of the Agent's security interest for the benefit of itself, the Banks and the CP Holders in any of the Collateral and of the preservation of its rights therein, whether in anticipation and following the effectiveness of Revised Article 9 in any jurisdiction. -22- 6.14.4 Other Provisions. In applying the law of any jurisdiction in which Revised Article 9 is in effect, the following references to sections in this Agreement to existing Article 9 of that jurisdiction shall be to the Revised Article 9 Section of that jurisdiction indicated below:
Agreement Section Existing Article 9 Revised Article 9 ---------------------------------------------------------------------------------- 1.1 (S) 9-105(1)(b) Rev. (S) 9-102(a)(11) ---------------------------------------------------------------------------------- 1.1 (S) 9-105(1)(i) Rev. (S) 9-102(a)(47) ---------------------------------------------------------------------------------- 1.1 (S) 9-106 Rev. (S) 9-102(a)(2) (for the definition of "accounts") or Rev. (S) 9-102(a)(46) (for the definition of general intangibles) ---------------------------------------------------------------------------------- 1.1 (S) 9-109(2) Rev. (S) 9-102(a)(33) ---------------------------------------------------------------------------------- 1.1 (S) 9-109(4) Rev. (S) 9-102(a)(48) ---------------------------------------------------------------------------------- 1.1 (S) 9-115 Rev. (S) 9-102(a)(49) ---------------------------------------------------------------------------------- 1.1 (S) (9-306(1) Rev. (S) 9-102(a)(64) ----------------------------------------------------------------------------------
6.14.5 Savings Clause. Nothing contained in this Section 6.14 shall be construed to narrow the scope of the Agent's security interest hereunder in any of the Collateral or the perfection or priority thereof or to impair or otherwise limit any of the rights, powers, privileges or remedies of the Agent, any Bank or any CP Holders hereunder except (and then only to the extent) mandated by Revised Article 9 to the extent then applicable. SECTION 6.15. Transitional Arrangements. The Borrower hereby (a) confirms its prior grant to the Agent in favor of the Banks of a security interest in the "Collateral" (as defined herein prior to giving effect to the Amendment No. 1 to Amended and Restated Security Agreement dated as of June 29, 2001, and in accordance with the provisions of Section 6.14 hereof), and (b) grants a continuing lien on such "Collateral" (as defined herein after giving effect to the Amendment No. 1 to Amended and Restated Security Agreement dated as of June 29, 2001, and in accordance with the provisions of Section 6.14 hereof)." 20. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants to the Agent and the Banks as of the date hereof, and as of any date on which the conditions set forth in Section 21 below are met, as follows: (a) The execution and delivery by the Borrower of this Amendment and all other instruments and agreements required to be executed and delivered by the Borrower in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the ------------------- performance by the Borrower of any of its obligations and agreements under the Amendment Documents and the Loan Agreement and the other Loan Documents, as amended hereby, are within the corporate or other authority of the Borrower, as the case may be, have been duly authorized by all necessary corporate proceedings on behalf of the Borrower and do not -23- and will not contravene any provision of law or of the Borrower's charter, other incorporation or organizational papers, or by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon the Borrower. (b) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which the Borrower is a party constitutes a legal, valid and binding obligation of such Person, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights. (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Borrower of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by the Borrower of the transactions among the parties contemplated hereby and thereby or referred to herein. (d) The representations and warranties contained in Article 4 of the Loan Agreement and in the other Loan Documents were true and correct at and as of the date made. Except (i) to the extent of changes resulting from transactions contemplated or permitted by the Loan Agreement and the other Loan Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse), (ii) to the extent that such representations and warranties relate expressly to an earlier date, and (iii) after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment, also are correct at and as of the date hereof. (e) The Borrower has performed and complied in all material respects with all terms and conditions herein and in the Loan Documents required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions of this Amendment and the other Amendment Documents, there exists no Event of Default or Default. (f) The Borrower acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in Section 4 of the Loan Agreement, a breach of which shall constitute an Event of Default. 21. Effectiveness. This Amendment shall become effective as of the date ------------- first written above (the "Effective Date") upon the satisfaction of each of the following conditions, in each case in a manner satisfactory to, and in form and substance satisfactory to, the Agent: (a) This Amendment shall have been duly executed and delivered by each of the Borrower and the Banks and shall be in full force and effect. -24- (b) The Agent shall have received evidence of the consent of the Senior Note Holders under the Intercreditor Agreement and the Note Purchase Agreement to this Amendment and the transactions contemplated hereby. (c) The Agent shall have received evidence of the effectiveness of an amendment of the Financial Agreement in the form attached hereto as Exhibit B. (d) The Agent shall have received evidence of the effectiveness of an amendment of the Intercreditor Agreement. (e) The Agent shall have received evidence of the effectiveness of an amendment of the Collateral Agency Agreement. (f) The Agent shall have received, for the pro rata account of each Bank --- ---- which executes and delivers its signature pages to the Agent, by 5:00 p.m. Boston time on June 29, 2001 in facsimile (to be followed by originals) or original form, an amendment fee equal in the aggregate to 0.30% of such Bank's Revolving Credit Commitment in effect on the date hereof. (g) The Agent shall have received from the Secretary of the Borrower a copy, certified by such Secretary to be true and complete as of such date, of each of (i) its charter or other organizational documents as in effect on such date of certification, (ii) its by-laws as in effect on such date, and (iii) the resolutions of its Board of Directors or other management authorizing, to the extent it is a party thereto, the execution, delivery and performance of the Amendment Documents; provided, however, that in lieu of providing the items -------- ------- required by subsections (i) and (ii) of this subsection (g), such Secretary may certify, to the extent true and correct, that charter documents and by-laws previously provided to the Agent are true and correct as of such date and have not been amended, rescinded or revoked; (h) The Agent shall have received from the Borrower an incumbency certificate, dated as of such date, signed by a duly authorized officer of such Person and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, the Amendment Documents; (i) The Agent shall have received from the Borrower good standing certificates for the Borrower, issued by the Secretary of State of New York, and evidence that the Borrower is duly licensed and qualified as a foreign organization in good standing under the laws of each jurisdiction where the failure to qualify as such would have a Material Adverse Effect; (j) The Agent shall have received a favorable legal opinion addressed to the Agent and the Banks, dated as of such date, in form and substance satisfactory to the Agent, from counsel to the Borrower, concerning corporate or other applicable entity authority matters and the enforceability of each of the Amendment Documents, the Loan Agreement as amended thereby, and the Amended and Restated Security Agreement as amended thereby, and concerning such other matters as the Agent may request; -25- (k) Bingham Dana LLP shall have received payment of all fees and expenses outstanding as of the date hereof, including, but not limited to, fees and expenses in the connection with the preparation of this Amendment and ancillary documentation. (l) The Agent shall have received such other items, documents, agreements or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. 22. Release. In order to induce the Agent and the Banks to enter into ------- this Amendment, the Borrower, on behalf of itself and its Subsidiaries, acknowledges and agrees that: (a) such Person does not have any claim or cause of action against the Agent or any Bank (or any of its respective directors, officers, employees or agents); (b) such Person does not have any offset right, counterclaim or defense of any kind against any of its respective obligations, indebtedness or liabilities to the Agent or any Bank; and (c) each of the Agent and the Banks has heretofore properly performed and satisfied in a timely manner all of its obligations to such Person. The Borrower, on behalf of itself and its Subsidiaries, wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the Agent's and the Banks' rights, interests, contracts, collateral security or remedies. Therefore, the Borrower, on behalf of itself and its Subsidiaries, unconditionally releases, waives and forever discharges (x) any and all liabilities, obligations, duties, promises or indebtedness of any kind of the Agent or any Bank to such Person, except the obligations to be performed by the Agent or any Bank on or after the date hereof as expressly stated in this Amendment, the Loan Agreement and the other Loan Documents, and (y) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which such Person might otherwise have against the Agent, any Bank or any of its directors, officers, employees or agents, in either case (x) or (y), on account of any past or presently existing condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind. 23. Miscellaneous Provisions. ------------------------ (a) The Borrower hereby ratifies and confirms all of its obligations to the Agent and the Banks under the Loan Agreement, as amended hereby, the Amended and Restated Security Agreement as amended hereby, and the other Loan Documents, including, without limitation, the Loans, and the Borrower hereby affirms its absolute and unconditional promise to pay to the Banks and the Agent the Revolving Credit Loans, the Term Loans, the Swing Line Loans, reimbursement obligations and all other amounts due or to become due and payable to the Banks and the Agent under the Loan Agreement and the other Loan Documents, as amended hereby. Except as expressly amended hereby, each of the Loan Agreement, the Amended and Restated Security Agreement and the other Loan Documents shall continue in full force and effect. This Amendment and the Loan Agreement shall hereafter be read and construed together as a single document, and all references to the Loan Agreement in the Loan Agreement, any other Loan Document or any agreement or instrument related to the Loan Agreement shall -26- hereafter refer to the Loan Agreement as amended by this Amendment. This Amendment and the Amended and Restated Security Agreement shall hereafter be read and construed together as a single document, and all references to the Amended and Restated Security Agreement in the Amended and Restated Security Agreement, any other Loan Document or any agreement or instrument related to the Amended and Restated Security Agreement shall hereafter refer to the Amended and Restated Security Agreement as amended by this Amendment. (b) No consent or waiver herein granted shall extend to or affect any obligations not expressly herein consented to or waived or shall impair any right of the Agent or the Banks consequent thereon. No consent or waiver herein granted shall extend beyond the term expressly set forth herein for such consent or waiver, nor shall anything contained herein be deemed to imply any willingness of the Agent or the Banks to agree to, or otherwise prejudice any rights of the Agent and the Banks with respect to, any similar or dissimilar consents or waivers that may be requested for any future period. (c) Without limiting the expense reimbursement requirements set forth in Section 10.6 of the Loan Agreement, the Borrower agrees to pay on demand all costs and expenses, including reasonable attorneys' fees, of the Agent incurred in connection with this Amendment. (d) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). (e) This Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Amendment to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written. MEDALLION FUNDING CORP. By: /s/ Alvin Murstein ------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ James Jack --------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association), as Agent, as Swing Line Lender and as one of the Banks By: /s/ Kevin J. Foley ------------------- Name: Kevin J. Foley Title: Sr. VP THE BANK OF NEW YORK, as Documentation Agent and as one of the Banks By: /s/ Gordon Smith ----------------- Name: Gordon Smith Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Michael S. Cameli ----------------------- Name: Michael S. Cameli Title: V.P. BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Jeffrey Millar ------------------- Name: J. Millar Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Carol A. Kornbluth ------------------------ Name: Carol A. Kornbluth Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: /s/ Robert J. Fainelli ------------------------ Name: Robert J. Fainelli Title: First Vice President By: /s/ Howard Weinberg --------------------- Name: Howard Weinberg Title: Senior Vice President EUROPEAN AMERICAN BANK By: /s/ George L. Stirling ------------------------ Name: George L. Stirling Title: VP BANK LEUMI USA By: /s/ Paul Tine /s/ John Koenigsberg --------------- --------------------- Name: Paul Tine John Koenigsberg Title: V.P. First VP HSBC BANK USA By: /s/ Bruce Wicks ---------------- Name: Bruce Wicks Title: Vice President Each of the undersigned hereby reaffirms and ratifies all of its agreements and obligations under the Loan Documents which such Person is party to, and confirms that it consents to the amendment of the Loan Agreement as set forth above. MEDALLION FINANCIAL CORP. By: /s/ Alvin Murstein ------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ James Jack --------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer MEDALLION TAXI MEDIA, INC. By: /s/ Alvin Murstein ------------------- Name: Alvin Murstein Title: Director By: /s/ Andrew M. Murstein ----------------------- Name: Andrew M. Murstein Title: Chief Executive Officer Exhibit A --------- Borrowing Base Certificate -------------------------- Borrowing Base as of _______________ ("Borrowing Base Date") - -------------------------------------------------------------------------------- (1) The aggregate outstanding principal balances of $ all Eligible Medallion Loans and Eligible Commercial Loans shown on Borrower's balance sheet as of the last day of the most recent month - -------------------------------------------------------------------------------- (2) The aggregate accrued interest (excluding $ deferred interest) on all Eligible Medallion Loans and Eligible Commercial Loans shown on Borrower's balance sheet as of the last day of the most recent month - -------------------------------------------------------------------------------- (3) Total of (1) plus (2) $ - -------------------------------------------------------------------------------- (4) The portion, if any, of the Loans, plus accrued $ interest (excluding deferred interest) thereon, that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing - -------------------------------------------------------------------------------- (5) The Eligible Loans, plus accrued interest $ (excluding deferred interest) thereon, which are more than 60 days past due - -------------------------------------------------------------------------------- (6) 83.33% of the difference of (3) minus the sum of (4) and (5), without duplicating amounts in (4) and (5) - -------------------------------------------------------------------------------- (7) 83.33% of 75% of the Eligible Medallion Loans $ and accrued interest (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due - -------------------------------------------------------------------------------- (8) 83.33% of 65% of the Eligible Medallion Loans and $ accrued interest (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due - -------------------------------------------------------------------------------- (9) Through 8/31/01, 83.33% of up to $4,000,000 of the $ Advance Amounts of Eligible Yellow Cab Loans - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (10) Sum of Lines (6), (7), (8) and (9) $ - -------------------------------------------------------------------------------- (11) cash of up to $5,000,000 and Short Term $ Investments shown on the Borrower's balance sheet as of the Borrowing Base Date - -------------------------------------------------------------------------------- (12) Sum of Lines (10) and (11) (Borrowing Base) $ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Senior Debt (a) Indebtedness of Borrower under the Loan Agreement; $ (b) all CP Debt $ (c) Senior Note Debt $ (d) the aggregate amount of other Indebtedness of the $ Borrower incurred pursuant to Section 8.2(g) of the Loan Agreement (13) Sum of Items (a) -(d) (Senior Debt) $ $ $ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net Excess (Deficiency) of Borrowing Base over Senior Debt $ (Line 12 less Line 13) - -------------------------------------------------------------------------------- EX-10.2 4 dex102.txt AMENDMENT NO. 2 TO THE SECOND AMENDED AND RESTATE EXHIBIT 10.2 AMENDMENT NO. 2 TO SECOND AMENDED AND ------------------------------------- RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT --------------------------------------------------- AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT dated as of June 29, 2001 (this "Amendment"), by and among --------- MEDALLION FINANCIAL CORP., a Delaware corporation ("MFC"), MEDALLION BUSINESS --- CREDIT, LLC, a Delaware limited liability company ("MBC"; MBC and MFC are --- sometimes hereinafter referred to individually as a "Borrower" and together as -------- the "Borrowers"), the lending institutions that are listed on the signature --------- pages hereto, FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association), as a Bank ("Fleet"), as Swing Line Lender (the "Swing Line Lender"), as Arranger and ----- ----------------- as Agent for the Banks (including any successor, the "Agent"), amending the Loan Agreement (as defined below). WHEREAS, the Borrowers, the banks and other lending institutions that from time to time are signatories thereto (including Assignees, collectively, the "Banks" and individually, a "Bank"), the Agent and the Swing Line Lender are - ------ ---- parties to a Second Amended and Restated Loan Agreement dated as of September 22, 2000 (as amended and in effect from time to time, the "Loan Agreement", -------------- capitalized terms defined therein having the same meanings herein as therein), pursuant to which the Banks have extended credit to the Borrowers on the terms and subject to the conditions set forth therein; and WHEREAS, the Borrowers have requested an amendment of, and, subject to the terms and conditions set forth herein, the Borrowers, the Banks, the Agent and the Swing Line Lender have agreed to amend, the Loan Agreement as set forth herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Loan Agreement as follows: 1. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by (a) deleting the following definition in its entirety, and substituting in lieu thereof the following new definition: "Senior Debt" shall mean the sum of (a) all Indebtedness of either or ----------- both of the Borrowers under this Agreement, plus (b) all Indebtedness of ---- either or both of the Borrowers consisting of or with respect to Commercial Paper, plus (c) all Indebtedness of the Borrowers incurred in accordance ---- with Section 8.2(i). (b) deleting the first parenthetical of clause (i) of the definition of "Restricted Payment" in its entirety, and substituting in lieu thereof the following new parenthetical: -2- "(other than the payment of the sum of (a) the minimum amount of Dividends required to be paid for such Borrower to retain its status as a regulated investment company pursuant to Section 851(a) of the Code, plus ---- (b) the payment of Dividends required to be paid in order to avoid the imposition of income taxes pursuant to the Code)". and (c) inserting, in the places required by alphabetical order, the following new definitions: "Amendment No. 2" shall mean Amendment No. 2 to Second Amended and --------------- Restated Loan Agreement, Limited Waiver and Consent dated as of June 29, 2001 among the Borrowers, the Agent, the Swing Line Lender and the Banks. "Amendment No. 2 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 2. "Bank Loans" shall mean, collectively, the Revolving Credit Loans, the ---------- Swingline Loans and the Term Loan. "Debt Offering" shall mean the sale or issuance by either Borrower or ------------- any of their Subsidiaries of any Indebtedness. "Equity Offering" shall mean the sale or issuance by either Borrower --------------- or any of their Subsidiaries of any of its Capital Stock or other equity interests or any warrants, rights or options to acquire its Capital Stock or other equity interests (including any debt securities that are convertible into, or exchangeable for, capital stock or equity interests, but excluding any capital contributions permitted by this Agreement made by a Borrower to any of its Subsidiaries). "Net Cash Proceeds" shall mean, with respect to (a) any Debt Offering ----------------- or Equity Offering, the excess of the gross cash proceeds received by either Borrower or any of their Subsidiaries from such Debt Offering or Equity Offering after deduction of reasonable and customary transaction expenses actually incurred in connection with such Debt Offering or Equity Offering, and (b) any sale, disposition or transfer of assets by either Borrower or any of their Subsidiaries, the net cash proceeds received by either Borrower or any of their Subsidiaries, less all reasonable out-of- pocket fees, commissions and other reasonable and customary expenses actually incurred in connection with such asset sale, including the amount of income, franchise, sales and other applicable taxes required to be paid by such Borrower or such Subsidiary in connection with such sale, disposition or transfer. "Operating Account" shall mean the Borrowers' Account No. 2173008218 ----------------- with Fleet, or any successor account. -3- "Payment Amount One" shall mean the sum of (a) $2,000,000, plus (b) ------------------ ---- the sum of 1.8% multiplied by the principal amount of Indebtedness of the ---------- -- Borrowers incurred pursuant to Section 8.2(i) outstanding at any time of reference. "Payment Amount Two" shall mean the sum of (a) four multiplied by the ------------------ ---------- -- amount of the Excess Dividends (as defined in Section 2B(d)), plus (b) the ---- product of the principal amount of Indebtedness of the Borrowers incurred pursuant to Section 8.2(i) outstanding at any time of reference divided by ------- -- $110,000,000 multiplied by four multiplied by the amount of the Excess ---------- -- ---------- -- Dividends. 2. Addition of Article 2B to the Loan Agreement. The Loan Agreement is -------------------------------------------- hereby amended by adding the following new Article 2B: "ARTICLE 2B. ADDITIONAL PAYMENTS AND MANDATORY REDUCTIONS OF OUTSTANDING BANK LOANS. (a) Promptly following the occurrence of any Equity Offering or Debt Offering (other than of the Guarantor and following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements, including the Funding Agreement, for such Equity Offering or Debt Offering), (i) when no Term Loan is outstanding, the Borrowers shall repay (or cause any of their applicable Subsidiaries to repay) outstanding Bank Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such Equity Offering or Debt Offering; and (ii) when any Term Loan is outstanding (regardless of whether there are any Revolving Credit Loans or Swing Line Loans outstanding), the Borrowers shall repay (or cause any of their applicable Subsidiaries to repay) (A) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment to be made to it pursuant to this Section 2B(a)(ii) and in accordance with the terms of Section 2B(e), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), and (B) Indebtedness of the Borrowers incurred pursuant to Section 8.2(i), in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such Equity Offering or Debt Offering, with such Net Cash Proceeds being allocated among the Banks, the Agent and the holders of the Indebtedness described in clause (B) of this paragraph (a)(ii) on a pro rata basis in accordance with the --- ---- percentage interest that each Person holds of the sum of the outstanding Term Loans, plus the sum of the Revolving Credit ---- Commitment for each Bank whose Revolving Credit Commitment is not $0, plus the outstanding principal ---- -4- amount of Indebtedness of the Borrowers incurred pursuant to Section 8.2(i). In the event that any Net Cash Proceeds remain after applying the Net Cash Proceeds as contemplated above ("Excess Financial Proceeds"), such Excess Financial Proceeds shall be transferred to the Operating Account. (b) Promptly following the occurrence of any sale, transfer or disposition of the Guarantor's Capital Stock (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements, for such sale, transfer or disposition), (i) when no Term Loan is outstanding, MFC shall repay outstanding Bank Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition; and (ii) when any Term Loan is outstanding (regardless of whether there are any Revolving Credit Loans or Swing Line Loans outstanding), MFC shall repay (A) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment to be made to it pursuant to this Section 2B(b)(ii) and in accordance with the terms of Section 2B(e), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), (B) outstanding loans under the Funding Agreement, (C) the amounts outstanding under the Senior Notes, (D) the principal amounts outstanding with respect to the CP Debt, and (E) Indebtedness of the Borrowers incurred pursuant to Section 8.2(i), in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition, with such Net Cash Proceeds being allocated among the Banks, the Agent, the Funding Banks, the holders of the Senior Notes, the CP Holders and the holders of the Indebtedness described in clause (E) of this paragraph (b)(ii) on a pro rata basis in accordance with the provisions of --- ---- Section 5.3 of the Collateral Agency Agreement. (c) Promptly following the occurrence of any sale, transfer or disposition of Loans or other assets of either Borrower or any of their Subsidiaries (other than of the Capital Stock of the Guarantor and following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements, for such sale, transfer or disposition), (i) when no Term Loan is outstanding, such Borrower shall repay outstanding Bank Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition; and (ii) when any Term Loan is outstanding (regardless of whether there are any Revolving Credit Loans or Swing Line Loans outstanding), such Borrower shall repay (A) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit -5- Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment to be made to it pursuant to this Section 2B(c)(ii) and in accordance with the terms of Section 2B(e), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), and (B) Indebtedness of the Borrowers incurred pursuant to Section 8.2(i), in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such sale, transfer or disposition, with such Net Cash Proceeds being allocated among the Banks, the Agent and the holders of the Indebtedness described in clause (B) of this paragraph (c)(ii) on a pro rata basis in accordance with the --- ---- percentage interest that each Person holds of the sum of the outstanding Term Loans, plus the sum of the Revolving Credit ---- Commitment for each Bank whose Revolving Credit Commitment is not $0, plus the outstanding principal amount of Indebtedness of the Borrowers ---- incurred pursuant to Section 8.2(i). In the event that any Net Cash Proceeds remain after applying the Net Cash Proceeds as contemplated above ("Excess Asset Proceeds"), such Excess Asset Proceeds shall be transferred to the Operating Account. (d) In the event that either Borrower pays Dividends in excess of the minimum amount of Dividends required to be paid for such Borrower to retain its status as a regulated investment company pursuant to Section 851(a) of the Code (the amount of such excess Dividends is hereafter referred to as the "Excess Dividends"), upon 30 days prior written notice to the Agent from such Borrower and concurrently with the payment of such Excess Dividends, such Borrower shall repay (A) outstanding Bank Loans (with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of any repayment to be made to it pursuant to this Section 2B(d) and in accordance with the terms of Section 2B(e), and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) required to be made by this parenthetical), and (B) Indebtedness of the Borrower incurred pursuant to Section 8.2(i), in an amount equal to the greater of Payment Amount One or Payment Amount Two (the "Dividend Prepayment"), with such Dividend Prepayment being allocated among the Banks, the Agent and the holders of the Indebtedness described in clause (B) of this paragraph (d) on a pro rata basis in --- ---- accordance with the percentage interest that each such Person holds of the sum of the outstanding Term Loans, plus the Swing Line Commitment, ---- plus the sum of the Revolving Credit Commitment for each Bank whose ---- Revolving Credit Commitment is not $0, plus the outstanding ---- -6- principal amount of Indebtedness of the Borrowers incurred pursuant to Section 8.2(i). (e) With respect to all payments pursuant to subsections (a) through (d) above, each such payment shall be applied first, to outstanding Swing Line Loans, and second, to outstanding Revolving Credit Loans and Term Loans in accordance with the provisions of Section 2.5(d). Each payment pursuant to this Article 2B shall be applied pro rata among the Banks in proportion to their Percentages, --- ---- and, with respect to payments made pursuant to Section 2B(a)(ii), Section 2B(b)(ii), Section 2B(c)(ii), and Section 2B(d), with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced in an amount equal to the amount of the repayment made to it pursuant to this Article 2B and the Aggregate Revolving Credit Commitment being irrevocably reduced by an aggregate amount equal to the sum of the reductions of individual Revolving Credit Commitments (if any) being made in accordance with the requirements of this Article 2B." 3. Amendment of Article 8 of the Loan Agreement. The first paragraph of -------------------------------------------- Article 8 of the Loan Agreement is hereby deleted in its entirety and the following new paragraph is hereby substituted in lieu thereof: "Each Borrower covenants and agrees that until the Notes together with interest and all other Indebtedness of the Borrowers to the Agent, the Swing Line Lender and the Banks under this Agreement are paid in full and the Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term Loan Commitments are terminated, neither Borrower shall, and with respect to Section 8.2, neither Borrower shall permit the Guarantor to:" 4. Amendment of Section 8.2 of the Loan Agreement. Section 8.2 of the ---------------------------------------------- Loan Agreement is hereby amended by (a) deleting the word "and" at the end of subsection (f) thereof; (b) deleting the period at the end of subsection (g) and substituting in lieu thereof a semicolon (";"); and (c) adding the following new subsections (h) and (i) in proper alphabetical order therein: "(h) Indebtedness of the Guarantor in an aggregate amount not to exceed $10,000,000 at any time; and (i) other pari passu Indebtedness of the Borrowers, secured ratably by the Collateral, on terms and conditions acceptable to the Agent, provided -------- that (i) the Borrowers shall notify the Agent in writing three (3) weeks (or such lesser period as the Agent in its sole discretion shall agree to) prior to the incurrence of any such Indebtedness, (ii) no Default or Event of Default exists on the day any such Indebtedness is incurred, or would exist as a result thereof, and the Borrowers shall deliver to the Agent and each of the Banks pro forma financial statements and a pro forma -7- certificate of the chief financial officer of the Borrowers evidencing the Borrowers' computation of compliance with each of the financial ratios, tests or covenants specified in Article VII, including the MFC Borrowing Base or the MBC Borrowing Base, as applicable, after giving effect to the incurrence of any such Indebtedness, and (iii) the Person extending such Indebtedness shall become a party to the Collateral Agency Agreement." 5. Amendment of Section 8.3 of the Loan Agreement. Section 8.3(e) of the ---------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.3(e) is hereby substituted in lieu thereof: "(e) Make any Investment (including by way of the acquisition of any Person) in any Subsidiary or Affiliate, or any Person that after taking into account such Investment would become a Subsidiary or Affiliate, other than (i) Investments of MFC in MBC or of MBC in MFC, (ii) Investments existing on the Second Restatement Effective Date and listed on Schedule -------- III hereto, (iii) (A) Investments by MFC in BL of up to $10,000,000 arising --- from the conversion of accounts receivable owed by BL to MFC into an equity contribution into BL, and (B) other Investments by MFC in BL shall not exceed an aggregate amount of $1,000,000, (iv) Investments by MFC in Freshstart Venture Capital Corp. and Medallion Capital, Inc., which shall not exceed an aggregate amount of $19,000,000 for both such Investments, (v) Investments by MFC in the Guarantor which shall not exceed an aggregate amount of $4,000,000, and (vi) Investments by MFC in other Subsidiaries and Affiliates which shall not exceed an aggregate amount of $3,725,856." 