-----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, KIhGXS9fb1OYoIq9WbR+SoOEJ00zgZCMLClGe8GucEmmeO017FFR2GRjT5dBY5nu WjxD9NYfJ11hSEXupgX92g== 0000950130-02-002481.txt : 20020415 0000950130-02-002481.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950130-02-002481 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 24 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020408 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27812 FILM NUMBER: 02604922 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE 38 TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123282153 MAIL ADDRESS: STREET 1: 437 MADISON AVENUE STREET 2: 38TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 10-K 1 d10k.txt ANNUAL REPORT ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 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 04-3291176 (State of Incorporation) (IRS Employer Identification No.) 437 MADISON AVENUE, NEW YORK, NEW YORK 10022 (Address of principal executive offices) (Zip Code) (212) 328-2100 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of class) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K YES [ ] NO [ ]. The approximate aggregate market value of common equity held by non-affiliates of the Registrant as of April 1, 2002 was approximately $131 million based on the average bid and ask prices of the Registrant's Common Stock on the Nasdaq National Market as of the close of business on April 1, 2002. There were 18,242,035 shares of the Registrant's Common Stock outstanding as of April 1, 2002. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Definitive Proxy Statement for its 2002 Annual Meeting of Shareholders, which Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the Registrant's fiscal year-end of December 31, 2001, are incorporated by reference into Part III of this Form 10-K. MEDALLION FINANCIAL CORP. 2001 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS PAGE PART I...............................................................................................3 ITEM 1. BUSINESS OF THE COMPANY.....................................................................3 ITEM 2. PROPERTIES.................................................................................16 ITEM 3. LEGAL PROCEEDINGS..........................................................................16 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................16 PART II.............................................................................................17 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS...................17 ITEM 6. SELECTED FINANCIAL DATA....................................................................18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......19 ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ................................38 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...............................................39 ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES ......39 PART III............................................................................................39 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................................39 ITEM 11. EXECUTIVE COMPENSATION....................................................................39 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................39 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................39 PART IV.............................................................................................39 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...........................39
2 THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT MEDALLION FINANCIAL CORP. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY DESCRIBED IN THIS SECTION AND ELSEWHERE IN THIS REPORT. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE. PART I ITEM 1. BUSINESS OF THE COMPANY GENERAL Medallion Financial Corp. (the Company) is 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 13% and our commercial loan portfolio at a compound annual growth rate of 37%. Our total assets under management were approximately $737,000,000 as of December 31, 2001. The Company conducts its business through various wholly owned subsidiaries including its primary operating company, Medallion Funding Corp. (MFC). 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 (MBC), an originator of loans to small businesses for the purpose of financing inventory and receivables, Medallion Capital Inc. (MCI), which conducts a mezzanine financing business, and Freshstart Venture Capital Corp. (FSVC), a Small Business Investment Company (SBIC) which also originates and services medallion and commercial loans. FSVC operates as an SBIC, and is regulated and financed in part by the SBA. FSVC is regulated as a business development company under the 1940 Act and has elected to be treated as a RIC for federal income tax purposes. As an SBIC, FSVC's business is to provide loan financing to small and medium-sized businesses that qualify under SBA regulations as socially or economically disadvantaged. FSVC makes a substantial portion of its loans to finance taxicab medallions, taxicabs, and related assets, with the balance of the loans being made to other small business concerns. As an adjunct to the Company's taxicab medallion finance business, the Company operates a taxicab rooftop advertising business, Medallion Taxi Media, Inc. (Media), one of the largest taxicab rooftop advertising businesses in the nation, providing advertising space in 38 metropolitan areas across the United States and 19 cities in Japan. Since 1996, we have increased the number of our taxicab rooftop displays from 1,550 to approximately 11,000 at December 31, 2001, at a compound annual growth rate of 40%. Our goal is to provide stockholders with a stock that pays a high dividend yield and has strong growth potential. During 2001, we declared dividends totaling $0.38 per share, which equates to a dividend yield of approximately 5.3% based upon our stock price of $7.20 as of April 1, 2002. Alvin Murstein, Chairman and Chief Executive Officer, has over 40 years of experience in the ownership, management, and financing of taxicab medallions. Andrew Murstein, President, is the third generation in his family to be active in the business. We are a closed-end, non-diversified management investment company under the Investment Company Act of 1940, as amended (1940 Act). Our investment objectives are to provide a high level of distributable income, consistent with the preservation of capital, as well as long-term growth of net asset value. We have elected to be treated as a business development company registered under the 1940 Act. In addition, we have elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended (the Code). As a RIC, we will not be subject to US federal income tax on any investment company taxable income (which includes, among other things, dividends and interest reduced by deductible expenses) that we distribute to our stockholders if at least 90% of our investment company taxable income for that taxable year is distributed. To the extent permitted under our bank agreements, we intend to pay cash dividends to comply with this requirement. Stockholders can elect to reinvest distributions. MEDALLION LOANS Medallion loans of $252,675,000 comprised 56% of our $452,003,000 total loan portfolio as of December 31, 2001. Since 1979, we have originated, on a combined basis, approximately $800,000,000 in medallion loans in New York City, Chicago, Boston, Newark, Cambridge and other cities within the United States. Our medallion loan portfolio consists of mostly fixed-rate loans, collateralized by first security interests in taxicab medallions and related assets. As of December 31, 2001, approximately 81% of the principal amount of our medallion loans were in New York City. Although some of the medallion loans have from time to time been in arrears or in default, our loss experience on medallion loans has been negligible. We estimate that the average loan-to-value ratio of 3 all of the medallion loans is approximately 75%. In addition, we have recourse against a vast majority of the owners of the taxicab medallions and related assets through personal guarantees. The New York City Taxi and Limousine Commission, or TLC, estimates that the total value of all of New York City taxicab medallions and related assets exceeds $3.8 billion. We estimate that the total value of all taxicab medallions and related assets in the United States exceeds $4.2 billion. We believe that we will continue to develop growth opportunities by further penetrating the highly fragmented medallion financing markets. Additionally, in the future, the Company may enhance its portfolio growth rate with selective acquisitions of medallion financing businesses and their related portfolios. Since our initial public offering, we have acquired several additional medallion loan portfolios. Portfolio Characteristics Medallion loans generally require equal monthly payments covering accrued interest and amortization of principal over a ten to fifteen year schedule subject to a balloon payment of all outstanding principal after four or five years. More recently, we have begun to originate loans with one to four year maturities where interest rates are adjusted and a new maturity period set. Borrowers may prepay medallion loans upon payment of a fee of approximately 90 days interest. We believe that the likelihood of prepayment is a function of changes in interest rates. Borrowers are more likely to exercise prepayment rights in a decreasing interest rate environment when the interest rate payable on their loan is high relative to prevailing interest rates, and that they are less likely to prepay in a rising interest rate environment. We generally retain the medallion loans we originate; however, we do participate or sell shares of some loans or portfolios to other interested financial institutions. In these cases, we retain the borrower relationships and service the assets. The total amounts of medallion loans under management was $346,458,000 at December 31, 2001, compared to $381,215,000 at December 31, 2000. At December 31, 2001, substantially all medallion loans were secured by first security interests in taxicab medallions and related assets, and were originated at an approximate average loan-to-value ratio of 75%. In addition, we have recourse against the vast majority of direct and indirect owners of the medallions who personally guarantee the loans. Although personal guarantees increase the commitment of borrowers to repay their loans, there can be no assurance that the assets available under personal guarantees would, if required, be sufficient to satisfy the obligations secured by such guarantees. We believe that our medallion loan portfolio is of high credit quality because medallions have generally increased in value and are easy to repossess and resell in an active market. In instances where a borrower has defaulted on a loan, we have seized the medallion collateralizing that loan. If the loan was not brought current, the medallion was sold in the active market at prices at or in excess of the amounts due. Although some of medallion loans have from time to time been in arrears or in default, our loss experience on medallion loans has been negligible. Market Position We have originated and serviced medallion loans since 1979 and have established a leading position in the industry. Management has a long history of owning, managing, and financing taxicab fleets, taxicab medallions and corporate car services dating back to 1956. Medallion loans collateralized by New York City taxicab medallions and related assets comprised 81% of the value of the medallion loan portfolio at December 31, 2001. The balance consisted of medallion loans collateralized by taxicab medallions in Chicago, Boston, Newark, Cambridge, Philadelphia, Baltimore, and Hartford. We believe that there are significant growth opportunities in these and other metropolitan markets nationwide. 4 The following table displays information on medallion loans outstanding in each of our major markets at December 31, 2001:
- ------------------------------------------------------------------------------------------------ % of % of Total Medallion Loan Loan Average # Of Portfolio Portfolio Interest Principal Loans /(1)/ /(1)/ Rate /(2)/ Balance - ------------------------------------------------------------------------------------------------ Medallion loans New York 1,769 44.5% 80.9% 8.48% $205,597,977 Chicago 253 4.5 8.2 9.86 20,910,056 Boston 122 2.9 5.2 11.41 13,170,000 Newark 68 1.3 2.4 10.33 6,208,222 Cambridge 21 0.4 .7 11.66 1,718,123 Other 66 1.4 2.6 11.30 6,547,972 ------------------------------ ------------ Gross medallion loans 2,299 55.0% 100% 8.88 254,152,350 ------------------------------ Deferred loan acquisition costs 541,439 Unrealized depreciation on loans (2,019,155) ------------ Total medallion loans $252,674,634 ================================================================================================
/(1)/ Based on principal balance outstanding. /(2)/ Based on the contractual rates of the portfolios at December 31, 2001. - -------------------------------------------------------------------------------- The New York City Market. A New York City taxicab medallion is the only ------------------------ permitted license to operate a taxicab and accept street hails in New York City. As reported by the TLC, individual (owner-driver) medallions sold for approximately $190,000 and corporate medallions sold for approximately $216,000 at December 31, 2001. The number of taxicab medallions is limited by law, and as a result of the limited supply of medallions, an active market for medallions has developed. The law limiting the number of medallions also stipulates that the ownership for the 12,053 medallions outstanding at December 31, 2001 shall remain divided into 5,086 individual medallions and 6,967 fleet or corporate medallions. Corporate medallions are more valuable because they can be aggregated by businesses and leased to drivers and operated for more than one shift. A prospective medallion owner must qualify under the medallion ownership standards set and enforced by the TLC. These standards prohibit individuals with criminal records from owning medallions, require that the funds used to purchase medallions be derived from legitimate sources and mandate that taxicab vehicles and meters meet TLC specifications. In addition, before the TLC will approve a medallion transfer, the TLC requires a letter from the seller's insurer stating that there are no outstanding claims for personal injuries in excess of insurance coverage. After the transfer is approved, the owner's taxicab is subject to quarterly TLC inspections. Most New York City medallion transfers are handled through approximately 32 medallion brokers licensed by the TLC. In addition to brokering medallions, these brokers also arrange TLC documentation insurance, vehicles and meters, as well as financing. The Company has excellent relations with many of the most active brokers and regularly receives referrals from them. However, the Company receives most of its referrals from a small number of brokers. The Chicago Market. We estimate that Chicago medallions currently sell for ------------------ approximately $60,000. Pursuant to a municipal ordinance, the number of outstanding medallions is currently capped at 6,700, which includes an additional 150 and 200 medallions that were auctioned and placed into service in July 1999 and December 2000, respectively. We estimate that the total value of all Chicago medallions and related assets is over $536,000,000. The Boston Market. We estimate that Boston medallions currently sell for ----------------- approximately $175,000. The number of Boston medallions had been limited by law since 1930 to 1,525 medallions. However, in 1993, 300 additional medallions were authorized in January 1999, 75 additional medallions were auctioned and put into service, and in June 2000 an additional 57 medallions were auctioned. We estimate that the total value of all Boston medallions and related assets is over $382,000,000. The Newark Market. We estimate that Newark medallions currently sell for ----------------- approximately $210,000. The number of Newark medallions currently has been limited to 600 since 1950 by local law. We estimate that the total value of all Newark medallions and related assets is over $138,000,000. The Cambridge Market. We estimate that Cambridge medallions currently sell -------------------- for approximately $172,000. The number of Cambridge medallions has been limited to 248 since 1945 by a Cambridge city ordinance. We estimate that the total value of all Cambridge medallions and related assets is over $47,000,000. 5 COMMERCIAL LOANS Commercial loans of $199,329,000 comprised 44% of the $452,003,000 total loan portfolio as of December 31, 2001. From the inception of the commercial loan business in 1987 through December 31, 2001, we have originated more than 10,000 commercial loans for an aggregate principal amount of more than $545,700,000. We estimate that the average loan-to-value ratio of commercial loans was approximately 70% on December 31, 2001. The commercial loan portfolio consists of floating-rate, adjustable, and fixed-rate loans. We have increased our commercial loan activity in recent years primarily because of the attractive higher yielding, floating rate nature of most of this business. The outstanding balances of commercial loans grew at a compound annual rate of 37% since 1996, although balances dropped 6% during 2001, as the Company sought to increase liquidity by selling and not renewing certain loans. Since 1996, this increase has been primarily driven by internal growth through the origination of additional commercial loans. We plan to continue to expand our commercial loan activities to develop a more diverse borrower base, a wider geographic area of coverage, and to expand targeted industries. Commercial loans generally are secured by equipment, accounts receivable, real estate, and other assets, and have interest rates averaging 200 basis points over the prevailing prime rate. As with medallion loans, the vast majority of the principals of borrowers personally guarantee commercial loans. The aggregate realized loss of principal on commercial loans has averaged less than 1% per annum for each of the last five years. SBA Section 7 (a) loans ----------------------- The Company originates loans under the Section 7(a) program of the SBA through its BLL subsidiary. Up to 75% of the amount of these loans (up to $1,000,000) are guaranteed by the U.S. government. These loans are secured by fixed assets and or real estate throughout the New England and the New York areas, and comprise approximately 27.2% of the commercial loan portfolio. BLL has achieved "preferred lender" status from the SBA in 27 districts in which it originates loans, enabling them to obtain expedited loan approval and closing from the SBA. These loans are typically secured by assets or real estate, and have floating interest rates tied to a spread over the prime rate. Additionally, a liquid market exists for the sale of the guaranteed portion of these loans. BLL regularly sells the guaranteed portion of the Section 7(a) loans in the secondary market and recognizes a gain on these sales. This gain is accounted for in accordance with Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement of FASB Statement No.125." We believe that the floating-rate nature of these loans is beneficial for our interest rate exposure management. Due to limitations imposed by the Company's lenders, sources of liquidity were reduced for BLL, which resulted in BLL maintaining a business status quo as opposed to its previous rapid expansion. Since late 2000, no additional funding has been provided to BLL for new business growth, and as a result, BLL has reduced the scope of its operations by reducing personnel and closing offices, and has funded all new loan activity and operations from its own internally generated cash flow. The Company and BLL are currently in negotiations with several lending syndicates about financing the existing SBA Section 7(a) business as well as providing an ongoing warehouse line for future loan volumes. Pending the outcome of these discussions, the Company may embark upon a strategy of selling this division to existing management or another interested acquirer in accordance with a Board directive. Although there can be no assurances, the Company anticipates finalizing a financing arrangement on comparable terms to existing borrowings during the 2002 second quarter. Asset Based Loans ----------------- The Company originates asset-based loans to small businesses for working capital through its MBC subsidiary. These loans are primarily secured by accounts receivable of small businesses that require credit facilities ranging from $250,000 to $3,500,000, a market we believe is underserved, and which represents approximately 26% of the commercial loan portfolio. We had successfully established 51 credit lines at December 31, 2001. Security on these facilities is principally the borrower's accounts receivable, but may also include inventory, machinery, or equipment. Currently, our customer base is concentrated in the New York metropolitan area and includes manufacturers, distributors and service organizations. These loans are generally priced at approximately 300 basis points over the prevailing prime rate. Secured Mezzanine Loans ----------------------- Through our MCI subsidiary we originate both senior and subordinated loans to businesses in a variety of industries, including radio and television stations, airport food service, telephone companies, manufacturing companies, and laser eye surgery clinics. These loans are primarily secured by a second position on all assets of the companies and range from $1,000,000 to $5,000,000, and represent approximately 18% of the commercial loan portfolio. Frequently we receive warrants to purchase an equity interest in the companies in which we provide secured mezzanine loans. Other Commercial Secured Loans ------------------------------ The Company originates other commercial loans that are not concentrated in any particular industry. These loans, which are generally fixed-rate loans, represent approximately 29% of our commercial loan portfolio. Historically this portfolio had been made up of fixed rate loans, but substantially all business originated over the last three years has been of an adjustable nature, generally repricing on its anniversary date. The customer base includes food service, real estate, dry cleaners, and laundromats. 6 The following table displays the different types of loans in our commercial loan portfolio at December 31, 2001.
- ------------------------------------------------------------------------------------------------------ % of Total % of Loan Commercial Average # of Portfolio Loan Interest Principal Loans /(1)/ Portfolio /(1)/ Rate /(2)/ Balance - ------------------------------------------------------------------------------------------------------ Commercial loans SBA Section 7(a) loans 725 12.3% 27.2% 5.73% $ 56,702,117 Asset-based loans 51 11.7 26.0 9.20 53,955,523 Secured mezzanine loans 35 7.9 17.5 12.77 36,313,329 Other commercial secured loans 419 13.1 29.3 10.37 60,772,148 ------------------------------------ ------------ Gross commercial loans 1,230 45.0 100.0% 9.22 207,743,117 ------------------------------------ Deferred loan acquisition costs 1,608,278 Discount on SBA section 7(a) loans (2,415,459) Unrealized depreciation on loans (7,607,149) ------------ Total commercial loans $199,328,787 ======================================================================================================
/(1)/ Based on principal balance outstanding. /(2)/ Based on the contractual rates of the portfolios at December 31, 2001. - -------------------------------------------------------------------------------- Portfolio Characteristics Commercial loans finance either the purchase of the equipment and related assets necessary to open a new business or the purchase or improvement of an existing business. We have originated commercial loans in principal amounts ranging from $50,000 to approximately $5,300,000. These loans are generally retained and typically have maturities ranging from one to ten years and require equal monthly payments covering accrued interest and amortization of principal over a four to five year term. Substantially all loans generally may be prepaid with a fee ranging from 30 to 120 days' interest. The term of, and interest rate charged on, our outstanding loans are subject to SBA regulations. Under SBA regulations, the maximum rate of interest permitted on loans originated by the Company is 19.0%. Unlike medallion loans, for which competition precludes us from charging the maximum rate of interest permitted under SBA regulations, we are able to charge the maximum rate on certain commercial loans. We believe that the increased yield on commercial loans compensates for their higher risk relative to medallion loans and further illustrates the benefits of diversification. Commercial loans are generally originated at an average loan-to-value ratio of 70 to 75%. Substantially all of the commercial loans are collateralized by security interests in the assets being financed by the borrower. In addition, we have recourse against the vast majority of the principals of borrowers who personally guarantee the loans. Although personal guarantees increase the commitment of borrowers to repay their loans, there can be no assurance that the assets available under personal guarantees would, if required, be sufficient to satisfy the obligations secured by such guarantees. In certain cases, equipment vendors may provide full and partial recourse guarantees on loans. Delinquency And Loan Loss Experience We generally follow a practice of discontinuing the accrual of interest income on our commercial loans that are in arrears as to interest payments for a period of 90 days or more. We deliver a default notice and begin foreclosure and liquidation proceedings when management determines that pursuit of these remedies is the most appropriate course of action under the circumstances. At December 31, 2001, an aggregate principal balance of $43,400,000 or 9.4% of the portfolio was delinquent for 90 days or more, compared to an aggregate principal balance of $28,900,000 or 5.6% and $28,400,000 or 5.8% of the portfolio at December 31, 2000 and 1999. A loan in considered to be delinquent if the borrower fails to make a payment on time, however, during the course of discussion on delinquent status we may agree to modify the payment terms of the loan with a borrower that cannot make payments in accordance with the original loan agreement. For loan modifications, the loan will only be returned to accrual status if all past due payments are brought fully current. Based upon the assessment of our collateral position, we evaluate most of these relationships on an "enterprise value" basis and expect to locate and install a new operator to run the business and reduce the debt. For credit that are collateral based, we anticipate that a substantial portion of the principal amount of delinquent loans would be collected upon foreclosure of such loans, if necessary. There can be no assurance, however, that the collateral securing these loans will be adequate in the event of foreclosure. We monitor delinquent loans for possible exposure to loss, by analyzing various factors, including the value of the collateral securing the loan and the borrower's prior payment history. Under the 1940 Act, the 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, the valuation of our portfolio is adjusted quarterly to reflect estimates of the current realizable value of the loan portfolio. Since no ready 7 market exists for this portfolio, fair value is subject to the good faith determination of management and the approval of the 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 the balance sheet. In determining the value of the portfolio, management and 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 rates of interest, management and the Board of Directors could decrease its valuation of the portfolio if the portfolio consists primarily of fixed-rate loans. 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. Based upon these factors, net unrealized depreciation on investments is determined, or the amount by which our estimate of the current realizable value of our portfolio is below our cost basis. The following table sets forth the changes in the Company's unrealized appreciation (depreciation) on investments for the periods indicated:
- ---------------------------------------------------------------------------------------------------------------------- Equity Loans Investments Total - ---------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1998 ($2,164,292) $ 4,853,976 $ 2,689,684 Increase in unrealized: Appreciation on investments -- 12,966,343 12,966,343 Depreciation on investments (7,208,586) (208,853) (7,417,439) Reversals of unrealized appreciation (depreciation) related to realized: Gains on investments -- (18,197,295) (18,197,295) Losses on investments 388,825 -- 388,825 ------------------------------------------- Balance, December 31, 1999 (8,984,053) (585,829) (9,569,882) Increase in unrealized: Appreciation on investments 412,807 200,000 612,807 Depreciation on investments (636,367) (20,767) (657,134) Reversals of unrealized appreciation (depreciation) related to realized: Gains on investments (2,573) (15,981) (18,554) Losses on investments 2,221,396 -- 2,221,396 ------------------------------------------- Balance, December 31, 2000 (6,988,790) (422,577) (7,411,367) Increase in unrealized: Appreciation on investments -- 2,937,051 2,937,051 Depreciation on investments (6,495,139) (915,492) (7,410,631) Reversals of unrealized appreciation (depreciation) related to realized: Gains on investments (3,155) -- (3,155) Losses on investments 3,862,449 450,014 4,312,463 Other (1,669) 76,256 74,587 ------------------------------------------- Balance, December 31, 2001 ($9,626,304) $ 2,125,252 ($ 7,501,052) ======================================================================================================================
8 The following table presents credit-related information for the investment portfolios as of December 31:
- --------------------------------------------------------------------------------------------------------------------- 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------- Total loans Medallion loans $252,674,634 $299,302,548 $ 321,900,869 Commercial loans 199,328,787 212,721,373 165,653,933 --------------------------------------------- Total loans 452,003,421 512,023,921 487,554,802 Equity investments /(1)/ 3,591,962 2,129,685 2,012,394 --------------------------------------------- Total loans and equity investments $455,595,383 $514,153,606 $ 489,567,196 ===================================================================================================================== Realized losses (gains) on loans and equity investments Medallion loans $ 24,869 $ -- $ -- Commercial loans 3,489,075 2,663,082 540,698 --------------------------------------------- Total loans 3,513,944 2,663,082 540,698 Equity investments (498,798) 1,220,758 (23,085,715) --------------------------------------------- Total realized losses (gains) on loans and equity investments: $ 3,015,146 $ 3,883,840 ($ 22,545,017) ===================================================================================================================== Net unrealized depreciation (appreciation) on Investments Medallion loans $ 2,019,155 $ -- $ -- Commercial loans 7,607,149 6,988,790 8,984,053 --------------------------------------------- Total loans 9,626,304 6,988,790 8,984,053 Equity investments (2,125,252) 422,577 585,829 --------------------------------------------- Total net unrealized depreciation (appreciation) on investments $ 7,501,052 $ 7,411,367 $ 9,569,882 ===================================================================================================================== Realized losses (gains) as a % of average balance outstanding Medallion loans 0.01% 0.00% 0.00% Commercial loans 1.72 1.39 0.40 Total loans 0.74 0.54 0.13 Equity investments (21.55) 49.57 (200.20) Net investments 0.63 0.79 (5.27) - --------------------------------------------------------------------------------------------------------------------- Unrealized depreciation (appreciation) as a % of balance outstanding Medallion loans 0.80% 0.00% 0.00% Commercial loans 3.82 3.29 5.42 Total loans 2.02 1.42 2.16 Equity investments (59.17) 19.84 29.11 Net investments 1.65 1.44 1.95 =====================================================================================================================
/(1)/ Represents common stock and warrants held as investments. - -------------------------------------------------------------------------------- Investment Activity The following table sets forth the components of investment activity in the investment portfolio for the periods indicated: - ------------------------------------------------------------------------------- Year Ended December 31, ----------------------------------- (Dollars in thousands) 2001 2000 1999 - ------------------------------------------------------------------------------- Net investments at beginning of period $ 514,154 $ 489,567 $ 408,208 Investments originated 134,753 197,512 303,335 Repayments of investments (188,562) (170,084) (231,290) Net increase in unrealized appreciation (depreciation) (140) 2,159 (12,260) Net realized gains (losses) (3,015) (3,884) 22,545 Amortization of origination costs (1,595) (1,116) (971) ----------------------------------- Net (decrease) increase in investments (58,559) 24,587 81,359 ----------------------------------- Net investments at end of period $ 455,595 $ 514,154 $ 489,567 =============================================================================== Investment Strategy Our core philosophy has been "In niches there are riches." We try to identify markets that are profitable and where we can be an industry leader. Core lending areas include medallion lending, automobile lending (taxicabs and limousines only), SBA 7(a) guaranteed loans through an extensive network of preferred lending offices, and asset-based financing. Additionally, we lend to small businesses that meet our overall credit criteria of strong collateral values and personal ability to repay the debt. In all lending divisions, we look to focus on making secured loans to achieve favorable yield to risk profiles and below average losses. In addition to increasing market share in existing lending markets and identifying new niches, we seek to acquire specialty finance companies that 9 make secured loans to small businesses which have experienced historically low loan losses similar to our own. Since the initial public offering in May 1996, eight specialty finance companies, three loan portfolios, and three taxicab roof top advertising companies have been acquired. Marketing, Origination and Loan Approval Process We employ 32 loan originators to originate medallion and commercial loans. Each loan application is individually reviewed through analysis of a number of factors, including loan-to-value ratios, a review of the borrower's credit history, public records, personal interviews, trade references, personal inspection of the premises, and approval from the TLC, SBA, or other regulatory body, if applicable. Each applicant is required to provide personal and corporate tax returns, premises leases, and/or property deeds. Senior management establishes loan origination criteria. Loans that conform to such criteria may be processed by a loan officer with the proper credit authority, and non-conforming loans must be approved by the Chief Executive Officer and/or the Chief Credit Officer. Both medallion and commercial loans are sourced from brokers with extensive networks of applicants, and commercial loans are also referred by contacts with banks, attorneys, and accounting firms. TAXICAB ROOFTOP ADVERTISING Medallion Taxi Media, Inc. (Media) provides taxicab rooftop advertising, which is a relatively undeveloped segment of the out-of-home advertising industry. Out-of-home advertising includes: . Traditional outdoor advertising, such as billboards and posters; . Transit advertising, such as taxicabs, buses, bus shelters, subway, commuter train and airport advertising; and . In-store point-of-sale advertising. Media currently provides taxicab rooftop advertising in over 30 major cities and has the leading market share in New York, Los Angeles, Philadelphia, Dallas and Baltimore/Washington DC. Media's goal is to become the leading national provider of taxicab rooftop advertising by establishing a presence in additional major US metropolitan markets. As of December 31, 2001, we had approximately 10,000 installed displays in the United States, 1,000 installed displays in Japan and 6,000 installed racks inside of taxicabs in Japan. Media was organized in November 1994 and since that time the business has grown rapidly. Generally, Media enters into agreements with taxicab associations, fleets, or individuals to lease taxicab rooftop space for five-year terms. Media has added an additional 1,700 displays to the original number under contract in New York City for a total of over 3,200. In July 2001, Media acquired certain assets and assumed certain liabilities of Medallion Media Japan Ltd. (MMJ), a taxi advertising operation similar to those operated by Media in the US, which has advertising rights on approximately 7,000 cabs (1,000 rooftop displays and 6,000 interior racks) serving 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 three years. MMJ accounted for approximately 8% of Media's consolidated revenue during 2001. During 2001, Media operations were constrained by a very difficult advertising environment compounded by the rapid expansions of taxi tops inventory that occurred during 1999 and 2000. Media began to recognize losses as growth in operating expenses exceeded growth in revenue. A substantial portion of Media's revenues in 2001 arose from the realization of amounts that had been paid for and deferred from prior periods. Media is actively pursuing new sales opportunities including an expansion and upgrading of the sales force, and has taken steps to reduce operating expenses, including renegotiation of fleet payments for advertising rights, to better align ongoing revenues and expenses and to maximize cash flow from operations. In October 2002, Media's contract with one of its fleets expires and will be up for renewal. If the contract is not renewed with Media, and is put out to bid, Media has a right of first refusal to match any bids on this contract, which currently covers approximately 1,500 taxitops. If Media is able to retain this contract, it would likely be for a greater cost than the current contract which Media anticipates, but cannot guarantee, would be passed through to the advertising customers through higher rates. If the contract is not renewed, Media anticipates that the advertising would be moved to other markets that currently have available tops capacity and that the physical tops would be inventoried for future use. Media attaches each display to the rooftop of a taxicab and performs all ongoing display maintenance and repair. The display remains our property. The display serves as a platform or frame for advertising copy, which is preprinted on vinyl sheets with adhesive backing and provided by the advertiser. The advertising copy adheres to the display and is illuminated whenever the taxicab is in operation. The vinyl sheet is durable and is generally left on the display for up to 90 days. The advertising copy is replaced at the advertiser's discretion and cost when advertising campaigns change. The standard size of the vinyl advertising copy, 14 inches high and 48 inches long, was designed to be proportionally similar to "bulletins" or "billboards" to permit advertisers to conveniently translate billboard copy to display copy. Racks are attached to the interior of the passenger compartment of the taxicab and are likewise filled with promotional materials, typically provided by the advertiser. 10 The displays are marketed to advertising agencies and outdoor advertising buying agencies. Advertising contracts generally vary from 30 days to one year and provide for monthly payments by the advertiser. The following is a sample of Media's advertising accounts in 2001: . Armani Exchange . Versace . Cabaret . Continental Airlines . Aldo Shoes . H & M . Old Navy . French Connection . Disney's The Lion King on Broadway . The Full Monty . Rent . Hard Rock Cafe . Citibank . Wall Street Journal . Macy's.com . Fossil . Lexus . Ann Taylor We believe that there are growth opportunities within our existing markets because only approximately 40% of New York City taxicabs, and less than 10% of taxicabs nationwide, have rooftop advertising. In addition, we believe that our growth will be facilitated by our reputation and relationship within the taxicab industry and because our arrangement with the taxicab owners provides them with incremental income. Media's growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from September 11th and the economic downturn, which has resulted in operating losses and reduced cash flow, as well as restrictions on funding that can be provided by the Company in accordance with the terms of its bank loans. Media has developed an operating plan to fund only necessary operations out of available cash flow and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such times as business returns to historical levels. 