6. Amendment of Section 8.16 of the Loan Agreement. Section 8.16 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.16 is hereby substituted in lieu thereof: "8.16. Portfolio Purchases. Make, or obligate itself to make, any ------------------- Portfolio Purchase without the consent of each Bank." 7. Amendment of Section 10.2 of the Loan Agreement. Section 10.2 of the ----------------------------------------------- Loan Agreement is hereby amended by deleting Section 10.2 in its entirety and substituting the following new Section 10.2 in lieu thereof: "Section 10.2. Modification and Waiver. ----------------------- Any consent or approval required or permitted by this Loan Agreement to be given by the Banks may be given, and any term of this Loan Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrowers of any terms of this Loan Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrowers -8- and the written consent of the Required Banks. Notwithstanding the foregoing, no amendment, modification or waiver shall: (a) without the written consent of the Borrowers and each Bank directly affected thereby: (i) reduce or forgive the principal amount of any Revolving Credit Loans, Swing Line Loans or Term Loan, or reduce the rate of interest on the Notes or the amount of the Commitment Fee; (ii) increase the amount of such Bank's Revolving Credit Commitment or extend the expiration date of such Bank's Revolving Credit Commitment; (iii) postpone or extend the Termination Date or the Term Out Date or any other regularly scheduled dates for payments of principal of, or interest on, the Revolving Credit Loans, Swing Line Loans or Term Loan or any Fees or other amounts payable to such Bank (it being understood that (A) a waiver of the application of the default rate of interest, and (B) any vote to rescind any acceleration made pursuant to Section 9.1 of amounts owing with respect to the Revolving Credit Loans, Swing Line Loans and Term Loan shall require only the approval of the Required Banks); and (iv) other than pursuant to a transaction permitted by the terms of this Loan Agreement, release all or substantially all of the Collateral or release the Guarantor from its guaranty obligations under the Guaranty, other than in accordance with the terms thereof or the terms of the Collateral Agency Agreement (excluding, if the Borrower becomes a debtor under the federal Bankruptcy Code, the release of "cash collateral", as defined in Section 363(a) of the federal Bankruptcy Code pursuant to a cash collateral stipulation with the debtor approved by the Required Banks); (b) without the written consent of all of the Banks, amend or waive Section 8.16, this Section 10.2 or the definition of Required Banks (it being understood that the addition of one or more additional credit facilities, the allowance of the credit extensions, interest and fees thereunder to share ratably or on a subordinated basis with the Revolving Credit Loans, Swing Line Loans, Term Loan, interest and Fees in the benefits of the Loan Documents and the inclusion of the holders of such facilities in the determination of Required Banks shall require only the approval of the Required Banks); and -9- (c) without the written consent of the Agent, amend or waive provisions with respect to Swing Line Loans, Article 11, the amount or time of payment of the Agent's Fee payable for the Agent's account or any other provision applicable to the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrowers (or either of them) shall entitle the Borrowers (or either of them) to any other or further notice or demand in similar or other circumstances." 8. Waiver of Section 9.1(e) of the Funding Agreement. The Funding ------------------------------------------------- Agreement requires Medallion Funding to ensure that the ratio of the sum of Net Income plus Interest Expense (each as defined in the Funding Agreement) to ---- Interest Expense (as defined in the Funding Agreement) is not less than 1.35:1. Medallion Funding has reported that as of March 31, 2001, the ratio of the sum of Net Income plus Interest Expense (each as defined in the Funding Agreement) ---- to Interest Expense (as defined in the Funding Agreement) was 1.28:1. Each of the Agent and the Banks hereby waives (without changing the provisions of Section 9.1 of the Loan Agreement or the definition of Event of Default therein) any Default or Event of Default which may have occurred or may occur under Section 9.1(e) of the Loan Agreement as a result of Medallion Funding's non- compliance with Section 7.4 of the Funding Agreement, provided that, as of March -------- 31, 2001, the ratio of the sum of Net Income plus Interest Expense (each as ---- defined in the Funding Agreement) to Interest Expense (as defined in the Funding Agreement) was no less than 1.28:1. 9. Consent to Funding Amendment, etc. Each of the Required Banks hereby --------------------------------- consents to (a) the amendment of the Funding Agreement in form and substance satisfactory to the Agent for purposes of Section 2 of the Collateral Agency Agreement and Section 8.17 of the Loan Agreement, and (b) the amendment of the Note Purchase Agreement in form and substance satisfactory to the Agent for purposes of Section 2 of the Collateral Agency Agreement and Section 8.17 of the Loan Agreement. 10. Amendment No. 2 to the Security Agreement. Section 6.4 of the Security Agreement is hereby amended by (a) deleting the word "and" at the end of subsection (b) thereof, (b) relettering subsection (c) as subsection (d), and (c) adding the following new subsection (c) in proper alphabetical order therein: "(c) consented to and agreed to be bound by the terms of Article 2B of the Loan Agreement, including Section 2B(b) of the Loan Agreement, and". 11. Representations and Warranties. Each of the Borrowers hereby ------------------------------ represents and warrants to the Agent and the Banks as of the date hereof, and as -10- of any date on which the conditions set forth in Section 12 below are met, as follows: (a) The execution and delivery by each of the Borrowers of this Amendment and all other instruments and agreements required to be executed and delivered by each of the Borrowers in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment --------- Documents"), and the performance by each of the Borrowers of any of its --------- obligations and agreements under the Amendment Documents and the Loan Agreement and the other Loan Documents, as amended hereby, are within the corporate or other authority of each of the Borrowers, as the case may be, have been duly authorized by all necessary corporate proceedings on behalf of each of the Borrowers, as the case may be, and do not and will not contravene any provision of law or of the Borrowers' charter, other incorporation or organizational papers, or by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon the Borrowers (or either of them). (b) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which any of the Borrowers is a party constitutes a legal, valid and binding obligation of such Person, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights. (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by each of the Borrowers of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by each of the Borrowers of the transactions among the parties contemplated hereby and thereby or referred to herein. (d) The representations and warranties contained in Article 4 of the Loan Agreement and in the other Loan Documents were true and correct at and as of the date made. Except to the extent of changes resulting from transactions contemplated or permitted by the Loan Agreement and the other Loan Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse) and to the extent that such representations and warranties relate expressly to an earlier date and after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment, also are correct at and as of the date hereof. (e) Each of the Borrowers has performed and complied in all material respects with all terms and conditions herein and in the Loan Documents required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions of -11- this Amendment and the other Amendment Documents, there exists no Event of Default or Default. (f) Each of the Borrowers acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in Section 4 of the Loan Agreement, a breach of which shall constitute an Event of Default. 12. Effectiveness. This Amendment shall become effective as of the date ------------- first written above (the "Effective Date"), in the case of Sections 1 through 6 of this Amendment and Section 8 of this Amendment, upon the satisfaction of each of the following conditions, in each case in a manner satisfactory to, and in form and substance satisfactory to, the Agent; provided that Section 7 shall -------- become effective upon the satisfaction of each of the following conditions, in each case in a manner satisfactory to, and in form and substance satisfactory to, the Agent and as of the date that this Amendment shall have been duly executed and delivered by each of the Borrowers and one hundred percent (100%) of the Banks: (a) This Amendment shall have been duly executed and delivered by each of the Borrowers and the Required Banks and shall be in full force and effect. (b) The Agent shall have received evidence of the effectiveness of an amendment of the Funding Agreement, in the form attached hereto as Exhibit A. (c) The Agent shall have received evidence of the effectiveness of an amendment of the Collateral Agency Agreement. (d) Bingham Dana LLP shall have received payment of all fees and expenses outstanding as of the date hereof, including, but not limited to, fees and expenses in the connection with the preparation of this Amendment and ancillary documentation. (e) The Agent shall have received such other items, documents, agreements or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. 13. Release. In order to induce the Agent and the Banks to enter into ------- this Amendment, each of the Borrowers, on behalf of itself and its Subsidiaries, acknowledges and agrees that: (a) such Person does not have any claim or cause of action against the Agent or any Bank (or any of its respective directors, officers, employees or agents); (b) such Person does not have any offset right, counterclaim or defense of any kind against any of its respective obligations, indebtedness or liabilities to the Agent or any Bank; and (c) each of the Agent and the Banks has heretofore properly performed and satisfied in a timely manner all of its obligations to such Person. Each of the Borrowers, on behalf of itself and its Subsidiaries, wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would -12- impair or otherwise adversely affect any of the Agent's and the Banks' rights, interests, contracts, collateral security or remedies. Therefore, each of the Borrowers, on behalf of itself and its Subsidiaries, unconditionally releases, waives and forever discharges (x) any and all liabilities, obligations, duties, promises or indebtedness of any kind of the Agent or any Bank to such Person, except the obligations to be performed by the Agent or any Bank on or after the date hereof as expressly stated in this Amendment, the Loan Agreement and the other Loan Documents, and (y) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which such Person might otherwise have against the Agent, any Bank or any of its directors, officers, employees or agents, in either case (x) or (y), on account of any past or presently existing condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind. 14. Miscellaneous Provisions. ------------------------ (a) Each of the Borrowers hereby ratifies and confirms all of its obligations to the Agent and the Banks under the Loan Agreement, as amended hereby, and the other Loan Documents, including, without limitation, the Loans, and each of the Borrowers hereby affirms its absolute and unconditional promise to pay to the Banks and the Agent the Revolving Credit Loans, the Term Loans, the Swing Line Loans, reimbursement obligations and all other amounts due or to become due and payable to the Banks and the Agent under the Loan Agreement and the other Loan Documents, as amended hereby. Except as expressly amended hereby, each of the Loan Agreement and the other Loan Documents shall continue in full force and effect. This Amendment and the Loan Agreement shall hereafter be read and construed together as a single document, and all references to the Loan Agreement in the Loan Agreement, any other Loan Document or any agreement or instrument related to the Loan Agreement shall hereafter refer to the Loan Agreement as amended by this Amendment. (b) No consent or waiver herein granted shall extend to or affect any obligations not expressly herein consented to or waived or shall impair any right of the Agent or the Banks consequent thereon. No consent or waiver herein granted shall extend beyond the term expressly set forth herein for such consent or waiver, nor shall anything contained herein be deemed to imply any willingness of the Agent or the Banks to agree to, or otherwise prejudice any rights of the Agent and the Banks with respect to, any similar or dissimilar consents or waivers that may be requested for any future period. (c) Without limiting the expense reimbursement requirements set forth in Section 10.6 of the Loan Agreement, each of the Borrowers agree to pay on demand all costs and expenses, including reasonable attorneys' fees, of the Agent incurred in connection with this Amendment. -13- (d) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). (e) This Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Amendment to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written. MEDALLION FINANCIAL CORP. By: /s/ Alvin Murstein -------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ James Jack ---------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer MEDALLION BUSINESS CREDIT, LLC By: /s/ Alvin Murstein -------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ James Jack ---------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association), as Agent, as Swing Line Lender and as one of the Banks By: /s/ Kevin J. Foley -------------------- Name: Kevin J. Foley Title: Sr. VP HSBC BANK USA By: /s/ Bruce Wicks ----------------- Name: Bruce Wicks Title: Vice President CITIZENS BANK By: /s/ Thomas D. Opie -------------------- Name: Thomas D. Opie Title: VP THE BANK OF NEW YORK By: /s/ Gordon Smith ------------------ Name: Gordon Smith Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Carol A. Kornbluth ------------------------ Name: Carol A. Kornbluth Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: /s/ Robert J. Fainelli ------------------------ Name: Robert J. Fainelli Title: First Vice President By: /s/ Howard Weinberg --------------------- Name: Howard Weinberg Title: Senior Vice President EUROPEAN AMERICAN BANK By: /s/ George L. Stirling ------------------------ Name: George L. Stirling Title: VP BANK LEUMI By: /s/ Paul Tine /s/ John Koenigsberg --------------- ---------------------- Name: Paul Tine John Koenigsberg Title: V.P. First Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Jeffrey Millar -------------------- Name: J. Millar Title: Vice President ACKNOWLEDGED AND AGREED: - ------------------------ MEDALLION TAXI MEDIA, INC. By: /s/ Andrew M. Murstein ------------------------ Name: Andrew M. Murstein Title: Chief Executive Officer& Director By: /s/ Michael Leible -------------------- Name: Michael Leible Title: President EX-10.3 5 dex103.txt SECOND AMENDMENT AGREEMENT, DATED AS OF JUNE 29 ================================================================================ EXHIBIT 10.3 Second Amendment Agreement Dated as of June 29, 2001 to Note Purchase Agreements dated as of June 1, 1999 Re: $22,500,000 7.20% Senior Secured Notes, Series A due June 1, 2004 and Re: $22,500,000 7.20% Senior Secured Notes, Series B due September 1, 2004 ================================================================================ Table of Contents
Section Heading Page Section 1. Amendments to Existing Note Purchase Agreements...................... 2 Section 1.1. New Section 7.1(g)................................................... 2 Section 1.2. New Section 8.8...................................................... 2 Section 1.3. Amendment to Section 9.5............................................. 4 Section 1.4. Amendment to Section 10.4............................................ 4 Section 1.5. Amendment to Section 1.2(a).......................................... 4 Section 1.6. Amendment to Section 10.10........................................... 4 Section 1.7. New Section 10.7..................................................... 4 Section 1.8. New Section 10.14.................................................... 4 Section 1.9. New Section 10.15.................................................... 5 Section 1.10. Amendment to Section 11(c)(i)........................................ 5 Section 1.11. Amendments to Definitions............................................ 5 Section 1.12. Addition of Definitions.............................................. 6 Section 2. Waiver of Event of Default........................................... 8 Section 3. Amendment No. 1 to the Security Agreement............................ 8 Section 4. Amendment No. 1 to the Parent Pledge Agreement....................... 11 Section 5. Consent to Amendment of Bank Loan Agreement, etc..................... 11 Section 6. Representations and Warranties....................................... 12 Section 6.1. Organization; Power and Authority.................................... 12 Section 6.2. Authorization, Etc................................................... 12 Section 6.3. Compliance with Laws, Other Instruments, Etc......................... 12 Section 6.4. No Default or Event of Default....................................... 12 Section 6.5. Compliance........................................................... 12 Section 6.6. No Consents.......................................................... 13 Section 6.7. Representations in Note Purchase Agreements.......................... 13 Section 6.8. Priority; Continued Effectiveness.................................... 13 Section 6.9. Investment Company Act............................................... 14 Section 6. Conditions Precedent................................................. 14 Section 7.1. Execution............................................................ 14 Section 7.2. Representations and Warranties....................................... 14 Section 7.3. Related Transactions................................................. 14 Section 7.4. Amendment Fee........................................................ 14 Section 7.5. Payment of Fees...................................................... 14 Section 8. Miscellaneous........................................................ 14
-i- Section 8.1. Governing Law............................................................. 14 Section 8.2. Counterparts.............................................................. 14 Section 8.3. Captions.................................................................. 15 Section 8.4. References to Existing Note Purchase Agreements or Security Agreement..... 15 Section 8.5. Expenses.................................................................. 15 Section 8.6. Ratification.............................................................. 15 Section 9. Release................................................................... 15 Section 9.1. Release................................................................... 15
ii Medallion Funding Corp. Second Amendment Agreement Re: Note Purchase Agreements dated as of June 1, 1999 and $22,500,000 7.20% Senior Secured Notes, Series A due June 1, 2004 and $22,500,000 7.20% Senior Notes, Series B due September 1, 2004 To each of the institutional investors named on Schedule 1 attached hereto (the "Holders") Ladies and Gentlemen: Reference is made to the separate Note Purchase Agreements each dated as of June 1, 1999, as amended by that certain First Amendment Agreement dated March 30, 2001 (the "Existing Note Purchase Agreements") between Medallion Funding Corp., a New York corporation (the "Company") and each of the Purchasers named on Schedule A attached thereto (the "Purchasers"), respectively, pursuant to which the Company issued and sold (i) $22,500,000 aggregate principal amount of its 7.20% Senior Secured Notes, Series A, due June 1, 2004 and (ii) $22,500,000 aggregate principal amount of its 7.20% Senior Secured Notes, Series B, due September 1, 2004, all of which are currently outstanding (collectively, the "Outstanding Notes"). The Existing Note Purchase Agreements, as amended hereby, are hereinafter referred to as the "Note Purchase Agreements." Recitals Whereas, the Company desires to make certain amendments to the Existing Note Purchase Agreements. Capitalized terms not otherwise defined herein shall have the meaning set forth for such terms set forth in the Note Purchase Agreements. For good and valuable consideration, the Company hereby requests the amendment of certain provisions of the Existing Note Purchase Agreements, as hereinafter provided. Upon the acceptance of the Required Holders and satisfaction of the conditions precedent set forth in Section 4 hereof, this Amendment shall constitute a contract between the Company and the Holders, but only in the respects hereinafter set forth: Medallion Funding Corp. Second Amendment Agreement Section 1. Amendments to Existing Note Purchase Agreements. The Existing Note Purchase Agreements are hereby amended as of the Effective Date (as defined herein) as follows: Section 1.1. New Section 7.1(g). Section 7 of the Existing Note Purchase Agreements is hereby amended by adding in the proper alphabetical order the following new Section 7.1(g): "(g) Borrowing Base Reporting - (i) a Borrowing Base Certificate indicating a computation of the Borrowing Base (i) as of the last day of each month commencing with the month ending May 31, 2001 (to be delivered not later than 15 Business Days after the last day of such month), and (ii) promptly following any other date such a certificate is requested by the Agent;" (ii) to be delivered not later than 10 days after the last day of any month, a delinquency report listing the Loans delinquent over 60 days and detailing the top ten delinquent Loans; (iii) to be delivered not later than thirty (30) days after the last day of any calendar month, monthly underwater reports with respect to all Medallion Loans, monthly loan loss reserve reports, monthly delinquency reports monthly portfolio aging reports, and monthly charge off reports, in each case, in form and substance acceptable to the Agent; (iv) no later than December 15, 2001, the Company's strategic financing plan detailing how the Company will achieve its financing strategy goals as presented at its May 17, 2001 meeting with the Agent; (v) no later than October 1, 2001, income and outflow quarterly cash projections for the Company and its Parent for October 1, 2001 through December 31, 2002; and (vi) to be delivered not later than 60 days after the last day of any fiscal quarter, quarterly reports detailing Total Intercompany Receivables. Section 1.2. New Section 8.8. Section 8 of the Existing Note Purchase Agreements is hereby amended by adding in the following new Section 8.8: "Section 8.8. Additional Mandatory Prepayments. (a) Promptly following the occurrence of any Equity Offering or Debt Offering of the Company or any of its Subsidiaries (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements) which results in a Bank Debt Prepayment, the Company shall prepay (or cause any of its applicable Subsidiaries to prepay) the Notes in an amount equal to the holders' Pro Rata -2- Medallion Funding Corp. Second Amendment Agreement Share (as defined in the Intercreditor Agreement) of one hundred percent (100%) of the Net Cash Proceeds of any such Equity Offering or Debt Offering, in accordance with the provisions of Section 5 of the Intercreditor Agreement. (b) Promptly following the occurrence of any sale, transfer or disposition of the Guarantor's Capital Stock by the Parent (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements for such sale, transfer or disposition) which results in a Bank Debt Prepayment, the Company shall cause the Parent to transfer to the Company in order to enable the Company to prepay, if and to the extent permitted by the Collateral Agency Agreement, the Notes in an amount equal to the holders' Pro Rata Share (as defined in the Intercreditor Agreement) of one hundred percent (100%) of the Net Cash Proceeds, in accordance with the provisions of Section 5.3 of the Collateral Agency Agreement. (c) Promptly following the occurrence of any sale, transfer or disposition of Loans or other assets of the Company or any of its Subsidiaries (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements for such sale, transfer or disposition) which results in a Bank Debt Prepayment, the Company shall prepay the Notes in an amount equal to the holders' Pro Rata Share (as defined in the Intercreditor Agreement) of one hundred percent (100%) of the Net Cash Proceeds of any such sale, transfer or disposition, in accordance with the provisions of Section 5 of the Intercreditor Agreement. With respect to Section 10.3, prepayment by the Company of the Notes under this Section 8.8(c) shall satisfy the obligation to prepay the Notes under the definition of "Debt Prepayment Application." (d) In the event that the Company pays Dividends in excess of the minimum amount of Dividends required to be paid for the Company to retain its status as a regulated investment company pursuant to Section 851(a) of the Code (the amount of such excess Dividends is hereafter referred to as the "Excess Dividends"), upon 30 days prior written notice to the holders of the Notes from the Company and concurrently with the payment of such Excess Dividends, the Company shall prepay the Notes in an amount equal to the holders' of the Notes pro rata share of the greater of Payment Amount One or Payment Amount Two; such pro rata share to be determined by dividing the principal amount of the Notes then outstanding by the sum of (i) the outstanding Term Loans (as defined in the Bank Loan Agreement, plus (ii) the Aggregate Revolving Credit Commitment, plus (iii) the aggregate principal amount of the outstanding Swing Line Loans (as defined in the Bank Loan Agreement, plus (iv) the aggregate principal amount of the Notes, plus (v) the aggregate principal amount of all Additional Senior Obligations (as defined in the Intercreditor Agreement). (e) Prepayment of the Notes to be prepaid pursuant to this Section 8.8 shall be at 100% of the principal amount of such Notes, together with interest on such Notes accrued to the date of prepayment plus the Make-Whole Amount. On the Business Day preceding the date of prepayment, the Company shall deliver to each holder of Notes being prepaid a statement showing the amount due in connection with such prepayment and setting forth the details of the computation of such amount. Any and all prepayments -3- Medallion Funding Corp. Second Amendment Agreement made pursuant to this Section 8.8 shall be allocated among all Notes of each series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment." Section 1.3. Amendment to Section 9.5. Section 9.5 of the Existing Note Purchase Agreements shall be and is hereby amended to read as follows: "Section 9.5. Corporate Existence, etc. The Company will at all times preserve and keep in full force and effect its corporate existence. The Company will not at any time form, create, own, acquire or allow to exist any Subsidiary. The Company will at all times preserve and keep in full force and effect all rights and franchises of the Company unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect." Section 1.4. Amendment to Section 10.4. Section 10.4 of each of the Existing Note Purchase Agreements shall be and is hereby amended to read as follows: "The Company will not suffer or permit the sum of Tangible Net Worth minus up to $15,000,000 of the principal amount of Total Intercompany Receivables of the Company, to be less than $56,000,000 at any time." Section 1.5. Amendment to Section 10.5. Section 10.5 of each of the Existing Note Purchase Agreements shall be and is hereby amended to read as follows: "The Company will not suffer or permit the ratio of (a) Total Liabilities to (b) the sum of Tangible Net Worth minus Total Intercompany Receivables of the Company to be more than 4.85:1 at any time." Section 1.6. Amendment to Section 10.10. Section 10.10 of each of the Existing Note Purchase Agreements shall be and is hereby amended in its entirety to read as follows: "Section 10.10. Portfolio Purchases. The Company will not make, or obligate itself to make, any Portfolio Purchase. Section 1.7. New Section 10.13. Section 10 of the Existing Note Purchase Agreements is hereby amended by adding the following new Section 10.13: "Section 10.13. Net Finance Assets. The Company shall not suffer or permit at any time the aggregate unpaid balance of all Senior Debt to exceed the Net Finance Assets." Section 1.8. New Section 10.14. Section 10 of the Existing Note Purchase Agreements is hereby amended by adding the following new Section 10.14: -4- Medallion Funding Corp. Second Amendment Agreement "Section 10.14. Minimum EBIT to Interest Expense Ratio. The Company shall not suffer or permit the ratio, at the end of each fiscal quarter of the Company set forth in the table below, of (a) for the fiscal quarter ending June 30, 2001 ("Second FQ01"), EBIT for such fiscal quarter; for the fiscal quarter ending September 30, 2001, the sum of EBIT for the Second FQ01 plus EBIT for the fiscal quarter ending September 30, 2001 ("Third FQ01"); for the fiscal quarter ending December 31, 2001, the sum of EBIT for the Second FQ01 plus EBIT for the Third FQ01 plus EBIT for the fiscal quarter ending December 31, 2001; and, thereafter, EBIT for four (4) consecutive fiscal quarters then ended, to (b) the sum of Interest Expense for such four (4) fiscal quarters or lesser period as described above to be less than the ratio set forth opposite such fiscal quarter in the table below: Fiscal Quarter Ending Ratio June 30, 2001 1.15:1 September 30, 2001 1.20:1 December 31, 2001 1.25:1 March 31, 2002 and thereafter" 1.30:1 Section 1.9. New Section 10.15. Section 10 of the Existing Note Purchase Agreement is hereby amended by adding the following new Section 10.15: "Section 10.15. Intercompany Receivables. Suffer or permit the aggregate principal amount of Total Intercompany Receivables to exceed $15,000,000 at any time." Section 1.10. Amendment to Section 11(c)(i). Section 11(c)(i) of each of the Existing Note Purchase Agreements shall be and is hereby amended in its entirety to read as follows: "(i) the Company defaults in the performance of or compliance with any term contained in Section 7.1(d), 9.8, 10.4 through 10.8, 10.12 through 10.14 or" Section 1.11. Amendments to Definitions. The following definitions of terms set forth in Schedule B to each of the Existing Note Purchase Agreements shall be and are hereby amended by (a) deleting and restating in their entirety the following definitions: "Net Finance Assets" shall mean, as of any date of calculation, an amount equal to the sum of: (i) cash of up to $5,000,000 and Short Term Investments shown on the Company's balance sheet as of such date, plus -5- Medallion Funding Corp. Second Amendment Agreement (ii) 83.33% of the sum, without duplication, of (A) the aggregate outstanding principal balances of, plus accrued interest (excluding deferred interest) on, all Eligible Medallion Loans and Eligible Commercial Loans shown on the Company's balance sheet as of the last day of the most recent month, minus_(B) the portion, if any, of the Loans, plus accrued interest (excluding deferred interest) thereon, that Company, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus (C) the Eligible Loans, plus accrued interest (excluding deferred interest) thereon, which are more than 60 days past due, plus (iii) 83.33% of 75% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due, plus (iv) 83.33% of 65% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due, plus (v) through August 31, 2001, 83.33% of up to $4,000,000 of the Advance Amounts of Eligible Yellow Cab Loans; provided, that if all or any part of any Loan would be excluded under any of the provisions set forth above, then the entire outstanding principal amount of, plus accrued interest (including deferred interest) on, such Loan shall be excluded." "Senior Debt" shall mean the sum of (a) all Indebtedness of the Company under this Agreement, plus (b) all CP Debt of the Company, plus (c) all Indebtedness of the Company under the Bank Loan Agreement, plus (d) any other Indebtedness of the Company secured by a Lien on any assets of the Company."; and (b) deleting the first parenthetical clause (i) of the definition of "Restricted Payment" in its entirety and substituting in lieu thereof the following new parenthetical: "(other than the payment of (i) the sum of (a) the minimum amount of Dividends required to be paid for the Company to retain its status as a regulated investment company pursuant to Section 851(a) of the Code), plus (b) the payment of Dividends required to be paid in order to avoid the imposition of income taxes pursuant to the Code". Section 1.12. Addition of Definitions. The following definitions of terms shall be and are hereby added to Schedule B to each of the Existing Note Purchase Agreements to read as follows: "Adjusted Net Investment Income" shall mean, with respect to the Company, the aggregate income (or loss), after realized gains on investments have been added thereto and realized losses on investments have been subtracted therefrom and net of unrealized -6- Medallion Funding Corp. Second Amendment Agreement appreciation or depreciation on investments, of the Company for such period, which shall be an amount equal to net revenues and other proper items of income less than aggregate for the Company of any and all items that are treated as expenses under GAAP and, to the extent applicable thereto, the regulations of the SEC applicable to investment companies, after realized gains on investments have been added thereto and realized losses on investments have been subtracted therefrom and net of unrealized appreciation or depreciation on investments. "Agent" shall have the meaning set forth for such term in the Bank Loan Agreement. "Bank Debt Prepayment" means any payment or prepayment of any (i) Senior Obligations (as defined in the Intercreditor Agreement and Collateral Agency Agreement) provided, however, in the case of a payment or prepayment of the revolving credit under the Bank Loan Agreement, only to the extent that such payment or prepayment results in a permanent reduction of the availability thereunder, or (ii) any other Additional Senior Obligations (as defined in the Intercreditor Agreement and the Collateral Agency Agreement). "Borrowing Base" shall have the meaning set forth for such term in the Bank Loan Agreement. "Borrowing Base Certificate" shall have the meaning set forth for such term in the Bank Loan Agreement. "Debt Offering" shall mean the sale or issuance by the Company or any of its Subsidiaries of any Indebtedness. "EBIT" shall mean, with respect to the Company for any period, the sum of (i) Adjusted Net Investment Income, plus (ii) Interest Expense, plus (iii) federal, state and local income taxes, if any, of the Company for such period, computed in accordance with GAAP. "Equity Offering" shall mean the sale or issuance by the Company or any of its Subsidiaries of any of its Capital Stock or other equity interests or any warrants, rights or options to acquire its Capital Stock or other equity interests (including any debt securities