11 SOURCES OF FUNDS Overview We have historically funded our lending operations primarily through credit facilities with bank syndicates and, to a lesser degree, through fixed-rate, senior secured notes and long-term subordinated debentures issued to or guaranteed by the SBA. The determination of funding sources is established by our management, based upon an analysis of the respective financial and other costs and burdens associated with funding sources. Our funding strategy and interest rate risk management strategy is to have the proper structuring of debt and to minimize both rate and maturity risk, while maximizing returns with the lowest cost of funding over an intermediate period of time. The table below summarizes our cash levels and borrowings as of December 31, 2001, and should be read in conjunction with Note 6 of the consolidated financial statements: - ------------------------------------------------------------------------- (Dollars in thousands) Total - ------------------------------------------------------------------------- Cash $ 25,409 Bank loans /(1)/ 318,000 Amounts outstanding 233,000 Average interest rate 5.30% Maturity 11/01-6/02 SBA debentures /(2)/ $ 93,360 Amounts undisbursed 49,515 Amounts outstanding 43,845 Average interest rate 6.96% Maturity 12/02-12/11 Senior secured notes /(3)/ $ 45,000 Average interest rate 7.35% Maturity 6/04-9/04 - ------------------------------------------------------------------------- Total cash and amounts available from the SBA $ 74,924 ========================================================================= Total debt outstanding $321,845 ========================================================================= /(1)/ Subsequent to December 31, 2001, the agreements providing the bank loans for the Company and MFC were amended to (a) provide, with respect to the Company bank loans, for a May 15, 2002 maturity date, with commitment reductions to approximately $76,000,000, $71,000,000, and $61,000,000 on March 1, 2002, April 1, 2002 and May 1, 2002 (b) provide, with respect to the MFC line of credit, for a June 28, 2002 maturity date (subject to conversion of amounts outstanding on June 28, 2002 into a one year term loan), with a commitment reduction to $150,000,000 on April 1, 2002. /(2)/ The remaining amounts under the approved commitment from the SBA may be drawn down over a five year period ending May, 2006, upon submission of a request for funding by the Company and its subsequent acceptance by the SBA. /(3)/ In connection with the maturity of the revolving line described in (1) above, the terms of the senior secured notes were renegotiated on March 29, 2002, generally providing for $13,000,000 of principal payments, due in April, 2002 higher levels of interest, and accelerated final maturities to June 30, 2003 from June and September 2004 (as well as required scheduled amortization and asset sales) - -------------------------------------------------------------------------------- We fund our fixed-rate loans with variable-rate bank debt and fixed-rate senior secured notes and SBA debentures. The mismatch between maturities and interest-rate sensitivities of these balance sheet items results in interest rate risk. We seek to manage our exposure to increases in market rates of interest to an acceptable level by: . Originating adjustable rate loans; . Incurring fixed-rate debt; and . Purchasing interest rate caps to hedge a portion of our variable-rate debt against increases in interest rate. Nevertheless, we accept varying degrees of interest rate risk depending on market conditions. For additional discussions of our funding sources and asset and liability management strategy, see Asset/Liability Management on page 28. OUR OPERATION AS A RIC We have elected to be taxed as a RIC under Sections 851 through 855 of the Code. Now and in the future, we plan to operate in a manner that satisfies the requirements for taxation as a RIC under the Code. However, we cannot give assurances that we will remain qualified. The sections of the Code relating to qualification and operation as a RIC are highly technical and complex. The following discussion summarizes material aspects of the sections of the Code that govern the federal income tax treatment of a RIC and the treatment of stockholders. This summary is qualified in its entirety by the applicable Code provisions, rules and regulations developed under the Code and the rules, and administrative and judicial interpretations of these provisions, rules and regulations. 12 In general, if certain detailed conditions of the Code are met, business development companies, like us, are generally not taxed, at the corporate level, on "investment company taxable income" that is distributed to stockholders. The income of a non-RIC corporation is generally subject to corporate tax. In addition, stockholders who receive income from non-RIC corporations are also taxed on the income they receive. Thus, the income of a non-RIC corporation is subject to "double taxation" (i.e., taxation at both the corporate and stockholder levels). RIC treatment substantially eliminates this "double taxation." A RIC is, however, generally subject to federal income tax, at regular corporate rates, on undistributed investment company taxable income. To avoid a 4% nondeductible federal excise tax on undistributed income and capital gains, we must distribute (or be deemed to have distributed) by December 31st of each year: (1) at least 98% of our ordinary income for such year; (2) at least 98% of our capital gain net income (which is the excess of our capital gain over our capital loss and is generally computed on the basis of the one-year period ending on October 31st of such year); and (3) any amounts that were not distributed in the previous calendar year and on which no income tax has been paid. If we fail to qualify as a RIC in any year, we will be subject to federal income tax as if we were a domestic corporation, and our stockholders will be taxed in the same manner as stockholders of ordinary corporations. If this were to occur, we could be subject to potentially significant tax liabilities and the amount of cash available for distribution to our stockholders could be reduced. The Code's definition of the term "RIC" includes a domestic corporation that has elected to be treated as a business development company under the 1940 Act and meets certain requirements. These requirements are: (a) The company derives at least 90% of its gross income for each taxable year from dividends, interest, interest payments with respect to securities loans and gains from the sale or other disposition of stocks or securities or foreign currencies, or other income derived from its business of investing in such stocks, securities or currencies; and (b) The company diversifies its holdings so that, at the close of each quarter of its taxable year, (i) At least 50% of the value of its total assets is represented by (A) cash, and cash items (including receivables), U.S. Government securities and securities of other RICs, and (B) other securities limited in respect of any one issuer to an amount not greater in value than 5% of the value of the total assets of the company and to not more than 10% of the outstanding voting securities of such issuer, and (ii) Not more than 25% of the value of total assets is invested in the securities (other than U.S. Government securities or securities of other RICs) of any one issuer or two or of more issuers controlled by the company and engaged in the same, similar or related trades or businesses. These diversification requirements could restrict the expansion of our taxicab rooftop advertising business and our medallion collateral appreciation loan business. In addition, to qualify as a RIC under the Code, in each taxable year, a company also must distribute to its stockholders at least 90% of (a) its investment company taxable income and (b) the excess of its tax-exempt interest income over certain disallowed deductions. If we satisfy these requirements, neither the investment company taxable income we distribute to stockholders nor any net capital gain distributed to our stockholders would be subject to federal income tax. However, any investment company taxable income and/or net capital gains retained by us would be subject to federal income tax at regular corporate income tax rates. However, we may designate retained net long-term capital gains as "deemed distributions" and pay a tax on this for the benefit of our stockholders. We currently intend to continue distributing substantially all of our investment company taxable income to our stockholders for each taxable year and may or may not distribute any capital gains. If we acquire debt obligations that were originally issued at a discount, or bear interest rates that do not call for payments at fixed rates (or certain "qualified variable rates") at regular intervals over the life of the obligation, we will be required to include, as interest income, in each year, a portion of the "original issue discount" that accrues over the life of the obligation regardless of whether we receive the income, and we will be obligated to make distributions accordingly. If this were to occur, we may borrow funds or sell assets to meet the distribution requirements. However, the 1940 Act prohibits us from making distributions to stockholders while senior securities are outstanding unless we meet certain asset coverage requirements. If we are unable to make the required distributions, we may be subject to the nondeductible 4% excise tax or we may fail to qualify as a RIC. In addition, the SBA restricts the amount of distributions to the amount of undistributed net realized earnings less the allowance for unrealized loan losses (which in our case includes unrealized depreciation). If we qualify as a RIC, distributions made to our taxable domestic stockholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be considered ordinary income to them. Distributions that are designated as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed our actual net long-term capital gain for the taxable year) without regard to the period for which the stockholder has held its stock. Corporate stockholders, however, are subject to tax on capital gain dividends at the same rate as ordinary income. 13 To the extent that we make distributions in excess of current and accumulated earnings and profits, these distributions are treated first as a tax-free return of capital to the stockholder, reducing the tax basis of a stockholder's common stock by the amount of such distribution (but not below zero). Distributions in excess of the stockholder's tax basis are taxable as capital gains (if the common stock is held as a capital asset). In addition, any dividends declared by us in October, November or December of any year and payable to a stockholder of record on a specific date in any such month shall be treated as both paid by us and received by the stockholder on December 31st of such year, provided that the dividend is actually paid by us during January of the following calendar year. Stockholders may not include in their individual income tax returns any net operating losses or capital losses by us. If we choose to retain and pay tax on any net capital gain rather than distribute such gain to our stockholders, we will designate such deemed distribution in a written notice to stockholders within 60 days after the close of the taxable year. Each stockholder would then be treated, for federal income tax purposes, as if we had distributed to such stockholder, on the last day of its taxable year, the stockholder's pro rata share of the net long-term capital gain retained by us and the stockholder had paid its pro rata share of the taxes paid by the us and reinvested the remainder in us. In general, any loss upon a sale or exchange of common stock by a stockholder who has held the stock for six months or less (after applying certain holding period rules) will be treated as long-term capital loss to the extent that distributions from us are required to be treated by the stockholder as long-term capital gains. OUR OPERATION AS A BUSINESS DEVELOPMENT COMPANY (BDC) As a BDC, we are subject to regulation under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between investment companies and their affiliates, principal underwriters and affiliates of those affiliates or underwriters. In addition, the 1940 Act provides that we may not change the nature of our business in a way which would cause us to lose our status as a BDC or withdraw our election as a BDC, unless we are authorized by a vote of a "majority of the Company's outstanding voting securities," as defined under the 1940 Act. We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock (collectively, "senior securities," as defined under the 1940 Act) senior to the shares of common stock if the asset coverage of the indebtedness and all senior securities is at least 200% immediately after the issuance. Subordinated SBA debentures guaranteed by or issued to the SBA by our RIC subsidiaries are not subject to this asset coverage test. In addition, while senior securities are outstanding, provisions must be made to prohibit the declaration of any dividend or other distribution to stockholders (except stock dividends) or the repurchase of securities or shares unless we meet the applicable asset coverage ratios at the time of the declaration of the dividend or distribution or repurchase after deducting such dividend, distribution or purchase price. Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act ("Qualifying Assets") unless, at the time the acquisition is made, certain Qualifying Assets represent at least 70% of the value of the company's total assets. The principal categories of Qualifying Assets relevant to our business are the following: (1) Securities purchased in transactions not involving a public offering from the issuer of such securities, which issuer is an eligible portfolio company. An "eligible portfolio company" is defined in the 1940 Act as any issuer which: (a) Is organized under the laws of, and has its principal place of business in, the United States; (b) Is not an investment company other than an SBIC wholly-owned by the BDC; and (c) Satisfies one or more of the following requirements: (i) The issuer does not have a class of securities with respect to which a member of a national securities exchange broker or dealer may extend margin credit; or (ii)The issuer is controlled by a BDC, such BDC exercises a controlling influence over the issuers management as a result of such control, and the BDC has an affiliated person serving as a director of issuer; (iii) The issuer has total assets of not more than $4 million and capital and surplus (shareholders' equity less retained earnings) of not less than $2 million, or such other amounts as the Securities and Exchange Commission may establish by rule, regulation; or order; or (iv) Issuer meets such other criteria as the Commission may establish from time to time by rule; (2) Securities for which there is no public market and which are purchased in transactions not involving a public offering from the issuer of such securities where the issuer is an eligible portfolio company which is controlled by the BDC; (3) Securities received in exchange for or distributed on or with respect to securities described in (1) or (2) above, or pursuant to the exercise of options, warrants or rights relating to such securities; and (4) Cash. 14 In addition, a BDC's cash items, government securities, or high quality debt securities maturing in one year or less from the time of investment must have been organized (and have its principal place of business) in the United States for the purpose of making investments in the types of securities described in (1) or (2) above. To count securities as Qualifying Assets for the purpose of the 70% test, a BDC must either control the issuer of the securities or must make available to the issuer of the securities significant managerial assistance; except that, where a business development company purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available the required managerial assistance. We believe that the common stock of MFC and Media are Qualifying Assets. REGULATION BY THE SBA MFC, MCI, and FSVC each operate as a Small Business Investment Company (SBIC). The Small Business Investment Act of 1958 (SBIA) authorizes the organization of SBICs as vehicles for providing equity capital, long term financing and management assistance to small business concerns. The SBIA and the SBA Regulations define a "small business concern" as a business that is independently owned and operated, which does not dominate its field of operation and which (i) has a net worth, together with any affiliates, of $18.0 million or less and average annual net income after U.S. federal income taxes for the preceding two years of $6.0 million or less (average annual net income is computed without the benefit of any carryover loss), or (ii) satisfies alternative criteria under SBA Regulations that focus on the industry in which the business is engaged and the number of persons employed by the business or its gross revenues. In addition, at the end of each year, at least 20% of the total amount of loans made after April 25, 1994 must be made in "smaller businesses" which have a net worth of $6.0 million or less and average net income after federal income taxes for the preceding two years of $2.0 million or less. SBA Regulations also prohibit an SBIC from providing funds to a small business concern for certain purposes, such as relending and reinvestment. MFC is authorized to make loans to borrowers other than Disadvantaged Businesses (that is, businesses that are at least 50% owned, and controlled and managed, on a day to day basis, by a person or persons whose participation in the free enterprise system is hampered because of social or economic disadvantage) if, at the time of the loan, MFC has in its portfolio, outstanding loans to Disadvantaged Businesses with an aggregate cost basis equal to or exceeding the value of the unamortized repurchase discount under the preferred stock repurchase agreement between MFC and the SBA. Under current SBA Regulations, the maximum rate of interest that MFC may charge may not exceed the higher of (i) 19% and (ii) the sum of (a) the higher of (I) that company's weighted average cost of qualified borrowings, as determined under SBA Regulations, or (II) the current SBA debenture rate, plus (b) 11%, rounded to the next lower eighth of one percent. At December 31, 2001, the maximum rate of interest permitted on loans originated by the RIC Subsidiaries was 19%. At December 31, 2001, our outstanding medallion loans had a weighted average rate of interest of 8.88% and outstanding commercial loans had a weighted average rate of interest of 9.22%. Current SBA Regulations also require that each loan originated by an SBIC have a term of between 5 years and 20 years; loans to Disadvantaged Businesses may be for a minimum of four years. However, recent legislation enacted by the U.S. Congress and signed into law by the President on December 21, 2000, Public Law 106-554, amended the SBIA to define "long term" financing as "any period of time not less than one year." The effect of this statutory change is to eviscerate SBA's regulatory authority to require a minimum period of financing for a period of time longer than one year. The SBA restricts the ability of SBIC's to repurchase their capital stock, to retire their SBA debentures and to lend money to their officers, directors and employees or invest in affiliates thereof. The SBA also prohibits, without prior SBA approval, a "change of control" or transfers which would result in any person (or group of persons acting in concert) owning 10% or more of any class of capital stock of an SBIC. A "change of control" is any event which would result in the transfer of the power, direct or indirect, to direct the management and policies of an SBIC, whether through ownership, contractual arrangements or otherwise. Under SBA Regulations, without prior SBA approval, loans by licensees with outstanding SBA leverage to any single small business concern may not exceed 20% of an SBIC's Regulatory Capital, as defined, however, under the terms of the respective conversion agreements with the SBA Regulations, MFC is authorized to make loans to Disadvantaged Borrowers in amounts not exceeding 30% of their respective Regulatory Capital. SBIC's must invest funds that are not being used to make loans in investments permitted under SBA Regulations. These permitted investments include direct obligations of, or obligations guaranteed as to principal and interest by, the government of the United States with a term of 15 months or less and deposits maturing in one year or less issued by an institution insured by the FDIC. The percentage of an SBIC's assets invested in this manner depends on, among other things, loan demand, timing of equity infusions and SBA funding and availability of funds under credit facilities. SBIC's may purchase voting securities of small business concerns in accordance with SBA Regulations. SBA Regulations prohibit SBIC's from controlling a small business concern except where necessary to protect an investment. SBA Regulations presume control when SBIC's purchase (i) 50% or more of the voting securities of a small business concern if the small business concern has less than 50 stockholders or (ii) more than 20% (and in certain situations up to 25%) of the voting securities of a small business concern if the small business concern has 50 or more stockholders. 15 COMPETITION Banks, credit unions and finance companies, some of which are SBICs, compete with the Company in originating medallion loans and commercial loans. Finance subsidiaries of equipment manufacturers also compete with the Company in originating commercial loans. Many of these competitors have greater resources than the Company and certain competitors are subject to less restrictive regulations than the Company. As a result, there can be no assurance that the Company will be able to identify and complete the financing transactions that will permit it to compete successfully. The Company's taxicab rooftop advertising business competes with other taxicab rooftop advertisers, as well as all segments of the out-of-home advertising industry and other types of advertising media, including cable and network television, radio, newspapers, magazines and direct mail marketing. Many of these competitors have greater financial resources than the Company and offer several forms of advertising as well as production facilities. There can be no assurance that the Company will continue to compete with these businesses successfully. EMPLOYEES As of December 31, 2001, the Company employed a total of 151 persons. The Company believes that its relations with all of its employees are good. ITEM 2. PROPERTIES The Company leases approximately 17,000 square feet of office space in New York City for its corporate headquarters under a lease expiring in June 2006 and leases a facility in Long Island City, New York, with approximately 6,000 square feet shared by back office operations and the Media division. The Company also leases office space for loan origination offices in Boston, MA, Chicago, IL, Hartford, CT, and Somers Point, NJ. Media leases space for sales and maintenance in New York, NY, New Orleans, LA, Boston, MA, Boca Raton, FL, San Diego, CA, Beltsville, MD, Dallas, TX , Houston, TX, and Los Angeles, CA. The Company does not own any real property. The Company believes that its leased properties, taken as a whole, are in good operating condition and are suitable for the Company's current business operations. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are currently involved in various legal proceedings incident to the ordinary course of its business, including collection matters with respect to certain loans. The Company intends to vigorously defend any outstanding claims and pursue its legal rights. In the opinion of the Company's management and based upon the advice of legal counsel, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision would result in a material adverse effect on the Company's results of operations or financial condition. The acquisition of BLL in 1997 included an earnout provision to be paid to the sellers after three years. The Company provided a calculation of the earnout in 2001 to the sellers which they responded to in January 2002 claiming approximately $2,600,000 from the Company. The Company believes that this claim is without merit and intends to contest this vigorously, and expects to prevail in any arbitration settlement, although there can be no assurances, such that any settlement would not have a material, adverse impact on the Company's financial position and results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the Company's 2001 fiscal year. 16 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Our common stock is quoted on the Nasdaq National Market under the symbol "TAXI." Our common stock commenced trading on May 23, 1996. As of April 1, 2002, there were approximately 18,242,035 holders of record of the Company's common stock. On April 1, 2002, the last reported sale price of our common stock was $7.20 per share. The following table sets forth the range of high and low closing prices of the common stock as reported on the Nasdaq National Market for the periods indicated. Our common stock has historically traded at a premium to net asset value per share. There can be no assurance, however, that such premium will be maintained. The following table sets forth for the periods indicated the range of high and low closing prices for Medallion's common stock on the Nasdaq National Market: - --------------------------------------------------------- 2001 HIGH LOW - --------------------------------------------------------- First Quarter $15.09 $ 8.52 Second Quarter 13.54 8.46 Third Quarter 10.98 7.67 Fourth Quarter 9.52 6.90 2000 - --------------------------------------------------------- First Quarter $19.00 $15.75 Second Quarter 17.94 14.17 Third Quarter 17.75 15.25 Fourth Quarter 17.13 11.50 ========================================================= We have distributed and currently intend to continue to distribute at least 90% of our investment company taxable income to our stockholders. Distributions of our income are generally required to be made within the calendar year the income was earned to maintain our RIC status; however, in certain circumstances distributions can be made up to a full calendar year after the income has been earned. Our Investment Company taxable income includes, among other things, dividends and interest reduced by deductible expenses. Our ability to make dividend payments is restricted by certain asset coverage requirements under the Investment Company Act and is dependent upon maintenance of our status as a RIC under the Code. Our ability to make dividend payments is further restricted by certain financial covenants contained in our credit agreements, which requires paydowns on amounts outstanding if dividends exceed certain amounts, and generally disallow any dividend until July 1, 2002, by SBA regulations and under the terms of the SBA debentures. We have adopted a dividend reinvestment plan pursuant to which stockholders may elect to have distributions reinvested in additional shares of common stock. When we declare a dividend or distribution, all participants will have credited to their plan accounts the number of full and fractional shares (computed to three decimal places) that could be obtained with the cash, net of any applicable withholding taxes, that would have been paid to them if they were not participants. The number of full and fractional shares is computed at the weighted average price of all shares of common stock purchased for plan participants within the 30 days after the dividend or distribution is declared plus brokerage commissions. The automatic reinvestment of dividends and capital gains distributions will not relieve plan participants of any income tax that may be payable on the dividends or capital gains distributions. Stockholders may terminate their participation in the dividend reinvestment plan by providing written notice to the Plan Agent at least 10 days before any given dividend payment date. Upon termination, we will issue to a stockholder both a certificate for the number of full shares of common stock owned and a check for any fractional shares, valued at the then current market price, less any applicable brokerage commissions and any other costs of sale. There are no additional fees or expenses for participation in the dividend reinvestment plan. Stockholders may obtain additional information about the dividend reinvestment plan by contacting the Plan Agent at 59 Maiden Lane, New York, NY 10038. There can be no assurances; however, that we will have sufficient earnings to pay such dividends in the future. 17 ITEM 6. SELECTED FINANCIAL DATA Summary Consolidated Financial Data You should read the consolidated financial information below with the Consolidated Financial Statements and Notes thereto for the years ended December 31, 2001, 2000, and 1999. Financial information for the years ended December 31, 1998 and 1997, has been derived from audited financial statements. Prior year amounts have been restated to reflect the pooling of interests with FSVC.
- ----------------------------------------------------------------------------------------------------------------------- Year Ended December 31, (Dollars in thousands, except per share data) 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- Statement of Operations Data Investment income $ 42,077 $ 55,356 $ 44,076 $ 37,854 $ 27,658 Interest expense 25,485 28,944 20,988 16,967 10,864 -------------------------------------------------------------------------- Net interest income 16,592 26,412 23,088 20,887 16,794 Equity in earnings (losses) of Media /(1)/ (3,375) (421) (214) 1,200 203 Other income 2,105 3,378 2,247 1,663 1,087 Gain on sale of loans 1,511 2,814 3,014 2,316 336 Accretion of negative goodwill -- 351 722 722 722 Operating expenses 17,099 22,909 17,470 13,696 6,590 Amortization of goodwill 653 540 530 506 368 Income tax provision (benefit) (16) (181) 49 (152) 930 -------------------------------------------------------------------------- Net investment income (loss) (903) 9,266 10,808 12,738 11,254 Net realized gain (loss) on investments (3,015) (3,884) 22,545 1,291 78 Net change in unrealized appreciation (depreciation) of investments /(2)/ (140) 2,159 (12,259) 2,581 1,929 Net increase (decrease) in net assets resulting from operations /(3)/ ($4,058) $ 7,541 $ 21,094 $ 16,610 $ 13,261 ======================================================================================================================= Per Share Data Net investment income (loss) ($0.05) $ 0.64 $ 0.74 $ 0.87 $ 0.88 Net investment income (loss) adjusted for acquisition and other non-recurring charges /(4)/ (0.03) 0.84 0.74 0.98 0.88 Net increase (decrease) in net assets resulting from operations (0.24) 0.52 1.44 1.14 1.04 Dividends declared per share /(5)/ 0.38 1.19 1.27 1.16 0.88 ======================================================================================================================= Weighted average common shares outstanding Basic 16,582,179 14,536,942 14,515,660 14,461,276 12,621,301 Diluted 16,582,179 14,576,183 14,620,437 14,591,045 12,769,394 ======================================================================================================================= Balance Sheet Data Investments, net of unrealized depreciation on investments $ 455,595 $ 514,154 $ 489,567 $ 408,208 $ 334,141 Total assets 507,756 560,715 533,924 448,037 362,168 Notes payable 233,000 305,700 195,450 120,600 138,750 Senior secured notes 45,000 45,000 45,000 -- -- Subordinated SBA debentures 43,845 21,360 22,770 55,360 53,540 Commercial paper -- 24,066 93,984 103,082 -- Total liabilities 332,732 412,982 376,263 292,490 206,306 Negative goodwill -- -- 351 1,073 1,795 Total shareholders' equity 175,024 147,733 157,310 154,474 154,067 =======================================================================================================================
18
- ----------------------------------------------------------------------------------------------------------------------- Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- Selected Financial Ratios And Other Data Return on average assets /(6)/ Net investment income (loss) (0.17%) 1.69% 2.20% 3.14% 3.81% Net increase (decrease) in net assets resulting from operations (0.76) 1.38 4.30 4.10 4.49 Net increase (decrease) in net assets resulting from operations adjusted for acquisition and other non-recurring charges /(4)/ (0.76) 1.95 4.30 4.47 4.49 Return on average equity /(7)/ Net investment income (loss) (0.56) 6.27 6.87 8.25 7.30 Net increase (decrease) in net assets resulting from operations (2.51) 4.94 13.53 10.77 11.28 Net increase (decrease) in net assets resulting from operations adjusted for acquisition and other non-recurring charges /(4)/ (2.51) 7.00 13.53 11.74 11.28 ======================================================================================================================= Weighted average yield /(8)/ 8.71% 10.82% 9.91% 9.92% 10.20%/(13)/ Weighted average cost of funds /(9)/ 5.27 5.66 7.12 6.49 7.15/(13)/ Net interest margin, /(10)/ 3.44 5.16 2.79 3.43 3.05/(13)/ Other income ratio /(11)/ 0.43 0.66 0.46 0.41 0.33 Operating expense ratio /(12)/ 3.20 4.09 3.27 3.06 1.82 As a percentage of total investment portfolio Medallion loans 55.46% 58.21% 65.75% 70.10%/(13)/ 72.13%/(13)/ Commercial loans 43.75 41.37 33.84 27.10/(13)/ 25.48/(13)/ Equity investments 0.79 0.41 0.41 2.80 2.24 ======================================================================================================================= Investments to assets /(14)/ 89.73% 91.70% 91.69% 91.11% 92.26% Equity to assets /(15)/ 34.47 26.35 29.46 34.48 42.54 Debt to equity /(16)/ 183.89 268.14 227.07 180.64 124.81 =======================================================================================================================
/(1)/ Equity in earnings (losses) of unconsolidated subsidiary represents the net income (loss) for the period indicated from the Company's investment in Media. /(2)/ Change in unrealized appreciation (depreciation) of investments represents the increase (decrease) for the period in the fair value of the Company's investments. /(3)/ Net increase in net assets resulting from operations is the sum of net investment income, realized gains or losses on investments and change in unrealized appreciation (depreciation) on investments. /(4)/ The Company considers net investment income before acquisition and other non-recurring charges to be a more appropriate measure of operating performance; consequently, this calculation represents net investment income plus acquisition-related and other non-recurring charges of $396,000 in 2001, $3,140,000 in 2000, and $1,494,000 in 1998, divided by weighted average diluted common shares outstanding. /(5)/ Includes $0.09 per share dividend declared on December 21, 2001 and paid on January 14, 2002 to shareholders of record as of December 31, 2001 and $0.36 per share declared on November 17, 2000 and paid on January 12, 2001 to shareholders of record as of December 8, 2000. /(6)/ Return on average assets represents the net investment income (loss) or net increase (decrease) in net assets resulting from operations, for the period indicated, divided by average total assets. /(7)/ Return on average equity represents the net investment income (loss) or net increase (decrease) in net assets resulting from operations, for the period indicated, divided by average shareholders' equity. /(8)/ Weighted average yield on the investment portfolios for 2001 and 2000, and end of period yield representing the end of the year weighted average interest rate on investments for 1999, 1998, and 1997. /(9)/ Weighted average cost of funds on the investment portfolios for 2001 and 2000, and end of period cost of funds representing the end of the year weighted average interest rate on debt for 1999, 1998, and 1997. /(10)/ Net interest margin represents weighted average yield less weighted average cost of funds. /(11)/ Other income ratio represents other income for the year indicated, divided by average interest earning assets. /(12)/ Operating expense ratio represents operating expenses for the year indicated, divided by average interest earning assets. /(13)/ Does not include financial information for FSVC. /(14)/ Represents total investments divided by total assets as of December 31. /(15)/ Represents total shareholders equity divided by total assets as of December 31. /(16)/ Represents total debt (commercial paper, notes payable to banks, senior secured notes, and SBA debentures payable) divided by total shareholders' equity as of December 31. - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in this section should be read in conjunction with Consolidated Financial Statements and Notes thereto for the years ended December 31, 2001, 2000, and 1999. In addition, this section contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results and conditions to differ materially from those projected in these forward-looking statements are set forth below in the Investment Considerations section. 19 Critical Accounting Policies The Securities and Exchange Commission ("SEC") has recently issued cautionary advice regarding disclosure about critical accounting policies. The SEC defines critical accounting policies as those that are both most important to the portrayal of a company's financial condition and results and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain and may change materially in subsequent periods. The preparation of the Company's consolidated financial statements requires estimates and assumption that affect amounts reported and disclosed in the financial statements and related notes. Significant estimates made by the Company include valuation of loans, evaluation of the recoverability of accounts receivable and income tax assets, and the assessment of litigation and other contingencies. The Company's ability to collect accounts receivable and recover the value of its loans depends on a number of factors, including the financial conditions and its ability to enforce provisions of its contracts in the event of disputes, through litigation if necessary, in accordance with generally accepted accounting principles, to record net assets and liabilities at estimated realizable values. The matters that give rise to such provisions are inherently uncertain and may require complex and subjective judgments. Although the Company believes that estimates and assumptions used in determining the recorded amounts of net assets and liabilities at December 31, 2001, are reasonable, actual results could differ materially from the estimated amounts recorded in the Company's financial statements. 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 13% and our commercial loan portfolio at a compound annual growth rate of 37%. Our total assets under our management were approximately $737 million and have grown from $215 million at the end of 1996, a compound annual growth rate of 25%. 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 the Company'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. The Company, 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 MCI. MCI'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, operated by Media is reflected on the Company'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. 20 Economic Conditions in New York City The terrorist attacks on New York City on September 11, 2001, created a tremendous amount of actual and collateral damage to the City, and to the people and businesses who live, work, and operate there. The slowdown in traffic, tourism, and other personal concerns resulted in initial operating problems for certain of our medallion individual and fleet customers. It also effected some of our commercial borrowers. The taxi top advertising business, many of whose ads are from Broadway shows, suffered short term contract cancellations from these and other customers which had a gross revenue impact of approximately $934,000 during 2001. The attacks also further exacerbated the recessionary trends which had become more apparent as 2001 unfolded. The effects of a general economic slowdown has impacted the Company as evidenced by an increase in delinquencies and nonperforming loans, increased prepayment activity as borrowers sought lower rate financing with the Company or other lenders, and stresses on medallion and other collateral values, primarily in Chicago, and by reduced levels of advertising in Media. As a result of the above, the Company reassessed the loss potential on the loan portfolio, servicing asset, and other receivables which resulted in charges of $11,300,000 in the 2001 third quarter to provide reserves against or writedown the values of these assets which were impacted by the attacks and the recession in the economy. 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, 21 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. 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:
- ------------------------------------------------------------------------------------------------------- December 31, 2001 December 31, 2000 --------------------------------------------------------------------------- Contractual Contractual Weighted Percentage Weighted Percentage Average Principal of Total Average Principal of Total (Dollars In thousands) Yield Amount Portfolio Yield Amount Portfolio - ------------------------------------------------------------------------------------------------------- Medallion loan portfolio 8.88% $252,675 55.4% 9.22% $299,303 58.2% Commercial loan portfolio 9.22 199,328 43.8 12.41 212,721 41.4 Equity investments -- 3,592 0.8 -- 2,130 0.4 ---------------------- ---------------------- Total portfolio 9.04 $455,595 100.0% 10.56 $514,154 100.0% ======================================================================================================= - ---------------------------------------------------------------- December 31, 1999 ------------------------------------ Contractual Weighted Percentage Average Principal of Total (Dollars In thousands) Yield Amount Portfolio - ---------------------------------------------------------------- Medallion loan portfolio 8.91% $321,901 65.8% Commercial loan portfolio 11.69 165,654 33.8 Equity investments -- 2,012 0.4 ---------------------- Total portfolio 9.91 $489,567 100.0% ================================================================
Portfolio Summary Total Portfolio Yield The weighted average yield of the total portfolio at December 31, 2001 was 9.04%, which is a decrease of 188 basis points from 10.56% at December 31, 2000. The decrease primarily reflects the reductions in the general level of interest rates in the economy, demonstrated by the reduction in the prime rate from 9.5% to 4.75% during the course of 2001. The total weighted average portfolio yield increased 65 basis points to 10.56% at December 31, 2000 from 9.91% at December 31, 1999. The increase in the total portfolio yield was due to the increased yield on the commercial loan portfolio and the shift in the composition of the portfolio to an increased percentage of commercial loans. The Company expects to try to continue increasing both the percentage of commercial loans in the total portfolio and the origination of floating and adjustable-rate loans and non-New York medallion loans. Medallion Loan Portfolio The Company's loans comprised 55% of the total portfolio of $455,595,000 at December 31, 2001, compared to 58% of the total portfolio of $514,154,000 at December 31, 2000 and 66% of the total portfolio of $489,567,000 at December 31, 1999. The medallion loan portfolio decreased by $46,628,000 or 16% in 2001, reflecting a decrease in medallion loan originations, principally in New York City, Chicago, and Boston, and the Company's execution of participation agreements with third parties for $93,784,000 of low yielding New York medallion loans. The Company retains a portion 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 December 31, 2001 was 8.88%, a decrease of 34 basis points from 9.22% at December 31, 2000, which was up 31 basis points from 8.91% at December 31, 1999. The decrease in yields at December 31, 2001 reflects the generally lower level of rates in the economy. The increased yield at December 31, 2000, primarily reflected the Company's expansion into markets outside of New York, which produce yields 100 to 300 basis points higher than loans originated in the New York medallion market, offset by the effects of continuing competition in the New York medallion market. At December 31, 2001, 19% of the medallion loan portfolio represented loans outside New York compared to 24% and 16% at year-end 2000 and 1999, respectively. Medallion continues to focus its efforts on originating higher yielding medallion loans outside the New York market. Collateral Appreciation Participation Loans During the 2000 first half, the Company originated collateral appreciation participation loans collateralized by Chicago taxi medallions of $29,800,000, of which $20,850,000 were 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 $29,800,000 of the collateral. During 2001, the effect of the economic downturn began to stress the value of Chicago taxi medallions, which accelerated as the year progressed. As a result, the Company determined that the previously recorded appreciation was no longer supported by current Chicago medallion prices, and therefore adjusted the carrying values down to their original face value of $8,950,000, which represented approximately 2% of its total investment portfolio. Additional interest income was reduced by $3,100,000 for 2001, compared to increases of $3,100,000 and $0 for 2000 and 1999, and is reflected in investment income on the consolidated statements of operations and in accrued interest receivable on the consolidated balance sheets. 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 in each accounting period, by relying upon information such as recent and historical medallion sale prices. The loans are due in March 2005, but may be prepaid at the borrowers option. If that occurs, the Company expects to 22 refinance the loans with the existing borrower, including the syndicated portion, at that time at the rates and terms prevailing at that time. 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 44% of the total portfolio at December 31, 2001 compared to 41% and 34% at December 31, 2000 and 1999, respectively. The commercial loan portfolio continued to experience strong growth in the asset-based lending portfolio and the mezzanine financing business, which was more than offset by the decline in the other commercial lending segments. The overall decline in the commercial lending business reflects the chargeoff of $3,778,000 of fully-reserved loans during 2001, and the slowdown in originations due to liquidity constraints during the first part of 2001. The weighted average yield of the commercial loan portfolio at December 31, 2001 was 9.22%, a decrease of 319 basis points from 12.41% at December 31, 2000, which was up 72 basis points from 11.69% at December 31, 1999. The decrease in 2001 and the increase in 2000 primarily reflected 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, which fell 475 basis points during 2001 after rising for much of 2000. The Company continues to originate adjustable-rate and floating-rate loans tied to the prime rate to help mitigate its interest rate risk in a rising interest rate environment. At December 31, 2001, floating-rate loans represented approximately 68% of the commercial portfolio compared to 69% and 52% at December 31, 2000 and 1999. 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. Equity Investments Equity investments were 0.8%, 0.4%, and 0.4% of Medallion's total portfolio at December 31, 2001, 2000, and 1999. Equity investments are comprised of common stock and warrants. Investment in and loans to Unconsolidated Subsidiaries The investment in unconsolidated subsidiaries represents the Company's investment in its taxicab advertising business, Media. 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, fixed-rate, long-term debentures issued to or guaranteed by the SBA, and, to a lesser degree, secured commercial paper. As a result of the recent amendments to the bank lines of credit and senior secured notes, the Company's cost of funds will increase in 2002 until the debts mature and are paid off. As noted above, the amendments entered into during 2002 to the Company's bank loans and senior secured notes involved changes, and in some cases increases, to the interest rates payable thereunder. In addition, during events of default, the interest rate borne on the bank loans is based upon a margin over the prime rate rather than LIBOR. The bank loans are priced on a grid depending on leverage and were at LIBOR plus 325 basis points for the Company and LIBOR plus 250 basis points for MFC as of April 1, 2002. The senior secured notes adjusted to 8.35% effective March 29, 2002, and thereafter adjust upwards an additional 50 basis points on a quarterly basis until maturity. In addition to the interest rate charges, $1,654,000 has been incurred through April 1, 2002 for attorneys and other professional advisors, most working on behalf of the lenders, which will be expensed over the remaining lives of the related debt outstanding. The Company'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. The Company incurs LIBOR-based debt for terms generally ranging from 30-90 days. The Company's debentures issued to the SBA typically have initial terms of ten years. The Company measures its cost of funds as its aggregate interest expense for all of its interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period. The following table shows the average borrowings and related costs of funds for 2001, 2000, and 1999. Average balances have declined during 2001, primarily reflecting the initial use of the equity proceeds raised during 2001 for debt reductions and the growth in participations sold to other financial institutions to raise capital for debt reductions and other corporate purposes. The decline in the costs of funds reflects the trend of declining interest rates in the economy, partially offset by the switch from lower cost commercial paper to higher cost bank debt and related renewal expenses, and additional long-term SBA debt also at higher rates. 23
- -------------------------------------------------------------------------------- Percentage of Total Average Average Interest Interest Balance Cost of Funds Expense Expense - -------------------------------------------------------------------------------- December 31, 2001 Notes payable to banks $283,963,077 6.91% $19,626,805 77.0% Senior secured notes 45,000,000 7.41 3,336,398 13.1 SBA debentures 30,814,615 7.54 2,322,702 9.1 Commercial paper 2,550,077 7.82 199,350 0.8 ------------ ------------------------ Total $362,327,769 7.03 $25,485,255 100.0% - -------------------------------------------------------------------------------- December 31, 2000 Notes payable to banks $180,711,538 7.77% $14,034,234 48.5% Commercial paper 135,564,188 7.25 9,827,886 34.0 Senior secured notes 45,000,000 7.31 3,287,459 11.4 SBA debentures 22,770,000 7.88 1,794,081 6.1 ------------ ------------------------ Total $384,045,726 7.54 $28,943,660 100.0% - -------------------------------------------------------------------------------- December 31, 1999 Notes payable to banks $131,219,231 6.97% $ 9,143,232 43.6% Commercial paper 123,143,074 5.82 7,171,459 34.2 SBA debentures 42,498,462 7.44 3,160,314 15.0 Senior secured notes 19,038,462 7.95 1,512,684 7.2 ------------ ------------------------ Total $315,899,229 6.64 $20,987,689 100.0% ================================================================================
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 has generally decreased its interest expense, but has also increased the Company's exposure to the risk of increases in market interest rates, which the Company mitigates with certain hedging strategies. At December 31, 2001 and 2000, short-term LIBOR-based debt including commercial paper constituted 72%, and 82% of total debt, respectively. Taxicab Advertising In addition to its finance business, the Company also conducts a taxicab rooftop advertising business through Media, which began operations in November 1994. Media's revenue is affected by: the number of taxicab rooftop advertising displays, currently showing advertisements, and the rate charged customers for those displays. At December 31, 2001, Media had approximately 10,000 installed displays in the US. The Company 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. Although Media is a wholly-owned subsidiary of the Company, its results of operations are not consolidated with the Company's operations because the Securities and Exchange Commission regulations prohibit the consolidation of non-investment companies with investment companies. During 2001, Media's operations were constrained by a very difficult advertising environment compounded by the rapid expansions of tops inventory that occurred during 1999 and 2000. Media began to recognize losses as growth in operating expenses exceeded growth in revenue. Also, a substantial portion of Media's revenues in 2001 arose from the realization of amounts that had been paid for and deferred from prior periods. Media is actively pursuing new sales opportunities, including expansion and upgrading of the sales force, and has taken steps to reduce operating expenses, including renegotiation of fleet payments for advertising rights, to better align ongoing revenues and expenses, and to maximize cash flow from operations. Media's growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from September 11th and the economic downturn, which has resulted in operating losses and a drain on cash flow, as well as the limitation on funding that can be provided by the Company in accordance with the terms of the bank agreements. Media has developed an operating plan to fund only necessary operations out of available cash flow and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such times as business returns to historical levels. In July 2001, Media acquired certain assets and assumed certain liabilities of MMJ, a taxi advertising operation similar to those operated by Media in the US, which has advertising rights on approximately 7,000 cabs (1,000 rooftop displays and 6,000 interior racks) 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 three years. Factors Affecting Net Assets Factors that affect the Company'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 24 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 the Company's estimate of the fair value of its investment portfolio is above or below the previously established fair value or the cost basis of the portfolio. Under the 1940 Act and the SBIA, the Company's loan portfolio and other investments must be recorded at fair value. Unlike certain lending institutions, the Company is not permitted to establish reserves for loan losses, but adjusts quarterly the valuation of our loan portfolio to reflect the Company's estimate of the current value of the total loan portfolio. Since no ready market exists for the Company's loans, fair value is subject to the good faith determination of the Company. In determining such fair value, the Company 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 the Company 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. Consolidated Results of Operations For the Years Ended December 31, 2001 and 2000 ---------------------------------------------- Net assets resulting from operations of ($4,058,000) or ($0.24) per common share, decreased $11,599,000 from $7,541,000 or $0.52 per share in 2000, reflecting decreased net interest and non interest income, and higher levels of net realized/unrealized losses on the investment portfolios, partially offset by reduced operating expenses. Included in the results for 2001 were charges of $11,500,000 primarily relating to valuation assessments the Company made in regards to the future realizability of asset values in light of the September 11, 2001 terrorist attacks and their impact on New York City and the Company's operations, compounded by the recessionary forces battering the economy, including the sharp reduction in interest rates and their effect on prepayment levels. The charges included $3,300,000 to increase unrealized depreciation to reflect the impact of the economic forces on delinquency trends, reduced payment levels, and collateral values; $3,100,000 to writedown the value of collateral appreciation participation loans to reflect recent transaction activity in Chicago medallions; $2,050,000 to reflect acceleration in the deterioration in the prepayment speeds on the Company's servicing asset receivable; $1,350,000 to reserve against the risks of future realization of previously recorded deferred tax benefits related to Media's operations; $1,150,000 related to additional bank charges for new amendments to our borrowing agreements and higher pricing; and $550,000 related to the write-off of previously capitalized transaction costs that are no longer expected to close. Likewise, 2000 results included one-time charges of $3,140,000 related to acquisition-related matters ($1,804,000), the termination of certain capital markets activities ($801,000), and the costs of amending our borrowing agreements with our bank group ($535,000), fully offset by income of $3,100,000 reflecting the write-up in the value of collateral appreciation participation loans. Excluding the impact of these charges, 2001 net increase in net assets resulting from operations was $7,442,000 or $0.45 per share, a decrease of $139,000 or 2% compared to 2000. Investment income was $42,077,000, down $13,279,000 or 24% from $55,356,000 in 2000. The decrease compared to 2000 primarily reflected the $6,200,000 swing in values of the collateral appreciation participation loans from early 2000 to late 2001, as well as lower yields on the portfolio primarily due to the lower interest rate environment in 2001, a decreased level of loans, and a higher level of nonaccrual loans. Total net investments at year end were $462,253,000, down $53,757,000 or 10% from 2000. The yield on the total portfolio during 2001 was 9.04%, compared to 10.82% for 2000, a decline of 178 basis points. The 2001 decrease primarily reflected the reduction in additional interest income related to the collateral appreciation loans and the series of rate drops initiated by the Federal Reserve bank during late 2000 and continuing through 2001, which reduced the prime lending rate by 475 basis points. Adjusted for the effects of the additional income recorded on the collateral appreciation participation loans, the yields were 9.35% and 10.21% for 2001 and 2000, respectively, a decline of 86 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 44% of the investment portfolio at December 31, 2001, compared to 41% at December 31, 2000. Yields on medallion loans were 8.88% at yearend, compared to 9.22% at yearend 2000, and yields on commercial loans were 9.22% compared to 12.41% for 2000. Medallion loans were $252,675,000 at yearend, down $46,628,000 or 16% from $299,303,000 at the end of 2000, reflecting reductions in most markets. The commercial loan portfolio was $199,329,000 at yearend, compared to $212,721,000, for 2000 a decrease of $13,392,000 or 6%, reflecting reductions in all commercial lending categories except asset-based receivable lending which increased $10,835,000 or 25%. In general, the decrease in the loan portfolios was a result of the bank lenders requiring the Company to reduce the level of outstandings in the revolving lines of credit. During the 2000 first half, the Company originated collateral appreciation participation loans collateralized by Chicago taxi medallions of $29,800,000, of which $20,850,000 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 $29,800,000 of the collateral. During 2001, the effect of the economic downturn began to stress the value of Chicago taxi medallions, which accelerated as the year progressed. As a result the Company determined that the previously recorded appreciation was no longer supported by current Chicago medallion prices, and 25 therefore adjusted the carrying values down to their original face value of $8,950,000, which represented approximately 2% of its total investment portfolio. Additional interest income was reduced $3,100,000 for 2001, compared to an increase of $3,100,000 for 2000, and is reflected in investment income on the consolidated statements of operations and in accrued interest receivable on the consolidated balance sheets. Interest expense was $25,485,000 in 2001, down $3,459,000 or 12% from $28,944,000 in 2000, primarily reflecting a switch from lower cost commercial paper to higher cost bank debt and SBA debentures, and higher bank fees and charges related to the renewals and amendments of the bank loans, partially offset by lower rates and lower average balances outstanding. The Company's borrowings from its bank lenders generally were repriced during the year as a result of the negotiations and amendments to the bank facilities. The impact of all of this was to increase the Company's cost of funds by $3,592,000 or 109 basis points. Outstanding balances under all financing arrangements decreased $74,281,000 or 19% during 2001 to $321,845,000 from $396,126,000 in 2000. The Company'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 7.03% in 2001, compared to 7.54% a year ago, a decrease of 51 basis points. Approximately 72% of the Company's debt is short-term and floating rate, compared to 82% a year ago. See page 23 for a table which shows average balances and cost of funds for the Company's funding sources. Net interest income was $16,592,000, and net interest margin was 3.43% in 2001, down $9,820,000 or 37% from $26,412,000 or 5.16% in 2000, primarily reflecting the $6,200,000 difference in additional interest income on the collateral appreciation participation loans and the decreases in yields and balances in the loan portfolio, partially offset by lower borrowing costs associated with reduced levels of borrowings at lower rates of interest. The net interest margin was 4.08% in 2001, compared to 4.56% in 2000, adjusted for the impact of the additional interest on the collateral appreciation participation loans. Noninterest income was $241,000 in 2001, down $5,880,000 or 96% from $6,121,000 in 2000. The Company had gains on the sale of the guaranteed portion of SBA 7(a) loans of $1,511,000 in 2001, down $1,303,000 or 46% from $2,814,000 in 2000. During 2001, $25,644,000 of loans were sold under the SBA program compared to $51,100,000 during 2000. The decline in gains on sale reflected a decrease in loans sold of $25,456,000 or 50%, 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 $0 in 2001, compared to $351,000 in 2000. Other income of $2,105,000 in 2001 was down $1,273,000 or 38% from $3,378,000 in 2000, primarily reflecting charges to revalue the servicing fee receivable by $2,171,000 in 2001, compared to $205,000 in 2000. The charges were primarily a result of substantial increases in prepayments on the serviced portfolio during 2001, resulting from the sharp decrease in interest rates, among other factors. Excluding the charges, other income which is comprised of servicing fee income, prepayment fees, late charges, and other miscellaneous income was up $1,004,000 or 28%. Also included in noninterest income was equity in earnings (losses) of unconsolidated subsidiary, which reflects the operations of the Media division of the Company in 2001. Media generated a net loss of $3,375,000 in 2001, an increase of $2,954,000 compared to a net loss of $421,000 for 2000. The decline in profits in 2001 reflected the charge of $1,500,000 to establish a reserve against the realizability of deferred tax benefits previously recorded due to changes in Media's tax situation and the greater costs associated with the rapid increase in tops under contract and cities serviced, which outpaced the increase in revenue. Advertising revenues were $13,250,000 in 2001, up $2,106,000 or 19% from $11,144,000 in 2000. Revenue in 2001 was reduced by approximately $934,000 related to contract cancellations resulting from the terrorist attacks in New York City. During 2001, Media exerted a greater effort to reduce the amount of deferred revenue by increasing capacity utilization, resulting in a drop of $4,699,000 in deferred revenue to $755,000 at year end 2001, compared to a year-ago. To the extent that Media cannot generate additional advertising revenue to replace the deferred revenue recorded in 2001, Media's results of operations may be negatively impacted. Also included in advertising revenue 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 300 or 3% to 10,200 from 9,900 a year ago. As a result of the substantial growth in tops inventory during the later part of 2000, Media's fleet payment costs and related operating expenses to service those tops increased in 2001 at a greater rate than the growth in revenue, resulting in lower profits in the 2001 periods compared to 2000. Media's results for 2001 also included losses of $294,000 related to foreign operations. Noninterest expenses were $17,752,000 in 2001, down $5,697,000 or 24% from $23,449,000 in 2000. Adjusting for the charges described above, the improvement in noninterest expense was $4,627,000 or 20%. Salaries and benefits expense of $9,421,000 was down $1,091,000 or 10% from $10,512,000 in 2000, primarily reflecting a 12% reduction in headcount. Professional fees of $2,260,000 were down $344,000 or 13% from $2,604,000 in 2000, and included the write-off in both periods of capitalized costs associated with certain financing transactions that are no longer being pursued. These write-offs equaled $396,000 in 2001 and $801,000 in 2000. Merger-related expense of $1,804,000 in 2000 reflected costs associated with the FSVC merger and the write-off of costs capitalized in connection with two acquisitions that were contracted in 2000, but which were subsequently terminated. Amortization of goodwill was $653,000 in 2001 compared to $540,000 a year-ago, and included the $116,000 write-off of all remaining goodwill related to the 1997 acquisition of BLL. Other operating expenses of $5,414,000 in 2001 were down $2,822,000 or 34% from $8,236,000 in 2000, primarily reflecting the continued cleanups of financial records and operations, and a general effort to control expenses. 26 Net investment income after taxes was a loss of $903,000 in 2001, down $10,169,000 from net investment income of $9,266,000 in 2000, reflecting the results of operations described above. Excluding the impact of the unusual items previously mentioned, net investment income after taxes was $7,297,000, down $2,009,000 or 22% from 2000. Net unrealized depreciation on investments was $140,000 in 2001, compared to net unrealized appreciation of $2,159,000 for 2000, a decrease of $2,299,000. Unrealized appreciation/(depreciation) arises when the Company 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 activity resulted from unrealized depreciation of $7,411,000 reflecting the recessionary impact on borrower operations and collateral values, and by the reversals of unrealized appreciation associated with sold investments, primarily equities, of $121,000, partially offset by the reversals of unrealized depreciation associated with investments fully written off, primarily fully depreciated loans which were charged off, of $4,455,000 and the increase in valuation of investments of $2,937,000, primarily in equity securities. The 2000 activity reflected the reversals of unrealized depreciation associated with fully depreciated loans which were charged off of $2,221,000 and the increase in valuation of loans and equity portfolio securities of $613,000, partially offset by unrealized depreciation of $657,000 and by the reversals of unrealized appreciation associated primarily with sold equity investments of $18,000. Net realized loss on investments was $3,015,000 in 2001 compared to losses of $3,884,000 in 2000, primarily reflecting the charge-off of fully reserved commercial loans. The Company's net realized/unrealized loss on investments was $3,155,000 in 2001 compared to $1,725,000 for 2000, reflecting the above. For the Years ended December 31, 2000 and 1999 ---------------------------------------------- The 2000 year was a year of maturity for the Company as cumulative growing pains from prior years were addressed and the Company began a new commitment to operational and financial excellence. Steps taken included the resolution of the material weaknesses identified from the 1999 financial audit, the hiring of a strong new cadre of senior management, the initiating of a dialogue with the Company's lending syndicates as to borrowing conditions, and the reassessment of strategic initiatives both underway and anticipated in the future. As a result of this process, the Company recorded adjustments against net investment income of $3,100,000 reflecting a number of one-time adjustments relating to acquisition-related matters ($1,800,000), the termination of certain capital markets activities ($800,000), and the costs of amending our borrowing agreements with our bank group ($500,000). As reported, net increase in net assets resulting from operations was $7,500,000 or $0.52 per share in 2000, a decrease of $13,600,000 or 64% from $21,100,000 or $1.44 per share in 1999, primarily reflecting the one-time adjustments described above and the impact of the Radio One, Inc. investment gain of $17,800,000 recorded in 1999 as a result of Radio One's initial public offering completed during the three months ended June 30, 1999. Adjusting for the effects of these unusual items, net increase in net assets resulting from operations was $10,700,000 or $0.73 per share in 2000, compared to $3,300,000 or $0.23 per share in 1999, an increase of $7,400,000 or 224%, reflecting increased net interest and non-interest income, complemented by a sharp reduction in net unrealized depreciation on investments, partially offset by an increase in operating expenses. Return on average assets and return on average equity for 2000 were 1.38% and 4.94% (1.95% and 7.00% adjusted for the unusual items), respectively, compared to 4.30% and 13.53% (0.68% and 2.14% adjusted for the Radio One investment gain) for 1999. Investment income was $55,400,000 in the year, up $11,300,000 or 26% from $44.1 million in 1999. The increase compared to 1999 reflected both the higher level of interest rates in the economy during 2000 and the increased level of loans, coupled with additional interest income recorded on the collateral appreciation participation loans. Net investments grew $24,600,000 or 5% to $514,200,000 in 2000 from $489,600,000 in 1999. The yield on the total portfolio at December 31, 2000 was 10.56%, an increase of 65 basis points compared with a yield of 9.91% a year-ago. The increase primarily reflects the series of rate hikes initiated by the Federal Reserve bank during late 1999 and continuing through most of 2000. The impact of the higher yield increased investment income by approximately $3.3 million in 2000. Also impacting the improvement in investment income was the continuing movement of portfolio composition towards higher-yielding commercial loans from lower-yielding medallion loans. Yields on medallion loans at year-end were 9.22% (up from 8.91% in 1999), and the yields on commercial loans were 12.41% at year-end (up from 11.69% in 1999). As rates began to rise, management made a conscious effort to sell or not renew these typically fixed, lower-rate medallion loans and replace them with floating, higher-rate commercial loans. Medallion loans were $299,300,000 at December 31, 2000, down $22,600,000 or 7% from $321,900,000 in 1999, primarily reflecting a reduction in New York City medallion loans, partly offset by increased medallion loans in other markets, especially in Chicago and Boston. The commercial loan portfolio was $212,700,000 at year-end, compared to $165,700,000 a year earlier, an increase of $47,100,000 or 28%. The increases were in most commercial lending categories, including $13,600,000 in the asset-based lending business and $8,600,000 in the SBA 7(a) lending program. The balance of the commercial loan increase was spread amongst many generic commercial lending categories, including restaurants, real estate, mezzanine financing, and other small business pursuits. 27 During the 2000 first half, we originated collateral appreciation participation loans collateralized by Chicago taxi medallions of $29,800,000, of which $20,850,000 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 $29,800,000. The value of Chicago taxi medallions increased during 2000, and accordingly, additional interest of $3,100,000 was recorded as investment income for 2000. Interest expense was $28,900,000 in 2000, up $8,000,000 or 38% compared to 1999, primarily reflecting increased borrowing levels, coupled with the impact of an increased interest rate environment. During 2000, Medallion completed the leveraging of its equity base by essentially fully drawing down the existing bank lines of credit, resulting in an increase in debt outstanding of $39,000,000 or 11% to $396,100,000. The increase in average debt outstanding was $67,800,000, a 21% increase compared to 1999. In addition to the higher borrowing levels, Medallion's debt is primarily tied to floating rate indexes, which rose during most of 2000. As a result, the average cost of funds was 7.54% in 2000, compared to 6.64% in 1999, a 14% increase of 90 basis points. Approximately 83% of Medallion's debt is short-term and floating rate, up slightly from 81% in 1999. Net interest income was $26,400,000 for 2000, up $3.3 million or 14% from 1999, primarily reflecting the additional interest recorded on the collateral appreciation participation loans. Excluding those amounts, net interest income was up $200,000 or 1%, reflecting the relatively greater increase in the level of debt outstanding compared to the growth in the loan portfolio, coupled with a reduction in the net interest spread from the increase in borrowing costs which outpaced the increase in yield on the loan portfolio. Medallion had gains on the sale of the guaranteed portion of SBA 7(a) loans of $2,800,000 in 2000, down $200,000 or 7% from $3,000,000 in 1999. During 2000, $51,100,000 of loans were sold under the SBA program compared to $53,800,000 million during 1999. The decline in gains on sale reflected a decrease in loans sold of $2,700,000 or 5%, along with a decrease in the level of market-determined premiums received on the sales. Equity in earnings (losses) of unconsolidated subsidiary reflects the operations of the Media division of Medallion. The losses of $400,000 in 2000 increased $200,000 from losses of $200,000 in 1999, and reflected the greater costs associated with the rapid increase in tops under contract and cities serviced, which outpaced the $1,300,000 or 13% increase in revenue. During 2000, vehicles under contract increased 3,500 or 55% to 9,900 from 6,400 in 1999. Negative goodwill was fully accreted during 2000, and accordingly, accretion of $400,000 in 2000 declined from $700,000 in 1999. Other income of $3,400,000 increased $1,200,000 from $2,200,000 in 1999, primarily reflecting an increase of $600,000 in servicing fee income, as well as increases in prepayment fees, late charges, and other miscellaneous income. Non-interest expense was $23,400,000, up $5,400,000 or 30%, from $18,000,000 in 1999. Included in the amounts for 2000 were $1,100,000 of costs related to the FSVC acquisition, and write-offs of $900,000 for costs related to acquisitions that were terminated during the year, $500,000 of other costs associated with capital markets activities, $300,000 related to a spin-off of an operating division that was terminated, and $300,000 related to a postponed asset securitization. Excluding these amounts, non-interest expense was $20,300,000, up $2,300,000 or 13% from 1999. Salaries and benefits expense of $10,500,000 was up $900,000 or 9%, reflecting normal salary increases and the impact of new senior management hires. Professional fees of $2,600,000 were up $700,000 or 40% from $1,900,000 in 1999 (up $200,000 or 13% excluding the write-offs of certain of the costs described above), reflecting higher audit costs in 2000, and consultation on systems development and a variety of business development initiatives. Merger-related expense of $1,800,000 in 2000 reflects the costs associated with the FSVC merger and the write-off of costs capitalized in connection with two acquisitions that were contracted in 2000, but which were subsequently terminated. Amortization of goodwill was $500,000 in 2000, essentially unchanged from 1999. Administration and advisory fees were $100,000 in 2000, down $100,000 or 54% from $200,000 in 1999, reflecting the completion of the advisory services contract. Other operating expenses of $7,900,000 were up $2,200,000 or 38% (up $1,300,000 or 23% excluding the write-offs of certain of the costs described above) from $5,700,000 in 1999. The increase was generally spread among many operating areas of the Company, and included write-offs related to a general cleanup of operations, increased rent, and higher depreciation, advertising, bank charges, and miscellaneous other operating expenses. As reported, net investment income after taxes in 2000 was $9,300,000, down $1,500,000 or 14% from net investment income of $10,800,000 in 1999, reflecting the results of operations described above. Excluding the impact of the unusual items previously mentioned, net investment income after taxes was $12,400,000, up $1,600,000 or 15% from 1999. Net unrealized appreciation on investments was $2,200,000 in 2000, compared to net unrealized depreciation of $12,300,000 in 1999, an increase of $14,400,000. 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 increase in 2000 activity primarily resulted from the reversal of unrealized depreciation related to realized losses of $2,300,000 compared to 1999 activity which included the reversal of unrealized appreciation related to the Radio One gain in 2000 of $5,400,000, along with a net increase in unrealized depreciation of $6,900,000 in 1999. Net realized loss on investments in 2000 was $3,900,000, compared to a net gain of $22,500,000 in 1999, a decrease of $26,400,000. Most of the decrease related to the 1999 sale of Medallion's Radio One equity investment, which resulted in a realized gain of $23,100,000. Aside from Radio One, Medallion sold another equity investment in 2000, which resulted in a loss of 28 $1,300,000. The balance of the increase in 2000 of $2,000,000 represented the write-off of various commercial loans that had previously been fully written down through the quarterly valuation adjustment process Medallion's net realized/unrealized loss on investments in 2000 was $1,700,000, which primarily reflected losses on commercial loans, compared to a net realized/unrealized loss in 1999 of $7,500,000 (excluding the Radio One transaction) which primarily represented increased valuation allowances for commercial loans. ASSET/LIABILITY MANAGEMENT Interest Rate Sensitivity The Company, 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, senior secured notes, and subordinated SBA debentures). A relative measure of interest rate risk can be derived from the Company's interest rate sensitivity gap. The interest rate sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities, which mature and/or reprice within specified intervals of time. The gap is considered to be positive when repriceable assets exceed repriceable liabilities and negative when repriceable liabilities exceed repriceable assets. A relative measure of interest rate sensitivity is provided by the cumulative difference between interest sensitive assets and interest sensitive liabilities for a given time interval expressed as a percentage of total assets. The Company's interest rate sensitive assets were $443,704,000 and interest rate sensitive liabilities were $487,285,000 at December 31, 2001. The one-year cumulative interest rate gap was negative $68,073,000 or 14% of interest rate sensitive assets. 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, the Company anticipates that approximately 40% of the portfolio will mature or be prepaid each year. The Company 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. The following schedule of principal payments sets forth at December 31, 2001 the amount of interest-earning assets and interest-bearing liabilities maturing or repricing within the time periods indicated. The principal amount of medallion loans and commercial loans are assigned to the time frames in which such principal amounts are contractually obligated to be paid. The Company has not reflected an assumed annual prepayment rate for medallion loans or commercial loans in this table. 29
- ---------------------------------------------------------------------------------------------------------------------------- More Than More Than More Than More Than More Than Less 1 and 2 and 3 and 4 and 5 and Than Less Than Less Than Less Than Less Than Less Than (Dollars in thousands) 1 Year 2 Years 3 Years 4 Years 5 Years 6 Years Thereafter Total - ---------------------------------------------------------------------------------------------------------------------------- Earnings Assets Medallion and commercial $ 57,990 $54,545 $84,300 $ 56,423 $ 20,274 $ 1,887 $ 17,193 $292,612 fixed-rate loans Variable-rate loans 82,847 10,509 12,011 4,947 1,569 1,773 55,627 169,283 Cash 25,390 -- -- -- -- -- 25,390 -------------------------------------------------------------------------------------------- Total earning assets 166,227 65,054 96,311 61,370 21,843 3,660 72,820 487,285 - ---------------------------------------------------------------------------------------------------------------------------- Liabilities Bank loans 233,000 -- -- -- -- -- 233,000 SBA debentures 1,300 -- -- 3,040 5,750 11,270 22,485 43,845 Senior secured notes /(1)/ 21,857 23,143 -- -- -- -- 45,000 -------------------------------------------------------------------------------------------- Total liabilities 256,157 23,143 -- 3,040 5,750 11,270 22,485 321,845 -------------------------------------------------------------------------------------------- Interest rate gap (89,930) 41,911 96,311 58,330 16,093 (7,610) 50,335 $165,440 -------------------------------------------------------------------------------------------- Cumulative interest rate gap ($89,930) ($48,019) $48,292 $106,622 $122,715 $115,105 $165,440 $ -- ============================================================================================================================
/(1)/ On March 29, 2002, the Company amended its agreements with the senior noteholders which, among other provisions, accelerated the maturity of the notes to June 30, 2003 from June 30, 2004 and September 30, 2004. - -------------------------------------------------------------------------------- Interest Rate Cap Agreements The Company 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 and private term notes. We entered into an interest rate cap agreement on a notional amount of $10,000,000 limiting our maximum LIBOR exposure on our revolving credit facility until June 24, 2002 to 7.25%. Total premiums paid under the interest rate cap agreements have been expensed. The Company will seek to manage interest rate risk by originating adjustable-rate loans, by incurring fixed-rate indebtedness, by evaluating appropriate derivatives, pursuing securitization opportunities, and by other options consistent with managing interest rate risk. In addition, the Company manages its exposure to increases in market rates of interest by incurring fixed-rate indebtedness, such as five year senior secured notes and ten year subordinated SBA debentures. The Company had outstanding $45,000,000 of senior secured notes at December 31, 2001, half of which were to 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 $43,845,000 with a weighted average interest rate of 6.96%. At December 31, 2001, these notes and debentures each constituted 14% of the Company's total indebtedness. On March 29, 2002, the Company amended its agreements with the senior noteholders which, among other provisions, accelerated the maturity of the notes to June 30, 2003 from June 30, 2004 and September 30, 2004. 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, loan amortization and prepayments, and participations of loan's with third parties. As a RIC, we distribute at least 90% of our investment company taxable income; consequently, we primarily rely upon external sources of funds to finance growth. At December 31, 2001, our $321,845,000 of outstanding debt was comprised as follows: 72% bank debt, at variable effective interest rates with an weighted average interest rate of 5.30%, 14% long-term senior secured notes fixed at an interest rate of 7.35%, and 14% subordinated SBA debentures with fixed-rates of interest with an annual weighted average rate of 7.54%. In May 2001, the Company applied for and received $72.0 million of additional funding with the SBA ($111,700,000 to be committed by the SBA in total for the Company, subject to the infusion of additional equity capital into the respective subsidiaries.) Since SBA financing subjects its recipients to certain regulations, the Company will seek funding at the subsidiary level to maximize its benefits. 30 Financing Arrangements The Company's bank loan matured on November 5, 2001. In addition, MFC was in default under its bank loan and its senior secured notes. In April, 2002, the Company and MFC obtained amendments to their bank loans and senior secured notes. The amendments, in general, changed the maturity dates of the loans and notes, modified the interest rates borne on the secured notes, required certain immediate, scheduled or other prepayments of the loans and notes and reductions in the commitments under the bank loans, required the Company or MFC to engage or seek to engage in certain asset sales, instituted additional operating restrictions and reporting requirements. As modified by the amendments, the scheduled amortization on the lines of credit and secured notes are as follows:
Maturity --------------------------------------------------------------------- Principal Payments Monthly Principal outstanding from from outstanding at December 31, January 1, 2002 July 2002 at and after 2001 - March 31, 2002 April, 2002 May, 2002 - May 2003 June, 2003 June 30, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Medallion Financial loans $ 85,000,000 $13,711,270 $ 5,000,000 $66,288,730 $ -- $ -- $-- MFC loans 148,000,000 -- -- -- 6,166,667 80,166,663 -- MFC loans senior secured notes 45,000,000 1,000,000 13,143,125 -- 1,285,703 16,714,142 -- -------------------------------------------------------------------------------------------------- Total $278,000,000 $14,711,270 $18,143,125 $66,288,730 $7,452,370 $96,880,805 $-- ===================================================================================================================================