that are convertible into, or exchangeable for, capital stock or equity interests but excluding any capital contributions permitted by this Agreement made by the Company to any of its Subsidiaries). "Excess Dividends" shall have the meaning set forth for such term in Section 8.8(d). "Net Cash Proceeds" shall mean, with respect to (a) any Debt Offering or Equity Offering, the excess of the gross cash proceeds received by the Company or any of its Subsidiaries from such Debt Offering or Equity Offering after deduction of reasonable -7- Medallion Funding Corp. Second Amendment Agreement and customary transaction expenses actually incurred in connection with such Debt Offering or Equity Offering, and (b) any sale, disposition or transfer of assets by the Company or any of its Subsidiaries or of any of the Capital Stock of the Guarantor by the Parent, the net cash proceeds received by the Company or any of its Subsidiaries or, in the case of any of the Capital Stock of the Guarantor, by the Parent in respect thereof, less all reasonable out-of-pocket fees, commissions and other reasonable and customary expenses actually incurred in connection with such asset sale, including the amount of income, franchise, sales and other applicable taxes required to be paid by the Company, such Subsidiary or the Parent in connection with such sale, disposition or transfer. "Payment Amount One" shall mean the sum of (a) $2,000,000, plus (b) $400,000, plus (c) the sum of 0.90% multiplied by the principal amount of Additional Senior Obligations (as defined in the Intercreditor Agreement) outstanding at the time of determination. "Payment Amount Two" shall mean the sum of (a) four multiplied by the amount of the Excess Dividends, plus (b) .8 multiplied by the amount of the Excess Dividends, plus (c) the product of the principal amount of Additional Senior Obligations (as defined in the Intercreditor Agreement) outstanding at the time of determination divided by $220,000,000 multiplied by four multiplied by the amount of the Excess Dividends. "Total Intercompany Receivables" shall mean, with respect to the Company, the sum of (a) the amount listed as "Intercompany Receivables" on the Company's balance sheet delivered to each holder of Notes pursuant to Section 7.1(a) or (b) as the case may be, plus (b) to the extent not otherwise included, all amounts owed to the Company by its Affiliates, plus (c) to the extent not otherwise included, Investments by the Company in its Affiliates. Section 2. Waiver of Event of Default Each of the Holders hereby waives the Event of Default under Section 11(f) of the Existing Note Purchase Agreements, which arises due to the Company's failure to comply with the covenant set forth in Section 7.4 of the Bank Loan Agreement, provided, however, that such waiver shall only be effective to the extent that the ratio of the sum of Net Income (as defined in the Bank Loan Agreement) plus Interest Expense (as defined in the Bank Loan Agreement) to Interest Expense for the fiscal quarter ended March 31, 2001 shall not be less than 1.28:1. Section 3. Amendment No. 1 to the Security Agreement. Section 3.1. Amendments to Security Agreement. The Security Agreement dated as of June 1, 1999, between the Company and Fleet Bank, N.A., as the Collateral Agent for the benefit of those named therein, is hereby amended by (a) in the definition of "Collateral", (i) deleting the word "and" at the end of subsection (q) thereof, (ii) relettering subsection (r) as subsection (v), and (iii) adding the following new subsections (r), (s), (t) and (u) in proper alphabetical order therein: -8- Medallion Funding Corp. Second Amendment Agreement "(r) all Receivables; (s) all Documents; (t) all Depository Accounts; (u) rights to the payment of money, insurance refund claims and all other insurance claims and proceeds, tort claims and rights to the proceeds of letters of credit, and"; (b) inserting in Section 1.1, in the places required by alphabetical order, the following new definitions: "Documents" shall have the meaning assigned to it in Section 9-105(1)(i) of the UCC. "Receivables" shall mean, with respect to any Person, all present and future rights to payment for goods sold or leased or for services rendered by such Person whether or not evidenced by an instrument or chattel paper. (c) amending Section 2.3 by adding the following new subsection (d) in proper alphabetical order therein: "(d) Upon the effectiveness of certain revisions to Article 9 of the UCC described in Section 6.14 hereof, comply with all of the requirements of and its agreements contained within such Section 6.13." and (d) adding the following new Sections 6.15 and 6.16 in proper numerical order therein: Section 6.15. Concerning Revised Article 9 of the Uniform Commercial Code. The parties acknowledge and agree to the following provisions of this Agreement in anticipation of the possible application, in one or more jurisdictions to the transactions contemplated hereby, of the revised Article 9 of the UCC in the form or substantially in the form approved by the American Law Institute and the National Conference of Commissioners on Uniform State Law and contained in the 1999 official text of Revised Article 9 ("Revised Article 9"). Section 6.15.1. Attachment. In applying the law of any jurisdiction in which Revised Article 9 is in effect, the Collateral is all assets of the Company, whether or not within the scope of Revised Article 9. The Collateral shall include, without limitation, the following categories of assets as defined in Revised Article 9: goods (including inventory, equipment and any accessions thereto), instruments (including promissory notes), documents, accounts (including health-care-insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is -9- Medallion Funding Corp. Second Amendment Agreement evidenced by a writing), commercial tort claims, securities and all other investment property, general intangibles (including payment intangibles and software), supporting obligations and any and all proceeds of any thereof, wherever located, whether now owned or hereafter acquired. If the Company shall at any time, whether or not Revised Article 9 is in effect in any particular jurisdiction, acquire a commercial tort claim, as defined in Revised Article 9, the Company shall immediately notify the Agent in a writing signed by the Company of the brief details thereof and grant to the Agent for the benefit of the Noteholders in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Noteholders. Section 6.15.2. Perfection by Filing. The Collateral Agent may at any time and from time to time, pursuant to the provisions of Sections 2.3(d) or 2.6 hereof, file financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of the Company or words of similar effect and which contain any other information required by Part 5 of Revised Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether the Company is an organization, the type of organization and any organization identification number issued to the Company. The Company agrees to furnish any such information to the Collateral Agent promptly upon request. Any such financing statements, continuation statements or amendments may be signed by the Collateral Agent on behalf of the Company, as provided in Section 2.6 hereof, and may be filed at any time in any jurisdiction whether or not Revised Article 9 is then in effect in that jurisdiction. Section 6.15.3. Other Perfection, etc. The Company shall at any time and from time to time, whether or not Revised Article 9 is in effect in any particular jurisdiction, take such steps as the Collateral Agent may reasonably request for the Collateral Agent (a) to obtain an acknowledgement, in form and substance satisfactory to the Collateral Agent, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the Collateral Agent for the benefit of itself and the Noteholders, (b) to obtain "control" of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such terms are defined in Revised Article 9 with corresponding provisions in Rev. (S)(S) 9-104, 9-105, 9-106 and 9-107 relating to what constitutes "control" for such items of Collateral), with any agreements establishing control to be in form and substance satisfactory to the Collateral Agent, and (c) otherwise to insure the continued perfection and priority of the Collateral Agent's security interest for the benefit of itself and the Noteholders in any of the Collateral and of the preservation of its rights therein, whether in anticipation and following the effectiveness of Revised Article 9 in any jurisdiction. Section 6.15.4. Provisions. -10- Medallion Funding Corp. Second Amendment Agreement In applying the law of any jurisdiction in which Revised Article 9 is in effect, the following references to sections in this Agreement to existing Article 9 of that jurisdiction shall be to the Revised Article 9 Section of that jurisdiction indicated below:
-------------------------------------------------------------------------------- Agreement Section Existing Article 9 Revised Article 9 -------------------------------------------------------------------------------- 1.1 (S) 9-105(1)(b) Rev. (S) 9-102(a)(11) -------------------------------------------------------------------------------- 1.1 (S) 9-105(1)(i) Rev. (S) 9-102(a)(47) -------------------------------------------------------------------------------- 1.1 (S) 9-106 Rev. (S) 9-102(a)(2) (for the definition of "accounts") or Rev. (S) 9-102(a)(46) (for the definition of general intangibles) -------------------------------------------------------------------------------- 1.1 (S) 9-109(2) Rev. (S) 9-102(a)(33) -------------------------------------------------------------------------------- 1.1 (S) 9-109(4) Rev. (S) 9-102(a)(48) -------------------------------------------------------------------------------- 1.1 (S) 9-115 Rev. (S) 9-102(a)(49) -------------------------------------------------------------------------------- 1.1 (S) 9-306(1) Rev. (S) 9-102(a)(64) --------------------------------------------------------------------------------
6.15.5 Savings Clause. Nothing contained in this Section 6.15 shall be construed to narrow the scope of the Collateral Agent's security interest hereunder in any of the Collateral or the perfection or priority thereof or to impair or otherwise limit any of the rights, powers, privileges or remedies of the Agent or any Noteholders hereunder except (and then only to the extent) mandated by Revised Article 9 to the extent then applicable. Section 6.16. Transitional Arrangements. The Company hereby (a) confirms its prior grant to the Collateral Agent in favor of the Noteholders of a security interest in the "Collateral" (as defined herein), and (b) grants a continuing lien on such "Collateral" (as defined herein)." Section 4. Amendment No. 1 to the Parent Pledge Agreement . Section 23 of the Parent Pledge Agreement is hereby amended by (a) deleting the word "and" at the end of subsection (b) thereof, (b) relettering subsection (c) as subsection (d), and (c) adding the following new subsection (c) in proper alphabetical order therein: "(c) consented to and agreed to be bound by the terms of Section 8.8 of the Note Agreements, including 8.8(b) of the Note Agreements, and". Section 5. Consent to Amendment of Bank Loan Agreement, etc. Each of the Holders hereby consents to the amendment of the Bank Loan Agreement in the form and substance satisfactory to the Holders and attached hereto as Exhibit B for purposes of Section 2 of the Intercreditor Agreement and Section 10.11 of the Existing Note Purchase Agreements. -11- Medallion Funding Corp. Second Amendment Agreement Section 6. Representations and Warranties. The Company represents and warrants to the Holders as of the date hereof, and as of any date on which the conditions set forth in Section 6 below are met, that: Section 6.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and the corporate authority to own or hold under lease the Properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, and to execute, deliver and perform this Amendment and the Note Documents. Section 6.2. Authorization, Etc. The execution and delivery by the Company of this Amendment and all other instruments and agreements required to be executed and delivered by the Company in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by the Company of any of its obligations and agreements under the Amendment Documents and the Note Purchase Agreements and the other Note Documents, as amended hereby, have been duly authorized by all necessary corporate action on the part of the Company, each of the Amendment Documents has been duly executed and delivered by the Company. Each of the Amendment Documents, the Existing Note Purchase Agreements and the other Note Documents, as amended hereby, constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 6.3. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company of this Amendment and the other Note Documents do not and will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority known to be applicable to the Company or any Subsidiary. Section 6.4. No Default or Event of Default. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. Section 6.5. Compliance. The Company has performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof. -12- Medallion Funding Corp. Second Amendment Agreement Section 6.6. No Consents. No approval or consent of, or filing with, any Governmental Authority is required to make valid and legally binding the execution, delivery or performance by the Company of the Amendment Documents or the Note Purchase Agreements or other Note Documents, as amended hereby, or the consummation by the Company of the transactions among the parties contemplated hereby and thereby or referred to herein. Section 6.7. Representations in Note Purchase Agreements. The representations and warranties contained in Section 5 of the Note Purchase Agreements were true and correct at and as of the date made. Except (i) to the extent of changes resulting from transactions contemplated or permitted by the Note Purchase Agreements and the other Note Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse), (ii) to the extent that such representations and warranties relate expressly to an earlier date, and (iii) after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment, also are correct at and as of the date hereof. The Company acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in Section 5 of the Note Purchase Agreements, a breach of which shall constitute an Event of Default. Section 6.8. Priority; Continued Effectiveness. Except as otherwise permitted under the Note Purchase Agreements, the Collateral Agent, for the ratable benefit of the holders of the Notes, has a valid and perfected first priority security interest (subject to the terms of the Intercreditor Agreement and the Collateral Agency Agreement) in and to all Collateral, enforceable against the Company and all third parties in all relevant jurisdictions and securing the payment of the Notes and all other sums payable under or in connection with the Note Documents. Each of the Company Security Agreement and, after the execution and delivery thereof, the Parent Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the holders of the Notes, a valid and perfected first priority security interest (subject to the terms of the Intercreditor Agreement and the Collateral Agency Agreement and except as otherwise permitted hereunder) in and to the Collateral described therein securing the payment of the Notes and all other sums payable under or in connection with the Note Documents, whether incurred prior to or after the Effective Date. No additional Company Financing Statements are required to be filed in order to maintain the perfection and priority of the security interests created pursuant to the Company Security Agreement and the Parent Pledge Agreement. -13- Medallion Funding Corp. Second Amendment Agreement Section 6.9. Investment Company Act. The Company is a closed-end management investment company registered under the 1940 Act. The Company is an "investment company," as such term is defined in the 1940 Act. The Company is not a "business development company," as such term is defined in the 1940 Act. The purchase of the Notes by the holders, the application of the proceeds and repayment thereof by the Company and the performance of the transactions contemplated by this Agreement and the other Note Documents did not and will not violate any provision of said Act, or any rule, regulation or order issued by the SEC thereunder. Section 7. Conditions Precedent. This Second Amendment Agreement shall be effective when each of the following conditions shall have been satisfied (the "Effective Date"): Section 7.1. Execution. Each of the Holders shall have received this Amendment, duly executed by the Company. The Holders shall have consented to this Amendment as evidenced by their execution thereof. Section 7.2. Representations and Warranties. The representations and warranties of the Company set forth in Section 6 hereof are true and correct as of the Effective Date. Section 7.3. Related Transactions. (a) The Holders shall have received an executed copy of the amendment of the Financial Agreement in the form attached hereto as Exhibit A. (b) The Holders shall have received an executed copy of the Amendment No. 5 to the Bank Loan Agreement in the form attached hereto as Exhibit B. Section 7.4. Amendment Fee. The Holders shall have received by wire transfer to each Holder's account specified in Schedule A to the Existing Note Purchase Agreements their pro rata portion of an amendment fee equal .15%. Section 7.5. Payment of Fees. The Company shall have paid the fees and disbursements of the Holders' special counsel, Chapman and Cutler, incurred in connection with the negotiation, preparation, execution and delivery of this Amendment. Upon receipt of all of the foregoing, this Amendment shall become effective. Section 8. Miscellaneous. Section 8.1. Governing Law. This Amendment shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such state. Section 8.2. Counterparts. This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Amendment. -14- Medallion Funding Corp. Second Amendment Agreement Section 8.3. Captions. The descriptive headings of the various Sections or parts of this Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 8.4. References to Existing Note Purchase Agreements or Security Agreement. Any and all notices, requests, certificates and other instruments executed and delivered concurrently with or after the effectiveness of this Amendment may refer to the Existing Note Purchase Agreements and the Outstanding Notes or the Security Agreement without making specific reference to this Amendment but nevertheless all such references shall be deemed to include this Amendment unless the context shall otherwise require. Section 8.5. Expenses. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay all expenses relating to the subject matter of this Amendment, including but not limited to the reasonable out-of-pocket expenses of the Holders and the reasonable fees and expenses of Chapman and Cutler, special counsel for the Holders. Section 8.6. Ratification. Except to the extent hereby modified or amended, the Existing Note Purchase Agreements, the Security Agreement as amended hereby and the other Note Documents are in all respects hereby ratified, confirmed and approved by the parties hereto. Section 9. Release. Section 9.1. Release. In order to induce the holders of the Notes to enter into this Amendment, the Company, on behalf of itself and its Subsidiaries, acknowledges and agrees that: (a) such Person does not have any claim or cause of action against any holder of Notes (or any of its respective directors, officers, employees or agents); (b) such Person does not have any offset right, counterclaim or defense of any kind against any of their respective obligations, indebtedness or liabilities to any holder; and (c) each of the holders of the Notes has heretofore properly performed and satisfied in a timely manner all of its obligations to such Person. The Company, on behalf of itself and its Subsidiaries, wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the holders' rights, interests, contracts, collateral security or remedies. Therefore, the Company, on behalf of itself and its Subsidiaries, unconditionally releases, waives and forever discharges (x) any and all liabilities, obligations, duties, promises or indebtedness of any kind of any holder of Notes to such Person, except the obligations to be performed by any holder on or after the date hereof as expressly stated in this Amendment, the Note Purchase Agreements and the other Note Documents, and (y) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which such Person might otherwise have against any holder of Notes or any of its directors, officers, employees or agents, in either case (x) or (y), on account of any past or presently existing condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind. -15- Medallion Funding Corp. Second Amendment Agreement Medallion Funding Corp. By /s/ Alvin M. Murstein ----------------------- Name: Alvin M. Murstein Title: Chief Executive Officer By /s/ James Jack ---------------- Name: James E. Jack Title: Chief Financial Officer -16- Medallion Funding Corp. Second Amendment Agreement The foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The Travelers Insurance Company By /s/ A. William Carnduff ------------------------- Name: A. William Carnduff Title: Second Vice President First Citicorp Life Insurance Company By Travelers Asset Management International Company LLC By /s/ A. William Carnduff ------------------------- Name: A. William Carnduff Title: Second Vice President Citicorp Life Insurance Company By Travelers Asset Management International Company LLC By /s/ A. William Carnduff ------------------------- Name: A. William Carnduff Title: Second Vice President United of Omaha Life Insurance Company By /s/ Edwin H. Garrison, Jr. ---------------------------- Name: Edwin H. Garrison, Jr. Title: First Vice President -17- Medallion Funding Corp. Second Amendment Agreement Companion Life Insurance Company By /s/ Edwin H. Garrison, Jr. ---------------------------- Name: Edwin H. Garrison, Jr. Title: First Vice President -18- Medallion Funding Corp. Second Amendment Agreement Each of the undersigned hereby reaffirms and ratifies all of its agreements and obligations under the Note Documents which such Person is party to, and confirms that it consents to the amendment of the Existing Note Purchase Agreements as set forth above. Medallion Taxi Media By /s/ Andrew M. Murstein ------------------------ Name: Andrew M. Murstein Title: Chief Executive Officer and Director By /s/ Michael Leible -------------------- Name: Michael Leible Title: President Medallion Financial Corp. By /s/ Andrew M. Murstein ------------------------ Name: Andrew M. Murstein Title: President and Director By /s/ Brian S. O'Leary ---------------------- Name: Brian O'Leary Title: Chief Operating Officer -19- Schedule 1 Principal Amount and Series of Name of Holder of Outstanding Notes Held as of Outstanding Notes June 29, 2001 The Travelers Insurance Company $10,000,000 Series A $10,000,000 Series B First Citicorp Life Insurance Company $ 1,000,000 Series A $ 1,000,000 Series B Citicorp Life Insurance Company $ 1,000,000 Series A $ 1,000,000 Series B $ 500,000 Series A $ 500,000 Series B United of Omaha Life Insurance Company $ 8,500,000 Series A $ 8,500,000 Series B Companion Life Insurance Company $ 1,500,000 Series A $ 1,500,000 Series B Schedule 1 (to First Amendment Agreement) Form of Amendment to Financial Agreement Exhibit A (to First Amendment Agreement) Form of Amendment to Bank Loan Agreement Exhibit B (to First Amendment Agreement) EX-10.4 6 dex104.txt AMENDMENT NO. 4 TO THE AMENDED AND RESTATED LOAN EXHIBIT 10.4 AMENDMENT NO. 4 TO AMENDED AND ------------------------------ RESTATED LOAN AGREEMENT ----------------------- AND CONSENT ----------- AMENDMENT NO. 4 TO AMENDED AND RESTATED LOAN AGREEMENT AND CONSENT dated as of March 30, 2001 (this "Amendment"), by and among MEDALLION FUNDING CORP., a --------- New York corporation (the "Borrower"), the banks that from time to time are -------- signatories thereto (including Assignees (as hereinafter defined), collectively, the "Banks" and individually, a "Bank"), FLEET NATIONAL BANK (f/k/a Fleet Bank, ----- ---- National Association), as a Bank ("Fleet"), as Swing Line Lender (the "Swing ----- ----- Line Lender"), as Arranger and as Agent for the Banks (including any successor, - ----------- the "Agent"). WHEREAS, the Borrower, the Banks, the Agent and the Swing Line Lender are parties to an Amended and Restated Loan Agreement dated as of December 24, 1997 (as amended and in effect from time to time, the "Loan Agreement," capitalized -------------- terms defined therein having the same meanings herein as therein), pursuant to which the Banks have extended credit to the Borrower on the terms and subject to the conditions set forth therein; WHEREAS, the Loan Agreement requires the Borrower to ensure that the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt is not less than 1.20:1 at all times and to pay down any amounts by which Minimum Asset Coverage at any time exceeds Net Finance Assets, and the Borrower has failed to comply with such requirements to the extent described below; WHEREAS, the Borrower has requested that the Agent and the Banks (a) forbear from exercising certain of their rights and remedies resulting from such failures to comply with such requirements, and (b) amend the Loan Agreement so as to make certain revisions; WHEREAS, subject to the terms and conditions hereof, certain of the Banks are willing to extend such forbearance and permit such revisions; and WHEREAS, subject to the terms and conditions set forth herein, the Borrower, the Banks, the Agent and the Swing Line Lender have agreed to amend the Loan Agreement as set forth herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to forbear and to amend the Loan Agreement as follows: 1. Forbearance. Upon the satisfaction of each of the conditions precedent ----------- set forth in Section 14 hereof, each of the Agent and the Required Banks hereby agrees, for so long as (a) no Default or Event of Default (other -2- than the 2000 Forbearance Events and the 2001 Forbearance Events, each as defined below), has occurred and is continuing and (b) the Borrower complies with the requirements contained in this Section 1, (w) to forbear from enforcing any of its rights and remedies under Section 9.2 of the Loan Agreement or under any of the other Loan Documents arising solely as a result of the occurrence of any of the 2000 Forbearance Events or the 2001 Forbearance Events, (x) that the Agent and the Banks will not demand accelerated payment of the obligations under Section 9.1 of the Loan Agreement or otherwise cause any of such obligations to become immediately due and payable, except that the Borrower shall in any event continue to be required to make any and all payments (other than payments required by Section 2.5(c) of the Loan Agreement solely as a result of any of the 2000 Forbearance Events or the 2001 Forbearance Events) that are provided for in the Loan Documents and this Amendment when and as the same are due and payable pursuant to the terms of the Loan Documents and this Amendment, (y) that compliance with Sections 5.2 (a) (solely with respect to Section 4.20 of the Loan Agreement as a result of the occurrence of the 2000 Forbearance Events and the 2001 Forbearance Events), (b) and (d) of the Loan Agreement shall be determined without regard to the 2000 Forbearance Events and the 2001 Forbearance Events, and (z) that the Agent and the Banks will not terminate the lending and other credit commitments of the Agent and the Banks under the Loan Agreement prior to the scheduled expiration and termination thereof upon the Maturity, except that all such lending and other credit commitments of the Agent and the Banks under the Loan Documents shall in any event terminate and expire when and as the same are scheduled to do so, pursuant to the terms of the Loan Agreement and this Amendment. So long as no Default or Event of Default, other than the 2000 Forbearance Events or 2001 Forbearance Events, has occurred and is continuing, nothing herein shall be deemed to prevent the Borrower from exercising any right or taking any action otherwise permitted by the Loan Agreement or the other Loan Documents, which right or action is conditioned upon the absence of any Default or Event of Default. The forbearances contained in this Section 1 shall be contingent on the Borrower's compliance with the following requirements: The Borrower shall not permit, at any time following January 1, 2001, Forbearance Net Finance Assets to be less than the sum of Forbearance Senior Debt and SBA Debt, as evidenced by a Borrowing Base Certificate delivered by the Borrower to the Agent in accordance with Section 6.1(i) of the Loan Agreement. The Borrower shall not permit the Excess Amount to exceed (a) as of January 31, 2001, $6,700,000; (b) as of February 28, 2001, $5,700,000; (c) as of March 31, 2001, $5,000,000; and (d) as of April 30, 2001 and thereafter, $0. For purposes hereof, the following terms shall have the following meanings: "2000 Forbearance Events" shall mean any Default or Event of Default ----------------------- which may arise or have arisen under (a) Section 2.5(c) or -3- Section 7.3 of the Loan Agreement as a result of the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt being less than 1.20:1 at any time during the year 2000, or (b) Section 9.1(f)(iii) of the Loan Agreement as a result of a default under Section 10.6 of the Note Purchase Agreements as a result of the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt being less than 1.15:1 at any time during the year 2000, but excluding any Default or Event of Default which may arise or have arisen in the event that the ratio of Forbearance Net Finance Assets to Adjusted Minimum Asset Coverage as of December 31, 2000 is less than 0.97:1. "2001 Forbearance Events" shall mean any Default or Event of Default ----------------------- which may arise or have arisen under (a) Section 2.5(c) or Section 7.3 of the Loan Agreement from January 1, 2001 through June 30, 2001, or (b) Section 9.1(f)(iii) as a result of a default under Section 10.6 of the Note Purchase Agreements as a result of the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt being less than 1.15:1 at any time from January 1, 2001 until June 30, 2001; provided, however, that the Excess -------- ------- Amount does not exceed (w) $6,700,000 as of January 31, 2001, (x) $5,700,000 as of February 28, 2001, (y) $5,000,000 as of March 31, 2001, and (z) $0 as of April 30, 2001. "Adjusted Minimum Asset Coverage" shall mean the sum, without ------------------------------- duplication, of (a) all Indebtedness of the Borrower under the Loan Agreement, plus (b) all CP Debt, plus (c) Senior Note Debt, plus (d) SBA ---- ---- ---- Debt, plus (e) the aggregate amount of other Indebtedness of the Borrower ---- relating to the borrowing of money, including the issuance of notes or bonds and the maximum drawing amount of all letters of credit outstanding, plus (f) Indebtedness of the type referred to in clause (e) of another ---- Person guaranteed by the Borrower. "Adjusted Net Finance Assets" shall mean the sum of the following --------------------------- clauses, in each case based on the clauses set forth in the definition of Forbearance Net Finance Assets: clause (i), plus clause (ii), minus clause ---- ----- (iii), plus clause (iv), plus clause (v), plus clause (vi). ---- ---- ---- "Advance Amounts" shall mean, as of any date of calculation, an amount --------------- equal to the sum of: (i) the aggregate amount of all Eligible Yellow Cab Loans shown on Borrower's balance sheet as of the last day of the most recent month, minus ----- (ii) the portion, if any, of the Eligible Yellow Cab Loans that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus ----- (iii) the Eligible Yellow Cab Loans which are more than 60 days past due, -4- provided, that if all or any part of any Eligible Yellow Cab Loan would be -------- excluded under any of the provisions set forth above, then the entire amount of such Eligible Yellow Cab Loan shall be excluded. "Eligible Yellow Cab Loan" shall mean, with respect to any Yellow Cab ------------------------ Loan, the portion of the outstanding principal balance of, plus accrued interest (excluding deferred interest) on, such Yellow Cab Loan, in each case owed to the Borrower and attributable to the portion of such Yellow Cab Loan made by the Borrower. "Excess Amount" shall mean the difference of Adjusted Minimum Asset ------------- Coverage minus Adjusted Net Finance Assets; provided that (a) as of January ----- -------- 31, 2001, the Excess Amount shall not be greater than $6,700,000; (b) as of February 28, 2001, the Excess Amount shall not be greater than $5,700,000; (c) as of March 31, 2001 the Excess Amount shall not be greater than $5,000,000; and (d) as of April 30, 2001 and thereafter, the Excess Amount shall be $0. "Forbearance Net Finance Assets" shall mean, as of any date of ------------------------------ calculation, an amount equal to the sum of: (i) cash and Short Term Investments shown on the Borrower's balance sheet as of such date, plus ---- (ii) 83.33% of the sum, without duplication, of (A) the aggregate outstanding principal balances of, plus accrued interest (excluding deferred interest) on, all Eligible Medallion Loans and Eligible Commercial Loans shown on Borrower's balance sheet as of the last day of the most recent month, minus (B) the portion, if any, of ----- the Loans, plus accrued interest (excluding deferred interest) thereon, that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus ----- (C) the Eligible Loans, plus accrued interest (excluding deferred interest) thereon, which are more than 60 days past due, minus ----- (iii) 83.33% of the aggregate outstanding principal of, plus accrued interest (excluding deferred interest) on, the SBA Collateral; plus ---- (iv) 83.33% of the amount of 75% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due, plus ---- (v) 83.33% of the amount of 65% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due; plus ---- -5- (vi) 83.33% of the Advance Amounts of Eligible Yellow Cab Loans; plus ---- (vii) the Excess Amount; provided, that if all or any part of any Loan would be excluded under any -------- of the provisions set forth above, then the entire outstanding principal amount of, plus accrued interest (including deferred interest) on, such Loan shall be excluded. "Forbearance Senior Debt" shall mean the sum, without duplication, of ----------------------- (a) all Indebtedness of the Borrower under the Loan Agreement, plus (b) all ---- CP Debt, plus (c) Senior Note Debt, plus (d) the aggregate amount of other ---- ---- Indebtedness of the Borrower relating to the borrowing of money, including the issuance of notes or bonds and the maximum drawing amount of all letters of credit outstanding, plus (e) Indebtedness of the type referred ---- to in clause (d) of another Person guaranteed by the Borrower. Notwithstanding the foregoing, SBA Debt shall not be included in Senior Debt. "Yellow Cab Loan" shall mean any Medallion Loan made to YellowOne LLC --------------- or YellowTwo LLC, secured by Medallion Rights in respect of Chicago Medallions, that (a) satisfies subsections (b) through (f) of the Eligibility Requirements (other than, with respect to the requirement set forth in subsection (e) thereof, by virtue of the subordination provisions of such Yellow Cab Loan), provided that, with respect to the requirement -------- set forth in subsection (f) thereof, the endorsement on any promissory note evidencing such Yellow Cab Loan explicitly state that any pledge is subject to the requirements of any relevant participation agreement, (b) with respect to accrued interest thereon is guaranteed by Yellow Cab Management, Inc., its affiliate, (c) does not exceed, with respect to the portion thereof owed to the Borrower and attributable to the portion of such Yellow Cab Loan made by the Borrower, an aggregate principal amount of $4,000,000, and when aggregated with all other Yellow Cab Loans does not exceed, with respect to the portion thereof owed to the Borrower and attributable to the portion of such Yellow Cab Loan made by the Borrower, an aggregate principal amount of $9,000,000, and (d) matures no later than June 30, 2005. In the event that (a) the foregoing requirements are not met, (b) a Default or Event of Default (other than any of the 2000 Forbearance Events or 2001 Forbearance Events ) shall occur and be continuing, or (c) the forbearance obligations of the Senior Note Holders under the First Amendment Agreement to the Note Purchase Agreement, by and among the Senior Note Holders and the Borrower, shall terminate, the forbearance obligations of the Agent and the Banks under this Amendment shall, at the option of the Agent or the Required Banks, terminate. Upon such termination, the Agent and the Banks shall be relieved of the forbearance obligations set forth in this Section -6- 1 and, accordingly, the Agent and the Banks shall then be free in their sole and absolute discretion (subject to the applicable provisions of the Loan Documents) to declare any and all of the obligations and other amounts owing to the Agent and the Banks under the Loan Documents to be immediately due and payable, with the effect of such declaration as set forth in Section 9.1 of the Loan Agreement (it being understood that, in the case of any Event of Default under Sections 9.1(h) or (i) of the Loan Agreement, all such obligations and other amounts shall become immediately due and payable automatically, without any requirement of notice from the Agent or any Bank), and/or to terminate all lending and other credit commitments of the Agent and the Banks under the Loan Documents, with the effect of such termination as set forth in Section 9.1 of the Loan Agreement (it being understood that, in the case of any Event of Default under Sections 9.1(h) or (i) of the Loan Agreement, all such lending and other credit commitments of the Agent and the Banks shall immediately terminate automatically, without any requirement of notice from the Agent or any Bank); and the Agent and the Banks may, if they so elect, proceed to enforce their rights and remedies under or in respect of the Loan Documents (subject to the applicable provisions thereof) and applicable law. The remedies specified herein are cumulative and not exclusive of any other remedy including, but not limited to, the remedies under the Loan Documents as a result of the existence of Events of Default. The failure or delay of the Agent or any Bank to exercise any right or remedy after any particular Event of Default shall not operate as a waiver of any remedy or of such Event of Default in that or in any subsequent instance. 2. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by: (a) deleting the following definitions in their entirety and substituting in lieu thereof the following new definitions: "Applicable LIBO Margin" means (a) 3.75% with respect to such portion ---------------------- of the LIBO Rate Loans that are Revolving Credit Loans as is equal to the then existing Excess Amount (as defined in Section 1 of Amendment No. 4 and whether or not the amount thereof at any time of reference complies with the requirements of the proviso contained in the definition thereof), (b) 1.50% in the case of all other LIBO Rate Loans that are also Revolving Credit Loans, and (c) 1.50% in the case of any LIBO Rate Loan that is a Term Loan. "Borrowing Base Certificate" shall mean a certificate substantially in -------------------------- the form of Exhibit A to Amendment No. 4. --------- "Capital Stock" with respect to any entity, shall mean common stock, ------------- preferred stock, limited or general partnership interests, limited liability company membership interests, and any and all shares or other equivalents (however designated) of any other equity interests, of such entity. -7- "Collateral" shall mean and include the assets, property or interests ---------- in property of whatever nature whatsoever, real, personal or mixed, tangible or intangible, of the Borrower, and the pledge of the Guarantor's stock by the Parent pursuant to the terms of the Parent Pledge Agreement, securing the Revolving Credit Loans, Swing Line Loans and/or Term Loans and all other property and interests in personal property that shall, from time to time, secure the Revolving Credit Loans, Swing Line Loans and/or Term Loans. "Loan Documents" shall mean and include this Agreement, the Revolving -------------- Credit Notes, the Term Notes, the Swing Line Note, the Borrower Security Agreement, any Mortgage Assignment, the Borrowing Base Certificates, the Intercreditor Agreement, the Borrower Financing Statements, the Guaranty, the Parent Pledge Agreement and the Collateral Agency Agreement. "Restricted Payment" shall mean, with respect to the Borrower, any of ------------------ the following: (i) the payment of any dividend on or any distribution in respect of any Capital Stock of the Borrower (other than the payment of Dividends required to be paid in order to avoid the imposition of income taxes pursuant to the Code, or, for so long as the Borrower is a registered investment company under the 1940 Act, the payment of such Dividends as may be required by the 1940 Act), (ii) any defeasance, redemption, repurchase or other acquisition or retirement for value prior to scheduled maturity of any Indebtedness ranked pari passu or subordinate in right of payment to ---------- the Revolving Credit Notes, the Swing Line Notes or the Term Notes or of any Indebtedness having a maturity date prior to the maturity of the Revolving Credit Notes, the Swing Line Notes or the Term Notes (other than Permitted Debt and Indebtedness permitted by Sections 8.2(b) and (e) hereof), (iii) when paid (or when the proceeds of which are paid) to any Person during the continuance of any Default or Event of Default, any defeasance, redemption, repurchase or other acquisition or retirement for value prior to scheduled maturity of any Indebtedness permitted by Sections 8.2(b) and (e) hereof, (iv) the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Borrower or of any warrants, rights or options to purchase or acquire any Capital Stock of the Borrower (other than pursuant to and in accordance with stock option plans and other benefit plans for management or employees of the Borrower, in an aggregate amount not in excess of $500,000 during any 12-month period, provided that -------- any such redemption, repurchase, retirement or other acquisition of any Capital Stock of the Borrower or of any warrants, rights or options to purchase or acquire any Capital Stock of the Borrower otherwise permitted by this parenthetical clause shall not be permitted following the occurrence and during the continuance of any Default or Event of Default), (v) any expenditure or the incurrence of any liability to make any expenditure for any Restricted Investment not permitted by Section 8.3 hereof, (vi) when incurred during the continuance of any Default or Event of Default any expenditure or the incurrence of any liability to make any -8- expenditure for any Restricted Investment permitted by Section 8.3 hereof (other than Loans made in the ordinary course of business), (vii) the payment of any principal of, interest on, or any amounts due in respect of, any Indebtedness not permitted by Section 8.2 hereof, and (viii) the payment of any principal or interest on, or any other amounts due in respect of, any Subordinated Debt (except to the extent otherwise approved by the Required Banks and the Agent). (b) inserting, in the places required by alphabetical order, the following new definitions: "Amendment No. 4" shall mean Amendment No. 4 to Amended and Restated --------------- Loan Agreement and Consent dated as of March 30, 2001 among the Borrower, the Agent, the Swing Line Lender and the Banks." "Amendment No. 4 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 4." "Collateral Agency Agreement" shall mean the Collateral Agency --------------------------- Agreement, by and among the collateral agent named therein, the Agent, the Banks, the Senior Note Holders and the agent and the banks party to the Financial Agreement. "Financial Agreement" shall mean the Second Amended and Restated Loan ------------------- Agreement dated as of September 22, 2000, by and among Medallion Financial Corp., Medallion Business Credit, LLC, Fleet National Bank (f/k/a Fleet Bank, National Association) as agent and the other financial institutions from time to time party thereto, as amended and in effect from time to time. "Guarantor" shall mean Medallion Taxi Media, Inc., a New York --------- corporation. "Guaranty" shall mean the Guaranty from the Guarantor in favor of the -------- Agent and the Banks, guaranteeing the payment and performance of the obligations owing by the Borrower to the Agent and the Banks pursuant to the Loan Documents. "Parent" shall mean Medallion Financial Corp., a Delaware corporation. ------ "Parent Pledge Agreement" shall mean the Stock Pledge Agreement from ----------------------- the Parent in favor of the Agent and the Banks, pledging the stock of the Guarantor as security for the obligations owing by the Borrower to the Agent and the Banks pursuant to the Loan Documents. 3. Addition of Article 2A to the Loan Agreement. The Loan Agreement is -------------------------------------------- hereby amended by adding the following new Article 2A: -9- "ARTICLE 2A. COLLATERAL SECURITY; GUARANTY. The obligations of the Borrower under this Agreement shall be secured by (a) a perfected first priority security interest (subject only to Liens permitted hereunder and entitled to priority under applicable law) in substantially all of the assets of the Borrower, whether now owned or hereafter acquired and wherever located, pursuant to the terms of the Borrower Security Agreement and subject to the Intercreditor Agreement, and (b) following the Borrower's compliance with the requirements of Section 15 of Amendment No. 4, a perfected first priority security interest (subject only to Liens permitted hereunder and entitled to priority under applicable law (including Liens in favor of the "Agent" (as defined in the Financial Agreement) under the Financial Agreement to secure the obligations thereunder) and to the Collateral Agency Agreement) in the capital stock of the Guarantor pursuant to the terms of the Parent Pledge Agreement. Following the Borrower's compliance with the requirements of Section 15 of Amendment No. 4, the obligations of the Borrower under this Agreement and the other Loan Documents shall also be guaranteed by the Guarantor pursuant to the terms of the Guaranty (subject to the terms of the Collateral Agency Agreement); provided, however, that the -------- ------- Guaranty shall provide that, with the prior written consent of the Agent and the Required Banks, which consent shall not be conditioned on any requirement to repay Indebtedness, such Guaranty shall be released upon any sale, transfer, public offering, merger, consolidation or other similar event involving the change of at least 33% of the legal and beneficial ownership of the Guarantor." 4. Amendment of Section 4.22 of the Loan Agreement. Section 4.22 of the ----------------------------------------------- Loan Agreement is hereby amended deleted in its entirety and the following new Section 4.22 is hereby substituted in lieu thereof: "Section 4.22. Priority; Continued Effectiveness. --------------------------------- Except as otherwise permitted hereunder, the Agent, for the ratable benefit of the Banks, the Swing Line Lender and the CP Holders, has or will have, following the Borrower's compliance with the requirements of Section 15 of Amendment No. 4, a valid and perfected first priority security interest (subject to the terms of the Intercreditor Agreement and the Collateral Agency Agreement) in and to all Collateral, enforceable against the Borrower and all third parties in all relevant jurisdictions and securing the payment of the Revolving Credit Loans, Swing Line Loans and Term Loans and all other sums payable under or in connection with the Loan Documents. Each of the Borrower Security Agreement and, after the execution and delivery thereof, the Parent Pledge Agreement is effective to create in favor of the Agent, for the ratable benefit of the Banks, the Swing Line Lender and the CP Holders, -10- a valid and perfected first priority (subject to the terms of the Intercreditor Agreement and the Collateral Agency Agreement and except as otherwise permitted hereunder) security interest in and to the Collateral described therein securing the payment of the Revolving Credit Loans, Swing Line Loans and Term Loans and all other sums payable under or in connection with the Loan Documents, whether incurred prior to or after the Amendment No. 4 Effective Date. No additional Borrower Financing Statements are required to be filed in order to maintain the perfection and priority of the security interests created pursuant to the Borrower Security Agreement and the Parent Pledge Agreement." 5. Amendment of Article 4 of the Loan Agreement. Article 4 of the Loan -------------------------------------------- Agreement is hereby amended by adding in proper numerical order the following new Section 4.23: "Section 4.23. Investment Company Act. ---------------------- The Borrower is a closed-end management investment company registered under the 1940 Act. The Borrower is an "investment company," as such term is defined in the 1940 Act. The Borrower is not a "business development company" as such term is defined in the 1940 Act. The acquisition of the Notes by the Banks, the application of the proceeds and repayment thereof by the Borrower and the performance of the transactions contemplated by this Agreement and the other Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the SEC thereunder." 6. Amendment of Article 6 of the Loan Agreement. Article 6 of the Loan -------------------------------------------- Agreement is hereby amended by (a) deleting Section 6.1(i) in its entirety and substituting the following new Section 6.1(i) in lieu thereof: "(i) a Borrowing Base Certificate indicating a computation of the Forbearance Net Finance Assets (as defined in Section 1 of Amendment No. 4) and the ratio of Forbearance Net Finance Assets (as defined in Section 1 of Amendment No. 4) to Adjusted Minimum Asset Coverage (as defined in Section 1 of Amendment No. 4) (i) as of the last day of each month commencing with the month ending March 31, 2001 (to be delivered not later than 15 Business Days after the last day of such month), (ii) as of the last day of February, 2001 (to be delivered no later than April 6, 2001), and (iii) promptly following any other date such a certificate is requested by the Agent;" and (b) adding in proper numerical order therein the following new Sections 6.18, 6.19 and 6.20: "Section 6.18. M.R. Weiser, etc. The Borrower agrees to retain M.R. ---------------- Weiser, Inc. to assist in the preparation of each Borrowing Base Certificate and to provide reporting requested by the Agent with respect -11- thereto and the Borrowers shall assist and fully cooperate with M.R. Weiser, Inc. to provide all necessary or appropriate information promptly following any request therefor. Section 6.19. CFO. The Borrower shall retain a full-time chief --- financial officer, or an interim chief financial officer (or a firm performing such function), by May 1, 2001. Section 6.20. Effectiveness of Loan Documents. The Borrower shall ------------------------------- ensure that each of the Loan Documents, including, once executed and delivered, the Guaranty, shall be in full force and effect, and not cancelled, terminated, revoked or rescinded, in each case otherwise than in accordance with the terms thereof or Section 4.5 hereof or with the express prior written agreement, consent or approval of the Banks, and shall further ensure that neither the Borrower nor any of its Subsidiaries or respective stockholders shall commence any action at law or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents." 7. Amendment of Section 8.2 of the Loan Agreement. Section 8.2 of the ---------------------------------------------- Loan Agreement is hereby amended by (a) deleting the word "and" at the end of subsection (d) thereof; (b) deleting the period at the end of subsection (e) and substituting in lieu thereof "; and"; and (c) adding the following new subsections (f) in proper alphabetical order therein: "(f) Indebtedness to Ameritrans Capital Corporation in an aggregate amount not to exceed $950,000 outstanding at any time and incurred in connection with Yellow Cab Loans (as defined in Section 1 of Amendment No. 4)." 8. Amendment of Section 8.3 of the Loan Agreement. Section 8.3 of the ---------------------------------------------- Loan Agreement is hereby amended by adding in proper alphabetical order therein the following new subsections (e) through (h): "(e) Make any Investment (including by way of the acquisition of any Person) in any Subsidiary or Affiliate, or any Person that after taking into account such Investment would become a Subsidiary or Affiliate, other than (i) Investments in the Parent in an aggregate amount not to exceed $4,200,000, and (ii) Investments existing on the Amendment No. 4 Effective Date and listed on Schedule III hereto. ------------ (f) Sell, discount or otherwise dispose of Loans or any Collateral; sell, discount or otherwise dispose of other Receivables or obligations owing to the Borrower, with or without recourse, otherwise than (i) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 hereof, (ii) for collection in the ordinary course of business, (iii) to the Agent for the benefit of the Banks and, for so long as the Intercreditor Agreement and the Collateral Agency Agreement are in effect, the Collateral Agent, for the benefit of -12- the Banks, the Senior Noteholders, the CP Holders and the Additional Senior Creditors (as defined in the Intercreditor Agreement), and (iv) Loans disposed of to Affiliates for cash for a price at least equal to the outstanding principal amount thereof (without discount thereon). (g) Make, or commit to make, or acquire or commit to acquire, any Loan to or from any Person or any other assets of any Person unless, with respect to any Loan, the Borrower reasonably believes that such Loan constitutes, or upon funding or acquisition will constitute, an Eligible Loan; provided, that, it shall not be a breach of this covenant if any Loan -------- that would otherwise cause the breach is not in a material amount and in any event is not included in Forbearance Net Finance Assets (as defined in Section 1 of Amendment No. 4). (h) Fail to file, upon making or acquiring a Loan, all required Borrower Financing Statements and Mortgage Assignments, deliver to the Agent all instruments and chattel paper with respect to such Loans, or take such other actions as may be required in order to assure that the Agent for the benefit of the Banks receives a first priority perfected security interest or mortgage interest therein; provided, that it shall not be a -------- breach of this covenant if the Loan that would otherwise cause the breach is not in a material amount and in any event is not included in Forbearance Net Finance Assets (as defined in Section 1 of Amendment No. 4)." 9. Amendment of Section 8.16 of the Loan Agreement. Section 8.16 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.16 is hereby substituted in lieu thereof: "8.16. Portfolio Purchase. Make, or obligate itself to make, any ------------------ Portfolio Purchase, other than, so long as no Default or Event of Default then exists or would exist as a result thereof, the repurchase of certain Medallion Loans sold to Sterling Bank prior to the Amendment No. 4 Effective Date, provided that the aggregate amount of such repurchase shall -------- not exceed $2,000,000." 10. Amendment of Article 8 of the Loan Agreement. Article 8 of the Loan -------------------------------------------- Agreement is hereby amended by adding in proper numerical order therein the following new Section 8.17: "8.17. Amendment of Agreements. Amend, waive or otherwise modify any ----------------------- provision of the Note Purchase Agreement, without the prior written consent of the Agent and the Required Banks except to the extent that any such amendment, waiver or other modification shall not have a material adverse effect on the interests of the Banks and the Agent." 11. Amendment to Exhibits and Schedules to the Loan Agreement. The --------------------------------------------------------- Schedules to the Loan Agreement are hereby amended by adding in proper -13- numerical order therein Schedule III attached hereto, and the Exhibits to the Loan Agreement are hereby amended by deleting Exhibit I in its entirety and substituting in lieu thereof Exhibit A attached hereto. 12. Consent to Note Purchase Agreement Amendment, etc. Each of the ------------------------------------------------- Required Banks hereby consents (a) to the amendment of the Note Purchase Agreement in form and substance satisfactory to the Agent for purposes of Section 2 of the Intercreditor Agreement and Section 8.17 of the Loan Agreement, and (b) for purposes of Section 8(b) of the Intercreditor Agreement, to the exclusion from the provisions thereof (i) of the credit enhancement contemplated to be provided by the Guaranty, and (ii) with respect to the Collateral covered by the Intercreditor Agreement, of the shares of the Guarantor contemplated to be pledged to the Agent as collateral security pursuant to the Parent Pledge Agreement (as such term is defined in the Loan Agreement, as amended hereby); provided, however, that such consent (solely with respect to clause (b) hereof) - -------- ------- is conditioned upon the parties thereto executing and delivering the Collateral Agency Agreement, in form and substance satisfactory to the Agent. 13. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants to the Agent and the Banks as of the date hereof, and as of any date on which the conditions set forth in Section 14 below are met, as follows: (a) The execution and delivery by the Borrower of this Amendment and all other instruments and agreements required to be executed and delivered by the Borrower in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the ------------------- performance by the Borrower of any of its obligations and agreements under the Amendment Documents and the Loan Agreement and the other Loan Documents, as amended hereby, are within the corporate or other authority of the Borrower, as the case may be, have been duly authorized by all necessary corporate proceedings on behalf of the Borrower and do not and will not contravene any provision of law or of the Borrower's charter, other incorporation or organizational papers, by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon the Borrower. (b) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which the Borrower is a party constitutes a legal, valid and binding obligation of such Person, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights. (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Borrower of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended -14- hereby, or the consummation by the Borrower of the transactions among the parties contemplated hereby and thereby or referred to herein. (d) The representations and warranties contained in Article 4 of the Loan Agreement and in the other Loan Documents were true and correct at and as of the date made. Except (i) to the extent of changes resulting from transactions contemplated or permitted by the Loan Agreement and the other Loan Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse), (ii) to the extent that such representations and warranties relate expressly to an earlier date, (iii) solely with respect to Section 4.20 of the Loan Agreement, as a result of the occurrence of the 2000 Forbearance Events and the 2001 Forbearance Events, and (iv) after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment, also are correct at and as of the date hereof. (e) The Borrower has performed and complied in all material respects with all terms and conditions herein and in the Loan Documents required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions of this Amendment and the other Amendment Documents, there exists no Event of Default or Default (excluding any of the 2000 Forbearance Events or 2001 Forbearance Events). (f) The Borrower acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in Section 4 of the Loan Agreement, a breach of which shall constitute an Event of Default. 14. Effectiveness. This Amendment shall become effective as of the date ------------- first written above (the "Effective Date") upon the satisfaction of each of the following conditions, in each case in a manner satisfactory in form and substance to the Agent; provided that upon such satisfaction of each of the -------- following conditions, the revision to (i) subsection (a) of "Applicable LIBO Margin" in Section 2(a) hereof shall become effective as of January 1, 2001, and (ii) subsections (b) and (c) of "Applicable LIBO Margin" in Section 2(a) hereof shall become effective as of February 1, 2001: (a) This Amendment shall have been duly executed and delivered by each of the Borrower and the Required Banks and shall be in full force and effect. (b) The Agent shall have received evidence of the amendment of the Note Purchase Agreement and the consent of the Senior Note Holders under the Intercreditor Agreement and the Note Purchase Agreement to this Amendment and the transactions contemplated hereby. (c) The Agent shall have received evidence of the effectiveness of an amendment of the Financial Agreement in the form attached hereto as Exhibit B. -15- (d) The Agent shall have received a Borrowing Base Certificate, certified by the corporate controller of the Borrower, showing the Excess Amount as of January 31, 2001, copies of which shall be distributed to the Banks by the Agent. (e) The Agent shall have received, for the pro rata account of each Bank --- ---- which executes and delivers its signature pages to the Agent, by 5:00 p.m. Boston time on March 30, 2001 in facsimile (to be followed by originals) or original form, an amendment fee equal in the aggregate to 0.10% of each such Bank's Revolving Credit Commitment. (f) The Agent shall have received such other items, including legal fees of counsel to the Agent, documents, agreements or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. 15. Post-Closing Matters. The Borrower agrees to take the following -------------------- actions and deliver the following items to the Agent or, in the case of Section 15(f) hereof, the Collateral Agent, no later than April 30, 2001: (a) From each of the parties thereto, duly executed originals of each of the Guaranty, the Parent Pledge Agreement, the Collateral Agency Agreement and, if and to the extent deemed necessary or appropriate by the Agent, an amendment to the Intercreditor Agreement (the "New Security Documents"), each in form and substance satisfactory to the Agent; (b) From the Secretary of each of the Parent and the Guarantor a copy, certified by such Secretary to be true and complete as of such date, of each of (i) its charter or other organizational documents as in effect on such date of certification, (ii) its by-laws as in effect on such date, and (iii) the resolutions of its Board of Directors or other management authorizing, to the extent it is a party thereto, the execution, delivery and performance of the New Security Documents; provided, however, that in lieu of providing the items -------- ------- required by subsections (i) and (ii) of this subsection (b), such Secretary may certify, to the extent true and correct, that charter documents and by-laws previously provided to the Agent are true and correct as of such date and have not been amended, rescinded or revoked; (c) From each of the Parent and the Guarantor, an incumbency certificate, dated as of such date, signed by a duly authorized officer of such Person and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, the New Security Documents; (d) From the Parent and the Guarantor, good standing certificates for each such Person, issued by the Secretary of State of each such entity's jurisdiction of incorporation or organization, and evidence that such Person is duly licensed and qualified as a foreign organization in good standing under the laws of each jurisdiction where the failure to qualify as such would have a Material Adverse Effect; -16- (e) A favorable legal opinion addressed to the Agent and the Banks, dated as of such date, in form and substance satisfactory to the Agent, from counsel to the Parent and the Guarantor, with respect to each such Person concerning corporate or other applicable entity authority matters and the enforceability of each of the Guaranty, the Parent Pledge Agreement, and the perfection of the security interests granted therein, and concerning such other matters as the Administrative Agent may request; (f) All stock certificates or other certificates evidencing the Parent's equity interests in the Guarantor, together with undated stock powers or other instruments of endorsement duly executed in blank; (g) The results of such UCC filing searches for the Guarantor as the Agent shall have requested. (h) Such other items, documents, agreements, items or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. The Borrower acknowledges and agrees that the failure to deliver any of the above-referenced items, or take the above-referenced actions, by April 30, 2001, shall constitute an Event of Default under Section 9.1(b) of the Loan Agreement. 16. Release. In order to induce the Agent and the Banks to enter into ------- this Amendment, the Borrower, on behalf of itself and its Subsidiaries, acknowledges and agrees that: (a) such Person does not have any claim or cause of action against the Agent or any Bank (or any of its respective directors, officers, employees or agents); (b) such Person does not have any offset right, counterclaim or defense of any kind against any of its respective obligations, indebtedness or liabilities to the Agent or any Bank; and (c) each of the Agent and the Banks has heretofore properly performed and satisfied in a timely manner all of its obligations to such Person. The Borrower, on behalf of itself and its Subsidiaries, wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the Agent's and the Banks' rights, interests, contracts, collateral security or remedies. Therefore, the Borrower, on behalf of itself and its Subsidiaries, unconditionally releases, waives and forever discharges (x) any and all liabilities, obligations, duties, promises or indebtedness of any kind of the Agent or any Bank to such Person, except the obligations to be performed by the Agent or any Bank on or after the date hereof as expressly stated in this Amendment, the Loan Agreement and the other Loan Documents, and (y) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which such Person might otherwise have against the Agent, any Bank or any of its directors, officers, employees or agents, in either case (x) or (y), on account of any past or presently existing condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind. -17- 17. Miscellaneous Provisions. ------------------------ (a) The Borrower hereby ratifies and confirms all of its obligations to the Agent and the Banks under the Loan Agreement, as amended hereby, and the other Loan Documents, including, without limitation, the Loans, and the Borrower hereby affirms its absolute and unconditional promise to pay to the Banks and the Agent the Revolving Credit Loans, the Term Loans, the Swing Line Loans, reimbursement obligations and all other amounts due or to become due and payable to the Banks and the Agent under the Loan Agreement and the other Loan Documents, as amended hereby. Except as expressly amended hereby, each of the Loan Agreement and the other Loan Documents shall continue in full force and effect. This Amendment and the Loan Agreement shall hereafter be read and construed together as a single document, and all references in the Loan Agreement, any other Loan Document or any agreement or instrument related to the Loan Agreement shall hereafter refer to the Loan Agreement as amended by this Amendment. (b) No consent or waiver herein granted shall extend to or affect any obligations not expressly herein consented to or waived or shall impair any right of the Agent or the Banks consequent thereon. No consent or waiver herein granted shall extend beyond the term expressly set forth herein for such consent or waiver, nor shall anything contained herein be deemed to imply any willingness of the Agent or the Banks to agree to, or otherwise prejudice any rights of the Agent and the Banks with respect to, any similar consents or waivers that may be requested for any future period. (c) Without limiting the expense reimbursement requirements set forth in Section 10.6 of the Loan Agreement, the Borrower agrees to pay on demand all costs and expenses, including reasonable attorneys' fees, of the Agent incurred in connection with this Amendment. (d) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). (e) This Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. -18- IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Amendment to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written. MEDALLION FUNDING CORP. By: /s/ Alvin Murstein ------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ Larry D. Hall ------------------ Name: Larry D. Hall Title: Corporate Controller FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association), as Agent, as Swing Line Lender and as one of the Banks By: /s/ Kevin J. Foley ------------------- Name: Kevin J. Foley Title: Sr. VP THE BANK OF NEW YORK, as Documentation Agent and as one of the Banks By: /s/ Gordon Smith ----------------- Name: Gordon Smith Title: The Bank of New York HARRIS TRUST AND SAVINGS BANK By: /s/ Michael S. Cameli ---------------------- Name: Michael S. Cameli Title: Vice President -19- BANK TOKYO-MITSUBISHI TRUST COMPANY By:____________________________________ Name: Title: THE CHASE MANHATTAN BANK By: /s/ Carol A. Kornbluth ----------------------- Name: Carol A. Kornbluth Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: /s/ Robert J. Fainelli ----------------------- Name: Robert J. Fainelli Title: First Vice President By: /s/ Tim McCurry ----------------- Name: Tim McCurry Title: Assistant Manager EUROPEAN AMERICAN BANK By: /s/ George L. Stirling ------------------------ Name: George L. Stirling Title: VP BANK LEUMI USA By: /s/ John Koenigsberg /s/ Phyllis Rosenfeld ---------------------- ------------------ Name: John Koenigsberg Phyllis Rosenfeld Title: First VP Vice President -20- HSBC BANK USA By: /s/ Bruce Wicks ---------------- Name: Bruce Wicks Title: Vice President Schedule III Medallion Funding Corp. Investment in Subsidiaries December 31, 2000 ----------------- NONE ---- Exhibit A --------- Exhibit A - --------- Borrowing Base Certificate -------------------------- Borrowing Base as of _______________ ("Borrowing Base Date") - -------------------------------------------------------------------------------------------------------- (1) The aggregate outstanding principal balances of all Eligible $ Medallion Loans and Eligible Commercial Loans shown on Borrower's balance sheet as of the last day of the most recent month - -------------------------------------------------------------------------------------------------------- (2) The aggregate accrued interest (excluding deferred interest) on $ all Eligible Medallion Loans and Eligible Commercial Loans shown on Borrower's balance sheet as of the last day of the most recent month - -------------------------------------------------------------------------------------------------------- (3) Total of (1) plus (2) $ - -------------------------------------------------------------------------------------------------------- (4) The portion, if any, of the Loans, plus accrued interest $ (excluding deferred interest) thereon, that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing - -------------------------------------------------------------------------------------------------------- (5) The Eligible Loans, plus accrued interest (excluding deferred $ interest) thereon, which are more than 60 days past due - -------------------------------------------------------------------------------------------------------- (6) Difference of (3) minus the sum of (4) and (5), without duplicating amounts in (4) and (5) - -------------------------------------------------------------------------------------------------------- (7) 75% of the Eligible Medallion Loans and accrued interest $ (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due - -------------------------------------------------------------------------------------------------------- (8) 65% of the Eligible Medallion Loans and accrued interest $ (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due - -------------------------------------------------------------------------------------------------------- (9) The Advance Amounts of Eligible Yellow Cab $ - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------- Loans - -------------------------------------------------------------------------------------------------------- (10) Sum of Lines (6), (7), (8) and (9) $ - -------------------------------------------------------------------------------------------------------- (11) Line (10) times .8333 $ - -------------------------------------------------------------------------------------------------------- (12) cash and Short Term Investments shown on the Borrower's balance $ sheet as of the Borrowing Base Date - -------------------------------------------------------------------------------------------------------- (13) Excess Amount $ - -------------------------------------------------------------------------------------------------------- (14) Sum of Lines (11), (12) and (13) (Forbearance Net Assets) $ - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- Forbearance Senior Debt (a) Indebtedness of Borrower under the Loan Agreement; $ (b) all CP Debt $ (c) Senior Note Debt $ (d) the aggregate amount of other Indebtedness of the Borrower $ relating to the borrowing of money, including the issuance of notes or bonds and the maximum drawing amount of all letters of credit outstanding $ (e) Indebtedness of the type referred to in clause (d) of another $ Person guaranteed by the Borrower (f) SBA Debt $ (15) Sum of Items (a) -(f) (Total Forbearance Debt) - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- Net Excess (Deficiency) of Net Forbearance Assets over Forbearance $ Debt (Line 14 less Line 15) - --------------------------------------------------------------------------------------------------------