In addition to the changes in maturity (acceleration of maturity dates in the case of MFC), the interest rates on the Company's bank loan and MFC's secured notes were increased, and additional fees were charged to renew and maintain the facilities and notes. The recent amendments contain substantial limitations on our ability to operate and in some cases require modifications to our previous normal course of operations. Covenants restricting investment in the Media and BLL subsidiaries, elimination of various intercompany balances between affiliates, limits on the amount and timing of dividends, and continuation of the prior financial and operating covenants were all tightened as a condition of renewal. While we have experienced difficulty complying with the restrictive covenants under our existing agreements, the Company believes it will be able to comply with all provisions of the amended agreements, including the accelerated maturity schedule. As of March 29, 2002, the Company had $29,000,000 of cash on hand. We may need to sell assets to meet the amortization requirements under these amendments. While we fully intend to comply with the covenants in recent amendments, we have failed to comply with similar covenants in our existing agreements. We are currently exploring refinancing options which would replace our obligations under the Company and MFC loans and the senior secured notes. We have signed a non-binding preliminary term sheet and we are currently engaged in discussions, and have received a proposal from, a nationally known asset-based lender to provide a refinancing for the obligations owed under our secured notes and bank loans. The proposed financing would enable the Company to refinance its existing indebtedness and provide additional capital with longer maturities, but there can be no assurance that such financing will be obtained, the date that it will be obtained or whether such financing would provide more operating flexibility than is provided under our current credit agreements. The failure to obtain such financing or alternative financing on a timely basis could have a material adverse effect on the Company. In addition, the Company is actively pursuing other financing options for individual subsidiaries with alternate financing sources, and is continuing the ongoing program of loan participations and sales to provide additional sources of funds for both external expansion and continuation of internal growth. The Company has also received non-binding preliminary offers from other nationally recognized lenders to refinance certain subsidiaries of the Company. Furthermore, the Company is considering the possibility of submitting an application to receive a bank charter, which if granted, would permit the Company to receive deposits insured by the Federal Deposit Insurance Corporation. The Company has held meetings with the relevant regulatory bodies in connection with such an application. There can be no assurances that such financings will be obtained or that any application related to a bank charter would be approved. The Company believes that its credit facilities with the SBA and cash flow from operations (after distributions to stockholders) will be adequate to fund the continuing operation of the Company. As a result of the recent amendments to the bank loans and senior secured notes, the Company's cost of funds will increase in 2002 until the debts mature and are paid off. As noted above, the amendments entered into during 2002 to the Company's bank loans and senior secured notes involved changes, and in some cases increases, to the interest rates payable thereunder. In addition, during events of default, the interest rate borne by the bank loans is based upon a margin over the prime rate rather than LIBOR. The bank loans are priced on a grid depending on leverage and were at LIBOR plus 325 basis points for the Company and LIBOR plus 250 basis points for MFC as of April 1, 2002. The senior secured notes adjusted to 8.35% effective March 29, 2002, and thereafter adjust upwards an additional 50 basis points on a quarterly basis until maturity. In addition to the interest rate charges, $1,654,000 has been incurred for attorneys and other professional advisors, most working on behalf of the lenders, which generally will be expensed over the remaining lives of the related debt outstanding. We are a party to three financing agreements: 1) the Second Amended and Second Amended and Restated Loan Agreement, dated as of September 22, 2000, among the Company, Medallion Business Credit, LLC and the parties thereto (the Company Bank Loan); 2) the Amended and Restated Loan Agreement, dated as of December 24, 1997, as amended, among MFC and the parties thereto (the MFC Bank Loan); and 3) the Note Purchase Agreements, each dated as of June 1, 1999, as amended, between the Company and the note purchasers thereto (the MFC Note Agreements). In the fourth quarter of 2001, the Company Bank Loan matured, and MFC was in default under both the MFC Bank Loan and the MFC Note Agreements. In 2002, the Company and MFC entered into amendments to such agreements. In addition to imposing maturities and scheduled amortization requirements, the amendments also instituted various other prepayment requirements: (a) the Company is required to repay to MFC an intercompany receivable in excess of $8 million by May 15, 2002, and (b) MFC is required to use its best efforts to sell a portion its laundromat and dry cleaning loans in its commercial loan portfolio by May 31, 2002, and its Chicago Yellow Cab loan portfolio before November 1, 2002. The proceeds from these repayments and sales must be used to repay the Company's or MFC's indebtedness, as applicable. In addition, the amendments require MFC to further amend the MFC Note Agreements and the MFC Bank Loan to provide for periodic prepayments of the indebtedness thereunder out of excess cash flow. 31 The Company Bank Loan, MFC Bank Loan, and the MFC Note Agreements contain substantial limitations on our ability to operate and in some cases require modifications to our previous normal course of operations. Under all of the agreements, if our outstanding debt exceeds the borrowing base, as defined in each agreement, then we must repay the outstanding indebtedness that exceeds the borrowing base within five business days. The agreements, collectively, also contain financial covenants, including a maximum consolidated leverage ratio, maximum combined leverage ratio, minimum EBIT to interest expense ratio, minimum asset quality ratio, minimum tangible net worth and maximum losses of Media. The agreements also impose limitations on ability to incur liens and indebtedness, merge, consolidate, sell or transfer asset, loan and invest in third parties and our subsidiaries, repurchase or redeem stock, purchase portfolios, acquire other entities, amend certain material agreements, make capital expenditures, have outstanding intercompany receivables and securitize our assets. They prohibit (a) the Company and MFC from paying dividends prior to July 1, 2002, (b) MFC from paying more than $2 million of dividends between July 1, 2002 and September 12, 2002 and (c) the Company from paying dividends after September 12, 2002 unless it certifies that it will be in pro forma compliance with amortization requirements for the remainder of 2002 after paying the dividend. Lastly, the agreements limit the amount of investments we can make in our subsidiaries and the creation of new subsidiaries. The Company paid amendment fees of $255,000, and MFC paid amendment fees of $478,000 and is obligated to pay an additional amendment fee on June 28, 2002 equal to 0.20% of the amount outstanding under the MFC Bank Loan and the MFC Note Agreements. Additionally, under the MFC Note Agreements and MFC Bank Loan, MFC is obligated to pay the lenders and note holders an aggregate monthly fee of $25,000 commencing on June 30, 2002 and increasing by $25,000 each month. We are currently engaged in discussions, and have received a proposal from, a nationally known asset based lender to provide a refinancing for the obligations owed under our term loan and revolving credit agreement, but there can be no assurance that such financing will be obtained, the date that it will obtained or whether such financing would provide more operating flexibility than is provided under our current credit agreements. The Company values its portfolio at fair value as determined in good faith by the Company's Board of Directors in accordance with the Company's valuation policy. Unlike banks, the Company is not permitted to provide a general reserve for anticipated loan losses. Instead, the Company must value each individual investment and portfolio loan on a quarterly basis. The Company will record unrealized depreciation on investments and loans when it believes that an asset has been impaired and full collection of the loan is unlikely. The Company will record unrealized appreciation on equities if it has a clear indication that the underlying portfolio company has appreciated in value and, therefore, the Company's security has also appreciated in value. Without a readily ascertainable market value, the estimated value of the Company's portfolio of investments and loans may differ significantly from the values that would be placed on the portfolio if there existed a ready market for the investments. The Company adjusts quarterly the valuation of the portfolio to reflect the Board of Directors' estimate of the current fair value of each investment in the portfolio. Any changes in estimated fair value are recorded in the Company's statement of operations as "Net unrealized gains (losses)." In addition, the illiquidity of our loan portfolio and investments may adversely affect our ability to dispose of loans at times when it may be advantageous for us to liquidate such portfolio or investments. In addition, if we were required to liquidate some or all of the investments in the portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net operating income before net realized and unrealized gains. We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with short term floating rate debt, and to a lesser extent with long-term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. The Company has analyzed the potential impact of changes in interest rates on interest income net of interest expense. Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 1% change in interest rates would have affected net increase (decrease) in assets by less than 1% over a six month horizon. Although management believes that this measure is indicative of the Company's sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase (decrease) in assets. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate. 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, the Company'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 the Company's commercial paper did not rollover and has subsequently been replaced by Company'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. During the third quarter 2001 the commercial paper program matured and was terminated. 32 During the second and third quarters, the Company completed an equity offering of 3,660,000 common shares at $11 per share raising over $40,000,000 of additional capital. The Company 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 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 the Company's loan portfolio and advertising businesses. The following table illustrates sources of available funds for the Company and each of the subsidiaries, and amounts outstanding under credit facilities and their respective end of period weighted average interest rate at December 31, 2001:
- --------------------------------------------------------------------------------------------------------------- Medallion (Dollars in thousands) Financial MFC BLL MCI MBC FSVC Total - --------------------------------------------------------------------------------------------------------------- Cash $ 4,300 $ 6,616 $480 $ 8,209 $2,403 $ 3,401 $ 25,409 Bank loans/(1)/ 110,000 208,000 -- -- -- -- $ 318,000 Amounts outstanding 85,000 148,000 -- -- -- -- $ 233,000 Average interest rate 6.25% 4.75% -- -- -- -- 5.30% Maturity 11/5/01 6/30/02 -- -- -- -- 11/01-6/02 SBA debentures/(2)/ -- -- -- 46,500 46,860 $ 93,360 Amounts available -- -- -- 21,000 -- 28,515 $ 49,515 Amounts outstanding -- -- -- 25,500 -- 18,345 $ 43,845 Average interest rate -- -- -- 6.63% -- 7.41% 6.96% Maturity -- -- -- 3/06-12/11 -- 12/02-9/11 12/02-12/11 Senior secured notes/(3)/ -- 45,000 -- -- -- -- $ 45,000 Average interest rate -- 7.35% -- -- -- -- 7.35% Maturity -- 6/04 - 9/04 -- -- -- -- 6/04-9/04 - --------------------------------------------------------------------------------------------------------------- Total cash and amounts undisbursed under credit facilities $ 4,300 $ 6,616 $480 $ 29,209 $2,403 $ 31,916 $ 74,924 =============================================================================================================== Total debt outstanding $ 85,000 $ 193,000 -- $ 25,500 -- $ 18,345 $ 321,845 ===============================================================================================================
/(1)/ Subsequent to December 31, 2001, the agreements providing the lines of credit for the Company and MFC were amended to (a) provide, with respect to the Company line of credit, for a May 15, 2002 maturity date, with commitment reductions to approximately $76 million, $71 million, and $61 million on March 1, 2002, April 1, 2002 and May 1, 2002 (b) provide, with respect to the MFC line of credit, for a June 28, 2002 maturity date (subject to conversion of amounts outstanding on June 28, 2002 into a one year term loan) with a commitment reduction to $150 million on April 1, 2002. /(2)/ The remaining amounts under the approved commitment from the SBA may be drawn down over a five year period ending May, 2006, upon submission of a request for funding by the Company and its subsequent acceptance by the SBA. /(3)/ In connection with the maturity of the revolving line described in (1) above, the terms of the senior secured notes were renegotiated on March 29, 2002, generally providing for $13,000,000 of principal payments, higher levels of interest, and accelerated final maturities of June 30, 2003 from June and September 2004 (as well as required scheduled amortization and asset sales). - -------------------------------------------------------------------------------- Loan amortization, prepayments, and sales also provide a source of funding for the Company. 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, and more recently because of an increase in the percentage of medallion loans, which are refinanced with the Company 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 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. Media's growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from September 11th and the economic downturn, which has resulted in operating losses and a reduced cash flow, as well as restrictions on funding that can be provided by the Company in accordance with the terms of the bank loans. Media has developed an operating plan to fund only necessary operations out of available cash flow and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such times as business returns to historical levels. Recently Issued Accounting Standards 33 In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 142, Goodwill and Other Intangible Assets, requiring that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually, effective for fiscal years beginning after December 15, 2001. In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes an accounting model to be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions, effective for fiscal years beginning after December 15, 2001. The Company is evaluating the impact from adoption of these accounting standards. At December 31, 2001, the Company had $5,008,000 of goodwill on its consolidated balance sheet and $2,100,000 recorded on the balance sheet of Media, its wholly-owned subsidiary that will be subject to the asset impairment review required by SFAS 142. 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 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 capital and liquidity are the following: . bank credit facilities; . senior secured notes; . fixed-rate, long-term SBA debentures that are issued to or guaranteed by the SBA; . sales of participations in loans; and . loan amortization and prepayments. . follow on equity offering As a Regulated Investment Company (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 December 31, 2001, we had $49,515,000 available under outstanding commitments from the SBA. We may have difficulty raising capital to finance our planned level of lending operations. Subsequent to December 31, 2001, the agreements providing the bank loans for the Company and MFC were amended to (a) provide, with respect to the Company bank loan, for a May 15, 2002 maturity date, with commitment reductions to approximately $76,000,000, $71,000,000, and $61,000,000 on March 1, 2002, April 1, 2002 and May 1, 2002; and (b) provide, with respect to the bank loan, for a June 28, 2002 maturity date (subject to conversion of amounts outstanding on June 28, 2002 into a one year term loan) with a commitment reduction to $150,000,000 on April 1, 2002. See additional discussion related to the Company's bank loans and note agreements in the Liquidity and Capital Resources section on page 29. 34 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; . 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. 35 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, 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 the Company, 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. 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 continues to experience 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. If the current economic downturn continues, our commercial loan customers may experience difficulty in servicing their debt with us and the level of our delinquencies and loan losses may increase The economic downturn has resulted in certain of our commercial loan customers experiencing declines in business activities, which could lead to difficulties in their servicing of their loans with us. If the economic downturn continues, the level of delinquencies, defaults, and loan losses in commercial loan portfolio could increase. The terrorist attack on New York City on September 11, 2001 and the economic downturn have affected our revenues by increasing loan delinquencies and non-performing loans, increasing prepayments, stressing collateral value and decreasing taxi advertising. Although the Company believes the estimates and assumptions used in determining the recorded amounts of net assets and liabilities at December 31, 2002, are reasonable, actual results could differ materially from the estimated amounts recorded in the Company's financial statement. 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 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. 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 the Company and certain competitors are subject to less restrictive regulations than the Company. 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 the Company 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. 36 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 or sale of a substantial portion of portfolio loans. 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. If liquidity constraints required the sale of a substantial portion of the portfolio such an action may require the sale of certain assets at amounts less than their carrying amounts. 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 December 31, 2001, our net unrealized depreciation on investments was approximately $7,501,000. 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, 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 the Company, and could potentially adversely affect the value of the Company'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 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 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 37 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 December 31, 2001 was $8,950,000 million, which represented approximately 2% of the total investment 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. We operate in a highly regulated environment. We are regulated by the SEC 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's business activities contain elements of risk. The Company considers the principal types of risk to be fluctuations in interest rates and portfolio valuations. The Company considers the management of risk essential to conducting its businesses. Accordingly, the Company's risk management systems and procedures are designed to identify and analyze the Company's risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. The Company values its portfolio at fair value as determined in good faith by the Company's Board of Directors in accordance with the Company's valuation policy. Unlike banks, the Company is not permitted to provide a general reserve for anticipated loan losses. Instead, the Company must value each individual investment and portfolio loan on a quarterly basis. The 38 Company will record unrealized depreciation on investments and loans when it believes that an asset has been impaired and full collection of the loan is unlikely. The Company will record unrealized appreciation on equities if it has a clear indication that the underlying portfolio company has appreciated in value and, therefore, the Company's security has also appreciated in value. Without a readily ascertainable market value, the estimated value of the Company's portfolio of investments and loans may differ significantly from the values that would be placed on the portfolio if there existed a ready market for the investments. The Company adjusts quarterly the valuation of the portfolio to reflect the Board of Directors' estimate of the current fair value of each investment in the portfolio. Any changes in estimated fair value are recorded in the Company's statement of operations as "Net unrealized gains (losses)." In addition, the illiquidity of our loan portfolio and investments may adversely affect our ability to dispose of loans at times when it may be advantageous for us to liquidate such portfolio or investments. In addition, if we were required to liquidate some or all of the investments in the portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net operating income before net realized and unrealized gains. We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with short term floating rate debt, and to a lesser extent with long-term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. The Company has analyzed the potential impact of changes in interest rates on interest income net of interest expense. Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 1% change in interest rates would have affected net increase (decrease) in assets by less than 1% over a six month horizon. Although management believes that this measure is indicative of the Company's sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase (decrease) in assets. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to the financial statements set forth under Item 14(A)(1) in this Annual Report on Form 10-K, which financial statements are incorporated herein by reference in response to this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference from the Company's Definitive Proxy Statement to be filed by April 30, 2002 for its fiscal year 2001 Annual Meeting of Shareholders under the caption `Directors and Officers of the Registrant". ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from the Company's Definitive Proxy Statement to be filed by April 30, 2002 for its fiscal year 2001 Annual Meeting of Shareholders under the caption `Compensation of Directors and Executive Officers". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference from the Company's Definitive Proxy Statement to be filed by April 30, 2002 for its fiscal year 2001 Annual Meeting of Shareholders under the caption `Stock Ownership of Certain Beneficial Owners and Management". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the Company's Definitive Proxy Statement to be filed by April 30, 2002 for its fiscal year 2001 Annual Meeting of Shareholders under the caption `Certain Transactions". PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS The consolidated financial statements of Medallion Financial Corp. and the Report of the Independent Public Accountants thereon are included as set forth on the Index to Financial Statements on F-1. 39 2. FINANCIAL STATEMENT SCHEDULES See Index to Financial Statements on F-1. (B) REPORTS ON FORM 8-K None. (C) EXHIBITS Number Description 3.1a Medallion Financial Corp. Restated Certificate of Incorporation. Filed as Exhibit 2a to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 3.1b Certificate of Amendment of Medallion Financial Corp. Restated Certificate of Incorporation. Filed as Exhibit 3.1.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998 (File No. 000-27812) and incorporated by reference herein. 3.2 Medallion Financial Corp. Restated By-Laws. Filed as Exhibit b to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.1 Agreement of Merger between Medallion Financial Corp. and Tri-Magna Corporation, dated December 21, 1995, as amended on February 22, 1996. Filed as Exhibit K3(i) to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.2 Amendment Number 2 to Agreement of Merger between Medallion Financial Corp. and Tri-Magna Corporation, dated April 26, 1996. Filed as Exhibit K3(ii) to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.3 Stock Purchase Agreement among Medallion Financial Corp., Transportation Capital Corp., LNC Investments, Inc., Leucadia, Inc. and Leucadia National Corporation, dated February 12, 1996. Filed as Exhibit K1 to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.4 Amendment Number 1 to Stock Purchase Agreement among Medallion Financial Corp., Transportation Capital Corp., LNC Investments, Inc., Leucadia, Inc. and Leucadia National Corporation, dated April 30, 1996. Filed as Exhibit K(i) to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.5 Asset Purchase Agreement between Medallion Financial Corp. and Edwards Capital Company, dated February 21, 1996. Filed as Exhibit K2 to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.6 Amendment Number 1 to Asset Purchase Agreement between Medallion Financial Corp. and Edwards Capital Company, dated April 30, 1996. Filed as Exhibit K2(i) to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.7 Agreement between Medallion Taxi Media, Inc. and Glenn Grumman, dated July 25, 1996. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996 (File No. 814-00188) and incorporated by reference herein. 10.8 Agreement between Medallion Taxi Media, Inc. and Metropolitan Taxicab Board of Trade, Inc., dated March 6, 1997. Filed as Exhibit 10.37 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996 (File No. 000-27812) and incorporated by reference herein. 10.9 Medallion Financial Corp. Dividend Reinvestment Plan. Filed as Exhibit e to the Registration Statement on Form N-2 (File No. 333-01670) and incorporated by reference herein. 10.10 Medallion Financial Corp. Amended and Restated 1996 Stock Option Plan. Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998 (File No. 000-27812) and incorporated by reference herein. 10.11 Medallion Financial Corp. Amended and Restated 1996 Non-Employee Directors Stock Option 40 Plan. Filed as Exhibit A to the Application for an Amendment to the Order by the Commission approving the plan as of April 3, 2000 (File No. 812-11800) and incorporated by reference herein. 10.12 Medallion Funding Corp. 401k Savings Plan. Filed as Exhibit i.2 to the Registration Statement on Form N-2/A (File No. 333-01670) and incorporated by reference herein. 10.13 First Amended and Restated Employment Agreement between Medallion Financial Corp. and Andrew Murstein, dated May 29, 1998. Filed as Exhibit 10.20 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 814-00188) and incorporated by reference herein. 10.14 First Amended and Restated Employment Agreement between Medallion Financial Corp. and Alvin Murstein, dated May 29, 1998. Filed as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 814-00188) and incorporated by reference herein. 10.15 Employment Agreement, dated March 29, 1999, between Medallion Financial Corp. and Michael Kowalsky. Filed as Exhibit 2i.6 to the Registration Statement on Form N-2 (File No. 333-60080) and incorporated by reference herein. 10.16 Employment Agreement, dated May 1, 2001, between Medallion Financial Corp. and James E. Jack. Filed as Exhibit 2k.52 to the Registration Statement on Form N-2 (File Nos. 333-60080 and 333-62846) and incorporated by reference herein. 10.17 Code of Ethics. Filed as Exhibit 2r.1 to the Registration Statement on Form N-2 (File Nos. 333-60080 and 333-62846) and incorporated by reference herein. 10.18 Letter Agreement, dated April 18, 1997, between MFC and The Chase Manhattan Bank relating to an interest rate cap transaction in the amount of $10,000,000. Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997 (File No. 814-09744) and incorporated by reference herein. 10.19 Letter Agreement, dated May 9, 1997, between MFC and Fleet National Bank ("Fleet") relating to an interest rate cap transaction in the amount of $10,000,000. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997 (File No. 814-09744) and incorporated by reference herein. 10.20 Letter Agreement, dated May 12, 1997, between MFC and Fleet relating to an interest rate cap transaction in the amount of $10,000,000. Filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997 (File No. 814-09744) and incorporated by reference herein. 10.21 Asset Purchase Agreement, dated as of August 20, 1997, among Medallion Financial Corp., BLI Acquisition Co., LLC, Business Lenders, Inc., Thomas Kellogg, Gary Mullin, Penn Ritter and Triumph Connecticut, Limited Partnership (including all exhibits thereto - schedules omitted). Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997 (File No. 000-27812) and incorporated by reference herein. 10.22 Note Purchase Agreements, dated as of June 1, 1999, between Medallion Funding Corp. and the Note Purchasers thereto. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.23 First Amendment Agreement, dated March 30, 2001, to the Note Purchase Agreement, dated as of June 1, 1999, between Medallion Funding Corp. and the Note Purchasers thereto. Filed as Exhibit 10.57 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 814-00188) and incorporated by reference herein. 10.24 Second Amendment Agreement, dated as of June 29, 2001, to the Note Purchase Agreements dated as of June 1, 1999 between Medallion Financial Corp. and the Note Purchasers thereto. Filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.25 Amended and Restated Loan Agreement, dated as of December 24, 1997, among Medallion Funding Corp., the Lenders Party thereto, Fleet Bank, National Association as Swing Line 41 Lender, Administrative Agent and Collateral Agent and The Bank of New York as Documentation Agent with Fleet Bank, National Association as Arranger. Filed as Exhibit 10.50 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.26 Amendment No. 1, to the Amended and Restated Loan Agreement, dated as of February 5, 1998, among Medallion Funding Corp., the Banks thereto, Fleet National Bank and Swing Line Lender. Filed as Exhibit 10.62 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.27 Amendment No. 2 to the Amended and Restated Loan Agreement, dated as of December 31, 1998, among Medallion Funding Corp., the Banks thereto, Fleet National Bank and Swing Line Lender. Filed herewith. 10.28 Amendment No. 3 to the Amended and Restated Loan Agreement, dated as of June 1, 1999, among Medallion Funding Corp., the Banks thereto, Fleet National Bank and Swing Line Lender. Filed herewith. 10.29 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, Fleet National Bank and Swing Line Lender. Filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.30 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 as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.31 Amendment No. 6 to the Amended and Restated Loan Agreement, Limited Waiver and Consent, dated as of December 31, 2001, among Medallion Funding Corp., the Lenders thereto, Fleet National Bank and Swing Line Lender. Filed herewith. 10.32 Second Amended and Restated Loan Agreement, dated as of September 22, 2000, among Medallion Financial Corp., Medallion Business Credit, LLC, the Lenders Party thereto, Fleet Bank, National Association as Agent and Swing Line Lender and Fleet Bank, N.A. as Arranger. Filed herewith. 10.33 Amendment No. 1 to the Second Amended and Restated Loan Agreement and Limited Waiver, dated March 30, 2001, among Medallion Financial Corp., Medallion Business Credit, LLC, Fleet National Bank and Swing Line Lenders. Filed as Exhibit 10.5 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.34 Amendment No. 2 to the Second Amended and Restated Loan Agreement, Limited Waiver and Consent, dated as of June 29, 2001, among Medallion Financial Corp., Medallion Business Credit, LLC, Fleet National Bank and Swing Line Lenders. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.35 Amendment No. 3 to Second Amended and Restated Loan Agreement, dated as of December 31, 2001, among Medallion Financial Corp., Medallion Business Credit LLC, the Lenders thereto, Fleet National Bank and Swing Line Lender. Filed herewith. 10.36 Security Agreement, dated June 1, 1999, between Medallion Funding Corp. and Fleet Bank, N.A.. Filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.37 Amended and Restated Security Agreement, dated as of December 24, 1997, between Medallion Funding Corp. and Fleet Bank, N.A. Filed as Exhibit 10.61 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.38 Amendment No. 1, dated as of March 12, 1998, to the Amended and Restated Security 42 Agreement, dated as of December 24, 1997, between Medallion Funding Corp., Fleet Bank, N.A.. Filed as Exhibit 10.63 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.39 Security Agreement, dated as of June 29, 1999, between Medallion Business Credit, LLC and Fleet Bank, N.A. Filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.40 Security Agreement, dated as of February 20, 2002, among Medallion Funding Chicago Corp., the Lenders thereto, Fleet National Bank and Swing Line Lender. Filed herewith. 10.41 Intercreditor Agreement, dated June 1, 1999, among Fleet Bank, N.A., as Agent for and on behalf of the Banks, the Banks, the Senior Noteholders, Fleet, acting as Collateral Agent to the Senior Noteholders and Fleet Bank, N.A. as Intercreditor Collateral Agent for the Senior Creditors. Filed as Exhibit 10.5 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.42 Amendment No. 1 to the Intercreditor Agreement, dated as of June 29, 2001, among Fleet Bank, N.A., as Agent for and on behalf of the Banks, the Banks, the Senior Noteholders, Fleet, acting as Collateral Agent for the Senior Creditors. Filed herewith. 10.43 Stock Pledge Agreement, dated as of April 30, 2001, between Medallion Financial Corp. and Fleet National Bank. Filed herewith 10.44 Stock Pledge Agreement, dated as of April 30, 2001, between Medallion Financial Corp. and Fleet National Bank. Filed herewith. 10.45 Stock Pledge Agreement, dated as of February 20, 2002, between Medallion Funding Corp. and Fleet National Bank. Filed herewith. 10.46 Guaranty, dated as of April 30, 2001, by Medallion Taxi Media in favor of Fleet National Bank. Filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.47 Guaranty, dated as of April 30, 2001, by Medallion Taxi Media in favor of the Noteholders thereto. Filed as Exhibit 10.8 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.48 Guaranty, dated April 30, 2001, by Medallion Taxi Media in favor of Fleet National Bank. Filed as Exhibit 10.9 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001 (File No. 814-00188) and incorporated by reference herein. 10.49 Guaranty, dated as of February 20, 2002, by Medallion Funding Chicago Corp. in favor of Fleet National Bank. Filed herewith. 10.50 Revolving Credit Note, dated December 24, 1997, in the amount of $30,000,000 from Medallion Funding Corp. payable to Fleet Bank, National Association. Filed as Exhibit 10.51 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.51 Revolving Credit Note, dated December 24, 1997, in the amount of $30,000,000 from Medallion Funding Corp. payable to The Bank of New York. Filed as Exhibit 10.52 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.52 Revolving Credit Note, dated December 24, 1997, in the amount of $30,000,000 from Medallion Funding Corp. payable to Bank Boston, N.A. Filed as Exhibit 10.53 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 43 10.53 Revolving Credit Note, dated December 24, 1997, in the amount of $20,000,000 from Medallion Funding Corp. payable to Harris Trust and Savings Bank. Filed as Exhibit 10.54 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.54 Revolving Credit Note, dated December 24, 1997, in the amount of $20,000,000 from Medallion Funding Corp. payable to Bank Tokyo - Mitsubishi Trust Company. Filed as Exhibit 10.55 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.55 Revolving Credit Note, dated December 24, 1997, in the amount of $15,000,000 from Medallion Funding Corp. payable to Israel Discount Bank to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.56 Revolving Credit Note, dated December 24, 1997, in the amount of $15,000,000 from Medallion Funding Corp. payable to European American Bank. Filed as Exhibit 10.57 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.57 Revolving Credit Note, dated December 24, 1997, in the amount of $15,000,000 from Medallion Funding Corp. payable to Bank Leumi USA. Filed as Exhibit 10.58 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.58 Revolving Credit Note, dated December 24, 1997, in the amount of $20,000,000 from Medallion Funding Corp. payable to The Chase Manhattan Bank. Filed as Exhibit 10.59 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.59 Swing Line Note, dated December 24, 1997, in the amount of $5,000,000 from Medallion Funding Corp. payable to Fleet Bank, National Association. Filed as Exhibit 10.60 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.60 Indenture of Lease, dated October 31, 1997, by and between Sage Realty Corporation, as Agent and Landlord, and Medallion Financial Corp., as Tenant. Filed as Exhibit 10.64 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.61 Third Amendment, dated December 22, 1997, to Letter Agreement, dated as of December 1, 1996, between Medallion Financial Corp. and Fleet Bank, N.A. Filed as Exhibit 10.65 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.62 Endorsement No. 3, dated December 22, 1997, to Revolving Credit Note dated December 1, 1996 in the amount of $6,000,000 from Medallion Financial Corp., payable to Fleet Bank, N.A. Filed as Exhibit 10.66 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.63 (CE) Commercial Paper Dealer Agreement between Medallion Funding Corp., as issuer, and Smith Barney Inc., as dealer, dated as of March 13, 1998. Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998 (File No. 000-27812) and incorporated by reference herein. 10.64 Agency Agreement, by and between Medallion Funding Corp. and Bank of Montreal Trust Company, dated as of March 13, 1998. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998 (File No. 000-27812) and incorporated by reference herein. 10.65 Medallion Funding Corp. $22,500,000 7.20% Senior Secured Notes, Series A Due June 1, 2004 Note Purchase Agreement, dated as of June 1, 1999. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 44 10.66 $5,000,000 Swing Line Note, dated June 29, 1999. Filed as Exhibit 10.6 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.67 $20,000,000 Revolving Credit Note No. 1, dated June 29, 1999. Filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.68 $15,000,000 Revolving Credit Note No. 2, dated June 29, 1999. Filed as Exhibit 10.8 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.69 $10,000,000 Revolving Credit Note No. 3, dated June 29, 1999. Filed as Exhibit 10.9 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.70 $10,000,000 Revolving Credit Note No. 4, dated June 29, 1999. Filed as Exhibit 10.10 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.71 $10,000,000 Revolving Credit Note No. 5, dated June 29, 1999. Filed as Exhibit 10.11 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.72 $5,000,000 Revolving Credit Note No. 6, dated June 29, 1999. Filed as Exhibit 10.12 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.73 $10,000,000 Revolving Credit Note No. 7, dated June 29, 1999. Filed as Exhibit 10.13 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.74 $10,000,000 Revolving Credit Note No. 8, dated June 29, 1999. Filed as Exhibit 10.14 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.75 $10,000,000 Revolving Credit Note No. 9, dated June 29, 1999. Filed as Exhibit 10.15 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 814-00188) and incorporated by reference herein. 10.76 Commercial Paper Dealing Agreement, dated as of July 30, 1999 between Medallion Financial Corp. and U.S. Bancorp Investments, Inc. Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999 (File No. 814-00168) and incorporated by reference herein. 10.77 Amendment No. 4 to Second Amended and Restated Loan Agreement, Limited Waiver and Consent, dated as of April 1, 2002, by and among Medallion Financial Corp., Medallion Business Credit, LLC and Fleet National Bank. Filed herewith. 10.78 Amendment No. 7 to Amended and Restated Loan Agreement, Limited Waiver and Consent, dated as of April 1, 2002, by and among Medallion Funding Corp. and Fleet National Bank. Filed herewith. 10.79 Amendment No. 2 to Intercreditor Agreement, dated as of April 1, 2002, among Fleet National Bank, the Bank and the Senior Noteholders. Filed herewith. 10.80 Third Amendment Agreement, dated as of April 1, 2001, to the Note Purchase Agreements between Medallion Funding Corp. and the Note Purchasers thereto. Filed herewith. 10.81 Form of 8.35% Senior Secured Note, Series A, due June 30, 2003 from Medallion Funding Corp. Filed herewith. 10.82 Form of 8.35% Senior Secured Note, Series B, due June 30, 2003 from Medallion Funding Corp. Filed herewith. 10.83 Guaranty, dated as of April 1, 2002 by Medallion Funding Chicago Corp. in favor of the Note Purchasers. Filed herewith. 10.84 Stock Pledge Agreement, dated as of April 1, 2002, between Medallion Funding Corp. and Fleet National Bank. Filed herewith. 10.85 Security Agreement, dated as of April 1, 2002, among Medallion Funding Corp. and Fleet National Bank. Filed herewith. 21.1 List of Subsidiaries of Medallion Financial Corp. Filed herewith. 23.1 Consent of Arthur Andersen LLP relating to its report concerning Medallion Financial Corp., dated April 8, 2002. Filed herewith. 99.1 Letter to the Securities and Exchange Commission pursuant to Temporary Note 3T to Article 3 of Regulation S-X. Filed herewith. IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in such statements. In connection with certain forward-looking statements contained in this Form 10-K and those that may be made in the future by or on behalf of the Company, the 45 Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. The forward-looking statements contained in this Form 10-K were prepared by management and are qualified by, and subject to, significant business, economic, competitive, regulatory and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of the Company. Accordingly, there can be no assurance that the forward-looking statements contained in this Form 10-K will be realized or that actual results will not be significantly higher or lower. The statements have not been audited by, examined by, compiled by or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Form 10-K should consider these facts in evaluating the information contained herein. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in the forward-looking statements contained in this Form 10-K. The inclusion of the forward-looking statements contained in this Form 10-K should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this form 10-K will be achieved. In light of the foregoing, readers of this Form 10-K are cautioned not to place undue reliance on the forward-looking statements contained herein. These risks and others that are detailed in this Form 10-K and other documents that the Company files from time to time with the Securities and Exchange Commission, including quarterly reports on Form 10-Q and any current reports on Form 8-K must be considered by any investor or potential investor in the Company. 46 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: April 8, 2002 By: /s/ James E. Jack By: /s/ Larry D. Hall ----------------- ----------------- James E. Jack Larry D. Hall Executive Vice President and Senior Vice President and Chief Financial Officer Chief Accounting Officer Signing on behalf of the registrant Signing on behalf of the registrant as principal financial officer. as principal accounting officer. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date - -------------------------------------------------------------------------------- /s/ Alvin Murstein Chairman of the Board of Directors April 8, 2002 - --------------------------- and Chief Executive Officer Alvin Murstein - --------------------------- /s/ Andrew M. Murstein President and Director April 8, 2002 - --------------------------- Andrew M. Murstein - --------------------------- /s/ Mario M. Cuomo Director April 8, 2002 - --------------------------- Mario M. Cuomo - --------------------------- /s/ Frederick S. Hammer Director April 8, 2002 - --------------------------- Frederick S. Hammer - --------------------------- /s/ Stanley Kreitman Director April 8, 2002 - --------------------------- Stanley Kreitman - --------------------------- /s/ David L. Rudnick Director April 8, 2002 - --------------------------- David L. Rudnick - --------------------------- /s/ Benjamin Ward Director April 8, 2002 - --------------------------- Benjamin Ward - --------------------------- 47 MEDALLION FINANCIAL CORP. INDEX TO FINANCIAL STATEMENTS