Exhibit B --------- [Financial Amendment] EX-10.5 7 dex105.txt AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED EXHIBIT 10.5 879372.01 AMENDMENT NO. 1 TO SECOND AMENDED AND ------------------------------------- RESTATED LOAN AGREEMENT AND LIMITED WAIVER ------------------------------------------ AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED LOAN AGREEMENT AND LIMITED WAIVER dated as of March 30, 2001 (this "Amendment"), by and among MEDALLION --------- FINANCIAL CORP., a Delaware corporation ("MFC"), MEDALLION BUSINESS CREDIT, LLC, --- a Delaware limited liability company ("MBC"; MBC and MFC are sometimes --- hereinafter referred to individually as a "Borrower" and together as the -------- "Borrowers"), the lending institutions that are listed on the signature pages --------- hereto, FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association), as a Bank ("Fleet"), as Swing Line Lender (the "Swing Line Lender"), as Arranger and as ----- ----------------- Agent for the Banks (including any successor, the "Agent"), amending the Loan Agreement (as defined below). WHEREAS, the Borrowers, the banks and other lending institutions that from time to time are signatories thereto (including Assignees, collectively, the "Banks" and individually, a "Bank"), the Agent and the Swing Line Lender are ----- ---- parties to a Second Amended and Restated Loan Agreement dated as of September 22, 2000 (as amended and in effect from time to time, the "Loan Agreement", -------------- capitalized terms defined therein having the same meanings herein as therein), pursuant to which the Banks have extended credit to the Borrowers on the terms and subject to the conditions set forth therein; and WHEREAS, the Borrowers have requested an amendment of, and, subject to the terms and conditions set forth herein, the Borrowers, the Banks, the Agent and the Swing Line Lender have agreed to amend, the Loan Agreement as set forth herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Loan Agreement as follows: 1. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by: (a) deleting the following definitions in their entirety and substituting in lieu thereof the following new definitions: "Applicable LIBOR Margin" means 1.50% in the case of all LIBOR Rate ----------------------- Loans that are also Revolving Credit Loans, and 1.50% in the case of any LIBOR Rate Loan that is a Term Loan. "Loan Documents" shall mean and include this Agreement, the Revolving -------------- Credit Notes, the Term Notes, the Swing Line Notes, the Security Agreement, any Mortgage Assignment, the Borrower Financing Statements, the Borrowing Base Certificates, the Fee Letter, the Guaranty, and the Collateral Agency Agreement and each other document, instrument or agreement executed pursuant to, or in connection with, any Loan Document. "MFC Borrowing Base" shall mean, as determined pursuant to the most ------------------ recently required Borrowing Base Certificate: -2- (i) cash and Short Term Investments shown on MFC's balance sheet as of such date, plus ---- (ii) 83.3% of the aggregate outstanding principal balances of, plus accrued interest on, all of MFC's Eligible Medallion Loans from time to time outstanding that are Retained Loans, plus ---- (iii) 75% of the aggregate outstanding principal balances of, plus accrued interest on, all of MFC's Eligible Commercial Loans other than Section 7a Loans from time to time outstanding that are Retained Loans; plus ---- (iv) 75% of the aggregate outstanding principal balances of, plus accrued interest on, all of MFC's Eligible Section 7a Loans purchased from Business Lenders, LLC from time to time outstanding that are Retained Loans; plus ---- (v) 83.3% of the Eligible Yellow Cab Loan; provided, that, if all or any part of any Loan would be excluded as an -------- ---- Eligible Commercial Loan, Eligible Medallion Loan, Eligible Yellow Cab Loan or Eligible Section 7a Loan under any of the provisions of this Agreement, then the entire outstanding principal amount of, plus accrued interest on, such Loan shall be excluded. (b) inserting, in the places required by alphabetical order, the following new definitions: "Amendment No. 1" shall mean Amendment No. 1 to Second Amended and --------------- Restated Loan Agreement and Limited Waiver dated as of March 30, 2001 among the Borrower, the Agent, the Swing Line Lender and the Banks. "Amendment No. 1 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 1. "Collateral Agency Agreement" shall mean the Collateral Agency --------------------------- Agreement, by and among the collateral agent named therein, the Agent, the Banks, the Senior Note Holders and the administrative agent and the banks party to the Funding Agreement. "Eligible Yellow Cab Loan" shall mean, with respect to the Yellow Cab ------------------------ Loan, the portion of the outstanding principal balance of, plus accrued interest (excluding deferred interest) on the Yellow Cab Loan owed to MFC and attributable to the portion of the Yellow Cab Loan made by MFC; provided, that, the Yellow Cab Loan shall not be an Eligible Yellow Cab -------- Loan (i) if MFC, in its reasonable business judgment, deems such Eligible Yellow Cab Loan to be uncollectible or subject to classification as non- accruing and for which it has not made appropriate credits to its reserves or (ii) if the outstanding principal amount of the Yellow Cab Loan or interest thereon is more than 60 days past due. "Funding Agreement" shall mean the Amended and Restated Loan Agreement ----------------- dated as of December 24, 1997, by and among Medallion Funding, the lenders party thereto, Fleet National Bank, as swing line lender, administrative agent, arranger and collateral agent and The Bank of New York, as documentation agent, as amended and in effect from time to time. "Guarantor" shall mean Medallion Taxi Media, Inc., a New York --------- corporation. -3- "Guaranty" shall mean the Guaranty from the Guarantor in favor of the -------- Agent and the Banks, guaranteeing the payment and performance of the obligations owing by the Borrowers to the Agent and the Banks pursuant to the Loan Documents. "Yellow Cab Loan" shall mean the Medallion Loan made to Yellow Cab --------------- Management, Inc., secured by Medallion Rights in respect of Chicago Medallions, that (a) satisfies the Eligibility Requirements (other than, with respect to the requirement set forth in subsection (f) thereof, by virtue of the subordination provisions of the Yellow Cab Loan), provided -------- that, with respect to the requirement set forth in subsection (g) thereof, the endorsement on any promissory note evidencing the Yellow Cab Loan explicitly state that any pledge thereof is subject to the requirements of any relevant participation agreement, (b) does not exceed, with respect to the portion thereof owed to MFC and attributable to the portion of the Yellow Cab Loan made by MFC, an aggregate principal amount of $1,190,000, and (c) matures no later than March 1, 2003. 2. Addition of Article 2A to the Loan Agreement. The Loan Agreement is -------------------------------------------- hereby amended by adding the following new Article 2A: "ARTICLE 2A. COLLATERAL SECURITY; GUARANTY. The obligations of the Borrowers under this Agreement shall be secured by a perfected first priority security interest (subject only to Liens permitted hereunder and entitled to priority under applicable law (including Liens in favor of the "Agent" (as defined in the Funding Agreement) under the Funding Agreement to secure the obligations thereunder) and to the Collateral Agency Agreement) in substantially all of the assets of each Borrower, whether now owned or hereafter acquired and wherever located, pursuant to the terms of the Security Agreement, including a pledge by each of the Borrowers of one hundred percent (100%) of the capital stock owned by such Borrower of each of its Subsidiaries, subject to limitations imposed by applicable law with respect to any particular Subsidiary, and to the receipt of consents (including lender consents) as may be required under other loan documents for any particular Subsidiary, provided that the -------- Borrowers shall have used their best efforts to obtain such consents, with the Borrowers acknowledging that the stock of the Guarantor requires no such consent. Following the Borrowers' compliance with the requirements of Section 15 of Amendment No. 1, the obligations of the Borrowers under this Agreement and the other Loan Documents shall also be guaranteed by the Guarantor pursuant to the terms of the Guaranty (subject to the terms of the Collateral Agency Agreement); provided, however, that the Guaranty shall provide that, with the -------- ------- prior written consent of the Agent and the Required Banks, which consent shall not be conditioned on any requirement to repay Indebtedness, such Guaranty shall be released upon any sale, transfer, public offering, merger, consolidation or other similar event involving the change of at least 33% of the legal and beneficial ownership of the Guarantor. 3. Amendment of Section 4.22 of the Loan Agreement. Section 4.22 of the ----------------------------------------------- Loan Agreement is hereby amended deleted in its entirety and the following new Section 4.22 is hereby substituted in lieu thereof: "Section 4.22. Priority; Continued Effectiveness. --------------------------------- -4- Except as otherwise permitted hereunder, the Agent, for the ratable benefit of the Banks and the Swing Line Lender, has or will have, following the Borrowers' compliance with the requirements of Section 15 of Amendment No. 1, a valid and perfected first priority security interest (subject to the terms of the Collateral Agency Agreement) in and to all Collateral, enforceable against each Borrower and all third parties in all relevant jurisdictions and securing the payment of the Revolving Credit Loans, Swing Line Loans and Term Loans and all other sums payable under or in connection with the Loan Documents. The Security Agreement is effective to create in favor of the Agent, for the ratable benefit of the Banks, the Swing Line Lender and the CP Holders, a valid and perfected first priority (subject to the terms of the Collateral Agency Agreement and except as otherwise permitted hereunder) security interest in and to the Collateral described therein securing the payment of the Revolving Credit Loans, Swing Line Loans and Term Loans and all other sums payable under or in connection with the Loan Documents, whether incurred prior to or after the Amendment No. 1 Effective Date. No additional Borrower Financing Statements are required to be filed in order to maintain the perfection and priority of the security interests created pursuant to the Security Agreement. 4. Amendment of Article 6 of the Loan Agreement. Article 6 of the Loan -------------------------------------------- Agreement is hereby amended by adding in proper numerical order therein the following new Sections 6.20, 6.21 and 6.22: "Section 6.20. M.R. Weiser, etc. The Borrowers agree to retain M.R. ---------------- Weiser, Inc. to assist in the preparation of each Borrowing Base Certificate and to provide reporting requested by the Agent with respect thereto and the Borrowers shall assist and fully cooperate with M.R. Weiser, Inc. to provide all necessary or appropriate information promptly following any request therefor. Section 6.21. CFO. Each of the Borrowers shall retain a full-time --- chief financial officer, or an interim chief financial officer (or a firm performing such function), by May 1, 2001. Section 6.22. Effectiveness of Loan Documents. The Borrowers shall ------------------------------- ensure that each of the Loan Documents, including, once executed and delivered, the Guaranty, shall be in full force and effect, and not cancelled, terminated, revoked or rescinded, in each case otherwise than in accordance with the terms thereof or Section 4.5 hereof, or with the express prior written agreement, consent or approval of the Banks, and shall further ensure that no Borrower or any of its Subsidiaries or respective stockholders shall commence any action at law or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents." 5. Amendment of Section 8.3 of the Loan Agreement. Subsections 8.3(c), ---------------------------------------------- (e) and (g) of the Loan Agreement are hereby deleted in their entirety and the following new subsections 8.3(c), (e) and (g), respectively, are hereby substituted in lieu thereof: "(c) Make, or obligate itself to make, any Loan if, after giving effect to such Loan (i) with respect to MFC, the aggregate outstanding principal amount of all Loans made to any one Person together with its Affiliates would exceed 20% of Unconsolidated Tangible Net Worth of MFC, and (ii) with respect to MBC, the aggregate outstanding principal amount of all Loans made to any one Person together with its Affiliates would exceed $3,500,000. -5- (e) Make any Investment (including by way of the acquisition of any Person) in any Subsidiary or Affiliate, or any Person that after taking into account such Investment would become a Subsidiary or Affiliate, other than (i) Investments of MFC in MBC or of MBC in MFC, (ii) Investments existing on the Second Restatement Effective Date and listed on Schedule -------- III hereto, (iii) Investments by MFC in BL of up to $10,000,000 arising --- from the conversion of accounts receivable owed by BL to MFC into an equity contribution into BL, and (iv) Investments by MFC in Freshstart Venture Capital Corp. and Medallion Capital, Inc., which shall not exceed an aggregate amount of $5,000,000 for either such Investment (an aggregate amount of $10,000,000 for both such Investments). (g) Sell, discount or otherwise dispose of Loans or any Collateral; sell, discount or otherwise dispose of other Receivables or obligations owing to a Borrower or any of its Subsidiaries, with or without recourse, otherwise than (i) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 hereof, (ii) for collection in the ordinary course of business, (iii) to the Agent for the benefit of the Banks and, with respect to the pledged shares of the Guarantor and for so long as the Collateral Agency Agreement is in effect, the Collateral Agent, for the benefit of the Banks, the Senior Noteholders and the CP Holders, or (iv) Loans disposed of to Affiliates for cash for a price at least equal to the outstanding principal amount thereof (without discount thereon). " 6. Amendment of Section 8.16 of the Loan Agreement. Section 8.16 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.16 is hereby substituted in lieu thereof: "8.16. Portfolio Purchase. Make, or obligate itself to make, any ------------------ Portfolio Purchase." 7. Amendment of Article 8 of the Loan Agreement. Article 8 of the Loan -------------------------------------------- Agreement is hereby amended by adding in proper numerical order therein the following new Section 8.17: "8.17. Amendment of Agreements. The Borrowers will not amend, waive ----------------------- or otherwise modify any provision of the Note Purchase Agreement, without the prior written consent of the Agent and the Required Banks except to the extent that any such amendment, waiver or other modification shall not have a material adverse effect on the interests of the Banks and the Agent." 8. Amendment to Schedules to the Loan Agreement. The Schedules to the -------------------------------------------- Loan Agreement are hereby amended by deleting Schedule III in its entirety and substituting in lieu thereof Schedule III attached hereto. 9. Waiver of Section 7.4 of the Loan Agreement. Each of the Required ------------------------------------------- Banks hereby waives the Borrowers' compliance with the covenant set forth in (S)7.4 of the Loan Agreement for the fiscal quarter ended December 31, 2000; provided, however, that (a) the ratio of (i) the sum of Consolidated EBIT of MFC - -------- ------- for such fiscal quarter plus Consolidated Interest Expense of MFC for such ---- fiscal quarter to (ii) Consolidated Interest Expense of MFC for such fiscal quarter shall not be less than 1.49:1, and (b) the ratio of (i) the sum of Unconsolidated EBIT of MFC for such fiscal quarter plus Unconsolidated Interest ---- Expense of MFC for such fiscal quarter plus Unconsolidated EBIT of MBC for such ---- fiscal quarter plus Unconsolidated Interest Expense of MBC for such fiscal ---- quarter to (ii) the sum of Unconsolidated Interest Expense of MFC for such fiscal quarter plus Unconsolidated Interest Expense of MBC for such fiscal ---- quarter shall not be less than 1.07:1. -6- 10. Waiver of Section 8.3(c) of the Loan Agreement. Each of the Required ---------------------------------------------- Banks hereby waives MBC's compliance with the covenant set forth in (S)8.3(c) of the Loan Agreement for the fiscal quarter ended December 31, 2000; provided, -------- however, that MBC shall not have made, or obligated itself to make, any Loan if, - ------- after giving effect to such Loan the aggregate outstanding principal amount of all Loans made to any one Person together with its Affiliates exceeded $3,500,000. 11. Waiver of Section 9.1(e) of the Funding Agreement. The Funding ------------------------------------------------- Agreement requires Medallion Funding to ensure that the ratio of Net Finance Assets (as defined in the Funding Agreement) to the sum of Senior Debt and SBA Debt (each as defined in the Funding Agreement) is not less than 1.20:1 at all times and to pay down any amount by which Minimum Asset Coverage (as defined in the Funding Agreement) exceeds Net Finance Assets (as defined in the Funding Agreement). Medallion Funding has reported that from January 1, 2000 through the date hereof, it has not complied, and may not comply from the Effective Date until June 30, 2001, with such requirements as a result of the 2000 Forbearance Events and the 2001 Forbearance Events (each as defined in Amendment No. 4 (as defined in the Funding Agreement)) but has instead, for the period from and after January 1, 2001 through the date hereof, complied with, and for the period from and after the date hereof until June 30, 2001, agreed that it will comply with, the covenant set forth in Section 1 of Amendment No. 4 (as defined in the Funding Agreement). Each of the Agent and the Banks hereby waives (without changing the provisions of Section 9.1 of the Loan Agreement or the definition of Event of Default therein) any Default or Event of Default which may have occurred or may occur under Section 9.1(e) or (f) of the Loan Agreement (to the extent that Section 9.1(f) may be deemed to apply to the Funding Agreement) as a result of the occurrence of the 2000 Forbearance Events or the 2001 Forbearance Events (each as defined in Amendment No. 4 (as defined in the Funding Agreement)), for so long as and to the extent that the Banks under the Funding Agreement are required to forbear from the exercise of certain of their rights and remedies under and pursuant to Section 1 of Amendment No. 4 (as defined in the Funding Agreement). 12. Consent to Note Purchase Agreement Amendment. Each of the Required -------------------------------------------- Banks hereby consents to the amendment of the Note Purchase Agreement in form and substance satisfactory to the Agent for purposes of Section 8.10 of the Loan Agreement. 13. Representations and Warranties. Each of the Borrowers hereby ------------------------------ represents and warrants to the Agent and the Banks as of the date hereof, and as of any date on which the conditions set forth in Section 14 below are met, as follows: (a) The execution and delivery by each of the Borrowers of this Amendment and all other instruments and agreements required to be executed and delivered by each of the Borrowers in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment --------- Documents"), and the performance by each of the Borrowers of any of its --------- obligations and agreements under the Amendment Documents and the Loan Agreement and the other Loan Documents, as amended hereby, are within the corporate or other authority of each of the Borrowers, as the case may be, have been authorized by all necessary corporate proceedings on behalf of each of the Borrowers, as the case may be, and do not and will not contravene any provision of law or of the Borrowers' charter, other incorporation or organizational papers, by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon the Borrowers. (b) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which any of the Borrowers is a party constitutes a legal, valid and binding obligation of such Person, enforceable in accordance with its terms, except as limited -7- by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights. (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by each of the Borrowers of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by each of the Borrowers of the transactions among the parties contemplated hereby and thereby or referred to herein. (d) The representations and warranties contained in Article 4 of the Loan Agreement and in the other Loan Documents were true and correct at and as of the date made. Except to the extent of changes resulting from transactions contemplated or permitted by the Loan Agreement and the other Loan Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse) and to the extent that such representations and warranties relate expressly to an earlier date and after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment, also are correct at and as of the date hereof. (e) Each of the Borrowers has performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions of this Amendment and the other Amendment Documents, there exists no Event of Default or Default. (f) Each of the Borrowers acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in Section 4 of the Loan Agreement, a breach of which shall constitute an Event of Default. 14. Effectiveness. This Amendment shall become effective as of the date ------------- first written above (the "Effective Date") upon the satisfaction of each of the following conditions, in each case in a manner satisfactory in form and substance to the Agent; provided that upon such satisfaction of each of the -------- following conditions, (i) the revision to "Applicable LIBOR Margin" in Section 1(a) hereof shall become effective as of February 1, 2001, and (ii) the revisions to "MFC Borrowing Base" and additions of "Eligible Yellow Cab Loan" and "Yellow Cab Loan" in Sections 1(a) and (b) hereof shall become effective as of the date the Yellow Cab Loan was first included in the MFC Borrowing Base: (a) This Amendment shall have been duly executed and delivered by each of the Borrowers and the Required Banks and shall be in full force and effect. (b) The Agent shall have received evidence of the effectiveness of an amendment of the Funding Agreement, in the form attached hereto as Exhibit A. (c) The Agent shall have received, for the pro rata account of each Bank --- ---- which executes and delivers its signature pages to the Agent, by 5:00 p.m. Boston time on March 30, 2001 in facsimile (to be followed by originals) or original form, an amendment fee equal in the aggregate to 0.05% of each such Bank's Revolving Credit Commitment. (d) Such other items, including legal fees of counsel to the Agent, documents, agreements or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. -8- 15. Post-Closing Matters. Each of the Borrowers agrees to take the -------------------- following actions and deliver the following items to the Agent no later than April 30, 2001: (a) The Borrowers shall deliver to the Agent, from each of the parties thereto, duly executed originals of each of the Guaranty, the Collateral Agency Agreement and, if and to the extent deemed necessary or appropriate by the Agent, an amendment to the Intercreditor Agreement (the "New Security Documents"), each in form and substance satisfactory to the Agent; (b) The Borrowers shall deliver to the Agent, from the Secretary of the Guarantor a copy, certified by such Secretary to be true and complete as of such date, of (i) its charter or other organizational documents as in effect on such date of certification, (ii) its by-laws as in effect on such date, and (iii) the resolutions of its Board of Directors or other management authorizing, to the extent it is a party thereto, the execution, delivery and performance of the New Security Documents; provided, however, that in lieu of providing the items -------- ------- required by subsections (i) and (ii) of this subsection (b), such Secretary may certify, to the extent true and correct, that charter documents and by-laws previously provided to the Agent are true and correct as of such date and have not been amended, rescinded or revoked; (c) The Borrowers shall deliver to the Agent, from the Guarantor, an incumbency certificate, dated as of such date, signed by a duly authorized officer of such Person and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, the New Security Documents; (d) The Borrowers shall deliver to the Agent, from the Guarantor, good standing certificates for such Person, issued by the Secretary of State of such entity's jurisdiction of incorporation or organization, and evidence that such Person is duly licensed and qualified as a foreign organization in good standing under the laws of each jurisdiction where the failure to qualify as such would have a Material Adverse Effect; (e) The Borrowers shall deliver to the Agent a favorable legal opinion addressed to the Agent and the Banks, dated as of such date, in form and substance satisfactory to the Agent, from counsel to the Guarantor, with respect to such Person concerning corporate or other applicable entity authority matters and the enforceability of each of the Guaranty and the Collateral Agency Agreement and concerning such other matters as the Administrative Agent may request; (f) The Borrowers shall deliver to the Agent, from each of the parties thereto, duly executed originals of each of the Guaranty and the Collateral Agency Agreement, each in form and substance satisfactory to the Agent; (g) The Agent shall have received the results of such UCC filing searches for the Guarantor as the Agent shall have requested. (h) The Collateral Agent shall possess all stock certificates or other certificates evidencing MFC's equity interests in the Guarantor, together wish undated stock powers or other instruments of endorsement duly executed in blank. (i) Such other items, documents, agreements, items or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. -9- Each of the Borrowers acknowledges and agrees that the failure to deliver any of the above-referenced items, or take the above-referenced actions, by April 30, 2001, shall constitute an Event of Default under Section 9.1(b) of the Loan Agreement. 16. Release. In order to induce the Agent and the Banks to enter into ------- this Amendment, each of the Borrowers, on behalf of itself and its Subsidiaries, acknowledges and agrees that: (a) such Person does not have any claim or cause of action against the Agent or any Bank (or any of its respective directors, officers, employees or agents); (b) such Person does not have any offset right, counterclaim or defense of any kind against any of its respective obligations, indebtedness or liabilities to the Agent or any Bank; and (c) each of the Agent and the Banks has heretofore properly performed and satisfied in a timely manner all of its obligations to such Person. Each of the Borrowers, on behalf of itself and its Subsidiaries, wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the Agent's and the Banks' rights, interests, contracts, collateral security or remedies. Therefore, each of the Borrowers, on behalf of itself and its Subsidiaries, unconditionally releases, waives and forever discharges (x) any and all liabilities, obligations, duties, promises or indebtedness of any kind of the Agent or any Bank to such Person, except the obligations to be performed by the Agent or any Bank on or after the date hereof as expressly stated in this Amendment, the Loan Agreement and the other Loan Documents, and (y) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which such Person might otherwise have against the Agent, any Bank or any of its directors, officers, employees or agents, in either case (x) or (y), on account of any past or presently existing condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind. 17. Miscellaneous Provisions. ------------------------ (a) Each of the Borrowers hereby ratifies and confirms all of its obligations to the Agent and the Banks under the Loan Agreement, as amended hereby, and the other Loan Documents, including, without limitation, the Loans, and each of the Borrowers hereby affirms its absolute and unconditional promise to pay to the Banks and the Agent the Revolving Credit Loans, the Term Loans, the Swing Line Loans, reimbursement obligations and all other amounts due or to become due and payable to the Banks and the Agent under the Loan Agreement and the other Loan Documents, as amended hereby. Except as expressly amended hereby, each of the Loan Agreement and the other Loan Documents shall continue in full force and effect. This Amendment and the Loan Agreement shall hereafter be read and construed together as a single document, and all references in the Loan Agreement, any other Loan Document or any agreement or instrument related to the Loan Agreement shall hereafter refer to the Loan Agreement as amended by this Amendment. (b) No consent or waiver herein granted shall extend to or affect any obligations not expressly herein consented to or waived or shall impair any right of the Agent or the Banks consequent thereon. No consent or waiver herein granted shall extend beyond the term expressly set forth herein for such consent or waiver, nor shall anything contained herein be deemed to imply any willingness of the Agent or the Banks to agree to, or otherwise prejudice any rights of the Agent and the Banks with respect to, any similar consents or waivers that may be requested for any future period. (c) Without limiting the expense reimbursement requirements set forth in Section 10.6 of the Loan Agreement, each of the Borrowers agrees to pay on demand all costs and expenses, including reasonable attorneys' fees, of the Agent incurred in connection with this Amendment. -10- (d) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). (e) This Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. -11- IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Amendment to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written. MEDALLION FINANCIAL CORP. By: /s/ Alvin Murstein -------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ Larry D. Hall ------------------- Name: Larry D. Hall Title: Corporate Controller MEDALLION BUSINESS CREDIT, LLC By: /s/ Alvin Murstein -------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ Larry D. Hall ------------------- Name: Larry D. Hall Title: Corporate Controller FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association), as Agent, as Swing Line Lender and as one of the Banks By: /s/ Kevin J. Foley ------------------- Name: Kevin J. Foley Title: Sr. VP -12- HSBC BANK USA By: /s/ Bruce Wicks ---------------- Name: Bruce Wicks Title: Vice President CITIZENS BANK By: /s/ Thomas D. Opie -------------------- Name: Thomas D. Opie Title: VP THE BANK OF NEW YORK By: /s/ Gordon Smith ------------------ Name: Gordon Smith Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Carol A. Kornbluth ----------------------- Name: Carol A. Kornbluth Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: /s/ Robert J. Fainelli ----------------------- Name: Robert J. Fainelli Title: First Vice President By: /s/ Tim McCurry ---------------- Name: Tim McCurry Title: Assistant Manager -13- EUROPEAN AMERICAN BANK By: /s/ George L. Stirling ------------------------- Name: George L. Stirling Title: VP BANK LEUMI By: /s/ John Koenigsberg /s/ Phyllis Rosenfeld ---------------------- --------------------- Name: John Koenigsberg Phyllis Rosenfeld Title: First VP Vice President THE BANK OF TOKYO By:____________________________________________ Name: Title: -14- Schedule 3 ---------- Medallion Financial Corp. Investment in Subsidiaries December 31, 2000