Page ========================================================================================================== Report of Independent Public Accountants........................................................... F-2 Consolidated Statements of Operations for the Years ended December 31, 2001, 2000, and 1999........ F-3 Consolidated Balance Sheets as of December 31, 2001 and 2000....................................... F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years ended December 31, 2001, 2000, and 1999............................................ F-5 Consolidated Statements of Cash Flows for the Years ended December 31, 2001, 2000, and 1999........ F-6 Notes to Consolidated Financial Statements......................................................... F-7 Consolidated Schedules of Investments as of December 31, 2001 and 2000 ............................ F-26 ==========================================================================================================
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Medallion Financial Corp.: We have audited the accompanying consolidated balance sheets of Medallion Financial Corp. (a Delaware corporation) and its subsidiaries (the "Company") as of December 31, 2001 and 2000, including the consolidated schedules of investments as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As explained in Note 3, investments consist of loans and investments in equity securities valued at $462,253,000 (91% of total assets) and $516,010,000 (92% of total assets) as of December 31, 2001 and 2000, respectively, whose values have been estimated by the Board of Directors in the absence of readily ascertainable market values. However, because of the inherent uncertainty of valuation, the Board of Directors' estimate of values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Medallion Financial Corp. and its subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP New York, New York April 2, 2002 F-2 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
- ----------------------------------------------------------------------------------------------- 2001 2000 1999 - ----------------------------------------------------------------------------------------------- Investment income Interest income on investments $ 41,369,812 $ 55,014,780 $ 43,756,156 Interest income on short-term investments 707,331 341,245 319,972 ============================================ Total investment income 42,077,143 55,356,025 44,076,128 ============================================ Interest expense Notes payable to banks 19,626,805 14,034,234 9,143,232 Senior secured notes 3,336,396 3,287,459 1,512,684 SBA debentures 2,322,702 1,794,081 3,160,314 Commercial paper 199,351 9,827,886 7,171,459 -------------------------------------------- Total interest expense 25,485,254 28,943,660 20,987,689 ============================================ Net interest income 16,591,889 26,412,365 23,088,439 -------------------------------------------- Non interest income Gain on sale of loans 1,511,112 2,813,900 3,014,478 Equity in losses of Media (3,374,955) (421,155) (214,314) Accretion of negative goodwill -- 350,516 722,400 Other income 2,105,158 3,377,829 2,245,766 -------------------------------------------- Total non interest income 241,315 6,121,090 5,768,330 -------------------------------------------- Non interest expense Salaries and benefits 9,420,716 10,511,506 9,638,679 Professional fees 2,259,901 2,604,456 1,860,734 Amortization of goodwill 652,735 540,380 530,097 Administration and advisory fees 5,017 111,841 245,332 Merger related expense -- 1,444,513 -- Other operating expense 5,413,980 8,236,119 5,724,832 -------------------------------------------- Total non interest expense 17,752,349 23,448,815 17,999,674 ============================================ Net investment income (loss) before income taxes (919,145) 9,084,640 10,857,095 Income tax provision (benefit) (16,485) (181,373) 48,839 -------------------------------------------- Net investment income (loss) after income taxes (902,660) 9,266,013 10,808,256 Increase in net unrealized appreciation (depreciation) on investments (140,477) 2,158,515 (12,259,566) Net realized gain (loss) on investments (3,015,146) (3,883,840) 22,545,017 -------------------------------------------- Net increase (decrease) in net assets resulting from operations ($4,058,283) $ 7,540,688 $ 21,093,707 =============================================================================================== Net increase (decrease) in net assets resulting from operations per common share Basic ($0.24) $ 0.52 $ 1.45 Diluted (0.24) 0.52 1.44 =============================================================================================== Dividends declared per share $ 0.38 $ 1.19 $ 1.27 =============================================================================================== Weighted average common shares outstanding Basic 16,582,179 14,536,942 14,515,660 Diluted 16,582,179 14,576,183 14,620,437 ===============================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-3 MEDALLION FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000
- -------------------------------------------------------------------------------------- 2001 2000 - -------------------------------------------------------------------------------------- Assets Investments: Medallion loans $252,674,634 $299,302,548 Commercial loans 199,328,787 212,721,373 Equity investments 3,591,962 2,129,685 ---------------------------- Net investments 455,595,383 514,153,606 Investment in and loans to Media 6,658,052 1,856,421 ---------------------------- Total investments 462,253,435 516,010,027 Cash 25,409,058 15,652,878 Accrued interest receivable 3,989,989 8,701,981 Servicing fee receivable 3,575,079 6,632,516 Fixed assets, net 1,933,918 2,050,808 Goodwill, net 5,007,583 5,650,045 Other assets, net 5,586,720 6,016,747 ---------------------------- Total assets $507,755,782 $560,715,002 ====================================================================================== Liabilities Accounts payable and accrued expenses $ 7,105,309 $ 7,723,812 Dividends payable 1,643,656 5,244,281 Accrued interest payable 2,138,240 3,887,589 Commercial paper -- 24,066,269 Notes payable to banks 233,000,000 305,700,000 Senior secured notes 45,000,000 45,000,000 SBA debentures payable 43,845,000 21,360,000 ---------------------------- Total liabilities 332,732,205 412,981,951 Shareholders' Equity Preferred Stock (1,000,000 shares of $0.01 par value stock authorized - none outstanding) -- -- Common stock (50,000,000 shares of $0.01 par value stock authorized) 182,421 145,467 Capital in excess of par value 184,486,259 146,379,377 Accumulated undistributed net investment (loss) income (9,645,103) 1,208,207 ---------------------------- Total shareholders' equity 175,023,577 147,733,051 ---------------------------- Total liabilities and shareholders' equity $507,755,782 $560,715,002 ====================================================================================== Number of common shares outstanding 18,242,035 14,546,637 Net asset value per share $ 9.59 $ 10.16 ======================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-4 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
- -------------------------------------------------------------------------------------------------------------- Accumulated Common Stock Capital in Undistributed ---------------------- Excess Net Investment # of Shares Amount Of Par Value Income - -------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 14,511,379 $145,114 $145,996,289 $ 8,332,557 Exercise of stock options 10,665 107 110,518 Net increase in net assets resulting from operations -- -- -- 21,093,707 Dividends declared on common stock ($1.27 per share) -- -- -- (18,368,455) SOP 93-2 reclassification -- -- 529,289 (529,289) ============================================================================================================== Balance at December 31, 1999 14,522,044 145,221 146,636,096 10,528,520 Exercise of stock options 19,001 190 185,805 -- Issuance of common stock 5,592 56 91,944 -- Net increase in net assets resulting from operations -- -- -- 7,540,688 Dividends declared on common stock ($1.19 per share) -- -- -- (17,395,469) SOP 93-2 reclassification -- -- (534,468) 534,468 ============================================================================================================== Balance at December 31, 2000 14,546,637 145,467 146,379,377 1,208,207 Exercise of stock options 34,000 340 373,660 -- Issuance of common stock, net 3,661,398 36,614 37,364,863 -- Net decrease in net assets resulting from operations -- -- -- (4,058,283) Dividends declared on common stock ($0.38 per share) -- -- -- (6,426,668) SOP 93-2 reclassification -- -- 368,359 (368,359) ============================================================================================================== Balance at December 31, 2001 18,242,035 $182,421 $184,486,259 ($9,645,103) ==============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-5 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------------------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net increase (decrease) in net assets resulting from operations ($4,058,283) $ 7,540,688 $ 21,093,707 Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: Depreciation and amortization 610,447 973,010 721,160 Amortization of goodwill 652,735 540,380 530,097 Amortization of origination costs 1,595,237 1,116,223 971,091 Accretion of negative goodwill -- (350,516) (722,400) Increase in net unrealized (appreciation) depreciation 140,477 (2,158,515) 12,259,566 Net realized (gain) loss on investments 3,015,146 3,883,840 (22,545,017) Net realized gain on sales of loans (1,511,112) (2,813,900) (3,014,478) Equity in losses of Media 3,374,955 421,155 214,314 (Increase) decrease in valuation of collateral appreciation participation loans and servicing fee receivable 5,157,750 (3,100,000) -- Decrease (increase) in accrued interest receivable 1,611,992 (330,616) (1,307,617) Decrease (increase) in receivable from sale of loans -- 10,563,503 (993,514) Decrease (increase) in servicing fee receivable 999,687 (1,753,733) (2,588,480) Decrease (increase) in other assets, net 419,754 (2,770,788) (39,381) (Decrease) increase in accounts payable and accrued expenses (618,504) (1,744,426) 3,301,974 (Decrease) increase in accrued interest payable (1,749,349) (94,069) 1,374,721 ----------------------------------------------- Net cash provided by operating activities 9,640,932 9,922,236 9,255,743 ========================================================================================================================== CASH FLOWS FROM INVESTING ACTIVITIES Originations of investments (134,753,029) (197,512,295) (303,335,260) Proceeds from sales and maturities of investments 190,071,504 172,898,238 234,305,172 Investments in and loans to Media, net (8,176,586) 2,072,075 559,696 Capital expenditures (493,556) (626,169) (1,117,474) ----------------------------------------------- Net cash provided by (used for) investing activities 46,648,333 (23,168,151) (69,587,866) ========================================================================================================================== CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of (repayment of) notes payable to banks (72,700,000) 110,250,000 74,850,000 Proceeds from issuance of senior secured notes -- -- 45,000,000 Net repayment of commercial paper (24,066,269) (69,917,523) (9,097,993) Proceeds from the issuance of (repayment of) notes payable to SBA 22,485,000 (1,410,000) (32,590,000) Proceeds from exercise of stock options 374,000 185,995 110,625 Payment of declared dividends to current shareholders (10,027,293) (17,760,963) (17,523,363) Proceeds from issuance of common stock 37,401,477 92,000 -- ----------------------------------------------- Net cash provided by (used for) financing activities (46,533,085) 21,439,509 60,749,269 ========================================================================================================================== NET INCREASE IN CASH 9,756,180 8,193,594 417,146 CASH, beginning of year 15,652,878 7,459,284 7,042,138 ----------------------------------------------- CASH, end of year $ 25,409,058 $ 15,652,878 $ 7,459,284 ========================================================================================================================== SUPPLEMENTAL INFORMATION Cash paid during the year for interest $ 26,996,009 $ 29,037,729 $ 19,609,865 Cash paid during the year for income taxes -- -- 43,877 ==========================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-6 MEDALLION FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 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 a taxicab rooftop advertising business, Medallion Taxi Media, Inc. (Media). (See Note 5) 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. (MCI) which conducts a mezzanine financing business, and Freshstart Venture Capital Corp. (FSVC), a Small Business Investment Company (SBIC) which also originates and services medallion and commercial loans. (2) EFFECT OF NEW YORK CITY TERRORIST ATTACKS AND ECONOMIC RECESSION ON COMPANY OPERATIONS The terrorist attacks on New York City on September 11, 2001, created a tremendous amount of actual and collateral damage to the City, and to the people and businesses who live, work, and operate there. Thankfully, the Company and its employees were not directly impacted in a material way; however, indirectly there were repercussions on certain customers. The slowdown in traffic, tourism, and other personal concerns resulted in initial operating problems for certain of our medallion individual and fleet customers. We have worked with the borrowers to modify payment terms and establish a plan to enable these customers to again become current. There have been no reductions in New York City medallion values as a result of this event during 2001. The commercial lending side of the business also has several borrowers who were affected by this event. The taxi top advertising business, many of whose ads are from Broadway shows, suffered short term contract cancellations from these and other customers which reduced gross revenue by approximately $934,000 during 2001. The attacks also further exacerbated the recessionary trends, which had become more apparent as 2001 unfolded. The effects of a general economic slowdown has impacted the Company as evidenced by an increase in delinquencies and nonperforming loans, increased prepayment activity as borrowers sought lower rate financing with the Company or other lenders, and stresses on medallion and other collateral values, primarily in Chicago, and by reduced levels of advertising in Media. As a result of the above, the Company reassessed the loss potential on the loan portfolio, servicing asset, and other receivables which resulted in charges of $11,300,000 in the 2001 third quarter to provide reserves against or writedown the values of these assets which were impacted by the attacks and the recession in the economy. These charges included $4,050,000 related to the reversal of additional interest income related to collateral appreciation participation loans whose underlying collateral value dropped significantly during the quarter, $3,300,000 for additional unrealized depreciation on the investment portfolio, $2,050,000 to writedown the value of the servicing asset, primarily related to increased levels of prepayment activity, $1,350,000 related to the establishment of a reserve against a deferred tax asset in Media resulting from increased tax losses and tax loss carry back limitations, and $550,000 for the write-off of previously capitalized transaction costs for transactions which were no longer expected to close. The Company's bank loan matured on November 5, 2001. In addition, MFC was in default under its bank loan and its senior secured notes. By April 1, 2002, the Company and MFC obtained amendments to their bank loans and the senior secured notes. The amendments, in general, changed the maturity dates of the loans and notes, modified the interest rates borne on the loans and the secured notes, required certain immediate, scheduled or other prepayments of the loans and notes and reductions in the commitments under the loans, required the Company or MFC to engage or seek to engage in certain asset sales, instituted additional operating restrictions and reporting requirements. As modified by the amendments, the scheduled amortization on the loans and secured notes are as follows: F-7 The terms and maturities were changed from the prior agreement and are as follows:
Maturity ------------------------------------------------------------------- Principal Payments Monthly Principal outstanding from from July outstanding at December 31, January 1, 2002 2002 - May at and after 2001 - March 31, 2002 April, 2002 May, 2002 2003 June, 2003 June 30, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Medallion Financial loans $ 85,000,000 $13,711,270 $ 5,000,000 $66,288,730 $ -- $ -- $-- MFC loans 148,000,000 -- -- -- 6,166,667 80,166,663 -- MFC loans senior secured notes 45,000,000 1,000,000 13,143,125 -- 1,285,703 16,714,142 -- -------------- ------------------------------------------------------------------------------------ Total $278,000,000 $14,711,270 $18,143,125 $66,288,730 $7,452,370 $96,880,805 $-- ===================================================================================================================================
In addition to the changes in maturity (acceleration of maturity dates in the case of MFC), the interest rates on the Company's bank loan and MFC's secured notes were increased, and additional fees were charged to renew and maintain the facilities and notes. The recent amendments contain substantial limitations on our ability to operate and in some cases require modifications to our previous normal course of operations. Covenants restricting investment in the Media and BLL subsidiaries, elimination of various intercompany balances between affiliates, limits on the amount and timing of dividends, and continuation of the prior financial and operating covenants were all tightened as a condition of renewal. While we have experienced difficulty complying with the restrictive covenants under our existing agreements, the Company believes it will be able to comply with all provisions of the amended agreements, including the accelerated maturity schedule. As of March 29, 2002, the Company had $29,000,000 of cash on hand. We may need to sell assets to meet the amortization requirements under these amendments. While we fully intend to comply with the covenants in recent amendments, we have failed to comply with similar covenants in our existing agreements. We are currently exploring refinancing options which would replace our obligations under the Company and MFC loans and the senior secured notes. We have signed a non-binding preliminary term sheet and we are currently engaged in discussions, and have received a proposal from, a nationally known asset-based lender to provide a refinancing for the obligations owed under our secured notes and bank loans. The proposed financing would enable the Company to refinance its existing indebtedness and provide additional capital with longer maturities, but there can be no assurance that such financing will be obtained, the date that it will be obtained or whether such financing would provide more operating flexibility than is provided under our current credit agreements. The failure to obtain such financing or alternative financing on a timely basis could have a material adverse effect on the Company. In addition, the Company is actively pursuing other financing options for individual subsidiaries with alternate financing sources, and is continuing the ongoing program of loan participations and sales to provide additional sources of funds for both external expansion and continuation of internal growth. The Company has also received preliminary offers from other nationally recognized lenders to refinance certain subsidiaries of the Company. Furthermore, the Company is considering the possibility of submitting an application to receive a bank charter, which if granted, would permit the Company to receive deposits insured by the Federal Deposit Insurance Corporation. The Company has held meetings with the relevant regulatory bodies in connection with such an application. There can be no assurances that such financings will be obtained or that any application related to a bank charter would be approved. The Company believes that its credit facilities with the SBA and cash flow from operations (after distributions to stockholders) will be adequate to fund the continuing operation of the Company's loan portfolio and advertising business. (3) 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 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 FSVC retroactively combined with the Company's financial statements as if the merger had occurred at the beginning of the earliest period presented. All significant intercompany transactions, balances, and profits have been eliminated in the use of the equity method. As a non-investment company, Media cannot be consolidated with the Company, which is an investment company under the 1940 Act. See Note 5 for the presentation of financial information for Media. 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 F-8 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 December 31, 2001 are marketable and non-marketable securities of approximately $925,000 and $2,667,000, respectively. At December 31, 2000, the respective balances were approximately $1,490,000 and $640,000. 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 the differences could be material. The Company's investments consist primarily of long-term loans to persons defined by Small Business Administration (SBA) regulations as socially or economically disadvantaged, or to entities that are at least 50% owned by such persons. Approximately 56% and 58% of the Company's loan portfolio at December 31, 2001 and 2000, respectively, had arisen in connection with the financing of taxicab medallions, taxicabs, and related assets, of which 81% 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 finance companies, wholesalers, dry cleaners, restaurants, and real estate. 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 $29,800,000, of which $20,850,000 were 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 $29,800,000 of the collateral. During 2001, the effect of the economic downturn began to stress the value of Chicago taxi medallions, which accelerated in the 2001 third quarter. As a result, the Company determined that the previously recorded appreciation was no longer supported by current Chicago medallion prices, and therefore adjusted the carrying values down, to their original face value of $8,950,000, which represented approximately 2% of its total investment portfolio. Additional interest income was reduced $3,100,000 for 2001, compared to increases of $3,100,000 and $0 for 2000 and 1999, and is reflected in investment income on the consolidated statements of operations and in accrued interest receivable on the consolidated balance sheets. 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 in each accounting period, by relying upon information such as recent and historical medallion sale prices. The loans are due in March 2005, but may be prepaid at the borrowers option. If that occurs, the Company expects to refinance the loans with the existing borrower, including the syndicated portion, at that time at the rates and terms prevailing at that time. Investment Transactions and Income Recognition Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment to the yield of the related loans. At December 31, 2001 and 2000, net origination costs totaled approximately $2,149,000 and $2,460,000. Amortization expense for the years ended December 31, 2001, 2000, and 1999 was approximately $1,595,000, $1,116,000, and $971,000. 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 December 31, 2001 and 2000 total non-accrual loans were approximately $35,782,000 and $19,973,000. For the years ended December 31, 2001, 2000 and 1999 the amount of interest income on non accrual loans that would have been recognized if the loans had been paying in accordance with their original terms was approximately $3,737,000, $1,716,000, and $1,791,000. Loan Sales and Servicing Fee Receivable The Company currently accounts for its sales of loans in accordance with Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities- a Replacement of FASB Statement No. 125." SFAS 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. F-9 The principal portion of loans serviced for others by the Company was approximately $229,349,000 and $223,574,000, at December 31, 2001 and 2000. Gain 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 gains are calculated in accordance with SFAS 140, which requires that the gain on the sale of a portion of a loan be based on the relative fair values of the loan sold and the loan retained. The gain on loan sales is due to the differential between the carrying amount of the portion of loans sold and the sum of the cash received and the servicing fee receivable. The servicing fee receivable represents the present value of the difference between the servicing fee received by the Company (generally 100 to 400 basis points) and the Company's servicing costs and normal profit, after considering the estimated effects of prepayments and defaults over the life of the servicing agreement. In connection with calculating the servicing fee receivable, the Company must make certain assumptions including the cost of servicing a loan including a normal profit, the estimated life of the underlying loan that will be serviced, and the discount rate used in the present value calculation. The Company considers 40 basis points to be its cost plus a normal profit and uses the note rate plus 100 basis points for loans with an original maturity of ten years as the discount rate. The note rate is generally the prime rate plus 2.75%. The servicing fee receivable is amortized as a charge to loan servicing fee income over the estimated lives of the underlying loans using the effective interest rate method. The Company reviews the carrying amount of the servicing fee receivable for possible impairment by stratifying the receivables based on one or more of the predominant risk characteristics of the underlying financial assets. The Company has stratified its servicing fee receivable into pools by period of creation, generally one year, and the term of the loan underlying the servicing fee receivable. If the estimated present value of the future servicing income is less than the carrying amount, the Company establishes an impairment reserve and adjusts future amortization accordingly. If the fair value exceeds the carrying value, the Company may reduce future amortization. The servicing fee receivable is carried at the lower of amortized cost or fair value. The carrying amount of the servicing fee receivable, net of reserves, at December 31, 2001 and 2000 was approximately $3,575,000 and $6,633,000. During the year ended December 31, 2001, the Company recognized a servicing fee receivable totaling $472,000 and had $1,300,000 of servicing fee receivable amortization. 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 it's 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 servicing 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. During 2001, the Company began to experience an increase in prepayment activity and delinquencies. These trends continued to worsen during 2001, and as a result the Company revised its prepayment assumptions on certain loan pools from 15% to between 25% and 35%. This resulted in a $2,171,000 charge to operations, increasing the reserve for impairment of the servicing fee receivable during 2001. During 2000 and 1999, the Company used an estimated constant prepayment rate of 15%. The prepayment rate of loans may be affected by a variety of economic and other factors, including prevailing interest rates and the availability of alternative financing to borrowers. At December 31, 2001, the Company determined the fair value of its servicing fee receivable to be $3,706,000 using a present value of expected cash flows methodology. The activity in the reserve for servicing fee receivable follows: - -------------------------------------------------------------------------------- Year Ended December 31, ---------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Beginning Balance $ 205,000 $ -- $-- Additions charged to operations 2,171,000 205,000 -- - -------------------------------------------------------------------------------- Ending Balance $2,376,000 $205,000 $-- ================================================================================ The Company also has the option to sell the unguaranteed portions of loans to third party investors. The gain or loss on such sales will be calculated in accordance with SFAS No. 140. The discount related to unguaranteed portions sold would be reversed and the Company would recognize a servicing fee receivable or liability based on servicing fees retained by the Company. The Company is required to retain at least 5% of the unguaranteed portion of SBA guaranteed loans. The Company had sales of unguaranteed portions of loans to third party investors of $0 and $2,500,000 for the years ended December 31, 2001 and 2000. 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 F-10 of recoveries. An analysis of the unrealized appreciation /(depreciation) and realized (gains) losses on investments for the years ended December 31, 2001 and 2000 is as follows: - -------------------------------------------------------------------------------- Equity Loans Investments Total - -------------------------------------------------------------------------------- Balance, December 31, 1998 ($2,164,292) $ 4,853,976 $ 2,689,684 Change in unrealized: Appreciation on investments -- 12,966,343 12,966,343 Depreciation on investments (7,208,586) (208,853) (7,417,439) Realized: Gains on investments -- (18,197,295) (18,197,295) Losses on investments 388,825 -- 388,825 ================================================================================ Balance, December 31, 1999 ($8,984,053) ($585,829) ($9,569,882) Change in unrealized: Appreciation on investments 412,807 200,000 612,807 Depreciation on investments (636,367) (20,767) (657,134) Realized: Gains on investments (2,573) (15,981) (18,554) Losses on investments 2,221,396 -- 2,221,396 ================================================================================ Balance, December 31, 2000 (6,988,790) (422,577) (7,411,367) Change in unrealized: Appreciation on investments -- 2,937,051 2,937,051 Depreciation on investments (6,495,139) (915,492) (7,410,631) Realized: Gains on investments (3,155) -- (3,155) Losses on investments 3,862,449 450,014 4,312,463 Other (1,669) 76,256 74,587 - -------------------------------------------------------------------------------- Balance, December 31, 2001 ($9,626,304) $ 2,125,252 ($7,501,052) ================================================================================ For the years ended December 31, 2001, 2000, and 1999, gross unrealized appreciation/(depreciation) and gross realized gains/(losses) were as follows:
- --------------------------------------------------------------------------------------- 2001 2000 1999 - --------------------------------------------------------------------------------------- Increase in net unrealized appreciation (depreciation) on investments Unrealized appreciation $ 2,937,051 $ 612,807 $ 12,966,343 Unrealized depreciation (7,410,631) (657,134) (7,417,439) Realized gain (120,545) (18,554) (18,197,295) Realized loss 4,432,851 2,221,396 388,825 Other 20,797 -- -- - --------------------------------------------------------------------------------------- Total ($140,477) $ 2,158,515 ($12,259,566) ======================================================================================= Net realized gain (loss) on investments Realized gain $ 1,127,593 $ 273,676 $ 23,133,859 Realized loss (4,124,079) (4,157,516) (588,842) Direct charge-off (18,660) -- -- - --------------------------------------------------------------------------------------- Total ($3,015,146) ($3,883,840) $ 22,545,017 =======================================================================================
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 businesses 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 10 for additional information related to a new accounting pronouncement on goodwill. Fixed Assets Fixed assets are carried at cost less accumulated depreciation and amortization, and are depreciated on a straight-line basis over their estimated useful lives of 5 to 10 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated economic useful life of the improvement. Depreciation and amortization expense for the years ended December 31, 2001, 2000, and 1999 was approximately $610,000, $973,000, and $721,000. F-11 In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" which requires computer software costs associated with internal use software to be expensed as incurred unless certain capitalization criteria are met. Effective January 1, 1999, the Company capitalized eligible costs on a prospective basis and is amortizing these costs on a straight-line basis over the expected useful life of 3 to 5 years. Deferred Costs Deferred financing costs, included in other assets, represents costs associated with obtaining the Company's borrowing facilities, and is amortized over the lives of the related financing agreements. Amortization expense for the years ended December 31, 2001, 2000 and 1999 was approximately $555,000, $333,000, and $176,000. In addition, the Company capitalizes certain costs for transactions in the process of completion including those for acquisitions, and the sourcing of other financing alternatives. Upon completion or termination of the transaction, any amounts will be amortized against income over an appropriate period or capitalized as goodwill. The amounts on the balance sheet for all of these purposes as of December 31, 2001 and 2000 was $2,540,000 and $869,000. 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, as a non-investment company, has elected to be taxed as a regular corporation. 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 years ended December 31, 2001, 2000, and 1999 are as follows:
- --------------------------------------------------------------------------------------------------------------- 2001 2000 1999 ------------------------------------------ - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting ($4,058,283) $ 7,540,688 $21,093,707 from operations available to common shareholders - --------------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding applicable to basic EPS 16,852,179 14,536,942 14,515,660 Effect of dilutive stock options /(1)/ -- 39,241 104,777 ------------------------------------------ Adjusted weighted average common shares outstanding applicable to diluted EPS 16,852,179 14,576,183 14,620,437 - --------------------------------------------------------------------------------------------------------------- Basic earnings per share ($0.24) $ 0.52 $ 1.45 Diluted earnings per share (0.24) 0.52 1.44 ===============================================================================================================
/(1)/Because there is a net loss in 2001, the effect of stock options is a antidilutive, and therefore is not presented. - -------------------------------------------------------------------------------- F-12 Dividends to Shareholders On December 31, 2001, a dividend of $0.09 per share was declared. The dividend was paid on January 14, 2002, to shareholders of record on December 31, 2001. The tax character of distributions for 2001 and 2000 tax reporting purposes was as follows: - ------------------------------------------------------------------------------- 2001 2000 1999 ------------------------------------------ Dividends paid from: Ordinary income $6,426,668 $ 6,651,720 $ 8,505,156 Long-term capital gain -- 10,743,749 9,863,299 ------------------------------------------ Total income dividends 6,426,668 17,395,469 18,368,455 Return of Capital -- -- -- ------------------------------------------ Total dividends $6,426,668 $17,395,469 $18,368,455 =============================================================================== Our ability to make dividend payments is further restricted by certain financial covenants contained in our credit agreements, which requires paydowns on amounts outstanding if dividends exceed certain amounts, and generally disallow any dividend until July 1, 2002, and by SBA regulations and under the terms of the SBA debentures. As of December 31, 2001, all required dividends for tax purposes had been made or declared to be paid. Stock-Based Compensation The Company has adopted the provisions of SFAS No.123 " Accounting for Stock Based Compensation (SFAS No.123), which established a fair value-based method of accounting for stock options. The Company measures compensation cost for stock options using the current intrinsic value-based method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). Under SFAS No.123, the use of intrinsic value-based method requires pro forma disclosure of net income and earnings per share as if the fair value-based method had been adopted. Derivatives In June 1998, the FASB 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. 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. 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 settlements, if any, are recorded as a reduction of interest expense over the life of the agreements. The fair value of the Company's interest rate cap agreement as of December 31, 2001 was $0. Reclassifications Certain reclassifications have been made to prior year balances to conform with the current year presentation. F-13 (4) BUSINESS COMBINATIONS FSVC On October 2, 2000, the Company completed the merger with FSVC. The Company issued 0.23865 shares of its common stock for each outstanding share of FSVC, for a total of 518,449 shares of the Company's common stock. The transaction was accounted for as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended, and was treated under the pooling-of-interests method of accounting for financial reporting purposes. The following table sets forth the results of operations of FSVC and the Company for the nine months ended September 30, 2000 and the year ended December 31, 1999.
- ---------------------------------------------------------------------------------------- (Dollars in thousands) The Company/(1)/ Freshstart Combined - ---------------------------------------------------------------------------------------- For the nine months ended September 30, 2000 Total investment income $40,758 $1,864 $42,622 Net increase in net assets from operations 11,173 361 11,534 For the year ended December 31, 1999 Total investment income 41,380 2,696 44,076 Net increase in net assets from operations 20,880/(1)/ 214 21,094 ========================================================================================