- -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- Investment in Subsidiaries - -------------------------------------------------------------------------------------------------- Equity in Medallion Funding Corp. $ 50,541,390.96 - -------------------------------------------------------------------------------------------------- Equity in Medallion Capital Corp. 17,798,176.72 - -------------------------------------------------------------------------------------------------- Equity in Edwards Capital Corp. 15,439,943.09 - -------------------------------------------------------------------------------------------------- Equity in Transportation Capital Corp. 9,719,481.77 - -------------------------------------------------------------------------------------------------- Equity in Freshstart Venture Capital 6,944,861.23 - -------------------------------------------------------------------------------------------------- Equity in BLLC 6,398,947.64 - -------------------------------------------------------------------------------------------------- Equity in MBC 3,261,858.45 - -------------------------------------------------------------------------------------------------- Equity 2,000.00 - -------------------------------------------------------------------------------------------------- Total Investments in Subsidiaries $ 110,106,659.86 - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- Investments in Unconsolidated Subsidiary - -------------------------------------------------------------------------------------------------- Total Investments in Unconsolidated Subsidiary $ 1,856,421.31 - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- Intercompany Receivables - -------------------------------------------------------------------------------------------------- Intercompany - MBC $ 37,263,991.05 - -------------------------------------------------------------------------------------------------- Loan Receivable - BLI 16,714,478.37 - -------------------------------------------------------------------------------------------------- Interest Receivable - BLI 6,541,171.95 - -------------------------------------------------------------------------------------------------- Interest Receivable - MBC 3,913,165.30 - -------------------------------------------------------------------------------------------------- Intercompany - Medallion Funding 2,583,139.08 - -------------------------------------------------------------------------------------------------- Intercompany - BLI 897,762.57 - -------------------------------------------------------------------------------------------------- Intercompany - Medallion Capital 358,633.97 - -------------------------------------------------------------------------------------------------- Intercompany - Freshstart 116,574.27 - -------------------------------------------------------------------------------------------------- Intercompany - TCC (6,626,033.94) - -------------------------------------------------------------------------------------------------- Intercompany - Edwards (8,358,159.11) - -------------------------------------------------------------------------------------------------- Total Intercompany Receivables $ 53,404,723.51 - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- $ 165,367,804.68 Total Investment in Subsidiaries - --------------------------------------------------------------------------------------------------
-15- Exhibit A --------- [Funding Amendment] EX-10.6 8 dex106.txt FIRST AMENDMENT AGREEMENT, DATED AS OF MARCH 30 ================================================================================ EXHIBIT 10.6 First Amendment Agreement Dated as of March 30, 2001 to Note Purchase Agreements dated as of June 1, 1999 Re: $22,500,000 7.20% Senior Secured Notes, Series A due June 1, 2004 and Re: $22,500,000 7.20% Senior Secured Notes, Series B due September 1, 2004 ================================================================================ Table of Contents
Section Heading Page Section 1. Forbearance.......................................................... 2 Section 2. Amendments to Existing Note Purchase Agreements and Outstanding Notes................................................ 6 Section 2.1. Amendment to Section 1.1............................................. 6 Section 2.2. Amendments to Section 1.2(a)......................................... 6 Section 2.3. Amendment to Section 10.6............................................ 6 Section 2.4. Amendment to Section 10.8............................................ 7 Section 2.5. Amendment to Section 10.10........................................... 7 Section 2.6. Amendments to Section 10............................................. 8 Section 2.7. Amendments to Definitions............................................ 8 Section 2.8. Addition of Definitions.............................................. 10 Section 2.9. Amendment to Schedules to the Existing Note Purchase Agreements...... 12 Section 2.10. Amendment of Outstanding Notes....................................... 12 Section 3. Consent to Amendment of Bank Loan Agreement, etc..................... 12 Section 4. Representations and Warranties....................................... 12 Section 4.1. Organization; Power and Authority.................................... 12 Section 4.2. Authorization, Etc................................................... 13 Section 4.3. Compliance with Laws, Other Instruments, Etc......................... 13 Section 4.4. No Default or Event of Default....................................... 13 Section 4.5. Compliance........................................................... 13 Section 4.6. No Consents.......................................................... 13 Section 4.7. Representations in Note Purchase Agreements.......................... 14 Section 4.8. Priority; Continued Effectiveness.................................... 14 Section 4.9. Investment Company Act............................................... 14 Section 5. Conditions Precedent................................................. 14 Section 5.1. Execution............................................................ 15 Section 5.2. Representations and Warranties....................................... 15 Section 5.3. Related Transactions................................................. 15 Section 5.4. Amendment Fee........................................................ 15 Section 5.5. Payment of Fees...................................................... 15 Section 6. Post Closing Matters................................................. 15 Section 6.1. Post Closing Matters................................................. 15 Section 7. Miscellaneous........................................................ 16 Section 7.1. Governing Law........................................................ 16
-i- Section 7.2. Counterparts......................................................... 17 Section 7.3. Captions............................................................. 17 Section 7.4. References to Existing Note Purchase Agreements...................... 17 Section 7.5. Expenses............................................................. 17 Section 7.6. Ratification......................................................... 17 Section 7.7. Exchange of Notes.................................................... 17 Section 8. Release.............................................................. 17 Section 8.1. Release.............................................................. 17
ii Medallion Funding Corp. First Amendment Agreement Re: Note Purchase Agreements dated as of June 1, 1999 and $22,500,000 7.20% Senior Secured Notes, Series A due June 1, 2004 and $22,500,000 7.20% Senior Notes, Series B due September 1, 2004 To each of the institutional investors named on Schedule 1 attached hereto (the "Holders") Ladies and Gentlemen: Reference is made to the separate Note Purchase Agreements each dated as of June 1, 1999 (the "Existing Note Purchase Agreements") between Medallion Funding Corp., a New York corporation (the "Company") and each of the Purchasers named on Schedule A attached thereto, respectively, pursuant to which the Company issued and sold (i) $22,500,000 aggregate principal amount of its 7.20% Senior Secured Notes, Series A, due June 1, 2004 and (ii) $22,500,000 aggregate principal amount of its 7.20% Senior Secured Notes, Series B, due September 1, 2004, all of which are currently outstanding (collectively, the "Outstanding Notes"). The Existing Note Purchase Agreements, as amended hereby, are hereinafter referred to as the "Note Purchase Agreements." The Outstanding Notes, as amended hereby, are hereinafter referred to as the "Notes." Recitals Whereas, the Company is currently in default under Section 10.6 of each of the Existing Note Purchase Agreements and needs the waiver of the Required Holders with respect thereto and the Company desires to make certain amendments to the Existing Note Purchase Agreements. Capitalized terms not otherwise defined herein shall have the meaning set forth for such terms set forth in the Note Purchase Agreements. For good and valuable consideration, the Company hereby requests the waiver of an outstanding Default and Event of Default and the amendment of certain provisions of the Existing Note Purchase Agreements, as hereinafter provided. Medallion Funding Corp. First Amendment Agreement Upon your acceptance hereof, the acceptance of the Required Holders and satisfaction of the conditions precedent set forth in Section 5 hereof, this Amendment shall constitute a contract between the Company and the Holders, but only in the respects hereinafter set forth: Section 1. Forbearance Upon the satisfaction of each of the conditions precedent set forth in Section 5 hereof, the Holders hereby agree, for so long as (a) no Default or Event of Default (other than the 2000 Forbearance Events and the 2001 Forbearance Events, each as defined below), has occurred and is continuing and (b) the Company complies with the requirements contained in this Section 1, (x) to forbear from enforcing any of its rights and remedies under Section 12.2 of the Note Purchase Agreements or under any of the other Note Documents arising solely as a result of the occurrence of any of the 2000 Forbearance Events or the 2001 Forbearance Events and (y) the Holders will not demand accelerated payment of the obligations under Section 12.1 of the Note Purchase Agreements or otherwise cause any of such obligations to become immediately due and payable solely as a result of the occurrence of any of the 2000 Forbearance Events or the 2001 Forbearance Events, except that the Company shall in any event continue to be required to make any and all payments that are provided for in the Note Documents and this Amendment when and as the same are due and payable pursuant to the terms of the Note Documents and this Amendment. So long as no Default or Event of Default, other than the 2000 Forbearance Events or 2001 Forbearance Events, has occurred and is continuing, nothing herein shall be deemed to prevent the Company from exercising any right or taking any action otherwise permitted by the Note Purchase Agreements or the other Note Documents, which such right or action is conditioned upon the absence of any Default or Event of Default. The forbearances contained in this Section 1 shall be contingent on the Company's compliance with the following requirements: The Company shall not permit, at any time following January 1, 2001, Forbearance Net Finance Assets to be less than the sum of Forbearance Senior Debt and SBA Debt, as evidenced by a Borrowing Base Certificate prepared in accordance with Section 6.1(i) of the Bank Loan Agreement and the Company shall not permit the Excess Amount to exceed (a) $6,700,000 from January 1, 2001 through January 31, 2001, (b) $5,700,000 from February 1, 2001 through February 28, 2001, (c) $5,000,000 from March 1, 2001 through March 31, 2001, or (d) $0 as of April 1, 2001 and thereafter. The Company shall deliver a copy of such Borrowing Base Certificate to the Holders substantially concurrently upon delivery thereof to the Banks. For purposes hereof, the following terms shall have the following meanings: "2000 Forbearance Events" shall mean any Default or Event of Default which may arise or have arisen under (a) Section 10.6 of the Note Purchase Agreements as a result of the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt being less than 1.15:1 at any time during the year 2000 or (b) Section 11(f)(i) as a result of a default under Section 2.5(c) or Section 7.3 of the Bank Loan Agreement as a result of Minimum Asset Coverage exceeding Net -2- Medallion Funding Corp. First Amendment Agreement Finance Assets or the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt being less than 1.20:1 at any time during the year 2000, but excluding any Default or Event of Default which may arise or have arisen in the event that the ratio of Forbearance Net Finance Assets to Adjusted Minimum Asset Coverage as of December 31, 2000 is less than .97:1. "2001 Forbearance Events" shall mean any Default or Event of Default which may arise or have arisen under (a) Section 10.6 of the Note Purchase Agreements from January 1, 2001 through June 30, 2001 or (b) Section 11(f)(i) as a result of a default under Section 2.5(c) or Section 7.3 of the Bank Loan Agreement as a result of Minimum Asset Coverage exceeding Net Finance Assets or the ratio of Net Finance Assets to the sum of Senior Debt and SBA Debt being less than 1.20:1 at any time from January 1, 2001 through June 30, 2001; provided, however, that the Excess Amount does not exceed (w) $6,700,000 as of January 31, 2001, (x) $5,700,000 as of February 28, 2001, (y) $5,000,000 as of March 31, 2001, and (z) $0 as of April 30, 2001. "Adjusted Minimum Asset Coverage" shall mean the sum, without duplication of (a) all Indebtedness of the Company under the Note Purchase Agreements, plus (b) all CP Debt, plus (c) Indebtedness of the Company under the Bank Loan Agreement, plus (d) SBA Debt, plus (e) the aggregate amount of other Indebtedness of the Company relating to the borrowing of money, including the issuance of notes or bonds and the maximum drawing amount of all letters of credit outstanding, plus (f) Indebtedness of the type referred to in clause (e) of another Person guaranteed by the Company. "Adjusted Net Finance Assets" shall mean the sum of the following clauses, in each case based on the clauses set forth in the definition of Forbearance Net Finance Assets: clause (i), plus clause (ii), minus clause (iii), plus clause (iv), plus clause (v), plus clause (vi). "Advance Amounts" shall mean, as of any date of calculation, an amount equal to the sum of: (i) the aggregate amount of all Eligible Yellow Cab Loans shown on the Company's balance sheet as of the last day of the most recent month, minus (ii) the portion, if any, of the Eligible Yellow Cab Loans that the Company, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus (iii) the Eligible Yellow Cab Loans which are more than 60 days past due, -3- Medallion Funding Corp. First Amendment Agreement provided, that if all or any part of any Eligible Yellow Cab Loan would be excluded under any of the provisions set forth above, then the entire amount of such Eligible Yellow Cab Loan shall be excluded. "Eligible Yellow Cab Loan" shall mean, with respect to any Yellow Cab Loan, the portion of the outstanding principal balance of, plus accrued interest (excluding deferred interest) on such Yellow Cab Loan, in each case owed to the Company and attributable to the portion of such Yellow Cab Loan made by the Company. "Excess Amount" shall mean the difference of Adjusted Minimum Asset Coverage minus Adjusted Net Finance Assets; provided that (a) as of January 31, 2001, the Excess Amount shall not be greater than $6,700,000; (b) as of February 28, 2001, the Excess Amount shall not be greater than $5,700,000; (c) as of March 31, 2001 the Excess Amount shall not be greater than $5,000,000; and (d) as of April 30, 2001 and thereafter, the Excess Amount shall be $0. "Forbearance Net Finance Assets" shall mean, as of any date of calculation, an amount equal to the sum of: (i) cash and Short Term Investments shown on the Company's balance sheet as of such date, plus (ii) 83.33% of the sum, without duplication, of (A) the aggregate outstanding principal balances of, plus accrued interest (excluding deferred interest) on, all Eligible Medallion Loans and Eligible Commercial Loans shown on the Company's balance sheet as of the last day of the most recent month, minus (B) the portion, if any, of the Loans, plus accrued interest (excluding deferred interest) thereon, that the Company, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus (C) the Eligible Loans, plus accrued interest (excluding deferred interest) thereon, which are more than 60 days past due, minus (iii) 83.33% of the aggregate outstanding principal of, plus accrued interest (excluding deferred interest) on, the SBA Collateral; plus (iv) 83.33% of the amount of 75% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due, plus (v) 83.33% of the amount of 65% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due; plus (vi) 83.33% of the Advance Amounts of Eligible Yellow Cab Loans; plus -4- Medallion Funding Corp. First Amendment Agreement (vii) the Excess Amount; provided, that if all or any part of any Loan would be excluded under any of the provisions set forth above, then the entire outstanding principal amount of, plus accrued interest (including deferred interest) on, such Loan shall be excluded. "Forbearance Senior Debt" shall mean the sum, without duplication, of (a) all Indebtedness of the Company under the Note Purchase Agreements, plus (b) all CP Debt, plus (c) Indebtedness of the Company under the Bank Loan Agreement, plus (d) the aggregate amount of other Indebtedness of the Company relating to the borrowing of money, including the issuance of notes or bonds and the maximum drawing amount of all letters of credit outstanding, plus (e) Indebtedness of the type referred to in clause (d) of another Person guaranteed by the Company. Notwithstanding the foregoing, SBA Debt shall not be included in Senior Debt. "Yellow Cab Loan" shall mean any Medallion Loan made to YellowOne LLC or YellowTwo LLC secured by Medallion Rights in respect of Chicago Medallions, that (a) satisfies subsections (b) through (f) of the Eligibility Requirements (other than, with respect to the requirement set forth in subsection (e) thereof, by virtue of the subordination provisions of such Yellow Cab Loan), provided that, with respect to the requirement set forth in subsection (f) thereof, the endorsement on any promissory note evidencing such Yellow Cab Loan explicitly states that any pledge is subject to the requirements of any relevant participation agreement, (b) with respect to accrued interest thereon is guaranteed by Yellow Cab Management, Inc., its Affiliate, (c) does not exceed, with respect to the portion thereof owed to the Company and attributable to the portion of such Yellow Cab Loan made by the Company, an aggregate principal amount of $4,000,000, and when aggregated with all other Yellow Cab Loans does not exceed, with respect to the portion thereof owed to the Company and attributable to the portion of such Yellow Cab Loan made by the Company, an aggregate principal amount of $9,000,000, and (d) matures no later than June 30, 2005. In the event that (i) the foregoing requirements are not met, (ii) a Default or Event of Default (other than any of the 2000 Forbearance Events or 2001 Forbearance Events) shall occur and be continuing or (iii) the forbearance obligations of the Agent and the Banks under Amendment No. 4 to the Bank Loan Agreement shall terminate, the forbearance obligations of the Holders shall, at the option of the Required Holders, terminate. Upon such termination, the Holders shall be relieved of the forbearance obligations set forth in this Section 1 and, accordingly, the Holders shall then be free in their sole and absolute discretion (subject to the applicable provisions of the Note Documents) to declare any and all of the obligations and other amounts owing to the Holders under the Note Documents to be immediately due and payable, with the effect of such declaration as set forth in Section 12.1 of the Note Purchase Agreements (it being understood that, in the case of any Event of Default under Sections 11(g) or (h) of the Note Purchase Agreements, all such obligations and other amounts shall become immediately -5- Medallion Funding Corp. First Amendment Agreement due and payable automatically, without any requirement of notice from any Holder); and the Holders may, if they so elect, proceed to enforce their rights and remedies under or in respect of the Note Documents (subject to the applicable provisions thereof) and applicable law. The remedies specified herein are cumulative and not exclusive of any other remedy including, but not limited to, the remedies under the Note Documents as a result of the existence of Events of Default. The failure or delay of any Holder to exercise any right or remedy after any particular Event of Default shall not operate as a waiver of any remedy in that or in any subsequent instance. Section 2. Amendments to Existing Note Purchase Agreements and Outstanding Notes. The Existing Note Purchase Agreements and Outstanding Notes are hereby amended as of the Effective Date as follows: Section 2.1. Amendment to Section 1.1. Section 1.1 of each of the Existing Note Purchase Agreements shall be and is hereby amended to add the following paragraph to read as follows: "From and after the First Amendment Effective Date, all references in this Agreement, the Other Agreements and the Notes to "7.20% Senior Secured Notes" are hereby amended to read "7.35% Senior Secured Notes." Section 2.2. Amendments to Section 1.2. Section 1.2 of each of the Existing Note Purchase Agreements shall be and is hereby amended to add the following paragraph to read as follows: "Following the Company's compliance with the requirements of Section 6 of the First Amendment (including Liens in favor of the "Agent" (as defined in the Financial Agreement) under the Financial Agreement to secure the obligations thereunder), the obligations of the Company under this Agreement and the other Note Documents (i) shall also be secured by a perfected first priority security interest (subject only to Liens permitted hereunder and entitled to priority under applicable law and to the Collateral Agency Agreement) in the Capital Stock of the Guarantor pursuant to the terms of the Parent Pledge Agreement and (ii) shall also be guaranteed by the Guarantor pursuant to the terms of the Guaranty (subject to the terms of the Collateral Agency Agreement); provided, however, that the Guaranty shall provide that, with the prior written consent of the Required Holders, which consent shall not be conditioned on any requirement to repay Indebtedness, such Guaranty shall be released upon any sale, transfer, public offering, merger, consolidation or other similar event involving the change of at least 33% of the legal and beneficial ownership of the Guarantor." Section 2.3. Amendment to Section 10.6. The reference to "1.15:1.0" in Section 10.6 of each of the Existing Note Purchase Agreements shall be and is hereby amended to read "1.00:1.0." -6- Medallion Funding Corp. First Amendment Agreement Section 2.4. Amendment to Section 10.8. Section 10.8 of each of the Existing Note Purchase Agreements shall be and is hereby amended (i) to delete the term "or" at the end of clause (c), (ii) to delete the "." at the end of clause (d) and replace it with ";" and (iii) to add the following as new clauses (e) through (h): "(e) make any Investment (including by way of the acquisition of any Person) in any Subsidiary or Affiliate, or any Person that after taking into account such Investment would become a Subsidiary or Affiliate, other than (i) Investments in the Parent in an aggregate amount not to exceed $4,200,000, and (ii) Investments existing on the First Amendment Effective Date and listed on Schedule C hereto; (f) sell, discount or otherwise dispose of Loans or any Collateral; sell, discount or otherwise dispose of other Receivables or obligations owing to the Company, with or without recourse, otherwise than (i) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 of the Bank Loan Agreement, (ii) for collection in the ordinary course of business, (iii) to the Collateral Agent for the benefit of the holders of the Notes and, for so long as the Intercreditor Agreement and the Collateral Agency Agreement are in effect, the Collateral Agent for the benefit of the Banks (as defined in the Intercreditor Agreement), the Senior Noteholders, the CP Holders and the Additional Senior Creditors (as defined in the Intercreditor Agreement), or (iv) Loans disposed of to Affiliates for cash for a price at least equal to the outstanding principal amount thereof (without discount thereon); (g) make, or commit to make, or acquire or commit to acquire, any Loan to or from any Person or any other assets of any Person unless, with respect to any Loan, the Company reasonably believes that such Loan constitutes, or upon funding or acquisition will constitute, an Eligible Loan; provided, that, it shall not be a breach of this covenant if any Loan that would otherwise cause the breach is not in a material amount and in any event is not included in Forbearance Net Finance Assets as defined in Section 1 of the First Amendment; or (h) fail to file upon making or acquiring a Loan, all required Company Financing Statements and Mortgage Assignments, deliver to the Agent all instruments and chattel paper with respect to such Loans, or take such other actions as may be required in order to assure that the Collateral Agent for the benefit of the holders of the Notes receives a first priority perfected security interest or mortgage interest therein; provided, that, it shall not be a breach of this covenant if the Loan that would otherwise cause the breach is not in a material amount and in any event is not included in Forbearance Net Finance Assets as defined in Section 1 of the First Amendment." Section 2.5. Amendment to Section 10.10. Section 10.10 of each of the Existing Note Purchase Agreements shall be and is hereby amended in its entirety to read as follows: "Section 10.10. Portfolio Purchases. The Company will not, and will not permit any Subsidiary to, make, or obligate itself to make, any Portfolio Purchase, other than, so long as no Default or Event of Default then exists or would exist as a result thereof, the repurchase of certain Medallion Loans sold to Sterling Bank prior to the First -7- Medallion Funding Corp. First Amendment Agreement Amendment Effective Date, provided that the aggregate amount of such repurchase shall not exceed $2,000,000." Section 2.6. Amendments to Section 10. Section 10 of each of the Existing Note Purchase Agreements shall be and is hereby amended to add Section 10.13 and Section 10.14 to read as follows: "Section 10.13. CFO. The Company shall retain a full-time chief financial officer, or an interim chief financial officer (or a firm performing such function), by May 1, 2001. Section 10.14. Effectiveness of Note Documents. The Company shall ensure that each of the Note Documents, including, once executed and delivered, the Guaranty, shall be in full force and effect, and not cancelled, terminated, revoked or rescinded, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the holders of the Notes, and shall further ensure that neither the Company nor any of its Subsidiaries or respective stockholders shall commence any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Note Documents." Section 2.7. Amendments to Definitions. The following definitions of terms set forth in Schedule B to each of the Existing Note Purchase Agreements shall be and are hereby amended and restated in their entirety as follows: "'Capital Stock' with respect to any entity, shall mean common stock, preferred stock, limited or general partnership interests, limited liability company membership interests, and any and all shares or other equivalents (however designated) of any other equity interests, of such entity." "'Collateral' shall mean and include the assets, property or interests in property of whatever nature whatsoever, real, personal or mixed, tangible or intangible, of the Company, and the pledge of the Guarantor's stock by the Parent pursuant to the terms of the Parent Pledge Agreement, securing the Notes and all other property and interests in personal property that shall, from time to time, secure the Notes." "'Default Rate' means that rate of interest that is the greater of (i) 9.35% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by Citibank, N.A. in New York, New York as its "base" or "prime" rate." "'Net Finance Assets' shall mean, as of any date of calculation, an amount equal to the sum of: (i) cash and Short Term Investments shown on the Company's balance sheet as of such date, plus -8- Medallion Funding Corp. First Amendment Agreement (ii) 83.33% of the sum, without duplication, of (A) the aggregate outstanding principal balances of, plus accrued interest (excluding deferred interest) on, all Eligible Medallion Loans and Eligible Commercial Loans shown on the Company's balance sheet as of the last day of the most recent month, minus (B) the portion, if any, of the Loans, plus accrued interest (excluding deferred interest) thereon, that the Company, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus (C) the Eligible Loans, plus accrued interest (excluding deferred interest) thereon, which are more than 60 days past due, minus (iii) 83.33% of the aggregate outstanding principal of, plus accrued interest (excluding deferred interest) on, the SBA Collateral; plus (iv) 83.33% of the amount of 75% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 60 days past due, but are less than 91 days past due, plus (v) 83.33% of the amount of 65% of the Eligible Medallion Loans and accrued interest (excluding deferred interest) thereon which are more than 90 days past due, but are less than 121 days past due; plus (vi) 83.33% of the Advance Amounts of Eligible Yellow Cab Loans; provided, that if all or any part of any Loan would be excluded under any of the provisions set forth above, then the entire outstanding principal amount of, plus accrued interest (including deferred interest) on, such Loan shall be excluded." "'Note Documents' shall mean and include this Agreement, the Other Agreements, the Notes, the Security Documents, any Mortgage Assignment, the Intercreditor Agreement, the Company Financing Statements, the Guaranty, the Parent Pledge Agreement and the Collateral Agency Agreement and all other documents, instruments, certificates and notices at any time delivered in connection with the foregoing, in each case, as amended, modified or restated from time to time." "'Restricted Payment' shall mean, with respect to the Company, any of the following: (i) the payment of any dividend on or any distribution in respect of any Capital Stock of the Company (other than the payment of Dividends required to be paid in order to avoid the imposition of income taxes pursuant to the Code, or, for so long as the Company is a registered investment company under the 1940 Act, the payment of such Dividends as may be required by the 1940 Act), (ii) any defeasance, redemption, repurchase or other acquisition or retirement for value prior to scheduled maturity of any Indebtedness ranked pari passu or subordinate in right of payment to the Notes or of any Indebtedness having a maturity date prior to the maturity of the Notes (other than Permitted Debt), (iii) [intentionally -9- Medallion Funding Corp. First Amendment Agreement omitted], (iv) the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company or of any warrants, rights or options to purchase or acquire any Capital Stock of the Company (other than pursuant to and in accordance with stock option plans and other benefit plans for management or employees of the Company, in an aggregate amount not in excess of $500,000 during any 12-month period, provided that any such redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company or of any warrants, rights or options to purchase or acquire any Capital Stock of the Company otherwise permitted by this parenthetical clause shall not be permitted following the occurrence and during the continuance of any Default or Event of Default), (v) any expenditure or the incurrence of any liability to make any expenditure for any Restricted Investment not permitted by Section 10.8 hereof, (vi) when incurred during the continuance of any Default or Event of Default any expenditure or the incurrence of any liability to make any expenditure for any Restricted Investment permitted by Section 10.8 hereof (other than Loans made in the ordinary course of business), (vii) the payment of any principal of, interest on, or any amounts due in respect of, any Indebtedness not permitted hereunder and (viii) the payment of any principal or interest on, or any other amounts due in respect of, any Subordinated Debt (except to the extent otherwise approved by the Required Holders)." "'Senior Debt' shall mean the sum, without duplication, of (a) all Indebtedness of the Company under this Agreement, plus (b) all CP Debt, plus (c) Indebtedness of the Company under the Bank Loan Agreement, plus (d) the aggregate amount of other Indebtedness of the Company relating to the borrowing of money, including the issuance of notes or bonds and the maximum drawing amount of all letters of credit outstanding, plus (e) Indebtedness of the type referred to in clause (d) of another Person guaranteed by the Company. Notwithstanding the foregoing, SBA Debt shall not be included in Senior Debt." Section 2.8. Addition of Definitions. The following definitions of terms shall be and are hereby added to Schedule B to each of the Existing Note Purchase Agreements to read as follows "'Advance Amounts' shall mean, as of any date of calculation, an amount equal to the sum of: (i) the aggregate amount of all Eligible Yellow Cab Loans shown on the Company's