/(1)/ "The Company" column includes elimination entries for the intercompany transactions. - -------------------------------------------------------------------------------- (5) INVESTMENT IN AND LOANS TO MEDIA The statements of operations of Media for the years ended December 31, 2001, 2000, and 1999 were as follows: - ----------------------------------------------------------------------------- December 31, ------------------------------------------ 2001 2000 1999 - ----------------------------------------------------------------------------- Advertising revenue $ 13,249,993 $ 11,144,349 $9,878,117 Cost of fleet services 7,592,173 5,750,203 4,261,673 ------------------------------------------ Gross profit 5,657,820 5,394,146 5,616,444 Other operating expenses 7,907,994 6,056,576 5,223,833 ------------------------------------------ Income (loss) before taxes (2,250,174) (662,430) 392,611 Income tax provision (benefit) 1,124,781 (241,275) 134,125 ------------------------------------------ Net income (loss) ($3,374,955) ($421,155) $ 258,486 ============================================================================= As a result of the events in New York City on September 11, 2001, certain advertisers reduced the levels of advertisements for a period, which included late September and a portion of the fourth quarter. Media took steps to reduce the costs associated with this reduced level of advertising. The decline in revenue from these reductions was approximately $934,000 in 2001 before considering the benefits of cost reduction initiatives. Also included in 2001 was a $1,500,000 tax provision to establish a valuation allowance against the future realization of a deferred tax asset that was recorded in prior periods relating to actual tax payments made for taxable revenue that had not been recorded for financial reporting purposes. During 2001, primarily as a result of expansion into numerous cities and the lag associated with selling those taxi tops, Media began to incur losses for both financial reporting and tax purposes, indicating that this deferred tax asset now represents a receivable or refund from the tax authorities for those taxes previously paid. However, due to statutory limitations on Media's ability to carry these tax losses back more than two years, and the uncertainties concerning the level of Media's taxable income in the future, Media determined to reserve against the receivable. In March 2002 Congress passed and the President signed, an economic stimulus bill that among its provisions included a carryback provision for five years. As a result, Media will be able to carryback an additional $724,000 in 2002 and retain a tax carryforward of $1,123,000 for the balance of taxes paid. F-14 The balance sheets at December 31, 2001 and 2000 for Media were as follows: - ------------------------------------------------------------------------------- December 31, ---------------------------- 2001 2000 - ------------------------------------------------------------------------------- Cash $ 270,350 $ 5,259 Accounts receivable 1,531,183 2,652,055 Equipment, net 3,068,854 3,281,011 Goodwill 2,086,760 1,659,624 Prepaid signing bonuses 2,890,613 1,521,253 Federal income tax receivable 1,106,778 -- Other 342,118 2,882,750 Due from parent -- 321,723 ---------------------------- Total assets $11,296,656 $12,323,675 =============================================================================== Accounts payable and accrued expenses $ 1,822,386 $ 683,369 Note payable-bank 2,117,462 3,900,000 Deferred revenue 755,358 5,453,550 Intercompany payables 7,697,309 -- Federal income tax payable 9,168 -- ---------------------------- Total liabilities 12,401,683 10,036,919 ---------------------------- Equity 1,001,000 1,001,000 Retained earnings (deficit) (2,106,027) 1,285,756 ---------------------------- Total equity (deficit) (1,105,027) 2,286,756 ---------------------------- Total liabilities and equity $11,296,656 $12,323,675 =============================================================================== During 2001, Media's operations were constrained by a very difficult advertising environment compounded by the rapid expansions of tops inventory that occurred during 1999 and 2000. Media began to recognize losses as growth in operating expenses exceeded growth in revenue. Also, a substantial portion of Media's revenues in 2001 arose from the realization of amounts that had been paid for and deferred from prior periods. Media is actively pursuing new sales opportunities, including expansion and upgrading of the sales force, and has taken steps to reduce operating expenses, including renegotiation of fleet payments for advertising rights, to better align ongoing revenues and expenses, and to maximize cash flow from operations. Media's growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from September 11th and the economic downturn, which has resulted in operating losses and a drain on cash flow, as well as the limitation on funding that can be provided by the Company in accordance with the terms of the bank agreements. Media has developed an operating plan to fund only necessary operations out of available cash flow and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such times as business returns to historical levels. In July 2001, Media acquired certain assets and assumed certain liabilities of MMJ, a taxi advertising operation similar to those operated by Media in the U.S., which has advertising rights on approximately 7,000 cabs (1,000 rooftop displays and 6,000 interior racks) servicing various cities in Japan. The transaction has been accounted for as a purchase for financial reporting purposes and is included in Media's financial statements above. The terms of the agreement provide for an earn-out payment to the sellers based on average net income over the next three years. (6) 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 December 31, 2001 and 2000. - -------------------------------------------------------------------------------- Description 2001 2000 - -------------------------------------------------------------------------------- Commercial paper $ -- $ 24,066,269 Bank loans 233,000,000 305,700,000 Senior secured notes 45,000,000 45,000,000 - -------------------------------------------------------------------------------- Total $278,000,000 $374,766,269 ================================================================================ (a) Commercial Paper 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. At December 31, 2001 and 2000, MFC had approximately $0 and $24,066,000 outstanding at a weighted average interest rate of 0% and 7.10%. For the year ended December 31, 2001 and 2000, MFC's weighted average borrowings related to commercial paper were $2,027,000 and $135,568,000 with a weighted average interest F-15 rate of 7.31% and 7.25%. Commercial paper outstandings are deducted from the bank loans which acted as a liquidity facility for the commercial paper. During the 2001 third quarter, the commercial paper program matured and was terminated. (b) Bank Loans On March 27, 1992 (and as subsequently amended), MFC entered into a line of credit 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 were reduced by amounts outstanding under the commercial paper program as the Revolver acted as a liquidity facility for the commercial paper program. As of December 31, 2001 and 2000, amounts available under the Revolver were $0 and $234,000. On June 29, 2001 MFC renewed the Revolver until June 30, 2002, which was further amended on February 20, 2002. The Revolver matures June 30, 2002, and if not renewed, the Revolver agreement provides that each bank shall extend a term loan equal to its share of the principal amount outstanding of the revolving credit agreement. Maturity of the term note shall be the earlier of one year with a two year amortization schedule or any other date on which it becomes payable in accordance with the Revolver agreement. Interest and principal payments are paid monthly. Interest is calculated monthly at either the bank's prime rate or a rate based on the adjusted London Interbank Offered Rate of interest (LIBOR) at the option of MFC. Substantially, all promissory notes evidencing MFC's investments are held by a bank as collateral agent under the agreement. MFC is required to pay an annual facility fee of 20 basis points on the unused portion of the Revolver's aggregate commitment. Commitment fee expense for the years ended December 31, 2001, 2000, and 1999 was approximately $51,000, $386,000 and $388,000. Outstanding borrowings under the Revolver were $148,000,000 and $195,700,000 at weighted average interest rates of 4.75% and 7.68% at December 31, 2001 and 2000. Average borrowings outstanding under the Revolver were $188,775,000 and $76,812,000 for 2001 and 2000. MFC is required under the Revolver to maintain minimum tangible net assets of $65,000,000 and certain financial ratios, as defined therein. The Revolver agreement contains other restrictive covenants, including a limitation of $500,000 for capital expenditures. 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. On September 21, 2001, the Loan Agreement was extended to November 5, 2001 to allow for continuation of renewal discussions which were completed and an amendment signed on February 20, 2002. As of December 31, 2001 and 2000, amounts available under the loan agreement were $25,000,000 and $3,500,000. The Company's bank loan matured on November 5, 2001. In addition, MFC was in default under its bank loan and its senior secured notes. In April, 2002, the Company and MFC obtained amendments to their bank loans and senior secured notes. The amendments, in general, changed the maturity dates of the loans and notes, modified the interest rates borne on the bank loans and the secured notes, required certain immediate, scheduled or other prepayments of the loans and notes and reductions in the commitments under the bank loans, required the Company or MFC to engage or seek to engage in certain asset sales, instituted additional operating restrictions and reporting requirements. As modified by the amendments, the scheduled amortization on the bank loans and secured notes are as follows:
Maturity ---------------------------------------------------------------- Principal Principal Monthly outstanding outstanding Payments from from July at and after at December January 1, 2002- 2002 - May June 30, 31, 2001 March 31, 2002 April, 2002 May, 2002 2003 June, 2003 2003 - --------------------------------------------------------------------------------------------------------------------------------- Medallion Financial loans $ 85,000,000 $13,711,270 $ 5,000,000 $66,288,730 $ -- $ -- $ -- MFC loans 148,000,000 -- -- -- 6,166,667 80,166,663 -- MFC loans senior secured notes 45,000,000 1,000,000 13,143,125 -- 1,285,703 16,714,142 -- ----------------------------------------------------------------------------------------------- Total $278,000,000 $14,711,270 $ 18,143,125 $66,288,730 $7,452,370 $ 96,880,805 $ -- ================================================================================================================================
In addition to the change in maturity (acceleration of maturity dates in case of MFC), the interest rates on the Company's bank loan and MFC's secured notes were increased, and additional fees were charged to renew, and maintain the facilities and notes. The recent amendments contain substantial limitations on our ability to operate and in some cases require modifications to our previous normal course of operation. Covenants restricting investment in the Media and BLL subsidiaries, elimination of various intercompany balances between affiliates, limits on the amount and timing of dividends, and continuation of the prior financial and operating covenants were all tightened as a condition of renewal. While we have experienced difficulty complying with the restrictive covenants under our existing agreements, the Company believes it will be able to comply with all provisions of the amended agreements, including the accelerated maturity schedule. As of March 29, 2002, the Company had $29,000,000 of cash on hand. We may need to sell assets to meet the amortization requirements under these amendments. While we fully intend to comply with the covenants in recent amendments, we have failed to comply with similar covenants in our existing agreements. We are currently exploring refinancing options which would replace our obligations under the Company and MFC loans and the senior secured notes. We have signed a non-binding preliminary term sheet and we are currently engaged in discussions, and have received a proposal from, a nationally known asset-based lender to provide a refinancing for the obligations owed under our secured notes and bank loans. The proposed financing would enable the Company to refinance its existing indebtedness and provide additional capital with longer maturities, F-16 but there can be no assurance that such financing will be obtained, the date that it will be obtained or whether such financing would provide more operating flexibility than is provided under our current credit agreements. The failure to obtain such financing or alternative financing on a timely basis could have a material adverse effect on the Company. In addition, the Company is actively pursuing other financing options for individual subsidiaries with alternate financing sources, and is continuing the ongoing program of loan participations and sales to provide additional sources of funds for both external expansion and continuation of internal growth. The Company has also received non-binding preliminary proposals from other nationally recognized lenders to refinance certain subsidiaries of the Company. Furthermore, the Company is considering the possibility of submitting an application to receive a bank charter, which if granted, would permit the Company to receive deposits insured by the Federal Deposit Insurance Corporation. The Company has held meetings with the relevant regulatory bodies in connection with such an application. There can be no assurances that such financings will be obtained or that any application related to a bank charter would be approved. The Company believes that is credit facilities with the SBA and cash flow from operations (after distributions to stockholders) will be adequate to fund the continuing operation of the Company. As a result of the recent amendments to the bank loans and senior secured notes, the Company's cost of funds will increase in 2002 until the debts mature and are paid off. As noted above, the amendments entered into during 2002 to the Company's bank loans and senior secured notes involved changes, and in some cases increases, to the interest rates payable thereunder. In addition, during events of default, the interest rate borne on the lines of credit is based upon a margin over the prime rate rather than LIBOR. The bank lines of credit are priced on a grid depending on leverage and were at LIBOR plus 325 basis points for the Company and LIBOR plus 250 basis points for MFC as of April 1, 2002. The senior secured notes adjusted to 8.35% effective March 29, 2002, and thereafter adjust upwards an additional 50 basis points on a quarterly basis until maturity. In addition to the interest rate charges, $1,654,000 has been incurred through April 1, 2002 for attorneys and other professional advisors, most working on behalf of the lenders, which will be expensed over the remaining lives of the related debt outstanding. We are a party to three financing agreements: 1) the Second Amended and Second Amended and Restated Loan Agreement, dated as of September 22, 2000, among the Company, Medallion Business Credit, LLC and the parties thereto (the Company Bank Loan); 2) the Amended and Restated Loan Agreement, dated as of December 24, 1997, as amended, among MFC and the parties thereto (the MFC Bank Loan); and 3) the Note Purchase Agreements, each dated as of June 1, 1999, as amended, between the Company and the note purchasers thereto (the MFC Note Agreements). In the fourth quarter of 2001, the Company Bank Loan matured, and MFC was in default under both the MFC Bank Loan and the MFC Note Agreements. In 2002, the Company and MFC entered into amendments to such agreements. In addition to imposing maturities and scheduled amortization requirements, the amendments also instituted various other prepayment requirements: (a) the Company is required to repay to MFC an intercompany receivable in excess of $8 million by May 15, 2002, and (b) MFC is required to use its best efforts to sell a portion its laundromat and dry cleaning loans in its commercial loan portfolio by May 31, 2002, and its Chicago Yellow Cab loan portfolio before November 1, 2002. The proceeds from these repayments and sales must be used to repay the Company's or MFC's indebtedness, as applicable. In addition, the amendments require MFC to further amend the MFC Note Agreements and the MFC Bank Loan to provide for periodic prepayments of the indebtedness thereunder out of excess cash flow. The Company Bank Loan, MFC Bank Loan, and the MFC Note Agreements contain substantial limitations on our ability to operate and in some cases require modifications to our previous normal course of operations. Under all of the agreements, if our outstanding debt exceeds the borrowing base, as defined in each agreement, then we must repay the outstanding indebtedness that exceeds the borrowing base within five business days. The agreements, collectively, also contain financial covenants, including a maximum consolidated leverage ratio, maximum combined leverage ratio, minimum EBIT to interest expense ratio, minimum asset quality ratio, minimum tangible net worth and maximum losses of Media. The agreements also impose limitations on our ability to incur liens and indebtedness, merge, consolidate, sell or transfer assets, loan and invest in third parties and our subsidiaries, repurchase or redeem stock, purchase portfolios, acquire other entities, amend certain material agreements, make capital expenditures, have outstanding intercompany receivables and securitize our assets. They prohibit (a) the Company and MFC from paying dividends prior to July 1, 2002, (b) MFC from paying more than $2 million of dividends between July 1, 2002 and September 12, 2002 and (c) the Company from paying dividends after September 12, 2002 unless it certifies that it will be in pro forma compliance with amortization requirements for the remainder of 2002 after paying the dividend. Lastly, the agreements limit the amount of investments we can make in our subsidiaries and the creation of new subsidiaries. The Company paid amendment fees of $255,000, and MFC paid amendment fees of $478,000 and is obligated to pay an additional amendment fee on June 28, 2002 equal to 0.20% of the amount outstanding under the MFC Bank Loan and the MFC Note Agreements. Additionally, under the MFC Note Agreements and MFC Bank Loan, MFC is obligated to pay the lenders and note holders an aggregate monthly fee of $25,000 commencing on June 30, 2002 and increasing by $25,000 each month. We are currently engaged in discussions, and have received a proposal from, a nationally known asset based lender to provide a refinancing for the obligations owed under our term loan and revolving credit agreement, but there can be no assurance that such financing will be obtained, the date that it will be obtained or whether such financing would provide more operating flexibility than is provided under our current credit agreements. Interest and principal payments are paid monthly. Interest is calculated monthly at either the bank's prime rate or a rate based on the adjusted LIBOR rate at the option of the Company. Substantially all promissory notes evidencing the Company's investments are held by a bank as collateral agent under the Loan Agreement. The Company is required to pay an annual facility fee of 15 basis points on the amount of the aggregate commitment. Commitment fee expenses for the years ended December 31, 2001, 2000 and 1999 were approximately $165,000, $257,000, and $108,000. Outstanding borrowings under the Loan Agreement were $85,000,000 and $106,500,000 at a weighted average interest rate of 6.25% and 8.09% at December 31, 2001 and 2000. The Company is required under the Revolver to maintain certain levels of medallion loans and certain financial ratios, as defined therein. The Loan Agreement contains other restrictive covenants, including a limitation of $1,000,000 for capital expenditures per annum. On March 6, 1997, FSVC 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 was unsecured. In connection with the FSVC's merger, the line was reduced to $3,500,000, and was subsequently paid off in July 2001. F-17 The weighted average interest rate for the Company's consolidated outstanding revolver borrowings at December 31, 2001 and 2000 was 5.80% and 7.83%. During the years ended December 31, 2001 and 2000, the Company's weighted average borrowings were $283,963,000 and $180,712,000 with a weighted average interest rate of 6.91% and 7.77%, respectively. (c) Senior Secured Notes On June 1, 1999, MFC issued $22.5 million of Series A senior secured notes that mature on June 30, 2003 and on September 1, 1999, MFC issued $22.5 million of Series B senior secured notes that mature on June 30, 2003 (together, the Notes). The Notes bear a fixed rate of interest of 7.35% and interest is paid monthly in arrears effective with the amendments described above. The notes reprice quarterly beginning April 1, 2002 to 8.15% and further adjust to 8.75% on July 1, 2002 and increase an additional 50 basis points every quarter to maturity. The Notes rank pari passu with the bank agreements through inter-creditor agreements and generally are subject to the same terms, conditions, and covenants as the bank agreements. See also the discussion of recent amendment in the Bank Loans section above. (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. Premiums paid under interest rate cap agreements of $91,000, $84,000, and $73,000 were expensed in 2001, 2000, and 1999. There are no unamortized premiums on the balance sheet as of December 31, 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 the counterparty. (7) SBA DEBENTURES PAYABLE Outstanding SBA debentures are as follows at December 31, 2001 and 2000: - ------------------------------------------------------------------------------ Due Date 2001 2000 Interest Rate - ------------------------------------------------------------------------------ September 1, 2011 $17,985,000 $ -- 6.77% December 1, 2006 5,500,000 5,500,000 7.08 December 1, 2011 4,500,000 -- 3.38 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 ----------------------------------------- $43,845,000 $21,360,000 ============================================================================== During 2001, FSVC and MCI were approved by the SBA to receive $36 million each in funding over a period of 5 years. MCI drew down $10,500,000 during June 2001 and $4,500,000 during December, 2001. In July, 2001 FSVC drew down $7,485,000 and in January 2002 drew down an additional $6,000,000. On September 30, 2000, the Company redeemed the 4% cumulative 15 year redeemable preferred stock at par value. On June 1, 1999 and September 1, 1999, the Company prepaid outstanding debentures totaling $31,090,000. The Company also paid approximately $165,000 in prepayment penalties as a one-time charge that was included in interest expense. The SBA imposes certain restrictions on the Company, which include, among others, transfers of stock and payments of dividends by its licensees. (8) STOCK OPTIONS The Company has a stock option plan (1996 Stock Option Plan) available to grant both incentive and nonqualified stock options to employees. The 1996 Stock Option Plan, which was approved by the Board of Directors and shareholders on May 22, 1996, provides for the issuance of a maximum of 750,000 shares of common stock of the Company. On June 11, 1998, the Board of Directors and shareholders approved certain amendments to the Company's 1996 Stock Option Plan, including increasing the number of shares reserved for issuance from 750,000 to 1,500,000. At December 31, 2001, 267,279 shares of the Company's common stock remained available for future grants. The 1996 Stock Option Plan is administered by the Compensation Committee of the Board of Directors. The option price per share may not be less than the current market value of the Company's common stock on the date the option is granted. The term and vesting periods of the options are determined by the Compensation Committee, provided that the maximum term of an option may not exceed a period of ten years. F-18 A Non-Employee Director Stock Option Plan (the Director Plan) was also approved by the Board of Directors and shareholders on May 22, 1996. On February 24, 1999, the Board of Directors amended and restated the Director Plan in order to adjust the calculation of the number of shares of the Company's common stock issuable under options (Options) to be granted to a Non-employee Director upon his or her re-election. Under the prior plan the number of options granted was obtained by dividing $100,000 into the current market price for the common stock. The Director Plan calls for the grant of options to acquire 9,000 shares of common stock upon election of a non-employee director. It provides for an automatic grant of options to purchase 9,000 shares of the Company's common stock to an Eligible Director upon election to the Board, with an adjustment for directors who are elected to serve less than a full term. A total of 100,000 shares of the Company's common stock are issuable under the Director Plan. At December 31, 2001, 32,635 shares of the Company's common stock remained available for future grants. The grants of stock options under the Director Plan are automatic as provided in the Director Plan. The option price per share may not be less than the current market value of the Company's common stock on the date the option is granted. Options granted under the Director Plan are exercisable annually, as defined in the Director Plan. The term of the options may not exceed five years. The Company records stock compensation in accordance with APB Opinion No. 25. Had compensation cost for stock options been determined based on the fair value at the date of grant, consistent with the provisions of SFAS 123, the Company's net increase in net assets resulting from operations would have been increased/(reduced) to the pro forma amounts indicated below:
- --------------------------------------------------------------------------------------------- December 31, -------------------------------------- 2001 2000 1999 - --------------------------------------------------------------------------------------------- Net (decrease) increase in net assets resulting from operations As reported $(4,058,283) $7,540,688 $21,093,707 Pro forma(1) (3,618,507) 6,552,531 20,710,412 Per share diluted As reported $ (0.24) $ 0.52 $ 1.44 Pro forma(1) (0.22) 0.45 1.42 =============================================================================================
(1) During 2001, the impact of employee forfeitures exceeded the pro forma compensation expense related to grants and, accordingly, the pro forma impact reduced the Company's net decrease in net assets resulting from operations. The weighted average fair value of options granted during the years ended December 31, 2001, 2000, and 1999 was $2.79, $3.98, and $4.32 per share, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. However, management believes that such a model may or may not be applicable to a company regulated under the 1940 Act. The following weighted average assumptions were used for grants in 2001, 2000 and 1999: - -------------------------------------------------------------------------------- Year ended December 31, ----------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Risk free interest rate 5.4% 6.3% 5.7% Expected dividend yield 8% 8.0% 7.1% Expected life of option in years 7.0 7.0 7.0 Expected volatility 44% 44% 44% ================================================================================ F-19 The following table presents the activity for the stock option program under the 1996 Stock Option Plan and the Director Plan for the years ended December 31, 2001, 2000, and 1999: - ------------------------------------------------------------------------------- Exercise Weighted Number of Price Per Average Options Share Exercise Price - ------------------------------------------------------------------------------- Outstanding at December 31, 1998 696,344 $ 6.71-29.25 $19.72 Granted 397,884 14.25-20.06 17.52 Cancelled (42,700) 14.25-28.87 21.84 Exercised (10,665) 6.71-14.38 10.37 - ------------------------------------------------------------------------------- Outstanding at December 31, 1999 1,040,863 6.71-29.25 18.88 Granted 93,164 14.50-20.63 17.36 Cancelled (25,750) 14.25-29.25 19.85 Exercised (19,001) 6.71-11.00 9.79 - ------------------------------------------------------------------------------- Outstanding at December 31, 2000 1,089,276 6.71-29.25 18.88 Granted 213,750 11.50-16.00 12.37 Cancelled (284,613) 13.75-29.50 18.05 Exercised (34,000) 15.13-15.13 15.13 - ------------------------------------------------------------------------------- Outstanding at December 31, 2001 984,413 $ 6.71-29.25 $17.97 - ------------------------------------------------------------------------------- Options exercisable at December 31, 1999 254,751 $ 6.71-29.25 $16.37 December 31, 2000 494,712 6.71-29.25 17.68 December 31, 2001 492,654 6.71-29.25 19.37 =============================================================================== The following table summarizes information regarding options outstanding and options exercisable at December 31, 2001 under the 1996 Stock Option Plan and the Director Plan:
- --------------------------------------------------------------------------------------------------------------------- Options Outstanding Options Exercisable --------------------------------------------------------------------------------------------------- Weighted average Weighted average - --------------------------------------------------------------------------------------------------------------------- Remaining Remaining contractual contractual Range of Shares At life in Shares At life in Exercise Prices December 31, 2001 years Exercise price December 31, 2001 years Exercise price - --------------------------------------------------------------------------------------------------------------------- $ 6.71-$14.38 277,077 7.47 $11.94 100,356 5.10 $11.86 14.50- 17.38 382,780 5.42 16.98 168,521 5.26 17.04 18.75- 22.38 116,427 6.45 19.47 83,562 6.10 19.52 26.06- 29.25 208,129 6.31 27.40 140,215 6.21 27.46 - --------------------------------------------------------------------------------------------------------------------- $ 6.71-$29.25 984,413 6.31 $17.97 492,654 5.64 19.37 - ---------------------------------------------------------------------------------------------------------------------
F-20 (9) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) /(1)/ The following table presents the Company's quarterly result of operations for the years ended December 31, 2001, 2000, and 1999.
- ------------------------------------------------------------------------------------------------- (In thousands except per share amounts) March 31 June 30 September 30 December 31 - ------------------------------------------------------------------------------------------------- 2001 Quarter Ended Investment income $13,374 $11,618 $ 7,035 $ 10,050 Net investment income (loss) before taxes 2,331 2,599 (5,863) 14 Net increase (decrease) in net assets resulting from operations 2,289 2,364 (8,986) 275 Net increase (decrease) in net assets resulting from operations per common share Basic $ 0.16 $ 0.16 ($0.49) ($0.07) Diluted $ 0.16 0.16 (0.49) (0.07) - ------------------------------------------------------------------------------------------------- 2000 Quarter Ended Investment income $14,531 $13,787 $14,304 $ 12,734 Net investment income (loss) before taxes 4,366 4,250 3,245 (2,776) Net increase (decrease) in net assets resulting from operations 4,500 4,260 2,774 (3,993) Net increase (decrease) in net assets resulting from operations per common share Basic 0.31 0.29 0.19 (0.27) Diluted 0.31 0.29 0.19 (0.27) - ------------------------------------------------------------------------------------------------- 1999 Quarter Ended Investment income /(2)/ $10,097 $11,505 $11,466 $ 11,008 Net investment income before taxes /(2)/ 3,451 3,304 3,349 753 Net increase in net assets resulting from operations 4,757 5,236 6,208 4,893 Net increase in net assets resulting from operations per common share Basic 0.33 0.36 0.43 0.33 Diluted 0.33 0.36 0.42 0.33 =================================================================================================
/(1)/ The 2000 March, June, and September quarters, as well as all the quarters of 1999 have been restated to reflect the merger with FSVC. /(2)/ Subsequent to the 1999 year-end, the Company identified clerical errors resulting from the Company's system conversion that began in the third quarter of 1999. The effect of these items has been reflected in the results for the fourth quarter ended December 31, 1999. Certain of these errors resulted in a decrease to Investment Income and Net Investment Income of approximately $1,200,000 in the third quarter and an increase of approximately $1,200,000 in the fourth quarter. The clerical errors, in total, did not have an overall material impact on net increase in net assets resulting from operations for either quarter. - -------------------------------------------------------------------------------- (10) NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) has adopted SFAS No.141, "Business Combinations" and SFAS No. 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 standards further require that amortization of all goodwill cease, and in lieu of amortization, goodwill must be evaluated for impairment in each reporting period. Management has not yet determined the impact, if any, upon adoption of the new pronouncement. Management intends to evaluate its goodwill for impairment quarterly beginning in 2002, and has engaged a consulting firm to determine the valuation for 2002 first quarter financial reporting. At December 31, 2001, the Company had $5,008,000 of goodwill on its consolidated balance sheet and $2,100,000 recorded on the balance sheet of Media, its wholly-owned subsidiary that will be subject to the asset impairment review required by SFAS 142. (11) SEGMENT REPORTING The Company has two reportable business segments, lending and taxicab rooftop advertising. The lending segment originates and services secured commercial loans. The taxicab roof top advertising segment sells advertising space to advertising agencies and companies in several major markets across the United States. The segment is reported as an unconsolidated subsidiary, Medallion Taxi Media, Inc. 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 5. For taxicab advertising, the increase in net assets resulting from operations represents the Company's equity in net income from Media. Segment assets for taxicab advertising represent the Company's investment in and loans to Media. F-21 (12) COMMITMENTS AND CONTINGENCIES (a) Sub-Advisory Agreement In May 1996, the Company entered into a sub-advisory agreement (Agreement) with FMC Advisers, Inc. (FMC) in which FMC provided advisory services to the Company. Under the Agreement, the Company paid FMC a monthly fee for services rendered of $18,750. On February 24, 1999, the Agreement was extended until May 2000 at which point it was allowed to expire. Advisory fees incurred during the years ended December 31, 2001, 2000, and 1999 were $-0-, $93,750, and $225,000. (b) Employment Agreements The Company has employment agreements with certain key officers for either a three or five-year term. Annually, the contracts with a five-year term will renew for a new five-year term unless prior to the end of the first year, either the Company or the executive provides notice to the other party of its intention not to extend the employment period beyond the current five-year term. In the event of a change in control, as defined, during the employment period, the agreements provide for severance compensation to the executive in an amount equal to the balance of the salary, bonus and value of fringe benefits which the executive would be entitled to receive for the remainder of the employment period. (c) Other Commitments The Company had loan commitments outstanding at December 31, 2001 that are generally on the same terms as those to existing borrowers. Commitments generally have fixed expiration dates. Of these commitments, approximately 45% will be sold pursuant to SBA guaranteed sales. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition, the Company had approximately $14,111,000 of undisbursed funds relating to revolving credit facilities with borrowers. These amounts may be drawn upon at the customer's request if they meet certain credit requirements. Commitments for leased premises expire at various dates through June 30, 2006. At December 31, 2001, minimum rental commitments for non-cancelable leases are as follows: - ---------------------------------------------------------- 2002 $ 985,254 2003 814,971 2004 738,341 2005 730,181 2006 and thereafter 450,306 - ---------------------------------------------------------- Total $3,719,053 ========================================================== Rent expense for the years ended December 31, 2001, 2000, and 1999 was approximately $945,000, 1,029,000, and $853,000. (d) Litigation The Company and its subsidiaries become defendants to various legal proceedings arising from the normal course of business. In the opinion of management, based on the advice of legal counsel, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision would result in a material adverse impact in the financial condition or results of operations of the Company. The acquisition of BLL in 1997 included an earnout provision to be paid to the sellers after three years. The Company provided a calculation of the earnout in 2001 to the sellers which they responded to in January 2002 claiming approximately $2,600,000 from the Company. The Company believes that this claim is without merit and intends to contest this vigorously, and although there can be no assurances, expects to prevail in any arbitration settlement. (13) RELATED PARTY TRANSACTIONS Certain directors, officers and shareholders of the Company are also directors of its wholly owned subsidiaries, MFC, BLL, MCI, MBC, FSVC, and Media. Officer salaries are set by the Board of Directors of the Company. Media engaged in transactions to sell roof top advertising space to a company represented by a relative of a Media officer. All transactions were made under market conditions and pricing. During 2001, 2000, and 1999, a member of the Board of Directors of the Company was also a partner in the Company's primary law firm. F-22 (14) SHAREHOLDERS' EQUITY In accordance with Statement of Position 93-2, "Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies," ($368,359) was reclassified from capital in excess of par value to accumulated undistributed net investment income at December 31, 2001 in the accompanying consolidated balance sheets. Further $534,468 was reclassified from capital in excess of par value to accumulated undistributed net investment income at December 31, 2000 in the accompanying consolidated balance sheets. These reclassifications had no impact on the Company's total shareholders' equity and were designed to present the Company's capital accounts on a tax basis. (15) OTHER INCOME AND OTHER OPERATING EXPENSES The major components of other income for the years ended December 31, 2001, 2000, and 1999 were as follows: - -------------------------------------------------------------------------------- 2001 2000 1999 ------------------------------------------- Servicing fee income ($1,013,739)/(1)/ $1,004,331 $ 583,034 Accretion of discount 861,813 290,049 163,945 Late charges 831,904 492,378 293,008 Prepayment penalties 690,090 330,909 105,330 Other 735,090 1,260,162 1,100,449 -------------------------------------------- Total other income $ 2,105,158 $3,337,829 $2,245,766 ================================================================================ /(1)/ Included in servicing fee income was $2,171,000, $205,000, and $0 for 2001, 2000, and 1999 for writedowns against the value of the servicing fee receivable. - -------------------------------------------------------------------------------- The major components of other operating expenses for the years ended December 31, 2001, 2000, and 1999 were as follows: - -------------------------------------------------------------------------------- 2001 2000 1999 ------------------------------------- Rent expense $ 944,695 $1,028,695 $ 852,884 Bank charges 517,093 550,517 207,250 Depreciation and amortization 610,447 973,010 721,160 Travel meals and entertainment 560,568 611,406 509,797 Computer expense 440,640 319,532 206,875 Insurance 358,834 285,689 273,036 Temporary help 334,996 607,666 341,531 Office expense 321,968 254,373 371,654 Telephone 222,295 327,621 267,435 Advertising, marketing, public relations 158,563 606,982 969,263 Other expenses 943,881 2,670,628 1,003,947 ------------------------------------- Total operating expenses $5,413,980 $8,236,119 $5,724,832 ================================================================================ F-23 (16) SELECTED FINANCIAL RATIOS AND OTHER DATA The following table provides selected financial ratios and other data for the years ended December 31, 2001 and 2000.
- ------------------------------------------------------------------------------------------------------------ 2001 2000 1999 ---------------------------------------------- Net Share Data: Net asset value at the beginning of the period $ 10.16 $ 10.83 $ 10.65 Net investment income (loss) (0.05) 0.63 0.73 Realized gain (loss) on investments (0.17) (0.27) 1.55 Net unrealized appreciation (depreciation) on investments (0.01) 0.15 (0.84) ---------------------------------------------- Increase (decrease) in shareholders' equity from operations (0.23) 0.52 1.44 Issuance of common stock 0.01 0.01 0.00 Distribution of net investment income 0.35) (1.20) (1.26) ---------------------------------------------- Net asset value at the end of the period $ 9.59 $ 10.16 $ 10.83 ---------------------------------------------- Per share market value at beginning of period $ 14.63 $ 17.94 $ 14.31 Per share market value at end of period 7.90 14.63 17.94 Total Return /(1)/ (43.89%) (10.97%) 36.43% - ------------------------------------------------------------------------------------------------------------ Ratio/Supplemental Data Average net assets at the end of the period $175,023,923 $147,733,051 $157,309,837 Ratio of operating expenses to average net assets 11.00% 15.37% 11.55% Ratio of net investment income (loss) to average net assets (0.57%) 5.96% 6.96% ============================================================================================================ ----------------------------- 1998 1997/(2)/ ----------------------------- Net Share Data: Net asset value at the beginning of the period $ 10.69 $ 6.85 Net investment income (loss) 0.85 0.88 Realized gain (loss) on investments 0.09 0.15 Net unrealized appreciation (depreciation) on investments 0.18 0.01 ----------------------------- Increase (decrease) in shareholders' equity from operations 1.11 1.02 Issuance of common stock 0.00 3.46 Distribution of net investment income (1.16) (0.87) ----------------------------- Net asset value at the end of the period $ 10.65 $ 10.46 - ------------------------------------------------------------------------------------------- Per share market value at beginning of period $ 17.01 $ 11.23 Per share market value at end of period 14.31 17.01 Total Return (1) (30.19%) 49.33% - ------------------------------------------------------------------------------------------- Ratio/Supplemental Data Average net assets at the end of the period $154,473,960 131,391,510 Ratio of operating expenses to average net assets 9.21% 5.50% Ratio of net investment income (loss) to average net assets 8.16% 12.04% ===========================================================================================
/(1)/ Total return is calculated by comparing the change in value of a share of common stock assuming the reinvestment of dividends on the payment date. /(2)/ Excludes results of Freshstart Venture Capital Corporation. - -------------------------------------------------------------------------------- (17) EMPLOYEE BENEFIT PLANS The Company has a 401(k) Investment Plan (the 401(k) Plan) which covers all full-time and part-time employees of the Company who have attained the age of 21 and have a minimum of one-half year of service. Under the 401(k) Plan, an employee may elect to defer not less than 1% and no more than 15% of the total annual compensation that would otherwise be paid to the employee, provided, however, that employees' contributions may not exceed certain maximum amounts determined under the Code. Employee contributions are invested in various mutual funds according to the directions of the employee. Beginning September 1, 1998, the Company elected to match employee contributions to the 401(k) Plan in an amount per employee up to one-third of such employee's contribution but in no event greater than 2% of the portion of such employee's annual salary eligible for 401(k) Plan benefits. For the years ended December 31, 2001, 2000, and 1999, the Company committed and expensed approximately $57,000, $58,000, and $67,000 to the 401(k) Plan. (18) FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standard No. 107, "Disclosures About Fair Value of Financial Instruments" (SFAS 107) requires disclosure of fair value information about certain financial instruments, whether assets, liabilities, or off-balance-sheet commitments, if practicable. The following methods and assumptions were used to estimate the fair value of each class of financial instrument. Fair value estimates that were derived from broker quotes cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. (a) Investments-The Company's investments are recorded at the estimated fair value of such investments. (b) Servicing fee receivable-The fair value of the servicing fee receivable is estimated based upon expected future service fee income cash flows discounted at a rate that approximates that currently offered for instruments with similar prepayment and risk characteristics. (c) Commercial paper, notes payable to banks, and senior secured notes-Due to the short-term nature of these instruments, the carrying amount approximates fair value. (d) Commitments to extend credit-The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and present creditworthiness of the counter parties. For fixed rate loan commitments, fair value also includes a consideration of the difference between the current levels of interest rates and the committed rates. At December 31, 2001 and 2000, the estimated fair value of these off-balance-sheet instruments was not material. (e) Interest rate cap agreements-The fair value is estimated based on market prices or dealer quotes. At December 31, 2001 and December 31, 2000, the estimated fair value of these off-balance-sheet instruments was not material. F-24 (f) SBA debentures payable-The fair value of the debentures payable to the SBA is estimated based on current market interest rates for similar debt.