balance sheet as of the last day of the most recent month, minus (ii) the portion, if any, of the Eligible Yellow Cab Loans that the Company, in its reasonable business judgment, deems to be uncollectible or subject to classification as non- accruing, minus (iii) the Eligible Yellow Cab Loans which are more than 60 days past due, -10- Medallion Funding Corp. First Amendment Agreement provided, that if all or any part of any Eligible Yellow Cab Loan would be excluded under any of the provisions set forth above, then the entire amount of such Eligible Yellow Cab Loan shall be excluded." "'Collateral Agency Agreement' shall mean the Collateral Agency Agreement, by and among the collateral agent named therein, the Agent, the Banks, the holders of the Notes and the agent and the banks party to the Financial Agreement." "'Eligible Yellow Cab Loan' shall mean, with respect to any Yellow Cab Loan, the portion of the outstanding principal balance of, plus accrued interest (excluding deferred interest) on such Yellow Cab Loan, in each case owed to the Company and attributable to the portion of such Yellow Cab Loan made by the Company." "'Financial Agreement' shall mean the Second Amended and Restated Loan Agreement dated as of September 22, 2000, by and among Medallion Financial Corp., Medallion Business Credit, LLC, Fleet National Bank (f/k/a Fleet Bank, National Association) as agent and the other financial institutions from time to time party thereto, as amended and in effect from time to time." "'First Amendment' shall mean the First Amendment Agreement dated as of March 30, 2001 among the Company and the holders of the Notes." "'First Amendment Effective Date' shall mean the "Effective Date," as defined in Section 5 of the First Amendment." "'Guarantor' shall mean Medallion Taxi Media, Inc., a New York corporation." "'Guaranty' shall mean the Guaranty from the Guarantor in favor of the holders of the Notes, guaranteeing the payment and performance of the obligations owing by the Company to the holders of the Notes pursuant to the Note Documents." "'Parent' shall mean Medallion Financial Corp., a Delaware corporation." "'Parent Pledge Agreement' shall mean the Stock Pledge Agreement from the Parent in favor of the Collateral Agent and holders of the Notes, pledging the stock of the Guarantor as security for the obligations owing by the Company to the holders of the Notes pursuant to the Note Documents." "'Yellow Cab Loan' shall mean any Medallion Loan made to YellowOne LLC or YellowTwo LLC secured by Medallion Rights in respect of Chicago Medallions, that (a) satisfies subsections (b) through (f) of the Eligibility Requirements (other than, with respect to the requirement set forth in subsection (e) thereof, by virtue of the subordination provisions of such Yellow -11- Medallion Funding Corp. First Amendment Agreement Cab Loan), provided that, with respect to the requirement set forth in subsection (f) thereof, the endorsement on any promissory note evidencing such Yellow Cab Loan explicitly states that any pledge is subject to the requirements of any relevant participation agreement, (b) with respect to accrued interest thereon is guaranteed by Yellow Cab Management, Inc., its Affiliate, (c) does not exceed, with respect to the portion thereof owed to the Company and attributable to the portion of such Yellow Cab Loan made by the Company, an aggregate principal amount of $4,000,000, and when aggregated with all other Yellow Cab Loans does not exceed, with respect to the portion thereof owed to the Company and attributable to the portion of such Yellow Cab Loan made by the Company, an aggregate principal amount of $9,000,000, and (d) matures no later than June 30, 2005." Section 2.9. Amendment to Schedules to the Existing Note Purchase Agreements. The Schedules to the Existing Note Purchase Agreements shall be and are hereby amended by adding in proper order therein Schedule C attached hereto as Exhibit A. Section 2.10. Amendment of Outstanding Notes. The Outstanding Series A Notes and Exhibit 1(a) to the Existing Note Purchase Agreements shall be and are hereby amended to be in the form of Exhibit B attached hereto. The Outstanding Series B Notes and Exhibit 1(b) to the Existing Note Purchase Agreements shall be and are hereby amended to be in the form of Exhibit C attached hereto. Section 3. Consent to Amendment of Bank Loan Agreement, etc. Each of the Holders hereby consents (a) to the amendment of the Bank Loan Agreement in the form and substance satisfactory to the Holders and attached hereto as Exhibit B for purposes of Section 2 of the Intercreditor Agreement and Section 10.11 of the Existing Note Purchase Agreements, and (b) for purposes of Section 8(b) of the Intercreditor Agreement, to the exclusion from the Collateral covered by the Intercreditor Agreement, of the shares of the Guarantor contemplated to be pledged to the Agent as collateral security pursuant to the Parent Pledge Agreement (as such term is defined in the Existing Note Purchase Agreements, as amended hereby) and the Guaranty by the Guarantor (as such terms are defined in the Existing Note Purchase Agreements, as amended hereby); provided however, that with respect to the consent set forth in (b) above, such consent is conditioned upon the shares of the Guarantor and the Guaranty by the Guarantor being subject to an intercreditor agreement (substantially in the form of the Intercreditor Agreement) to be entered into upon terms and conditions satisfactory to the Required Holders. Section 4. Representations and Warranties. The Company represents and warrants to the Holders as of the date hereof, and as of any date on which the conditions set forth in Section 6 below are met, that: Section 4.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of -12- Medallion Funding Corp. First Amendment Agreement incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and the corporate authority to own or hold under lease the Properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, and to execute, deliver and perform this Amendment and the Note Documents. Section 4.2. Authorization, Etc. The execution and delivery by the Company of this Amendment and all other instruments and agreements required to be executed and delivered by the Company in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by the Company of any of its obligations and agreements under the Amendment Documents and the Note Purchase Agreements and the other Note Documents, as amended hereby, have been duly authorized by all necessary corporate action on the part of the Company, each of the Amendment Documents has been duly executed and delivered by the Company. Each of the Amendment Documents, the Existing Note Purchase Agreements and the other Note Documents, as amended hereby, constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 4.3. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company of this Amendment and the other Note Documents do not and will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority known to be applicable to the Company or any Subsidiary. Section 4.4. No Default or Event of Default. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing excluding any of the 2000 Forbearance Events or 2001 Forbearance Events. Section 4.5. Compliance. The Company has performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof. Section 4.6. No Consents. No approval or consent of, or filing with, any Governmental Authority is required to make valid and legally binding the execution, delivery or performance by the Borrower of the Amendment Documents or the Note Purchase Agreements or other Note Documents, as amended hereby, or the consummation by the Company of the transactions among the parties contemplated hereby and thereby or referred to herein. -13- Medallion Funding Corp. First Amendment Agreement Section 4.7. Representations in Note Purchase Agreements. The representations and warranties contained in Section 5 of the Note Purchase Agreements were true and correct at and as of the date made. Except (i) to the extent of changes resulting from transactions contemplated or permitted by the Note Purchase Agreements and the other Note Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse), (ii) to the extent that such representations and warranties relate expressly to an earlier date, (iii) solely with respect to Section 5.8(b) of the Note Purchase Agreements, as a result of the occurrence of the 2000 Forbearance Events and the 2001 Forbearance Events and (iv) after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment, also are correct at and as of the date hereof. The Company acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in Section 5 of the Note Purchase Agreements, a breach of which shall constitute an Event of Default. Section 4.8. Priority; Continued Effectiveness. Except as otherwise permitted under the Note Purchase Agreements, the Collateral Agent, for the ratable benefit of the holders of the Notes, has or will have, following the Company's compliance with the requirements of Section 6 of this Amendment, a valid and perfected first priority security interest (subject to the terms of the Intercreditor Agreement and the Collateral Agency Agreement) in and to all Collateral, enforceable against the Company and all third parties in all relevant jurisdictions and securing the payment of the Notes and all other sums payable under or in connection with the Note Documents. Each of the Company Security Agreement and, after the execution and delivery thereof, the Parent Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the holders of the Notes, a valid and perfected first priority security interest (subject to the terms of the Intercreditor Agreement and the Collateral Agency Agreement and except as otherwise permitted hereunder) in and to the Collateral described therein securing the payment of the Notes and all other sums payable under or in connection with the Note Documents, whether incurred prior to or after the Effective Date. No additional Company Financing Statements are required to be filed in order to maintain the perfection and priority of the security interests created pursuant to the Company Security Agreement and the Parent Pledge Agreement. Section 4.9. Investment Company Act. The Company is a closed-end management investment company registered under the 1940 Act. The Company is an "investment company," as such term is defined in the 1940 Act. The Company is not a "business development company," as such term is defined in the 1940 Act. The purchase of the Notes by the holders, the application of the proceeds and repayment thereof by the Company and the performance of the transactions contemplated by this Agreement and the other Note Documents did not and will not violate any provision of said Act, or any rule, regulation or order issued by the SEC thereunder. Section 5. Conditions Precedent. This First Amendment Agreement shall be effective when each of the following conditions shall have been satisfied (the "Effective Date"): -14- Medallion Funding Corp. First Amendment Agreement Section 5.1. Execution. Each of the Holders shall have received this Amendment, duly executed by the Company. The Holders shall have consented to this Amendment as evidenced by their execution thereof. Section 5.2. Representations and Warranties. The representations and warranties of the Company set forth in Section 3 hereof are true and correct as of the Effective Date. Section 5.3. Related Transactions. (a) The Holders shall have received an executed copy of the amendment of the Financial Agreement in the form attached hereto as Exhibit D. (b) The Holders shall have received an executed copy of the Amendment No. 4 to the Bank Loan Agreement in the form attached hereto as Exhibit E. Section 5.4. Amendment Fee. The Holders shall have received by wire transfer to each Holder's account specified in Schedule A to the Existing Note Purchase Agreements their pro rata portion of an amendment fee equal to 0.10% of the outstanding principal amount of the Outstanding Notes. Section 5.5. Payment of Fees. The Company shall have paid the fees and disbursements of the Holders' special counsel, Chapman and Cutler, incurred in connection with the negotiation, preparation, execution and delivery of this Amendment. Upon receipt of all of the foregoing, this Amendment shall become effective. Section 6. Post Closing Matters. Section 6.1. Post Closing Matters. The Company agrees to take the following actions and deliver the following items to the Holders no later than April 30, 2001: (a) The Company shall deliver to the Holders, from each of the parties thereto, duly executed originals of each of the Guaranty, the Parent Pledge Agreement, the Collateral Agency Agreement and, if and to the extent deemed necessary or appropriate by the Holders, an amendment to the Intercreditor Agreement (the "New Security Documents"), each in form and substance satisfactory to the Holders; (b) The Company shall deliver to the Holders, from the Secretary of each of the Parent and the Guarantor a copy, certified by such Secretary to be true and complete as of such date, of each of (i) its charter or other organizational documents as in effect on such date of certification, (ii) its by-laws as in effect on such date, and (iii) the resolutions of its Board of Directors or other management authorizing, to the extent it is a party thereto, the execution, delivery and performance of the New Security Documents; provided, however, that in lieu of providing the items required by subsections (i) and (ii) of this subsection (b), such Secretary may certify, to the extent true and correct, that charter documents and by-laws previously provided to the Holders are true and correct as of such date and have not been amended, rescinded or revoked; -15- Medallion Funding Corp. First Amendment Agreement (c) The Company shall deliver to the Holders, from each of the Parent and the Guarantor, an incumbency certificate, dated as of such date, signed by a duly authorized officer of such Person and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, the New Security Documents; (d) The Company shall deliver to the Holders, from the Parent and the Guarantor, good standing certificates for each such Person, issued by the Secretary of State of each such entity's jurisdiction of incorporation or organization, and evidence that such Person is duly licensed and qualified as a foreign organization in good standing under the laws of each jurisdiction where the failure to qualify as such would have a Material Adverse Effect; (e) The Company shall deliver to the Holders a favorable legal opinion addressed to the Holders, dated as of such date, in form and substance satisfactory to the Holders, from counsel to the Parent and the Guarantor, with respect to each such Person concerning corporate or other applicable entity authority matters and the enforceability of each of the Guaranty, the Parent Pledge Agreement, and the perfection of the security interests granted therein, and concerning such other matters as the Holders may request; (f) The Company shall deliver to the Collateral Agent all stock certificates or other certificates evidencing the Parent's equity interests in the Guarantor, together with undated stock powers or other instruments of endorsement duly executed in blank; (g) The Holders shall have received the results of such UCC filing searches for the Guarantor as the Holders shall have requested; (h) The Company shall deliver to the Collateral Agent UCC-1 financing statements executed by the Guarantor in form and substance satisfactory to the Company, for filing in each jurisdiction deemed necessary or appropriate by the Collateral Agent; and (i) Such other items, documents, agreements, items or actions as the Holders may reasonably request in order to effectuate the transactions contemplated hereby. The Company acknowledges and agrees that the failure to deliver any of the above-referenced items, or take the above-referenced actions, by April 30, 2001, shall constitute an Event of Default under Section 11(c) of the Note Purchase Agreements. Section 7. Miscellaneous. Section 7.1. Governing Law. This Amendment shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such state. -16- Medallion Funding Corp. First Amendment Agreement Section 7.2. Counterparts. This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Amendment. Section 7.3. Captions. The descriptive headings of the various Sections or parts of this Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 7.4. References to Existing Note Purchase Agreements. Any and all notices, requests, certificates and other instruments executed and delivered concurrently with or after the effectiveness of this Amendment may refer to the Existing Note Purchase Agreements and the Outstanding Notes without making specific reference to this Amendment but nevertheless all such references shall be deemed to include this Amendment unless the context shall otherwise require. Section 7.5. Expenses. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay all expenses relating to the subject matter of this Amendment, including but not limited to the reasonable out-of-pocket expenses of the Holders and the reasonable fees and expenses of Chapman and Cutler, special counsel for the Holders. Section 7.6. Ratification. Except to the extent hereby modified or amended, the Existing Note Purchase Agreements are in all respects hereby ratified, confirmed and approved by the parties hereto. Section 7.7. Exchange of Notes. At the request of any holder of Notes, the Company agrees to issue and deliver new Notes in the form of Exhibit B or C hereto (the "Amended Notes"), as the case may be, to the such holder in exchange for its Outstanding Notes and shall be issued in accordance with Section 13 of the Note Purchase Agreements. The Holders agree to surrender their Outstanding Notes to the Company in exchange for the Amended Notes, and the Outstanding Notes shall be canceled by the Company and shall be void. The Company shall pay any stamp tax or governmental charge imposed upon such exchange. The Company agrees and acknowledges that the amendments affected pursuant to this Amendment and the exchange of Notes for Outstanding Notes pursuant to this Amendment, if any, shall not be deemed a prepayment, redemption or repurchase of the Outstanding Notes for any purpose, including Section 8 of the Existing Note Purchase Agreements. Section 8. Release. Section 8.1. Release. In order to induce the holders of the Notes to enter into this Amendment, the Company, on behalf of itself and its Subsidiaries, acknowledges and agrees that: (a) such Person does not have any claim or cause of action against any holder of Notes (or any of its respective directors, officers, employees or agents); (b) such Person does not have any offset right, counterclaim or defense of any kind against any of their respective obligations, indebtedness or liabilities to any holder; and (c) each of the holders of the Notes has heretofore properly performed and satisfied in a timely manner all of its obligations to such Person. The Company, on behalf of itself and its Subsidiaries, wishes to eliminate any possibility that any -17- Medallion Funding Corp. First Amendment Agreement past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the holders' rights, interests, contracts, collateral security or remedies. Therefore, the Company, on behalf of itself and its Subsidiaries, unconditionally releases, waives and forever discharges (x) any and all liabilities, obligations, duties, promises or indebtedness of any kind of any holder of Notes to such Person, except the obligations to be performed by any holder on or after the date hereof as expressly stated in this Amendment, the Note Purchase Agreements and the other Note Documents, and (y) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which such Person might otherwise have against any holder of Notes or any of its directors, officers, employees or agents, in either case (x) or (y), on account of any past or presently existing condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind. -18- Medallion Funding Corp. First Amendment Agreement Medallion Funding Corp. By /s/ Alvin Murstein ------------------- Name: Alvin Murstein Title: Chief Executive Officer By /s/ Larry D. Hall ------------------ Name: Larry D. Hall Title: Corporate Controller -19- Medallion Funding Corp. First Amendment Agreement The foregoing First Amendment Agreement is hereby accepted and agreed to as of the date aforesaid, and each of the undersigned hereby confirms that on March 30, 2001 it held Notes of the Company as indicated on Schedule 1 attached hereto and that on the date of actual execution hereof it continues to hold such Notes. The Travelers Insurance Company By /s/ A. William Carnduff ------------------------ Name: A. William Carnduff Title: Second Vice President First Citicorp Life Insurance Company By Travelers Asset Management International Company LLC By /s/ A. William Carnduff ------------------------ Name: A. William Carnduff Title: Second Vice President Citicorp Life Insurance Company By Travelers Asset Management International Company LLC By /s/ A. William Carnduff ------------------------ Name: A. William Carnduff Title: Second Vice President United of Omaha Life Insurance Company By /s/ Edwin H. Garrison, Jr. --------------------------- Name: Edwin H. Garrison, Jr. Title: First Vice President -20- Medallion Funding Corp. First Amendment Agreement Companion Life Insurance Company By /s/ Edwin H. Garrison, Jr. --------------------------- Name: Edwin H. Garrison, Jr. Title: Assistant Treasurer -21- Schedule 1 Principal Amount and Series of Name of Holder of Outstanding Notes Held as of Outstanding Notes March 30, 2001 The Travelers Insurance Company $10,000,000 Series A $10,000,000 Series B First Citicorp Life Insurance Company $ 1,000,000 Series A $ 1,000,000 Series B Citicorp Life Insurance Company $ 1,000,000 Series A $ 1,000,000 Series B $ 500,000 Series A $ 500,000 Series B United of Omaha Life Insurance Company $ 8,500,000 Series A $ 8,500,000 Series B Companion Life Insurance Company $ 1,500,000 Series A $ 1,500,000 Series B Schedule 1 (to First Amendment Agreement) Exhibit A (to First Amendment Agreement) "Existing Investments as of First Amendment Effective Date None Schedule C (to Note Purchase Agreement)" Exhibit B (to First Amendment Agreement) [Form of Series A Note] Medallion Funding Corp. 7.35% Senior Secured Note, Series A, Due June 1, 2004 No. RA-[_] [Date] $[____________] PPN 58403# AA 5 For Value Received, the undersigned, Medallion Funding Corp. (herein called the "Company"), a corporation organized and existing under the laws of the State of New York, hereby promises to pay to [________________], or registered assigns, the principal sum of [________________] Dollars on June 1, 2004, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of [7.20% per annum from the date hereof to and including March 29, 2001 and]/1/ 7.35% per annum from [March 30, 2001]1 [the date hereof]/2/, payable semiannually, on the first day of June and December in each year, commencing with the June or December next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 9.35% or (ii) 2% over the rate of interest publicly announced by Citibank, N.A. from time to time in New York, New York as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of the Company or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Secured Notes, Series A (herein called the "Notes") issued, together with the Company's 7.35% Senior Secured Notes, Series B, due September 1, 2004, pursuant to separate Note Purchase Agreements, dated as of June 1, 1999, (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. ______________________________________ /1/ For Notes dated prior to March 30, 2001 only. /2/ For Notes dated March 30, 2001 or thereafter. Exhibit 1(a) (to Note Purchase Agreement) This Note is secured by, and this Note and the holder hereof are also entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Security Documents (as such term is defined in the Note Purchase Agreements). Reference is hereby made to each of the foregoing for a statement of the nature and extent of the benefits afforded thereby and the rights of the holders in respect thereof. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. Medallion Funding Corp. By______________________________________ Its___________________________________ E-1(a)-2 Exhibit C (to First Amendment Agreement) [Form of Series B Note] Medallion Funding Corp. 7.35% Senior Secured Note, Series A, Due September 1, 2004 No. RB-[_] [Date] $[____________] PPN 58403# AB 3 For Value Received, the undersigned, Medallion Funding Corp. (herein called the "Company"), a corporation organized and existing under the laws of the State of New York hereby promises to pay to [________________], or registered assigns, the principal sum of [________________] Dollars on September 1, 2004, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of [7.20% per annum from the date hereof to and including March 29, 2001 and]/1/ 7.35% per annum from [March 30, 2001]1 [the date hereof]/2/, payable semiannually, on the first day of March and September in each year, commencing with the March or September next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand, at a rate per annum from time to time equal to the greater of (i) 9.35% or (ii) 2% over the rate of interest publicly announced by Citibank, N.A. from time to time in New York, New York as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of the Company or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Secured Notes, Series B (herein called the "Notes") issued, together with the Company's 7.35% Senior Secured Notes, Series A, due June 1, 2004, pursuant to separate Note Purchase Agreements, dated as of June 1, 1999 (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in _____________________________________ /1/ For Notes dated prior to March 30, 2001 only. /2/ For Notes dated March 30, 2001 or thereafter. Exhibit 1(b) (to Note Purchase Agreement) Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is secured by, and this Note and the holder hereof are also entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Security Documents (as such term is defined in the Note Purchase Agreements). Reference is hereby made to each of the foregoing for a statement of the nature and extent of the benefits afforded thereby and the rights of the holders in respect thereof. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. Medallion Funding Corp. By______________________________________ Its___________________________________ E-1(b)-2 Form of Amendment to Financial Agreement Exhibit D (to First Amendment Agreement) Form of Amendment to Bank Loan Agreement Exhibit E (to First Amendment Agreement) EX-10.7 9 dex107.txt GUARANTY, DATED AS OF APRIL 30, 2001 - -------------------------------------------------------------------------------- EXHIBIT 10.7 GUARANTY DATED as of April 30, 2001 by MEDALLION TAXI MEDIA, INC. in favor of FLEET NATIONAL BANK, as Agent for itself and the Banks named herein and THE BANKS - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- 1. Definitions......................................................... 1 2. Guaranty of Payment and Performance................................. 1 3. Guarantor's Agreement to Pay Enforcement Costs, etc................. 2 4. Waivers by Guarantor; Bank's Freedom to Act......................... 2 5. Unenforceability of Obligations Against Borrower.................... 3 6. Subrogation; Subordination.......................................... 4 6.1. Waiver of Rights Against Borrower......................... 4 6.2. Subordination............................................. 4 6.3. Provisions Supplemental................................... 4 7. Security; Setoff.................................................... 5 8. Further Assurances.................................................. 5 9. Release............................................................. 5 10. Termination; Reinstatement.......................................... 6 11. Successors and Assigns.............................................. 6 12. Amendments and Waivers.............................................. 6 13. Notices............................................................. 7 14. Governing Law; Consent to Jurisdiction.............................. 7 15. Waiver of Jury Trial................................................ 7 16. Miscellaneous....................................................... 8
GUARANTY -------- GUARANTY, dated as of April 30, 2001, by MEDALLION TAXI MEDIA, INC., a New York corporation (the "Guarantor") in favor of (i) FLEET NATIONAL BANK, a national banking association, as agent (hereinafter, in such capacity, the "Agent" for itself and the other banking institutions (hereinafter, collectively, the "Banks") which are or may become parties to an Amended and Restated Loan Agreement dated as of December 24, 1997 (as amended and in effect from time to time, the "Loan Agreement"), among Medallion Funding Corp., a New York corporation ("Borrower"), the Banks and the Agent and (ii) each of the Banks. WHEREAS, the Borrower and the Guarantor are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group; WHEREAS, the Guarantor expects to receive substantial direct and indirect benefits from the extensions of credit to the Borrower by the Banks pursuant to the Loan Agreement (which benefits are hereby acknowledged); WHEREAS, it is a condition to the effectiveness of Amendment No. 4 that the Guarantor execute and deliver to the Agent, for the benefit of the Banks and the Agent, a guaranty substantially in the form hereof; and WHEREAS, the Guarantor wishes to guaranty the Borrower's obligations to the Banks and the Agent under or in respect of the Loan Agreement as provided herein; NOW, THEREFORE, the Guarantor hereby agrees with the Banks and the Agent as follows: 1. Definitions. The term "Obligations" shall have the meaning provided ----------- therefor in the Borrower Security Agreement (as defined in the Loan Agreement); all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Loan Agreement. 2. Guaranty of Payment and Performance. The Guarantor hereby guarantees to the Banks and the Agent the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the -2- Obligations including all such which would become due but for the operation of the automatic stay pursuant to (S)362(a) of the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Agent or any Bank first attempt to collect any of the Obligations from the Borrower or resort to any collateral security or other means of obtaining payment. Should the Borrower default in the payment or performance of any of the Obligations, the obligations of the Guarantor hereunder with respect to such Obligations in default shall, upon demand by the Agent, become immediately due and payable to the Agent, for the benefit of the Banks and the Agent, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Agent on any number of occasions. All payments by the Guarantor hereunder shall be made to the Agent, in the manner and at the place of payment specified therefor in the Loan Agreement, for the account of the Banks and the Agent. 3. Guarantor's Agreement to Pay Enforcement Costs, etc. The Guarantor --------------------------------------------------- further agrees, as the principal obligor and not as a guarantor only, to pay to the Agent, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by the Agent or any Bank in connection with the Obligations, this Guaranty and the enforcement hereof and thereof, together with interest on amounts recoverable under this (S)3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Loan Agreement, provided that if -------- such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount. 4. Waivers by Guarantor; Bank's Freedom to Act. The Guarantor agrees ------------------------------------------- that the Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any Bank with respect thereto. The Guarantor waives promptness, diligences, presentment, demand, protest, notice of acceptance, notice of any Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to -3- require the marshalling of assets of the Borrower or any other entity or other person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Agent or any Bank to assert any claim or demand or to enforce any right or remedy against the Borrower or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Loan Agreement, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations, (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligation; (v) the adequacy of any rights which the Agent or any Bank may have against any collateral security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which the Agent or any Bank might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any "one action" or "anti-deficiency" law which would otherwise prevent the Agent or any Bank from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against the Guarantor before or after the Agent's or such Bank's commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by the Agent or any Bank. 5. Unenforceability of Obligations Against Borrower. If for any reason ------------------------------------------------ the Borrower has no legal existence or is under no legal -4- obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Borrower by reason of the Borrower's insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Loan Agreement, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor. 6. Subrogation; Subordination. -------------------------- 6.1. Waiver of Rights Against Borrower. Until the final --------------------------------- payment and performance in full of all of the Obligations, the Guarantor shall not exercise and hereby waives any rights against the Borrower arising as a result of payment by the Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with the Agent or any Bank in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; the Guarantor will not claim any setoff, recoupment or counterclaim against the Borrower in respect of any liability of the Guarantor to the Borrower; and the Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Agent or any Bank. 6.2. Subordination. The payment of any amounts due with respect ------------- to any indebtedness of the Borrower for money borrowed or credit received now or hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all of the Obligations. The Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Obligations, the Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Borrower to the Guarantor until all of the Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still outstanding, such amounts shall be collected, enforced -5- and received by the Guarantor as trustee for the Banks and the Agent and be paid over to the Agent, for the benefit of the Banks and the Agent, on account of the Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty. 6.3. Provisions Supplemental. The provisions of this (S)6 shall ----------------------- be supplemental to and not in derogation of any rights and remedies of the Banks and the Agent under any separate subordination agreement which the Agent may at any time and from time to time enter into with the Guarantor for the benefit of the Banks and the Agent. 7. Setoff. Regardless of any other means of obtaining payment of any of ------ the Obligations, each of the Agent and the Banks is hereby authorized at any time and from time to time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Guarantor under this Guaranty, whether or not the Agent or such Bank shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured. 8. Further Assurances. The Guarantor agrees that it will from time to ------------------ time, at the request of the Agent, do all such things and execute all such documents as the Agent may consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Banks and the Agent hereunder. The Guarantor acknowledges and confirms that the Guarantor itself has established its own adequate means of obtaining from the Borrower on a continuing basis all information desired by the Guarantor concerning the financial condition of the Borrower and that the Guarantor will look to the Borrower and not to the Agent or any Bank in order for the Guarantor to keep adequately informed of changes in the Borrower's financial condition. 9. Release. Notwithstanding any provision of this Guaranty to the ------- contrary, this Guaranty shall be released, with the prior written consent of the Agent and the Required Banks, which consent shall not be conditioned on any requirement to repay Indebtedness, upon any sale, transfer, public offering, merger, consolidation or other similar event involving the change of at least 33% of the legal and beneficial ownership of the Guarantor. -6- 10. Termination; Reinstatement. This Guaranty shall remain in full -------------------------- force and effect until the Agent is given written notice of the Guarantor's intention to discontinue this Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Agent at the address of the Agent for notices set forth in (S) 10.4 of the Loan Agreement. No such notice shall affect any rights of the Agent or any Bank hereunder, including without limitation the rights set forth in (S)(S) 4 and 6, with respect to any Obligations incurred or accrued prior to the receipt of such notice or any Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to any Obligation is rescinded or must otherwise be returned by the Agent or any Bank upon the insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as though such payment had not been made or value received. 11. Successors and Assigns. This Guaranty shall be binding upon the ---------------------- Guarantor, its successors and assigns, and shall inure to the benefit of the Agent and the Banks and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Bank may assign or otherwise transfer the Loan Agreement, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Bank herein, all in accordance with (S) 12 of the Loan Agreement. The Guarantor may not assign any of its obligations hereunder without the prior written consent of the Agent and the Banks (and any such assignment without such consent shall be null and void). 12. Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Agent with the consent of the Majority Banks. No failure on the part of the Agent or any Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right -7- hereunder preclude any other or further exercise thereof or the exercise of any other right. 13. Notices. All notices and other communications called for hereunder ------- shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth beneath its signature hereto, and if to the Agent, at the address for notices to the Agent set forth on Exhibit A of the Loan Agreement, or at such address as either party may designate in writing to the other. 14. Governing Law; Consent to Jurisdiction. THIS GUARANTY IS -------------------------------------- INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the State of New York or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified by reference in (S) 13. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. 15. Waiver of Jury Trial. THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A -------------------- JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Guarantor (i) certifies that neither the Agent or any Bank nor any representative, agent or attorney of the Agent or any Bank has represented, expressly or otherwise, that the Agent or any Bank would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Loan Agreement and the other Loan Documents to which the Agent or any Bank is a party, the Agent and -8- the Banks are relying upon, among other things, the waivers and certifications contained in this (S)15. 16. Miscellaneous. This Guaranty constitutes the entire agreement of ------------- the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. MEDALLION TAXI MEDIA, INC. By: /s/ Andrew M. Murstein ----------------------- Andrew M. Murstein President Address: 437 Madison Avenue 38th Floor New York, New York 10022 Telecopy: 212-328-2125 EX-10.8 10 dex108.txt GUARANTY, DATED AS OF APRIL 30, 2001 ================================================================================ EXHIBIT 10.8 Guaranty Dated as of April 30, 2001 by Medallion Taxi Media, Inc. in favor of the holders from time to time of those certain $22,500,000 7.20% Senior Secured Notes, Series A due June 1, 2004 and $22,500,000 7.20% Senior Secured Notes, Series B due September 1, 2004 of Medallion Funding Corp. ================================================================================ Table of Contents
Section Heading Page Section 1. Definitions.......................................................................... 1 Section 2. Guaranty of Payment and Performance.................................................. 2 Section 3. Guarantor's Agreement to Pay Enforcement Costs, etc.................................. 2 Section 4. Waivers by Guarantor; Bank's Freedom to Act.......................................... 3 Section 5. Unenforceability of Obligations Against Borrower..................................... 3 Section 6. Subrogation; Subordination........................................................... 4 Section 7. Setoff............................................................................... 4 Section 8. Further Assurances................................................................... 4 Section 9. Release.............................................................................. 5 Section 10. Termination; Reinstatement........................................................... 5 Section 11. Successors and Assigns............................................................... 5 Section 12. Amendments and Waivers............................................................... 5 Section 13. Notices.............................................................................. 6 Section 14. Governing Law; Consent to Jurisdiction............................................... 6 Section 15. Waiver of Jury Trial................................................................. 6 Section 16. Miscellaneous........................................................................ 6
-i- Guaranty, dated as of April 30, 2001 ("Guaranty"), by Medallion Taxi Media, Inc., a New York corporation (the "Guarantor") in favor of (i) the holders from time to time (herein, the "Noteholders") of those certain $22,500,000 aggregate principal amount 7.20% Senior Secured Notes, Series A due June 1, 2004 (the "Series A Notes") and $22,500,000 aggregate principal amount 7.20% Senior Secured Notes, Series B Notes due September 1, 2004 (the "Series B Notes" and together with the Series A Notes, the "Notes") issued pursuant to those certain Note Purchase Agreements each dated as of June 1, 1999 (as amended pursuant to that certain First Amendment Agreement dated as of March 30, 2001 (the "First Amendment") and as further amended and in effect from time to time, the "Note Agreements"), between Medallion Funding Corp., a New York corporation ("Borrower") and each of the purchasers set forth in Schedule A thereto. Whereas, the Borrower and the Guarantor are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group; Whereas, the Guarantor has received and expects to continue to receive substantial direct and indirect benefits from the extensions of credit to the Borrower by the Noteholders pursuant to the Note Agreements (which benefits are hereby acknowledged); Whereas, it is a condition to the effectiveness of the First Amendment that the Guarantor execute and deliver to the Noteholders, for the benefit of the Noteholders, a guaranty substantially in the form hereof; and Whereas, the Guarantor wishes to guaranty the Borrower's obligations to the Noteholders under or in respect of the Note Agreements as provided herein; Now, Therefore, the Guarantor hereby agrees with the Noteholders as follows: Section 1. Definitions. All capitalized terms used herein without definition shall have the respective meanings provided therefor in the Note Agreements. "Obligations" means any and all present and future indebtedness and all performance obligations which may at any time be owing by the Borrower to the Collateral Agent or any Noteholder, however arising, under the Note Agreements, this Guaranty or any other Note Document between the Collateral Agent and/or any Noteholder and the Borrower in connection with any of the foregoing or in connection with any Note Document, whether now in existence or incurred hereafter, whether incurred directly or incurred by others and assumed by the Borrower, whether secured by mortgage, pledge, or lien upon or security interest in any property of the Borrower, or any other person, whether such indebtedness or other obligation is absolute or contingent, joint or several, matured or unmatured, direct or indirect, and whether the Borrower is liable for such indebtedness or other obligation as principal, surety, endorser, guarantor, or otherwise. Without limiting the generality of the foregoing, the Obligations shall include the liability of the Borrower to any Noteholder for all balances owing to any Noteholder under the Note Agreements or under any other agreement or arrangement now or hereafter entered into between the Borrower and the Collateral Agent or any Noteholder in connection therewith, and, solely in connection with this Guaranty or the Note Agreements, the following: (i) indebtedness owing by the Borrower to the Collateral Agent or any Noteholder, (ii) the liability of the Borrower to the Collateral Agent or any Noteholder as maker or endorser of any promissory note or other instrument for the payment of money, and (iii) the liability of the Borrower to the Collateral Agent or any Noteholder under any instrument of guaranty of indemnity, or arising under any guarantee, endorsement, or undertaking which the Collateral Agent or any Noteholder may make or issue to others for the account of the Borrower. The Obligations shall also include interest, premium (if any), Make-Whole Amount (if any), commissions, financing and service charges, and expenses and fees, including but not limited to the costs and expenses of collection of the Obligations (including the fees and disbursements of accountants), the costs and expenses of the Collateral Agent and the costs and expenses of filing, perfecting, preserving, retaking, holding, and preparing any of the Collateral for sale chargeable to the Borrower and due from the Borrower under this Guaranty, the Note Agreements or under any other agreement or arrangement which may be now or hereafter entered into between the Borrower and the Collateral Agent or the Noteholders. Section 2. Guaranty of Payment and Performance. The Guarantor hereby guarantees to the Noteholders the full and punctual payment when due (whether at stated maturity, by required prepayment, by acceleration or otherwise), as well as the performance, of all of the Obligations including all such which would become due but for the operation of the automatic stay pursuant to (S)362(a) of the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that any Noteholder first attempt to collect any of the Obligations from the Borrower or resort to any collateral security or other means of obtaining payment. Should the Borrower default in the payment or performance of any of the Obligations, the obligations of the Guarantor hereunder with respect to such Obligations in default shall, upon demand by the Required Holders, become immediately due and payable to the Noteholders, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Noteholders on any number of occasions. All payments by the Guarantor hereunder shall be made to the Noteholders, in the manner and at the place of payment specified therefor in the Note Agreements, for the account of the Noteholders. Section 3. Guarantor's Agreement to Pay Enforcement Costs, etc. The Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to the Noteholders, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by any Noteholder in connection with the Obligations, this Guaranty and the enforcement hereof and thereof, together with interest on amounts recoverable under this (S)3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Note Agreements, provided that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount. -2- Section 4. Waivers by Guarantor; Bank's Freedom to Act. The Guarantor agrees that the Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Noteholder with respect thereto. The Guarantor waives promptness, diligence, presentment, demand, protest, notice of acceptance, notice of any Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Borrower or any other entity or other person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of any Noteholder to assert any claim or demand or to enforce any right or remedy against the Borrower or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Note Agreements, the other Note Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations, (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligation; (v) the adequacy of any rights which any Noteholder may have against any collateral security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which any Noteholder might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any "one action" or "anti-deficiency" law which would otherwise prevent any Noteholder from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against the Guarantor before or after such Noteholder's commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by any Noteholder. Section 5. Unenforceability of Obligations Against Borrower. If for any reason the Borrower has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Borrower by reason of the Borrower's insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or for any other reason, al1 such amounts otherwise subject to acceleration under the terms of the Note Agreements, the other -3- Note Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor. Section 6. Subrogation; Subordination. Section 6.1. Waiver of Rights Against Borrower. Until the final payment and performance in full of all of the Obligations, the Guarantor shall not exercise and hereby waives any rights against the Borrower arising as a result of payment by the Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with any Noteholder in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; the Guarantor will not claim any setoff, recoupment or counterclaim against the Borrower in respect of any liability of the Guarantor to the Borrower; and the Guarantor waives any benefit of and any right to participate in any collateral security which may be held by or for the benefit of any Noteholder. Section 6.2. Subordination. The payment of any amounts due with respect to any indebtedness of the Borrower for money borrowed or credit received now or hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all of the Obligations. The Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Obligations, the Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Borrower to the Guarantor until all of the Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still outstanding, such amounts shall be collected, enforced and received by the Guarantor as trustee for the Noteholders and be paid over to the Noteholders, on account of the Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty. Section 6.3. Provisions Supplemental. The provisions of this (S)6 shall be supplemental to and not in derogation of any rights and remedies of the Noteholders under any separate subordination agreement which the Noteholders may at any time and from time to time enter into with the Guarantor for the benefit of the Noteholders. Section 7. Setoff. Regardless of any other means of obtaining payment of any of the Obligations, each of the Noteholders is hereby authorized at any time and from time to time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Guarantor under this Guaranty, whether or not such Noteholder shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured. Section 8. Further Assurances. The Guarantor agrees that it will from time to time, at the request of any Noteholder, do all such things and execute all such documents as such Noteholder may consider necessary ,or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Noteholder hereunder. The Guarantor acknowledges -4- and confirms that the Guarantor itself has established its own adequate means of obtaining from the Borrower on a continuing basis all information desired by the Guarantor concerning the financial condition of the Borrower and that the Guarantor will look to the Borrower and not to any Noteholder in order for the Guarantor to keep adequately informed of changes in the Borrower's financial condition. Section 9. Release. Notwithstanding any provision of this Guaranty to the contrary, this Guaranty shall be released, with the prior written consent of the Required Holders, which consent shall not be conditioned on any requirement to repay Indebtedness, upon any sale, transfer, public offering, merger, consolidation or other similar event involving the change of at least 33% of the legal and beneficial ownership of the Guarantor. Section 10. Termination; Reinstatement. This Guaranty shall remain in full force and effect until the Noteholders are given written notice of the Guarantor's intention to discontinue this Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Obligations. No such notice shall be effective unless received and acknowledged by an officer of each of the Noteholders at the address of each of the Noteholders for notices set forth in (S)18 of each of the Note Agreements. No such notice shall affect any rights of any Noteholder hereunder, including without limitation the rights set forth in (S)(S)4 and 6, with respect to any Obligations incurred or accrued prior to the receipt of such notice or any Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to any Obligation is rescinded or must otherwise be returned by any Noteholder upon the insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as though such payment had not been made or value received. Section 11. Successors and Assigns. This Guaranty shall be binding upon the Guarantor, its successors and assigns, and shall inure to the benefit of the Noteholders and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Noteholder may assign or otherwise transfer the Note Agreements, the other Note Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Noteholder herein, all in accordance with (S)13 of the Note Agreements. The Guarantor may not assign any of its obligations hereunder without the prior written consent of the Noteholders (and any such assignment without such consent shall be null and void). Section 12. Amendments and Waivers. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Required Holders. No failure on the part of any Noteholder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any fight hereunder preclude by other or further exercise thereof or the exercise of any other right. -5- Section 13. Notices. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth beneath its signature hereto, and if to the Noteholders, at their respective addresses for notices to the Noteholders set forth in Section 18 of the Note Agreements, or at such address as either party may designate in writing to the other. Section 14. Governing Law; Consent to Jurisdiction. THIS GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the State of New York or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified by reference in Section 13. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. Section 1.5. Waiver of Jury Trial. THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Guarantor (j) certifies that neither any Noteholder nor any representative, agent or attorney of any Noteholder has represented, expressly or otherwise, that any Noteholder would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Note Agreements and the other Note Documents any Noteholder is a party, the Noteholders are relying upon, among other things, the waivers and certifications contained in this Section 15. Section 16. Miscellaneous. This Guaranty constitutes the entire agreement of the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall he in addition to any other guaranty of or collateral security for any of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. -6- In WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Medallion Taxi Media, Inc. By:/s/ Andrew M. Murstein ------------------------------- Andrew M. Murstein President By:/s/ Larry D.Hall ------------------------------ Larry D. Hall Corporate Controller Address: 437 Madison Avenue 38th Floor New York, New York Telex: (212) 328-2125 EX-10.9 11 dex109.txt GUARANTY, DATED APRIL 30, 2001 EXHIBIT 10.9 GUARANTY -------- DATED as of April 30, 2001 by Medallion Taxi Media, Inc. in favor of FLEET NATIONAL BANK, as Agent for itself and the Banks named herein and THE BANKS TABLE OF CONTENTS ----------------- 1. Definitions.......................................... 1 ----------- 2. Guaranty of Payment and Performance.................. 2 ---------------------------------- 3. Guarantor's Agreement to Pay Enforcement Costs, etc.. 2 --------------------------------------------------- 4. Waivers by Guarantor; Bank's Freedom to Act.......... 2 ------------------------------------------- 5. Unenforceability of Obligations Against Borrowers.... 3 ------------------------------------------------- 6. Subrogation; Subordination........................... 4 -------------------------- 6.1. Waiver of Rights Against Borrowers............ 4 ---------------------------------- 6.2. Subordination................................. 4 ------------- 6.3. Provisions Supplemental....................... 5 ----------------------- 7. Security; Setoff..................................... 5 ---------------- 8. Further Assurances................................... 5 ------------------ 9. Release.............................................. 5 ------- 10. Termination; Reinstatement........................... 6 -------------------------- 11. Successors and Assigns............................... 6 ---------------------- 12. Amendments and Waivers............................... 6 ---------------------- 13. Notices.............................................. 7 ------- 14. Governing Law; Consent to Jurisdiction............... 7 -------------------------------------- 15. Waiver of Jury Trial................................. 7 -------------------- 16. Miscellaneous........................................ 8 ------------- GUARANTY -------- GUARANTY, dated as of April 30, 2001, by Medallion Taxi Media, Inc., a New York corporation (the "Guarantor") in favor of (i) Fleet National Bank, a national banking association, as agent (hereinafter, in such capacity, the "Agent") for itself and the other banking institutions (hereinafter, collectively, the "Banks") which are or may become parties to a Second Amended and Restated Loan Agreement dated as of September 22, 2000 (as amended and in effect from time to time, the "Financial Agreement"), among Medallion Financial Corp., a Delaware corporation ("MFC"), Medallion Business Credit, LLC, a Delaware limited liability company ("MBC"; MBC and MFC are sometimes hereinafter referred to individually as a "Borrower" and together as the "Borrowers"), the Banks and the Agent and (ii) each of the Banks. WHEREAS, the Borrowers and the Guarantor are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group; WHEREAS, the Guarantor expects to receive substantial direct and indirect benefits from the extensions of credit to the Borrowers by the Banks pursuant to the Financial Agreement (which benefits are hereby acknowledged); WHEREAS, it is a condition to the effectiveness of Amendment No. 1 that the Guarantor execute and deliver to the Agent, for the benefit of the Banks and the Agent, a guaranty substantially in the form hereof; and WHEREAS, the Guarantor wishes to guaranty the Borrowers' obligations to the Banks and the Agent under or in respect of the Financial Agreement as provided herein; NOW, THEREFORE, the Guarantor hereby agrees with the Banks and the Agent as follows: 1. Definitions. The term "Obligations" shall have the meaning provided ----------- therefor in the Security Agreement (as defined in the Financial Agreement); all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Financial Agreement. -2- 2. Guaranty of Payment and Performance. The Guarantor hereby guarantees to ----------------------------------- the Banks and the Agent the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Obligations including all such which would become due but for the operation of the automatic stay pursuant to Section 362(a) of the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Agent or any Bank first attempt to collect any of the Obligations from the Borrowers or resort to any collateral security or other means of obtaining payment. Should the Borrowers default in the payment or performance of any of the Obligations, the obligations of the Guarantor hereunder with respect to such Obligations in default shall, upon demand by the Agent, become immediately due and payable to the Agent, for the benefit of the Banks and the Agent, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Agent on any number of occasions. All payments by the Guarantor hereunder shall be made to the Agent, in the manner and at the place of payment specified therefor in the Financial Agreement, for the account of the Banks and the Agent. 3. Guarantor's Agreement to Pay Enforcement Costs, etc. The Guarantor ---------------------------------------------------- further agrees, as the principal obligor and not as a guarantor only, to pay to the Agent, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by the Agent or any Bank in connection with the Obligations, this Guaranty and the enforcement hereof and thereof, together with interest on amounts recoverable under this Section 3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Financial Agreement, provided that if such interest exceeds the maximum amount permitted to be paid - -------- under applicable law, then such interest shall be reduced to such maximum permitted amount. 4. Waivers by Guarantor; Bank's Freedom to Act. The Guarantor agrees that ------------------------------------------- the Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any Bank with respect thereto. The Guarantor waives promptness, diligences, -3- presentment, demand, protest, notice of acceptance, notice of any Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Borrowers or any other entity or other person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Agent or any Bank to assert any claim or demand or to enforce any right or remedy against the Borrowers or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Financial Agreement, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations, (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligation; (v) the adequacy of any rights which the Agent or any Bank may have against any collateral security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which the Agent or any Bank might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any "one action" or "anti-deficiency" law which would otherwise prevent the Agent or any Bank from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against the Guarantor before or after the Agent's or such Bank's commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other -4- law which in any other way would otherwise require any election of remedies by the Agent or any Bank. 5. Unenforceability of Obligations Against Borrowers. If for any reason ------------------------------------------------- the Borrowers have no legal existence or are under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Borrowers by reason of the Borrowers' insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrowers, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Financial Agreement, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor. 6. Subrogation; Subordination. -------------------------- 6.1. Waiver of Rights Against Borrowers. Until the final payment and ---------------------------------- performance in full of all of the Obligations, the Guarantor shall not exercise and hereby waives any rights against the Borrowers arising as a result of payment by the Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with the Agent or any Bank in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; the Guarantor will not claim any setoff, recoupment or counterclaim against the Borrowers in respect of any liability of the Guarantor to the Borrowers; and the Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Agent or any Bank. 6.2. Subordination. The payment of any amounts due with respect to ------------- any indebtedness of the Borrowers for money borrowed or credit received now or hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all of the Obligations. The Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Obligations, the Guarantor will not demand, sue for or -5- otherwise attempt to collect any such indebtedness of the Borrowers to the Guarantor until all of the Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still outstanding, such amounts shall be collected, enforced and received by the Guarantor as trustee for the Banks and the Agent and be paid over to the Agent, for the benefit of the Banks and the Agent, on account of the Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty. 6.3. Provisions Supplemental. The provisions of this Section 6 shall ----------------------- be supplemental to and not in derogation of any rights and remedies of the Banks and the Agent under any separate subordination agreement which the Agent may at any time and from time to time enter into with the Guarantor for the benefit of the Banks and the Agent. 7. Setoff. Regardless of any other means of obtaining payment of any of ------ the Obligations, each of the Agent and the Banks is hereby authorized at any time and from time to time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Guarantor under this Guaranty, whether or not the Agent or such Bank shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured. 8. Further Assurances. The Guarantor agrees that it will from time to ------------------ time, at the request of the Agent, do all such things and execute all such documents as the Agent may consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Banks and the Agent hereunder. The Guarantor acknowledges and confirms that the Guarantor itself has established its own adequate means of obtaining from the Borrowers on a continuing basis all information desired by the Guarantor concerning the financial condition of the Borrowers and that the Guarantor will look to the Borrowers and not to the Agent or any Bank in order for the Guarantor to keep adequately informed of changes in the Borrowers' financial condition. 9. Release. Notwithstanding any provision of this Guaranty to the ------- contrary, this Guaranty shall be released, with the prior written -6- consent of the Agent and the Required Banks, which consent shall not be conditioned on any requirement to repay Indebtedness, upon any sale, transfer, public offering, merger, consolidation or other similar event involving the change of at least 33% of the legal and beneficial ownership of the Guarantor. 10. Termination; Reinstatement. This Guaranty shall remain in full force -------------------------- and effect until the Agent is given written notice of the Guarantor's intention to discontinue this Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Agent at the address of the Agent for notices set forth in Section 10.4 of the Financial Agreement. No such notice shall affect any rights of the Agent or any Bank hereunder, including without limitation the rights set forth in (S)(S)4 and 6, with respect to any Obligations incurred or accrued prior to the receipt of such notice or any Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to any Obligation is rescinded or must otherwise be returned by the Agent or any Bank upon the insolvency, bankruptcy or reorganization of the Borrowers, or otherwise, all as though such payment had not been made or value received. 11. Successors and Assigns. This Guaranty shall be binding upon the ---------------------- Guarantor, its successors and assigns, and shall inure to the benefit of the Agent and the Banks and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Bank may assign or otherwise transfer the Financial Agreement, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Bank herein, all in accordance with Section 12 of the Financial Agreement. The Guarantor may not assign any of its obligations hereunder without the prior written consent of the Agent and the Banks (and any such assignment without such consent shall be null and void). -7- 12. Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Agent with the consent of the Majority Banks. No failure on the part of the Agent or any Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 13. Notices. All notices and other communications called for hereunder ------- shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth beneath its signature hereto, and if to the Agent, at the address for notices to the Agent set forth on Exhibit A of the Financial Agreement, or at such address as either party may designate in writing to the other. 14. Governing Law; Consent to Jurisdiction. THIS GUARANTY IS INTENDED TO -------------------------------------- TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the State of New York or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified by reference in Section 13. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. 15. Waiver of Jury Trial. THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY -------------------- TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Guarantor (i) certifies -8- that neither the Agent or any Bank nor any representative, agent or attorney of the Agent or any Bank has represented, expressly or otherwise, that the Agent or any Bank would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Financial Agreement and the other Loan Documents to which the Agent or any Bank is a party, the Agent and the Banks are relying upon, among other things, the waivers and certifications contained in this Section 15. 16. Miscellaneous. This Guaranty constitutes the entire agreement of the ------------- Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. MEDALLION TAXI MEDIA, INC. By: /s/ Andrew M. Murstein ------------------------------ Andrew M. Murstein President Address: 437 Madison Avenue 38th Floor New York, New York 10022 Telecopy: 212-328-2125 -----END PRIVACY-ENHANCED MESSAGE-----