- -------------------------------------------------------------------------------------------------------- December 31, 2001 December 31, 2000 ----------------------------------------------------------- (Dollars in thousands) Carrying Amount Fair Value Carrying Amount Fair Value - -------------------------------------------------------------------------------------------------------- Financial Assets Investments $462,253 $462,253 $516,010 $516,010 Cash 25,409 25,409 15,653 15,653 Servicing fee receivable 3,575 3,575 6,633 6,633 Financial Liabilities Notes payable to banks 233,000 233,000 305,700 305,700 Commercial Paper -- -- 24,066 24,066 Senior secured notes 45,000 45,000 45,000 45,000 SBA debentures payable 43,845 43,845 21,360 21,360 - --------------------------------------------------------------------------------------------------------
F-25
MEDALLION FINANCIAL CORP. Consolidated Schedule of Investments December 31, 2001 ===================================================================================== # of Loans Balance Outstanding Interest Rate -------------------------------------------------- 5 $ 2,833,767 0.00-4.24 2 1,051,652 4.25-4.74 5 1,771,329 4.75-4.99 1 177,278 5.00-5.24 1 146,617 5.25-5.49 1 1,040,000 5.50-5.74 1 71,155 5.75-5.99 8 3,970,113 6.00-6.24 12 13,027,356 6.25-6.49 7 1,772,575 6.50-6.74 12 12,594,251 6.75-6.99 46 7,903,014 7.00-7.24 79 17,817,536 7.25-7.49 167 23,465,573 7.50-7.74 591 60,942,903 7.75-7.99 147 28,454,804 8.00-8.24 141 27,993,474 8.25-8.49 286 34,134,942 8.50-8.74 161 25,004,520 8.75-8.99 208 36,632,870 9.00-9.24 42 6,004,051 9.25-9.49 117 22,462,602 9.50-9.74 51 5,449,378 9.75-9.99 251 6,932,025 10.00-10.24 16 1,075,011 10.25-10.49 200 9,633,239 10.50-10.74 51 7,917,316 10.75-10.99 78 5,139,848 11.00-11.24 47 5,842,980 11.25-11.49 66 4,783,443 11.50-11.74 51 4,199,399 11.75-11.99 210 24,914,789 12.00-12.24 24 2,339,941 12.25-12.49 38 3,031,577 12.50-12.74 12 1,092,645 12.75-12.99 87 26,248,506 13.00-13.24 35 6,888,525 13.25-13.49 33 1,974,744 13.50-13.74 12 435,368 13.75-13.99 42 1,444,166 14.00-14.24 5 308,022 14.25-14.49 37 1,400,329 14.50-14.74 9 425,620 14.75-14.99 77 2,242,229 15.00-15.24 10 252,136 15.50-15.74 6 847,681 15.75-15.99 16 646,204 16.00-16.24 9 170,225 16.25-17.49 3 126,858 17.50-17.74 2 5,138,811 17.75-17.99 11 1,722,070 18.00-19.99 - ------------------------------------------------------------------------------------- Total Loans 3,529 461,895,467 - ------------------------------------------------------------------------------------- Equities PMC 1,177,024 Kleener King Satellites 108,696 ARCA 50,000 Micromedics 58,828 Other 72,161 - ------------------------------------------------------------------------------------- Total Equities 1,466,709 ===================================================================================== Total Investments 463,362,176 Plus: Origination costs , net 2,149,718 Less: Discounts on 7(a) loans (2,415,459) - ------------------------------------------------------------------------------------- Investments, at cost 463,096,435 Less: Unrealized depreciation on investments (7,501,052) - ------------------------------------------------------------------------------------- Total investments $455,595,383 =====================================================================================
The accompanying notes are an integral part of this consolidated schedule. F-26 MEDALLION FINANCIAL CORP. Consolidated Schedule of Investments December 31, 2000
- ----------------------------------------------------------------------------------- # Of Loans Balance Outstanding Interest Rate ------------------------------------------------- 45 $ 11,767,129 7.50-7.74 85 27,217,587 7.75-7.99 152 34,278,418 8.00-8.24 174 33,977,262 8.25-8.49 319 37,774,811 8.50-8.74 174 29,215,803 8.75-8.99 251 35,527,944 9.00-9.24 48 7,981,436 9.25-9.49 127 12,986,862 9.50-9.74 57 5,891,982 9.75-9.99 246 11,562,678 10.00-10.24 20 1,051,415 10.25-10.49 145 5,851,637 10.50-10.74 39 11,206,375 10.75-10.99 118 20,814,299 11.00-11.24 74 11,050,517 11.25-11.49 135 32,623,997 11.50-11.74 148 18,435,203 11.75-11.99 466 52,907,902 12.00-12.24 504 34,696,214 12.25-12.49 79 14,793,634 12.50-12.74 13 3,329,520 12.75-12.99 142 28,893,963 13.00-13.24 35 5,815,090 13.25-13.49 31 3,433,838 13.50-13.74 16 1,074,968 13.75-13.99 62 2,249,164 14.00-14.24 4 257,190 14.25-14.49 57 1,999,389 14.50-14.74 9 4,787,792 14.75-14.99 124 4,097,995 15.00-15.24 10 262,907 15.50-15.74 7 1,047,411 15.75-15.99 25 1,349,751 16.00-16.24 6 141,099 16.50-16.74 3 82,971 16.75-16.99 8 2,444,134 17.00-17.24 5 247,535 17.50-17.74 3 4,771,982 17.75-17.99 9 1,663,429 18.00-18.24 10 139,011 19.00-19.24 1 81,704 19.25-19.49 1 64,641 20.50-23.99 1 10,208 24.00-24.24 - ----------------------------------------------------------------------------------- Total Loans 3,988 519,858,797 - ----------------------------------------------------------------------------------- Equities PMC 1,932,952 Cardinal Health 329,625 Kleener King Satellites 108,696 Micromedics 58,828 Arca 50,000 Other 72,161 ------------------- Total Equities 9 2,552,262 ------------------------------ Total Investments 3,997 522,411,059 -------- Plus: Origination costs, net 1,802,702 Less: Discounts on 7(a) loans (2,648,788) ------------------- Investments, at cost 521,564,973 Less: Unrealized depreciation on investments (7,411,367) - ----------------------------------------------------------------------------------- $514,153,606 ===================================================================================
The accompanying notes are an integral part of this consolidated schedule. F-27 EX-10.27 3 dex1027.txt AMENDMENT NO.2 TO THE AMENDED & RESTATED LOAN AGMT Exhibit 10.27 AMENDMENT NUMBER TWO TO LOAN AGREEMENT --------------------------------------- Second Amendment entered into as of December 31, 1998, among MEDALLION FUNDING CORP., a New York corporation ("Borrower"), the banks that are signatories hereto (collectively, the "Banks" and individually, a "Bank"), FLEET BANK, NATIONAL ASSOCIATION, as swing line lender (the "Swing Line Lender"), as Arranger and as Administrative Agent and Collateral Agent for the Banks (including any successor, the "Agent") and The Bank of New York, as Documentation Agent for the Banks (including any successor, the "Documentation Agent"); WHEREAS, the Borrower, the Banks, the Agent and the Documentation Agent are parties to an Amended and Restated Loan Agreement dated as of December 24, 1997, which Amended and Restated Loan Agreement was amended pursuant to Amendment Number One thereto dated as of February 5, 1998 (such Amended and Restated Loan Agreement as so amended is referred to herein as the "Agreement"); and WHEREAS, the Borrower has requested that the Banks and the Agent amend, and the Banks and the Agent have agreed to amend, certain provisions of the Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: Article I. The Agreement is hereby amended as follows: (a) The definition of "Net Finance Assets" contained in Section 1.1 of the Agreement is amended to read in its entirety as follows: "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 Borrower's balance sheet as of such date, plus ---- (ii) the aggregate outstanding principal balances of, plus accrued 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 fiscal quarter, minus ----- (iii) the portion, if any, of the Loans and accrued interest described in (ii) above that Borrower, in its reasonable business judgment, deems to be uncollectible or subject to classification as non-accruing, minus ----- (iv) the aggregate outstanding principal of, plus accrued interest on, the SBA Collateral; minus ----- (v) the Eligible Loans and accrued interest described in (ii) above which are 60 days or more past due, plus ---- (vi) 75% of -the New York Medallion Loans and accrued interest thereon which are 60 days past due (but are not more than 60 days past due), plus ---- (vii) 65% of the New York Medallion Loans and accrued interest thereon which are more than 60 days past due, but are not more than 90 days past due, plus ---- (viii) 50% of the New York Medallion Loans which are more than 90 days past due, but are not more than 120 days past due, provided that the amount in this subparagraph (viii) shall in no event on any occasion exceed 2% of the aggregate outstanding principal balance of all New York Medallion 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 on, such Loan shall be excluded. (b) A new definition of "New York Medallion Loans" shall be added to Section 1.1 in the correct place alphabetically as follows: "New York Medallion Loans" shall mean any Eligible Medallion Loan that ------------------------ is secured in whole or in part by Medallion Rights that relate to the operating of taxicabs in the City of New York. (c) Section 6.1(a), Section 6.1(b), Section 6.1(d) and Section 6.1(e) are amended to read in their entirety as follows: (a) as soon as practicable and in any event within 45 days after the close of each calendar quarter, beginning with the calendar quarter ending March 31, 1999, a detailed schedule of all outstanding Loans of Borrower setting forth (i) the aging, on a contractual basis, of each Loan and (ii) the aggregate dollar amount of Loans as to which any amendments or modifications to or waivers of any terms thereof have been made during such quarter as a result of the Person to whom such Loan was made being unable to comply (for whatever reason) with the terms thereof; (b) Intentionally Omitted; -2- (d) as soon as practicable and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, beginning with the fiscal quarter ending March 31, 1999, a balance sheet, a statement of income and retained earnings and a statement of cash flow of Borrower, , all on a consolidated and consolidating basis and as at the end of and for the quarterly period then ended and for the period commencing at the end of the previous fiscal year and ending with such quarter, setting forth the corresponding figures for the appropriate dates and periods of the previous fiscal year in comparative form, all in reasonable detail (which detail shall include data as to non-accruals (and related collateral, repossessions, charge-offs and reconciliation for allowance for losses) and be reviewed by the Independent Public Accountants and certified by the President or Chief Financial Officer of Borrower to be true and correct and to have been prepared in accordance with GAAP (except for the omission of footnotes), subject to normal recurring year-end audit adjustments; (e) as soon as practicable and in any event within 90 days after the end of each fiscal year of Borrower commencing with the fiscal year ending December 31, 1998, a balance sheet, a statement of income and retained earnings and a statement of cash flow of Borrower, all on a consolidated and consolidating basis and as at the end of and for the fiscal year just closed, setting forth the corresponding figures as of the end and for the previous fiscal year in comparative form, all in reasonable detail (which detail shall include data as to non-accruals and related collateral, repossessions, charge-offs and reconciliation for allowance for losses), presented in a manner consistent with the financial statements of Borrower for the preceding fiscal year, and, Nvith respect to such consolidated statements, certified (without any qualification or exception deemed material by the Agent or any Bank) by the Independent Public Accountants; and concurrently with such financial statements, a Nvritten statement, addressed to the Agent and the Banks, signed by such Independent Public Accountant to the effect that, in making the examination necessary for their certification of such financial statements, they have not obtained, as of the end of such fiscal year, any kno,,vledge of the existence of any Default or Event of Default, or, if such accountants shall have obtained from such examination any such knowledge, they shall disclose in such written statement such Default or Event of Default; 2. The Borrower hereby represents and warrants to the Agent and each Bank that: (a) Each and every of the representations and warranties set forth in the Agreement is true as of the date hereof and with the same effect as though made on the date hereof, and is hereby incorporated herein in full by reference as if fully restated herein in its entirety. -3- (b) No Default or Event of Default and no event or condition which, with the giving of notice or lapse of time or both, would constitute such a Default or Event of Default, now exists or would exist. 3. All capitalized terms used herein, unless otherwise defined herein, have the same meanings provided therefor in the Agreement. 4. The amendments set forth herein are limited precisely as written and shall not be deemed to (a) be a consent to or a waiver of any other term or condition of the Agreement or any of the documents referred to therein or (b) prejudice any right or rights which the Agent or any Bank may now have or may have in the future under or in connection with the Agreement or any documents referred to therein. Whenever the Agreement is referred to in the Agreement or any of the instruments, agreements or other documents or papers executed and delivered in connection therewith, it shall be deemed to mean the Agreement as modified by this Amendment Number Two. 5. This Amendment Number Two shall be effective as of the date first above written provided that the Borrower and the Agent shall have received counterparts of this Amendment Number Two duly signed by the Borrower and each of the Banks. Promptly after the effective date of this Amendment Number Two, the Agent shall deliver fully executed counterparts of this Amendment Number Two to each of the Banks, and the Agreement shall consist of the Agreement as amended by this Amendment Number Two. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES CONTINUED ON THE FOLLOWING PAGES BEGINNING WITH PAGE 5] -4- IN WITNESS WHEREOF, Borrower, the Agent, the Documentation Agent, the Swing Line Lender and the Banks have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the -day and year first above written. MEDALLION FUNDING CORP. By: /s/ Alvin Murstein ---------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ Daniel F. Baker ---------------------------- Name: Daniel F. Baker Title: Treasurer and Chief Financial Officer FLEET BANK, NATIONAL ASSOCIATION, as Agent, as Swing Line Lender and as one of the Banks By: Illegible ---------------------------- Title: Vice President THE BANK OF NEW YORK, as Documentation Agent and as one of the Banks By: Illegible ---------------------------- Title: BANKBOSTON, N.A. By: Illegible --------------------------- Title: -5- HARRIS TRUST AND SAVINGS BANK By: Illegible --------------------------- Title: BANK TOKYO - MITSUBISHI TRUST COMPANY By: /s/ JIM BROWN ---------------------------- Title: JIM BROWN Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: Illegible ---------------------------- Title: By: Illegible ---------------------------- Title: EUROPEAN AMERICAN BANK By: /s/ Dennis J. Nochowitz ---------------------------- Title: Dennis J. Nochowitz Vice President BANK LEUMI USA By: Illegible ---------------------------- Title: -6- THE CHASE MANHATTAN BANK By: Illegible --------------------------- Title: Vice President -7- EX-10.28 4 dex1028.txt AMENDMENT NO.3 TO THE AMENDED & RESTATED LOAN AGMT Exhibit 10.28 EXECUTION COPY AMENDMENT NUMBER THREE TO LOAN AGREEMENT ---------------------------------------- Third Amendment entered into as of June 1, 1999, among MEDALLION FUNDING CORP., a New York corporation ("Borrower"), the banks that are signatories hereto (collectively, the "Banks" and individually, a "Bank"), FLEET BANK, NATIONAL ASSOCIATION, as swing line lender (the "Swing Line Lender"), as Arranger and as Administrative Agent and Collateral Agent for the Banks (including any successor, the "Agent") and The Bank of New York, as Documentation Agent for the Banks (including any successor, the "Documentation Agent"); WHEREAS, the Borrower, the Banks, the Agent and the Documentation Agent are parties to an Amended and Restated Loan Agreement dated as of December 24, 1997, which Amended and Restated Loan Agreement was amended pursuant to Amendment Number One thereto dated as of February 5, 1998 and Amendment Number Two thereto dated as of December 11, 1.998 (such Amended and Restated Loan Agreement as so amended is referred to herein as the "Agreement"); and WHEREAS, the Borrower has requested that the Banks and the Agent amend, and the Banks and the Agent have agreed to amend, certain provisions of the Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Agreement is hereby amended as follows: (a) Section l.l is hereby amended by: (i) amending the definition of "Borrowing Base Certificate" to read in its entirety as follows: ""Borrowing Base Certificate" shall mean a certificate -------------------------- substantially in the form of Exhibit A to the Third Amendment;." --------- (ii) amending the definition of "Edwards Debt" to read in its entirety as follows: ""Edwards Debt" shall mean the outstanding amount owed by the ------------ Borrower to the SBA under the following notes, originally given by Edwards Capital Corp., a Delaware corporation (which merged with and into the Borrower), to the SBA: two debentures dated September 23, 1992, in the original principal amount of $3,500,000 and $6,050,000, respectively; a debenture dated June 29, 1994, in the original principal amount of $4,600,000; and a debenture dated September 28, 1994, in the original principal amount of $5,100,000;" (iii) amending the definition of "Intercreditor Agreement" to read in its entirety as follows: ""Intercreditor Agreement" shall mean that certain Intercreditor ----------------------- agreement entered into among the Senior Note Agent, the Agent, on behalf of the Banks, the Swing Line Lender and the CP Holders, the Banks, the Senior Note Holders and Fleet, as collateral agent on behalf of the Banks and the Senior Note Holders, substantially in the form of Exhibit B to the Third Amendment, and as such agreement is --------- amended from time to time, with the consent of the Agent and the Required Banks." (iv) amending the definition of "Initial Term" to delete the date "June 30, 1999" and substitute therefor the date "June 30, 2001;" (v) amending the definition of "Minimum Asset Coverage" to read in its entirety as follows: ""Minimum Asset Coverage" shall mean, at any time, 120% of the ---------------------- sum of (i) the aggregate unpaid balance of all Senior Debt at such time and (ii) the aggregate unpaid balance of the SBA Debt at such time." (vi) amending the definition of "Net Finance Assets" to restate clause (iv) thereof to read in its entirety as follows: "(iv) [intentionally left blank], minus" ----- (vii) amending the definition of the term "Percentage" to add to the end thereof the phrase "and/or 2.4 (b) hereof;" (viii) amending the definition of "Permitted Debt" to read in its entirety as follows: ""Permitted Debt" shall mean the Senior Note Debt, all unsecured -------------- Indebtedness of Borrower owed to Permitted Lenders (other than the SBA Debt), all CP Debt and, until September 1, 1999, the SBA Debt." (ix) amending the definition of "Senior Debt" to read in its entirety as follows: ""Senior Debt" shall mean all Indebtedness of Borrower ----------- (including, without limitation, all CP Debt, all Senior Note Debt and the Obligations (as such term is defined in the Borrower Security Agreement)), other than Subordinated Debt and the SBA Debt;" -2- (x) amending the definition of "TCC Debt" to read in its entirety as follows: ""TCC Debt" shall mean the outstanding amount owed by the -------- Borrower to the SBA under a debenture dated as of June 24, 1992, originally given by Transportation Capital Corp., a New York corporation (which merged with and into the Borrower), to the SBA in the original principal amount of $5,640,000." (xi) amending the definition of "Term Out Date" to read in its entirety as follows: ""Term Out Date" shall mean, with respect to each Revolving ------------- Credit Loan, June 30, 2001, subject, however, in each case, to the renewal provisions set forth in Section 2.10 hereof;" (xii) deleting the following definitions "Maximum SBA Collateral," "SBA Collateral," "SBA Secured Debt" and "SBA Security Agreement" and (xiii) adding the following new defined terns in appropriate alphabetical position: "Medallion SBA Debt" shall mean the outstanding amount owed by ------------------ the Borrower to the SBA under the following notes to the SBA: a debenture dated September 26, 1990, in the original principal amount of $510,000, a debenture dated December 19, 1990, in the original principal amount of $640,000; a debenture dated September 23, 1992, in the original principal amount of $1,950,000; a debenture dated June 29, 1994, in the original principal amount of $900,000; a debenture dated March 29, 1995, in the original principal amount of $1,700,000 and a debenture dated September 27, 1995, in the original principal amount of $500,000; "Note Purchase Agreements" shall mean, collectively, those ------------------------ certain identical Note Purchase Agreements dated as of June 1, 1999 by and between the Borrower and each of the Purchasers listed on Schedule A thereto, as the same may hereafter be amended, modified, or supplemented from time to time in accordance with Section 8.10 hereof; "SBA Debt" shall mean the Edwards Debt, the TCC Debt and the -------- Medallion SBA Debt in an aggregate principal amount as of the date of the Third Amendment of $31,090,000, as set forth in greater detail on Schedule I to the Third Amendment; "Senior Note Agent" shall mean Fleet, in its capacity as ----------------- collateral agent under the Senior Notes Security Agreement; -3- "Senior Note Debt" shall mean the principal amount of all ---------------- Indebtedness, together with accrued interest thereon, evidenced by the Senior Notes and/or the Note Purchase Agreements; "Senior Note Holders" shall mean the holders from time to time of ------------------- the Senior Notes; "Senior Notes" shall mean (i) the 7.20% Senior Secured Notes, ------------ Series A, Due June 1, 2004, in a maximum principal amount of $22,500,000 and (ii) the 7.20% Senior Secured Notes, Series B, Due September 1, 2004, in a maximum principal amount of $22,500,000, issued by the Borrower pursuant to the Note Purchase Agreements; "Senior Notes Security Agreement" shall mean the Security ------------------------------- Agreement, in substantially the form of Exhibit B to the Third --------- Amendment, between the Borrower and the Senior Notes Agent for the benefit of the holders from time to time of the Senior Notes, as such agreement is amended from time to time in accordance with the Intercreditor Agreement; "Third Amendment" shall mean Amendment Number Three to Loan --------------- Agreement, dated as of June l, 1999, among the Borrower, the Banks, the Swing Line Lender, the Agent and the Documentation Agent, relating to this Agreement. (b) Section 2.4 is hereby amended to (i) change the heading to read "Termination, Reduction and Increase of Aggregate Revolving Credit Commitment," (ii) to add an "(a)" to the beginning of such Section and (iii) to add a new subsection (b) thereto to read in its entirety as follows: "(b) Increase. Provided that no Default or Event of Default exists or -------- would exist immediately before and after giving effect thereto, the Borrower may at any time and from time to time, at its sole cost and expense, request any one or more of the Banks to increase (such decision to increase the Revolving Credit Commitment of a Bank to be within the sole and absolute discretion of such Bank) its Revolving Credit Commitment, or any other institution reasonably satisfactory to the Agent and the Swing Line Lender to provide a new Revolving Credit Commitment, by submitting an Increase Supplement in the form of Exhibit C to the Third Amendment (an "Increase Supplement"), duly executed by the Borrower and each such Bank ------------------- or other institution, as the case may be. If such Increase Supplement is in all respects reasonably satisfactory to the Agent, the Agent shall execute such Increase Supplement and deliver a copy thereof to the Borrower and each such Bank or other institution, as the case may be. Upon -4- execution and delivery of such Increase Supplement, (i) in the case of each such Bank, such Bank's Revolving Credit Commitment shall be increased to the amount set forth in such Increase Supplement, (ii) in the case of each such other institution, such other institution shall become a party hereto and shall for all purposes of the Loan Documents be deemed a "Bank" with a Revolving Credit Commitment in the amount set forth in such Increase Supplement, (iii) in each case, the Revolving Credit Commitment of such Bank or such other institution, as the case may be, shall be as set forth in the applicable Increase Supplement, and (iv) the Borrower shall contemporaneously therewith execute and deliver to the Agent (x) for each Bank providing an increased Revolving Credit Commitment, a new Revolving Credit Note in the amount of such increased Revolving Credit Commitment and (y) for each such other institution providing a new Revolving Credit Conunitment, a Revolving Credit Note in the amount of its Revolving Credit Commitment; provided, however, that: (i) immediately after giving effect thereto, the Aggregate Revolving Credit Commitment shall not have been increased pursuant to this Section by an aggregate amount greater than $30,000,000 (taking into account any prior increases); (ii) each such increase shall be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) the Aggregate Commitment Amount shall not be increased on more than six occasions; (iv) if Revolving Credit Loans shall be outstanding immediately after giving effect to such increase, each such Bank and each such other institution shall enter into a master assignment and acceptance agreement with the other Banks in all respects reasonably satisfactory to such other Banks, pursuant to which each such other Bank shall assign to it a portion of its Revolving Credit Loans necessary to reflect proportionately the Revolving Credit Commitments as adjusted in accordance with this subsection (b), and in connection with such master assignment and acceptance agreement each such other Bank may treat the assignment of LIBO Rate Loans as a prepayment of such LIDO Rate Loans for purposes of Section 2.11 (a) hereof; (v) each such other institution shall have delivered to the Agent and the Borrowers all forms, if any, that are required to be delivered by such other institution pursuant to Section 3.3 hereof; (vi) within five Business Days after the Agent executes and delivers each Increase Supplement in accordance with the terms hereof, the -5- Agent shall revise Exhibit A hereto to reflect the adjustments to the --------- Revolving Credit Commitments contemplated by clause (iv) above and shall promptly send a copy thereof to the Banks; and (vii) the Agent shall have received such certificates, legal opinions and other items as it shall reasonably request in connection with such increase." (c) Section 2.10(b) is hereby amended to restate the second parenthetical thereof to read in its entirety as follows: "(April 30, 2001 in the case of the hlitial Term)." (d) Section 2.11 (a) is hereby amended to restate the first parenthetical phrase thereof to read in its entirety as follows: "(including, without limitation, as a consequence of acceleration pursuant to Article IX hereof, a termination, reduction or increase of the Aggregate Revolving Credit Commitment pursuant to Section 2.4 hereof, a voluntary or mandatory prepayment pursuant to Section 2.5 hereof, or a mandatory conversion pursuant to Section 2.13 hereof)." (e) Section 6.1(c) is hereby restated to read in its entirety as follows: "(c) Intentionally Omitted." (f) Section 6.1 (d) is hereby amended to delete therefrom the phrase "reviewed by the Independent Public Accountants and." (g) Section 6.15 is hereby amended to delete therefrom the figure "65%" and to substitute therefor the figure "50%." (h) Section 7.3 is hereby restated to read in its entirety as follows: "Suffer or permit the ratio of (i) Net Finance Assets to (ii) the sum of Senior Debt and the SBA Debt to be less than 1.20:1 at any time." (i) Section 8.1(h) is restated to read in its entirety as follows: "(h) Liens securing the Senior Note Debt, subject to the terms and conditions of the Intercrediitor Agreement." (j) Section 8.10 is hereby amended to delete therefrom the phrase "(including, without limitation, the SBA Security Agreement)." (k) Section 8.15 is hereby restated to read in its entirety as follows: "Intentionally Omitted." -6- (l) Section 8.16 is hereby amended to restate the proviso of subsection (iv)(2) thereof (including the ensuing; clauses (A) and (B) thereof) to read in its entirety as follows: "provided, that, to the extent such Portfolio Purchase does not -------- ---- entirely involve loans secured by New York City taxicab medallions, in addition to the foregoing, (A) the aggregate outstanding principal balances of all loans included in such Portfolio Purchase that are not secured by New York City taxicab medallions, if any, shall not exceed $25,000,000 during any period of twelve consecutive calendar months with respect to all such Portfolio Purchases in the aggregate during such period and (B) such loans that are not secured by New York City taxicab medallions may be purchased only from a qualified SBIC." (m) Section 9.1 (f) is hereby restated to read in its entirety as follows: "(f) if Borrower shall (i) default in the payment of any principal, interest or premium with respect to any Indebtedness for borrowed money or any obligation which is the substantive equivalent thereof in excess of $250,000, other than Indebtedness under the Revolving Credit Loans, the Swing Line Loans, the Term Loans, or the CP Debt, and such default shall continue for more than the period of grace, if any, therein specified, (ii) default in the performance or observance of any other term, condition or agreement contained in any such obligation or in any agreement relating thereto if the effect thereof is to cause, or, with respect to any such obligation other than the Senior Note Debt, permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity or (iii) default in the performance of or compliance with Section 10.4 (Minimum Tangible Net Worth), 10.5 (Maximum Liability Ratio), 10.6 (Minimum Net Finance Assets) or 10.7 (Minimum Net Income to Interest Expense Ratio) of the Note Purchase Agreements." (n) Section 10.2 (a) is hereby amended by restating clause (i) thereof to read in its entirety as follows: "(i) increase the Revolving Credit Commitment or Term Loan Commitment of any Bank or (except as provided in Section 2.4 hereof) the Aggregate Revolving Credit Commitment or the Adjusted Aggregate Revolving Credit Commitment." (o) Section 11.1(i) is hereby restated to read in its entirety as follows: "(i) It is understood by all of the parties to this Agreement that the Agent is acting simultaneously in its capacity as Agent for the Banks and the CP Holders under this Agreement and the Borrower Security Agreement and as Agent for the Senior Holders under the Senior Notes Security Agreement; and accordingly the Agent shall not be liable to any Bank, the Swing Line Lender, any CP Holder, any Paying Agent, the Borrower or the Senior Note Holders (or their successors and -7- assigns) in connection with or in any way directly or indirectly related to its acting in such dual capacity (except for the Agent's own gross negligence or willful misconduct) and each of the Banks hereby consents thereto. All references to the Agent herein shall be construed in accordance with the foregoing so long as the Senior Notes Security Agreement shall remain in full force and effect and as long as the Borrower Security Agreement secures any CP Debt. Furthermore, each Bank expressly (i) consents to the Agent's, on behalf of such Bank, entering into the Borrower Security Agreement, provided such document is substantially similar to the form of the document attached as an Exhibit hereto and the Intercreditor Agreement, provided such document is substantially similar to the form of the attached as an Exhibit to the Third Amendment and (ii) agrees that to the extent either the Borrower Security Agreement or the Intercreditor Agreement expressly imposes any, obligation on any Bank it shall comply with each such obligation." 2. The Borrower hereby represents and warrants to the Agent and each Bank that: (a) Each and every of the representations and warranties set forth in the Agreement is true as of the date hereof and with the same effect as though made on the date hereof, and is hereby incorporated herein in full by reference as if fully restated herein in its entirety. (b) No Default or Event of Default and no event or condition which, with the giving of notice or lapse of time or both, would constitute such Default or Event of Default, now exists or would exist as a result of this Third Amendment. 3. All capitalized terms used herein, unless otherwise defined herein, have the same meanings provided therefor in the Agreement. 4. The amendments set forth herein are limited precisely as written and shall not be deemed to (a) be a consent to or a waiver of any other term or condition of the Agreement or any of the documents referred to therein or (b) prejudice any right or rights which the Agent or any Bank may now have or may have in the future under or in connection with the Agreement or any documents referred to therein. Whenever the "Agreement" is referred to in the Agreement or any of the instruments, agreements or other documents or papers executed and delivered in connection therewith, it shall be deemed to mean the Agreement as modified by this Third Amendment. 5. This Third Amendment shall be effective as of the date first above written provided that the Borrower and the Agent shall have received counterparts of this Third Amendment duly signed by the Borrower and each of the Banks and the Agent and each of the following conditions shall have been satisfied, unless waived in writing by the Agent with the consent of the Required Banks: -8- (i) Intercreditor Agreement. The Intercreditor Agreement, in form and ----------------------- substance satisfactory to the Agent and the Required Banks, shall have been executed and delivered by the parties thereto (the satisfaction of this condition to be evidenced by the execution and delivery of this Third Amendment by the Agent and the Banks); (ii) Senior Note Documents. The Agent shall have received copies of the --------------------- Note Purchase Agreements (which may consist of one copy of the body thereof, together with the signature pages of the purchasers party thereto), the form of Senior Notes (and a copy of each Senior Note to be issued as of the date hereof), the Senior Notes Security Agreement and all other documents and instruments delivered at the initial closing contemplated to occur pursuant to the Note Purchase Agreements on the date hereof, certified as true, complete and in full force and effect as of the date hereof by an Authorized Representative of the Borrower (which documents shall be satisfactory in form and substance to the Agent and the Required Banks, the same to be evidenced by the execution and delivery of this Third Amendment by the Agent and the Banks) and the First Closing (as defined in the Note Purchase Agreements), and receipt by the Borrower of the purchase price for the Senior Notes to be purchased at the First Closing, shall have occurred or will occur contemporaneously with the execution of this Third Amendment; (iii) Release of SBA Lien. The Agent shall have received evidence ------------------- satisfactory to it that (i) the payment of the SBA Secured Debt contemplated to occur on the date hereof shall have been made from the proceeds of the Senior Notes and (ii) the security interest created pursuant to the SBA Security Agreement shall have been released (the satisfaction of this condition to be evidenced by the execution and delivery of this Third Amendment by the Agent and the Banks); (iv) SBA Guaranty. The Agent shall have received a copy of Guaranty ------------ Agreement dated as of June l, 1999 by and between Medallion Financial Corp. and the SBA relating to the obligations of the Borrower pursuant to the SBA Secured Debt, certified as true, complete and in full force and effect as of the date hereof by an Authorized Representative of the Borrower, which document shall be satisfactory in form and substance to the Agent and the Required Banks (the satisfaction of this condition to be evidenced by the execution and delivery of this Third Amendment by the Agent and the Banks); and (v) Resolutions and Incumbency. The Agent shall have received a certificate -------------------------- of the Secretary or an Assistant Secretary of the Borrower certifying as to (i) resolutions then in full force and effect of the Board of Directors of the Borrower authorizing the execution and delivery of this Third Amendment and the consummation of the transactions contemplated hereby and (ii) the incumbency and signatures of those of its officers authorized to execute and deliver, and otherwise act with respect to, this Third Amendment, upon which certificate the Agent and each Bank may conclusively rely until they shall have received a further certificate of the Secretary or an Assistant Secretary of the Borrower canceling or amending such prior certificate. -9- Promptly after the effective date of this Third Amendment, the Agent shall deliver fully executed counterparts of this Third Amendment to each of the Banks, and the Agreement shall consist of the Agreement as amended by this Third Amendment. 6. This Third Amendment may be executed by the parties hereto individually or in any combination, in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same agreement. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES CONTINUED ON THE FOLLOWING PAGES BEGINNING WITH PAGE 11] -10- IN WITNESS WHEREOF, Borrower, the Agent, the Documentation Agent, the Swing Line Lender and the Banks have caused this Third Amendment to be duly executed by their respective officers hereunto duly authorized as of the day and year first above written. MEDALLION FUNDING CORP. By:/s/ Alvin Murstein --------------------------- Name: Alvin Murstein Title: Chief Executive Officer By:/s/ Daniel F. Baker --------------------------- Name: Daniel F. Baker Title: Treasurer and Chief Financial Officer FLEET BANK, NATIONAL ASSOCIATION, as Agent, as Swing Line Lender and as one of the Banks By: Illegible --------------------------- Title: Vice President THE BANK OF NEW YORK, as Documentation Agent and as one of the Banks By: Illegible --------------------------- Title: BANKBOSTON, N.A. By: Illegible --------------------------- Title: -11- HARRIS TRUST AND SAVINGS BANK By: Illegible --------------------------- Title: Vice President BANK TOKYO - MITSUBISHI TRUST COMPANY By:/s/ JIM BROWN --------------------------- Name: JIM BROWN Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: Illegible --------------------------- Title: Vice President By: Illegible --------------------------- Title: Vice President EUROPEAN AMERICAN BANK By: Illegible --------------------------- Title: Vice President BANK LEUMI USA By: Illegible --------------------------- Title: Vice President -12- The Chase Manhattan Bank By: Illegible --------------------------- Title: Vice President -13- Exhibit A Form of Borrowing Base Certificate Sum of: (i) Total Investments $ -------------- (ii) Accrued Interest Receivable $ -------------- (iii) Subtotal (sum of (i) and (ii)) $ -------------- Less: (iv) Investments 60 days or more past due ($ ) -------------- (v) Accrued Interest 60 days or more past due ($ ) -------------- Plus: (vi) 75% of New York Medallion Loans 60 days past due $ -------------- (vii) 65% of New York Medallion Loans more than 60 but less than 90 days past due $ -------------- (viii) 50% of New York Medallion Loans more than 90 but less than 120 days past due (provided not in excess of 2% of aggregate outstanding principal balance of all New York Medallion Loans); $ -------------- (ix) Subtotal (sum of (vi) through (viii)) $ -------------- (x) Total Adjustments ((ix) minus (iv) minus (v)) ($ ) -------------- (xi) Net Finance Assets (excess of (iii) over (x)) $ -------------- (xii) Net Finance Assets x .8333 $ -------------- Plus: (xiii) Cash $ -------------- (xiv) Net Available Borrowing Base $ -------------- Less: -14- (xv) Bank Debt $ -------------- (xvi) Senior Note Debt $ -------------- (xvii) CP Debt $ -------------- (xviii) SBA Debt $ -------------- (xix) Combined Debt (sum of (xv) through (xviii)) $ -------------- Net Excess Collateral (excess of (xiv) over xix))* $ -------------- - ---------- * To the extent this computation yields a number which represents less than 5% of Net Finance Assets (or if such number is negative), a mandatory prepayment is required pursuant to Section 2.5(c)(ii) of the Loan Agreement. -15- Exhibit B Form of Intercreditor Agreement EX-10.31 5 dex1031.txt AMENDMENT NO.6 TO THE AMENDED & RESTATED LOAN AGMT Exhibit 10.31 AMENDMENT NO. 6 TO AMENDED AND ------------------------------ RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT --------------------------------------------------- AMENDMENT NO. 6 TO AMENDED AND RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT dated as of December 31, 2001 (this "Amendment"), by and among MEDALLION --------- FUNDING CORP., a New York corporation ("Borrower"), 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 Borrower, 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 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, certain Events of Default have occurred; and WHEREAS, the Borrower has requested an amendment of, and, subject to the terms and conditions set forth herein, the Borrower, the Banks, the Agent and the Swing Line Lender have agreed to amend, certain provisions of the Loan Agreement and certain other Loan Documents, inter alia, and to waive certain ----- ---- Events of Default; 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 and the Borrower Security Agreement as follows: 1. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by: (a) inserting the words "first priority" immediately prior to the words "perfected security interest" in the definition of "Medallion Rights"; (b) inserting the words "a first priority perfected security interest in" immediately prior to the words "Medallion Rights" in the definition of "Eligible Medallion Loan"; (c) inserting the words "first priority" immediately prior to the words "mortgage interest" in the definition of "Eligible Real Estate"; (d) deleting the definition "Eligible Yellow Cab Loan" in its entirety; (e) deleting the following definitions in their entirety, and substituting in lieu thereof the following new definitions: -2- "Additional Commitment Amount" shall have the meaning set forth in ---------------------------- Section 12.3 hereof. "Adjusted Net Investment Income" shall mean, with respect to the ------------------------------ Borrower and its Subsidiaries, 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 and its Subsidiaries 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. "Applicable LIBO Margin" shall mean, (a) for the period commencing ---------------------- with the Amendment No. 6 Effective Date and ending March 31, 2002, for any Payment Period during such period, 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 1.75% 2 2.00% 3 2.25% and (b) for the period commencing with April 1, 2002 and thereafter, for any Payment Period during such period, 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 2.25% 2 2.50% -3- 3 2.75% provided that 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 Group 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 Group 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 clause (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 such clause (a) or (b) 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), provided -------- that any change in the Applicable LIBO Margin as a result of the circumstances described in clause (a) or (b) above 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 such clauses (a) and (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) hereof with respect to the portion of such Payment Period to which such certificate relates. "Borrower Obligations" shall mean, (i) all of the indebtedness, -------------------- obligations and liabilities of the Borrower under any of the Loan Documents, (ii) Cash Management Items, and (iii) all indebtedness of the Borrower to a Bank permitted to be incurred pursuant to Section 8.2(g) of this Agreement, in each case whether direct or indirect, joint or several, fixed, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, now existing or hereafter arising, created, assumed, incurred or acquired including (A) any obligation or liability in respect of any breach of any representation or warranty, and (B) all post-petition interest and funding losses. -4- "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 MFCC, the stock of Media pledged by the Parent pursuant to the terms of the Parent Pledge Agreement and the stock of MFCC pledged by the Borrower pursuant to the terms of the Borrower 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. "Dividends" shall mean for both the most recently completed fiscal --------- quarter of the Borrower and its Subsidiaries and the most recently completed four fiscal quarters of the Borrower and its Subsidiaries, the sum of all (a) paid cash dividends on Capital Stock of the Borrower and its Subsidiaries plus (b) accrued and unpaid cash dividends on Capital Stock of ---- the Borrower and its Subsidiaries. "EBIT" shall mean, with respect to the Borrower and its Subsidiaries ---- 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 and its Subsidiaries for such period, computed in accordance with GAAP, plus (iv) for the purposes of calculating EBIT of the ---- Borrower in Section 7.5 hereof for the fiscal quarter ending March 31, 2002, extraordinary non-recurring charges related to professional fees as further described on Schedule V hereto, provided that the aggregate of such -------- - -------- charges shall not exceed $538,000. "Fee Letter" shall mean that certain letter agreement between the ---------- Borrower and the Agent dated as of the Amendment No. 6 Effective Date. "Guarantor(s)" shall mean Media and/or MFCC, as the context requires. ------------ "Guaranty(ies)" shall mean the separate Guaranties from each of the ------------- Guarantors in favor of the Agent and the Banks, guaranteeing the payment and performance of the Borrower Obligations owing by the Borrower to the Agent and the Banks pursuant to the Loan Documents. "Indebtedness" shall mean as to any Person and whether recourse is ------------ secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication, all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date Indebtedness of such Person is to be determined (other than dividends on Capital Stock declared but not paid to the extent such dividends are not Restricted Payments), and including: (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, -5- (c) every reimbursement obligation (contingent or otherwise) of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account, or upon the application, of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), (e) every obligation of such Person under any Capitalized Lease, (f) every obligation of such Person under any Synthetic Lease, (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively "receivables"), whether ----------- pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (h) every obligation of such Person (an "equity related purchase ------ ------- -------- obligation") to purchase, redeem, retire or otherwise acquire for ---------- value any shares of Capital Stock issued by such Person or any rights measured by the value of such Capital Stock, (i) every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a "derivative contract"), ---------- -------- (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law, (k) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clause (a) through (j) (the "primary obligation") of another ------- ---------- Person (the "primary obligor"), in any manner, whether directly or ------- ------- indirectly, and including, -6- without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation, and (l) all indebtedness for borrowed money secured by any Lien upon property owned by such Person (whether or not the holder of such indebtedness has any recourse against such Person). The "amount" or "principal amount" of any Indebtedness at any time of ------ --------- ------ determination represented by (s) any letter of credit shall mean its face amount (excluding any reimbursement obligations with respect to any drawing under such a letter of credit which have been paid), (t) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (u) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (v) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than Borrower or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (w) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (x) any derivative contract shall be determined by the Agent in a manner consistent with its ordinary practices for valuing derivative contracts, (y) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (z) any guaranty or other contingent liability referred to in clause (k) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Initial Term" shall mean the period from and including the Effective ------------ Date to and including June 28, 2002. "Interest Expense" shall mean, for any period with respect to the ---------------- Borrower and its Subsidiaries, and calculated on a consolidated basis, all interest paid or scheduled to be paid (including amortization of original issue discount and non-cash interest payments or accruals and the interest component of Synthetic Leases or Capitalized Leases) by the Borrower and its Subsidiaries during such period on Indebtedness of the Borrower and its Subsidiaries. -7- "Investment" in any Person shall mean any loan, advance, or extension ---------- of credit to or for the account of; any guaranty, endorsement or other direct or indirect contingent liability in connection with the obligations, Capital Stock or dividends of; any ownership, purchase or acquisition of any assets, business, Capital Stock, obligations or securities of; or any other interest in or capital contribution to; such Person, but shall not include (a) any Loan, (b) any Investment permitted by Section 8.14 hereof and (c) any Portfolio Purchase. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (d) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (b) may be deducted when paid; and (e) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. "Loan Documents" shall mean and include this Agreement, the Revolving -------------- Credit Notes, the Swing Line Notes, the Security Agreements, any Mortgage Assignment, the Financing Statements, the Borrowing Base Certificates, the Fee Letter, the Guaranties, the Parent Pledge Agreement, the Borrower Pledge Agreement, the Collateral Agency Agreement and the Lockbox Agreements and each other document, instrument or agreement executed pursuant to, or in connection with, any Loan Document. "Media" shall mean Medallion Taxi Media, Inc., a New York corporation. ----- "Net Income" shall mean, for any period, the gross revenues of ---------- Borrower and its Subsidiaries, less (i) all realized and unrealized gains and losses on investments, (ii) all changes in loan loss reserve and (iii) all operating and nonoperating expenses (including, without limitation, Interest Expense and all fees and commissions, however designated, payable for management, administrative, or other services) of Borrower and its Subsidiaries for such period, derived in the ordinary course of its business, including all charges of a proper character (including current and deferred taxes on income, provision for taxes on income, and current additions to loan loss and other reserves), all determined on a basis consistent with prior years. "Parent Pledge Agreement" shall mean the Stock Pledge Agreement from ----------------------- the Parent in favor of the Agent and the Banks, pledging the stock of Media as security for the obligations owing by the Borrower to the Agent and the Banks pursuant to the Loan Documents. "Pricing Level" shall mean, for any Payment Period, the respective ------------- Pricing Level indicated below opposite the applicable Debt-Equity Ratio indicated below for -8- such Payment Period (or as provided in the final paragraph of this definition, for part of a Payment Period): Range of Debt-Equity Ratio Pricing Level ----------------- ------------- Less than 2.0 to 1 1 Greater than or equal to 2.0 but less than 3.0 to 1 2 Greater than or equal to 3.0 to 1 3 The Debt-Equity Ratio for any Payment Period shall be determined in connection with the certificate required to be delivered to the Agent pursuant to Section 6.1(f) hereof setting forth, among other things, a calculation of the ratio of Total Liabilities to Tangible Net Worth (the "Debt-Equity Ratio") as at the last day of the fiscal quarter immediately preceding such Payment Period, each of which certificates shall be delivered together with the financial statements for the fiscal quarter on which such calculation is based; provided, that, in the case of the initial Payment Period, the calculation shall be based on the Debt-Equity calculation set forth in the certificate delivered by the Borrower to the Banks on or prior to the Amendment No. 6 Effective Date. "Restricted Payment" shall mean, with respect to the Borrower and its ------------------ Subsidiaries, any of the following: (i) the payment of any dividend on or any distribution in respect of any Capital Stock of the Borrower and its Subsidiaries (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), (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 any of its Subsidiaries or of any warrants, rights or options to purchase or acquire any Capital Stock of the Borrower or any of its Subsidiaries (other than pursuant to and in accordance with stock option plans and other benefit plans for management or employees of the Borrower and its Subsidiaries, in an aggregate amount not in excess of $500,000 during any 12-month period, provided that any such redemption, -------- -9- repurchase, retirement or other acquisition of any Capital Stock of the Borrower or any of its Subsidiaries or of any warrants, rights or options to purchase or acquire any Capital Stock of the Borrower or any of its Subsidiaries 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 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, any interest on, or any amounts due in respect of, any Indebtedness not permitted by Section 8.2 hereof, (viii) the payment of any principal of 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), and (ix) the setting aside of any amount or other property for the payment of Indebtedness described above, including by means of a sinking fund, defeasance or other such payment. "Subsidiary" or "Subsidiaries" of Borrower shall mean any Person more ---------- ------------ than 50% of the outstanding Voting Interests of which is at the time owned, directly or indirectly, by Borrower and/or by one or more of its Subsidiaries; provided, however, that the term "Subsidiary" shall be deemed ---------- to exclude all Subsidiaries the Tangible Net Worth of which constitute less than 5% of the Tangible Net Worth of the Borrower. "Tangible Net Worth" shall mean, with respect to the Borrower and its ------------------ Subsidiaries, the sum of capital surplus, earned surplus, capital stock minus deferred charges, intangibles (including good will) and treasury stock, all determined in accordance with GAAP and, to the extent applicable thereto, the regulations of the United States Securities and Exchange Commission applicable to investment companies. "Total Intercompany Receivables" shall mean, with respect to the ------------------------------ Borrower and its Subsidiaries, the sum of (a) the amount listed as "Intercompany Receivables" on the balance sheet of the Borrower and its Subsidiaries delivered to the Agent pursuant to Section 6.1(d) hereof, plus ---- (b) to the extent not otherwise included, all amounts owed to the Borrower and any of its Subsidiaries by its Affiliates, plus (c) to the extent not ---- otherwise included, Investments by the Borrower or any of its Subsidiaries in its Affiliates. "Total Liabilities" shall mean and include, without duplication and ----------------- with respect to the Borrower and its Subsidiaries, as of any date of calculation, (i) all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date Indebtedness of the Borrower and its Subsidiaries is to be determined, other than dividends on Capital Stock declared but not paid to the extent such dividends are not Restricted Payments, (ii) any liability secured by any Lien on property owned or acquired by the Borrower or any of its Subsidiaries, whether or not such liability shall have been -10- assumed by the Borrower or any of its Subsidiaries, (iii) guaranties, endorsements (other than for collection in the ordinary course of business), reimbursement obligations in respect of undrawn letters of credit and other contingent obligations of the Borrower or any of its Subsidiaries in respect of the obligations of others, and (iv) all obligations of the Borrower or any of its Subsidiaries in respect of derivative contracts (as defined in clause (i) of the definition of Indebtedness). "Voting Interests" shall mean securities, as defined in Section ---------------- 2(a)(1) of the Securities Act of 1933, as amended, of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of the directors (or Persons performing similar functions) of the corporation, association, trust, partnership, joint venture or other business entity involved, whether or not the right to so vote exists by reason of the happening of a contingency. References in this Agreement to percentages of Voting Interests, unless otherwise noted, refer to percentages of votes to which such Voting Interests are entitled in the election of directors (or Persons performing similar functions) rather than to the number of shares.; (f) deleting the following definitions in their entirety, and substituting in lieu thereof the following new definitions: "Eligibility Requirements" with respect to any Loan, shall mean the ------------------------ following requirements: (a) such Loan is made to, and is a recourse obligation of, the Person to whom such Loan is made; (b) such Loan is a Domestic Loan; (c) such Loan is in compliance with the SBI Act and all SBA Regulations promulgated thereunder and, after giving effect to such Loan, the Borrower and its business and operations, taken as a whole, are in compliance with the SBI Act and all SBA Regulations promulgated thereunder; (d) such Loan is pledged in accordance with Section 2.1 of the Borrower Security Agreement; (e) the representations, warranties and covenants contained in Section 4.1 of the Borrower Security Agreement are true and correct, and have been complied with, with respect to such Loan; (f) the Agent, on behalf of the Banks, has a perfected, first priority security interest in such Loan; and (g) the monetary terms, payment terms, financial covenants, negative covenants and any other material terms governing such Loan have not been amended, modified or waived more than once in any 12-month period on account of the Person to whom such Loan was made being unable to comply (for whatever reason) with such terms. -11- "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 Media 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 Media, 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. "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) hereof, including without limitation, the face amount of all letters of credit issued pursuant thereto (excluding any reimbursement obligations with respect to any drawing under such a letter of credit which have been paid).; and (g) inserting, in the places required by alphabetical order, the following new definitions: "Agent's Fee" shall mean all fees due to the Agent pursuant to Section ----------- 3.1(b) hereof. "Amendment No. 6" shall mean Amendment No. 6 to the Amended and --------------- Restated Loan Agreement, Limited Waiver and Consent dated as of December 31, 2001 among the Borrower, the Agent, the Swing Line Lender and the Banks. "Amendment No. 6 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 6. "Applicable Prime Rate Margin" shall mean, (a) for the period ---------------------------- commencing with the Amendment No. 6 Effective Date and ending March 31, 2002, zero; and (b) for the period commencing April 1, 2002 and thereafter, for any Payment Period during such period, the respective rates indicated below for Revolving Credit Loans and Term Loans which are Prime Rate Loans opposite the applicable Pricing Level indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): Pricing Level Applicable Prime Rate Margin ------------- ---------------------------- (percent per annum) -12- 1 0.25% 2 0.50% 3 0.75% Subject to and in accordance with the final sentence of this definition, the Applicable Prime Rate Margin shall be effective as of the first date of each Payment Period (or in the circumstances described in the final sentence of this definition, such portion of a Payment Period). Anything in this Agreement to the contrary notwithstanding, in the event that the certificate of the Borrower required by Section 6.1(f) hereof shall not be delivered when required by such Section 6.1(f), the Applicable Prime Rate Margin for a Payment Period shall be the highest rate provided for in the table above until such time as such certificate is actually delivered. "Borrower Pledge Agreement" shall mean the Stock Pledge Agreement from ------------------------- the Borrower in favor of the Agent and the Banks, pledging the stock of MFCC as security for the obligations owing by the Borrower to the Agent and the Banks pursuant to the Loan Documents. "Capitalized Lease" shall mean any lease under which the Borrower or ----------------- any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP. "Cash Equivalents" shall mean as to the Borrower and its Subsidiaries, ---------------- (a) securities issued or directly and fully guaranteed or insured by the United States of America and having a maturity of not more than six (6) months from the date of acquisition; (b) certificates of deposit, time deposits and eurodollar time deposits with maturities of six (6) months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six (6) months and overnight bank deposits, in each case, (i) with any Bank or (ii) with any domestic commercial bank organized under the laws of the United States of America or any state thereof, in each case having a rating of not less than A or its equivalent by Standard & Poor's Ratings Group or any successor and having capital and surplus in excess of $1,000,000,000; (c) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clauses (a) and (b) above; and (d) any commercial paper or finance company paper issued by (i) any Bank or any holding company controlling any Bank or (ii) any other Person that is rated not less than "P-1" or "A-1" or their equivalents by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group or their successors. "Cash Management Items" shall mean all fees and other amounts owing to --------------------- the Agent by the Borrower related to cash management and similar services, returned checks or other items, or the reversal or withdrawal of any provisional or other credits granted by the Agent, or by any other financial institution which has entered into a Lockbox Agreement with the Agent (including without limitation actual -13- amounts returned by the Agent as the result of any such return, reversal or withdrawal). "DeMinimis Accounts" shall have the meaning set forth in Section 6.21 ------------------ hereof. "Fleet Concentration Account" shall have the meaning set forth in --------------------------- Section 6.21.1 hereof. "Financing Statements" shall mean the Borrower Financing Statements -------------------- and the MFCC Financing Statements. "Lockbox Agreements" shall have the meaning set forth in Section ------------------ 6.21.1 hereof. "MFCC" shall mean Medallion Funding Chicago Corp., a Delaware ---- corporation. "MFCC Financing Statements" shall mean financing statements approved ------------------------- for filing in accordance with the Uniform Commercial Code, and all other titles, certificates, assignments and other documents, including, but not limited to, the Mortgage Assignments, that the Agent or any Bank may require to perfect the security interests to be granted under the MFCC Security Agreement. "MFCC Security Agreement" shall mean the Security Agreement to be ----------------------- entered into by February 20, 2002, between MFCC and the Agent for the benefit of the Banks, the Agent and the CP Holders, in form and substance satisfactory to the Agent, as the same may be amended or supplemented from time to time. "Payment Period" shall mean (a) initially, the period commencing on -------------- the Amendment No. 6 Effective Date and ending on the later of February 14, 2002 or the date of the actual receipt by the Agent of the certificate required to be delivered by the Borrower on or before such date pursuant to Section 6.1(f) hereof, and (b) thereafter, the period commencing on the date immediately succeeding the last day of the prior Payment Period to, but not including, the fifth Business Day after the earlier of the due date of the next certificate required to be delivered by the Borrower to the Agent pursuant to Section 6.1(f) hereof or the date of the actual receipt by the Agent of such certificate. "Security Agreements" shall mean the Borrower Security Agreement and ------------------- the MFCC Security Agreement. "Synthetic Lease" shall mean any lease of goods or other property, --------------- whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes. "Yellow Cab Transfer" shall have the meaning set forth in Section 8.11 ------------------- hereof. -14- 2. Amendment of Section 2.1 of the Loan Agreement. Section 2.1 of the Loan ---------------------------------------------- Agreement is hereby amended by (a) inserting the following new sentence at the end of Section 2.1(c)(i): "Notwithstanding the requirements of the foregoing paragraph, in the event that any Cash Management Item is returned, a Swing Line Loan shall be deemed to automatically be made in an amount equal to such returned Cash Management Item, regardless of whether the conditions for making a Swing Line Loan described in the foregoing paragraph are met."; (b) deleting the first sentence of Section 2.1(c)(ii) in its entirety and replacing it with the following new first sentence: "Other than Swing Line Loans made with respect to returned Cash Management Items, the Swing Line Lender shall not be obligated to make any Swing Line Loan at a time when any Bank shall be in default of its obligations under this Agreement unless arrangements to eliminate the Swing Line Lender's risk with respect to such defaulting Bank's participation in such Swing Line Loan shall have been made for the benefit of the Swing Line Lender and such arrangements are in all respects satisfactory to the Swing Line Lender."; and (c) inserting the following new Section 2.1(d) in proper alphabetical order: "(d) Reallocations upon Assignment to New Banks. Any new Revolving ------------------------------------------ Credit Commitment, increase in Revolving Credit Commitment, new Bank Loans or increase in Bank Loans provided by any new Bank or Bank which is a Bank as of the Amendment No. 6 Effective Date in accordance with Section 12.2 hereof, shall be used to reduce the Revolving Credit Commitments and outstanding Bank Loans of each other Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans reduced, pro rata in --- ---- accordance with such other Bank's Percentage or, in the event that one or more Banks opt not to have their Revolving Credit Commitments and outstanding Bank Loans reduced, by an amount equal, in the case of each Bank desiring to have its Revolving Credit Commitment reduced, to (i)(A) such Bank's Revolving Credit Commitment (or outstanding Bank Loans) divided by (B) the sum of the Revolving Credit Commitments (or outstanding Bank Loans) of all Banks desiring to have their Revolving Credit Commitments and outstanding Bank Loans reduced, multiplied by (ii) the amount of the Revolving Credit Commitment (or outstanding Bank Loans) of such new Bank or, as the case may be, any increase in an existing Bank's Revolving Credit Commitment (or outstanding Bank Loans); provided that the Banks' -------- Percentages shall be correspondingly adjusted, each new Bank or existing Bank increasing its Revolving Credit Commitment (or outstanding Bank Loans) shall make all (if any) such payments to the other Banks as may be necessary to result in the Bank Loans made by such Bank being equal to such Bank's new Percentage (as then in effect) of the aggregate principal amount of all Bank Loans outstanding to the Borrower as of such date), and Notes shall be issued or amended and such other changes shall be made to the Loan -15- Documents, as necessary, to reflect any such changes to the Banks' Revolving Credit Commitments and outstanding Bank Loans." 3. Amendment of Section 2.2 of the Loan Agreement. Section 2.2 of the Loan ---------------------------------------------- Agreement is hereby amended by adding the words "plus the Applicable Prime Rate Margin" immediately following the words "Prime Rate" in clauses (c)(i)(a) and (c)(iii)(a) of Section 2.2, respectively. 4. Amendment of Section 2.3 of the Loan Agreement. Section 2.3 of the Loan ---------------------------------------------- Agreement is hereby amended by adding the following new paragraph immediately following the final paragraph of Section 2.3(a) of the Loan Agreement: "Notwithstanding the foregoing, the Borrower shall give the Agent fifty (50) days prior written notice of the requested borrowing date for any Revolving Credit Loan or Swing Line Loan, the amount of which would, when added to the amount of all Bank Loans outstanding and all other Bank Loans requested (in each case as of the date of request), exceed $160,000,000." 5. Amendment of Section 2.4 of the Loan Agreement. Section 2.4 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 as in effect on -------------- such date shall be irrevocably reduced to $190,000,000, (iv) on the date on which this Section 2.4(b) becomes effective pursuant to Section 45(b) of Amendment No. 6 (the "Fourth Revolver Reduction Date"), the Aggregate ------------------------------ Revolving Credit Commitment as in effect on such date shall be $160,000,000, and (v) on April 1, 2002 (the "Fifth Revolver Reduction ------------------------ Date", and together with the First Revolver Reduction Date, the Second ---- Revolver Reduction Date, the Third Revolver Reduction Date and the Fourth Revolver Reduction Date, the "Revolver Reduction Dates"), the Aggregate Revolving Credit Commitment as in effect on such date shall be irrevocably reduced to $150,000,000. The reductions in the Aggregate Revolving Credit Commitment required by this subsection (b) shall be in addition to any reductions in the Aggregate Revolving Credit Commitment resulting from mandatory prepayments required to be paid in accordance with Section 2.5(e) hereof or from any other prepayments (whether voluntary or otherwise) made by the Borrower. Each such reduction shall be accompanied by repayment of the Bank Loans, together with accrued interest thereon, 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. All such repayments shall be applied to the Bank Loans in accordance with the terms of Section 2.5(e)(v) hereof. Each -16- 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." 6. Amendment of Section 2.5 of the Loan Agreement. Section 2.5 of the Loan ---------------------------------------------- Agreement is hereby amended by: (a) deleting the first sentence of Section 2.5(c)(ii) in its entirety and substituting the following new sentence in lieu thereof: "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 of the first day there exists any such deficiency the Borrower shall (1) make payment to the Agent (to be applied against Borrower's Swing Line Loans first, then Revolving Credit Loans and then Term Loans in such order or preference as the Agent shall determine) 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) hereof, and (2) deliver a Borrowing Base Certificate showing compliance with Section 7.3 hereof, as well as a borrowing base certificate under the Financial Agreement showing Medallion Financial's compliance with Section 7.3 of the Financial Agreement, as of the date such excess is repaid."; and (b) deleting Section 2.5(e) in its entirety and substituting the following new Section 2.5(e) in lieu thereof: "(e)(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 the Financial Agreement, the Note Purchase Agreement and the Collateral Agency Agreement, for such Equity Offering or Debt Offering), the Borrower shall repay (or cause any of its applicable Subsidiaries to repay) (1) outstanding Bank Loans (with the Revolving Credit Commitment of each Bank being irrevocably reduced by 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) hereof, 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 required to be made by this parenthetical), (2) the principal amounts outstanding under the Senior Notes, (3) the principal amounts outstanding of the CP Debt, and (4) the outstanding principal amount of Indebtedness of the Borrower permitted pursuant to Section 8.2(g) hereof, 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 Swing Line -17- Lender, the Agent, the CP Holders, the Senior Noteholders and the holders of the Indebtedness described in clause (4) of this paragraph (e)(i) 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 Media'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), the Borrower shall cause the Parent to transfer the Net Cash Proceeds thereof 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 each Bank being irrevocably reduced by 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) hereof 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 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) the outstanding principal amount of Indebtedness of the Borrower permitted pursuant to Section 8.2(g) hereof, 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 Swing Line Lender, the Agent, the Senior Noteholders, the CP Holders and the holders of the Indebtedness described in clause (5) of this Section 2.5(e)(ii) 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), the Borrower shall repay (1) outstanding Bank Loans (and, except for transfers permitted by Section 8.3(f)(i) hereof with the Revolving Credit Commitment of each Bank being irrevocably reduced by 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) hereof, 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 required to be made by this parenthetical), (2) the principal amounts outstanding under the Senior Notes, (3) the principal amounts outstanding of the CP Debt, and (4) the outstanding principal amount of Indebtedness of the Borrower permitted pursuant to Section -18- 8.2(g) hereof, 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 Swing Line Lender, the Agent, the CP Holders, the Senior Noteholders and the holders of the Indebtedness described in clause (4) of this Section 2.5(e)(iii) 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 Asset Proceeds"), such Excess Asset Proceeds shall be transferred to the Operating Account. (iv) In the event that, with respect to any fiscal quarter ending on or after December 31, 2001, the Borrower seeks to pay Dividends in excess of ninety percent (90%) of the Adjusted Net Investment Income of the Borrower for such fiscal quarter (the amount of such excess Dividends is hereafter referred to as the "Excess Dividends"), the Borrower shall give 14 days prior written notice to the Agent of such intention, and concurrently with the payment of such Excess Dividends, the Borrower shall repay (1) outstanding Bank Loans (with the Revolving Credit Commitment of each Bank being irrevocably reduced by 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) hereof, 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 required to be made by this parenthetical), (2) the principal amounts outstanding under the Senior Notes, and (3) outstanding Indebtedness of the Borrower permitted pursuant to Section 8.2(g) hereof, 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 (3) 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 Borrower permitted pursuant to Section 8.2(g). Together with the payment of any Dividend Prepayment, the Borrower shall deliver to the Agent and the Banks a certificate in substantially the form of Exhibit X hereto demonstrating compliance with the calculations set ------- - forth above. (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, second, to outstanding Prime Rate Loans of the Borrower, whether Revolving Credit Loans or Term Loans, in accordance with the provisions of Section 2.5(d) hereof, and third, to outstanding LIBO Rate Loans of the Borrower, whether Revolving Credit Loans or Term Loans, in accordance with the provisions of Section 2.5(d) hereof, with any prepayment of LIBO Rate Loans being subject to Section 2.11 hereof; provided, however, that the Borrower may request to avoid such breakage -------- ------- costs (with the determination as to whether to agree with such request being made by -19- the Agent in its sole discretion) that one or more such payments be made by providing to the Agent cash in an amount sufficient to cash collateralize such LIBO Rate Loans (with the Borrower not to be deemed to have paid such LIBO Rate Loans until such cash has been applied to such LIBO Rate Loans) and otherwise in accordance with Section 2.B.1.3(b) hereof. 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), Section 2.5(e)(ii), Section 2.5(e)(iii), and Section 2.5(e)(iv) hereof, with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced by 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 (if any) being made in accordance with the requirements of this Section 2.5(e)." 7. Amendment of Section 2.6 of the Loan Agreement. Section 2.6 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting Section 2.6 in its entirety and substituting the following new Section 2.6 in lieu thereof: "Section 2.6. Interest after Default. ---------------------- 2.6.1. Overdue Amounts. Overdue principal and (to the extent permitted --------------- by applicable law) interest on the Bank Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to two percent (2%) plus the rate of interest then applicable thereto (or, ---- if no rate of interest is then applicable thereto, the Prime Rate) until such amount shall be paid in full (after as well as before judgment). 2.6.2. Amounts Not Overdue. During the continuance of a Default or an ------------------- Event of Default under Section 9.1(a), (b) or (c) hereof, the principal of the Bank Loans not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived pursuant to Section 10.2 hereof, bear interest at a rate per annum equal to two percent (2%) plus the rate of interest otherwise applicable to ---- such Bank Loans pursuant to Section 2.2(c) hereof. 2.6.3. Calculation of Default Interest. The rate of interest to be ------------------------------- charged under Section 2.6.1 or Section 2.6.2 hereof (in either case, a "Default Rate") shall be computed on the basis of a 360-day year for the actual number of days elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate to be charged shall change when and as the Prime Rate is changed, and any such change in the Prime Rate shall become effective at the opening of business on the day on which such change is adopted. At the end of the applicable Interest Period for a LIBO Rate Loan on which the Default Rate is being charged, such LIBO Rate Loan shall be automatically converted to a Prime Rate Loan, and the Default Rate to be charged in respect of such Loan shall be computed based on the Prime Rate. -20- 2.6.4. Special Provisions. Notwithstanding the foregoing, the Default ------------------ Rate shall not be charged for the period commencing with the day following the Amendment No. 6 Effective Date through March 15, 2002, provided that no Default or Event of Default shall occur and be continuing other than those described in Section 33 of Amendment No. 6." 8. Amendment of Section 2.14 of the Loan Agreement. Section 2.14 of the ----------------------------------------------- Loan Agreement is hereby amended by adding the following new sentence at the end thereof: "Notwithstanding the foregoing, the Borrower shall not grant a participation to any Subsidiary or Affiliate of the Borrower in any Medallion Loan originated by the Borrower." 9. Amendment of Article 2A of the Loan Agreement. Article 2A of the Loan --------------------------------------------- Agreement is hereby deleted in its entirety and the following new Article 2A is substituted in lieu thereof: "Article 2A. Collateral Security; Guaranties. The Borrower Obligations ------------------------------- 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 Financial Agreement) under the Financial Agreement to secure the obligations thereunder) and to the requirements of the Collateral Agency Agreement and the Intercreditor Agreement) in substantially all of the assets of the Borrower and MFCC, whether now owned or hereafter acquired and wherever located, pursuant to the terms of (1) the Security Agreements, including a pledge by the Borrower of one hundred percent (100%) of the capital stock owned by the 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 Borrower shall have used its best -------- efforts to obtain such consents, with the Borrower acknowledging that the pledge of (and subsequent enforcement of the security interest in) the stock of Media requires no such consent, and (2) the Lockbox Agreements upon the Borrower's compliance with Section 6.21.1 hereof. The Borrower Obligations under this Agreement and the other Loan Documents shall also be guaranteed by the Guarantors pursuant to the terms of the Guaranties (subject, in the case of Media, to the terms of the Collateral Agency Agreement and in the case of MFCC, to the terms of the Intercreditor Agreement); provided, however, that the Guaranty with respect to Media -------- ------- 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 of Media 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 Media." 10. Addition of Article 2B of the Loan Agreement. The Loan Agreement is -------------------------------------------- hereby amended by adding the following new Article 2B: -21- "Article 2B.1. Allocation of Funds in the Fleet Concentration Account ------------------------------------------------------ and Repayments of Revolving Credit Loans Prior to Event of Default. ------------------------------------------------------------------ 2B.1.1. Credit for Funds Received in Concentration Account. (a) -------------------------------------------------- All funds and cash proceeds in the form of money, checks and like items received in the Fleet Concentration Account as contemplated by Section 6.21 hereof shall be credited, on the same Business Day on which the Agent determines that good collected funds have been received, and, prior to the receipt of good collected funds, on a provisional basis until final receipt of good collected funds, and applied as contemplated by Section 2B.1.2 or 2B.1.3 hereof, as the case may be, (b) all funds and cash proceeds in the form of a wire transfer received in the Fleet Concentration Account as contemplated by Section 6.21 hereof shall be credited on the same Business Day as the Agent's receipt of such amounts (or on such later date as the Agent determines that good collected funds have been received), and transferred as contemplated by Section 2B.1.2 hereof or, as the case may be, applied as contemplated by Section 2B.1.3 hereof, and (c) all funds and cash proceeds in the form of an automated clearing house transfer received in the Fleet Concentration Account as contemplated by Section 6.21 hereof shall be credited, on the next Business Day following the Agent's receipt of such amounts (or on such later date as the Agent determines that good collected funds have been received), and transferred as contemplated by Section 2B.1.2 hereof or, as the case may be, applied as contemplated by Section 2B.1.3 hereof. For purposes of the foregoing provisions of this Section 2B.1.1, the Agent shall not be deemed to have received any such funds or cash proceeds on any day unless received by the Agent before 2:30 p.m. (Boston time) on such day. The Borrower further acknowledges and agrees that any such provisional credits or credits in respect of wire or automatic clearing house funds transfers shall be subject to reversal if final collection in good funds of the related item is not received by, or final settlement of the funds transfer is not made in favor of, the Agent in accordance with the Agent's customary procedures and practices for collecting provisional items or receiving settlement of funds transfers. 2B.1.2. Transfer to Operating Account Prior to Event of Default ------------------------------------------------------- and Request of the Agent that Such Transfers Cease. Amounts received -------------------------------------------------- in the Fleet Concentration Account which are determined by the Agent in its sole discretion to be good collected funds shall be transferred to the Operating Account on a daily basis, so long as neither (a) an Event of Default has occurred of which the account officers of the Agent active on the Borrower's accounts have knowledge, nor (b) has a determination been made by the Agent that the funds contained in the Fleet Concentration Account shall be applied to the Borrower Obligations as contemplated by Section 2B.1.3 or Section 2B.2 hereof. The Borrower shall be permitted to invest funds transferred to the Operating Account pursuant to this Section 2B.1.2 in Cash Equivalents. -22- 2B.1.3. Application of Payments Prior to Event of Default, but ------------------------------------------------------ Following The Agent's Determination That Funds Contained In the Fleet --------------------------------------------------------------------- Concentration Account Are To Be Applied To The Borrower Obligations. ------------------------------------------------------------------- (a) Prior to the occurrence of an Event of Default of which the account officers of the Agent active on the Borrower's accounts have knowledge, but following the Agent's determination (which may be made by the Agent in its sole discretion) that funds contained in the Fleet Concentration Account are to be applied to the Borrower Obligations, all funds transferred to the Fleet Concentration Account and for which the Borrower has received credits shall be allocated among the Banks, the Swing Line Lender, the Agent, the Senior Noteholders, the CP Holders and the holders of the outstanding Indebtedness permitted pursuant to Section 8.2(g) hereof, with the portion of such funds allocated to the Banks, the Swing Line Lender and the Agent being applied to the Borrower Obligations as follows: (i) first, to pay amounts then due and payable under this Agreement, the Notes and the other Loan Documents; (ii) second, to reduce Swing Line Loans made by the Swing Line Lender; (iii) third, to reduce Revolving Credit Loans and/or Term Loans which are Prime Rate Loans; (iv) fourth, to reduce Revolving Credit Loans and/or Term Loans which are LIBO Rate Loans; and (v) fifth, to the Operating Account. (b) All prepayments of LIBO Rate Loans prior to the end of an Interest Period shall obligate the Borrower to pay any breakage costs associated with such LIBO Rate Loans in accordance with Section 2.11 hereof. Prior to the occurrence of an Event of Default, the Borrower may request that it be permitted (with the Agent determining whether to agree to such request in its sole discretion) to avoid such breakage costs by providing to the Agent cash in an amount sufficient to cash collateralize such LIBO Rate Loans, but in no event shall the Borrower be deemed to have paid such LIBO Rate Loans until such cash has been applied to such LIBO Rate Loans. In the event that the Agent agrees to such request, the Agent may elect to cause such cash collateral to be deposited into either (i) a cash collateral account pursuant to the terms of a cash collateral agreement executed by the Borrower and the Agent and in form and substance satisfactory to the Agent or (ii) the Operating Account with appropriate instructions prohibiting the Borrower's withdrawal of such funds so long as they remain cash collateral. In each such case, the Borrower agrees to execute and deliver to the Agent -23- such instruments and documents, including Uniform Commercial Code financing statements and agreements with any third party depository banks, as the Agent may request. (c) All prepayments of the Revolving Credit Loans pursuant to this Section 2B.1.3 shall be allocated among the Banks making such Revolving Credit Loans, in proportion, as nearly as practicable, to the respective unpaid principal amount of such Revolving Credit Loans outstanding, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. All prepayments of the Revolving Credit Loans shall be applied in accordance with this Section 2B.1.3. No prepayment made in accordance with this Section 2B.1.3 shall reduce the Aggregate Revolving Credit Commitment. 2B.2. Repayments of Revolving Credit Loans After Event of Default. ----------------------------------------------------------- Following (a) the occurrence and during the continuance of an Event of Default of which the account officers of the Agent active on the Borrower's accounts have knowledge, and (b) the determination of either the Agent or the Required Banks (which determination may be made in the sole discretion of the Person or Persons making such determination) that funds contained in the Fleet Concentration Account shall be applied to the Borrower Obligations, all funds transferred to the Fleet Concentration Account and for which the Borrower has received credits shall be allocated among the Banks, the Swing Line Lender, the Agent, the Senior Noteholders, the CP Holders and the holders of the outstanding Indebtedness permitted pursuant to Section 8.2(g) hereof, with the portion of such funds allocated to the Banks, the Swing Line Lender and the Agent being applied to the obligations of the Borrower under the Loan Documents in accordance with Section 9.5 hereof." 11. Amendment of Section 3.1 of the Loan Agreement. Section 3.1 of the Loan ---------------------------------------------- Agreement is hereby amended by adding the following new Sections 3.1(c), (d), (e) and (f) in proper alphabetical order therein: "(c) Delinquency Fee. Without limiting the provisions of Section 9.1 --------------- hereof, the Borrower agrees to pay to the Agent, for the pro rata account of each Bank (based on each Bank's Percentage), on the last Business Day of each calendar month for any Delinquency Fee accrued during such calendar month, a delinquency fee of $12,000 for each and every five (5) consecutive Business Days that the Borrower fails to deliver any statement, certificate, report or other information required to be delivered to the Agent or the Banks in accordance with the requirements of Section 6.1 hereof (the "Delinquency Fee"). For purposes hereof, consecutive Business --------------- Days shall mean one Business Day following another Business Day, with intervening Saturdays, Sundays and holidays excluded. The Borrower authorizes the Agent to deduct the Delinquency Fee from the Operating Account on the last Business Day of each calendar month for any Delinquency Fee accrued during such calendar month. -24- (d) Amendment Fee. The Borrower agrees to pay to the Agent, for the ------------- pro rata account of each Bank (based on each Bank's Percentage), on the --- ---- Term-Out Date, an amendment fee equal in the aggregate to 0.20% of the Aggregate Revolving Credit Commitment in effect on the Term-Out Date; provided, however, that in the event that prior to the Term-Out Date, the -------- ------- Aggregate Revolving Credit Commitment has been terminated and the Borrower Obligations have been paid in full, the Borrower shall not be obligated to pay the amendment fee described in this Section 3.1(d). (e) Waiver Fee. The Borrower agrees to pay to the Agent, for the pro ---------- --- rata account of each Bank (based on each Bank's Percentage), on the ---- Amendment No. 6 Effective Date, a waiver fee equal in the aggregate to 0.20% of the Aggregate Revolving Credit Commitment in effect on the Amendment No. 6 Effective Date. (f) Nature of Fees. All fees hereunder shall, except for the amendment -------------- fee described in Section 3.1(d) hereof, be fully earned as of the Amendment No. 6 Effective Date, and shall in any case be non-refundable when paid." 12. Amendment of Article 4 of the Loan Agreement. Article 4 of the Loan -------------------------------------------- Agreement is hereby amended by: (a) inserting immediately following the text "the Borrower Security Agreement" in the second sentence of Section 4.22 the following new text: "and the Lockbox Agreements"; and (b) adding the following new Section 4.26: "4.26. Bank Accounts. Schedule IV sets forth the account numbers, ------------- -------- -- locations and descriptions of purpose of all bank accounts of the Borrower." 13. Amendment of Section 5.2 of the Loan Agreement. Section 5.2 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting the initial paragraph of Section 5.2 in its entirety and replacing it with the following new initial paragraph: "The obligation of the Banks to make any Revolving Credit Loans (including the Initial Revolving Credit Loan) and any Term Loans and the obligation of the Swing Line Lender to make any Swing Line Loan (including any initial Swing Line Loan, but excluding any Swing Line Loan made with respect to a returned Cash Management Item) is further subject to the satisfaction of the following conditions precedent:" 14. Amendment of Article 6 of the Loan Agreement. Article 6 of the Loan -------------------------------------------- Agreement is hereby amended by: (a) deleting Section 6.1(f) in its entirety and substituting the following new Section 6.1(f) in lieu thereof: "(f) concurrently with the delivery of the schedules or financial statements required to be furnished under Section 6.1(a) or 6.1(d) hereof, a certificate signed by -25- the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of Borrower and M.R. Weiser, Inc., or another consultant satisfactory to Borrower and the Agent, and concurrently with the delivery of the financial statements required to be furnished under Section 6.1(e) hereof, a certificate signed by the Independent Public Accountants, and promptly upon the occurrence of any Default or Event of Default, a certificate signed by the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of Borrower or such Independent Public Accountants, if a Default or Event of Default shall have occurred during the period of their review, in each case stating (i) that a review of the activities of Borrower during such period has been made under his or their, as the case may be, immediate supervision with a view to determining whether Borrower has observed, performed and fulfilled all of its obligations under this Agreement, and (ii) that there existed during such period no Default or Event of Default (provided that, as to a certificate prepared by the Independent Public Accountants, such period, as it relates to the compliance by Borrower with covenants contained in Section 2.5(e)(iv) and Articles VII and VIII hereof shall apply to the fiscal period covered by their review) or if any such Default or Event of Default exists, specifying the nature thereof, the period of existence thereof and what action the Borrower proposes to take, or have taken, with respect thereto; each such certificate to be accompanied by a schedule setting forth the computations as of the end of such period of each of the financial ratios, tests or covenants specified in Section 2.5(e)(iv) (with such computations being made substantially in the form attached hereto as Exhibit X), Article VII and Sections 6.15, 8.2, 8.3, and ------- - 8.14 hereof; " (b) deleting Sections 6.1(i), (j), (k) and (o), Section 6.6, Section 6.16, Section 6.18 and Section 6.20 in their entirety and substituting the following new Sections 6.1(i), (j), (k), (o) and (p), Section 6.6, Section 6.16, Section 6.18 and Section 6.20 in proper alphabetical and numerical order in lieu thereof: "(i) (A) within fifteen (15) Business Days after each of January 31, 2002, February 28, 2002, March 29, 2002, April 30, 2002, May 31, 2002, and June 28, 2002, and at any other time upon the Agent's request, a Borrowing Base Certificate indicating a separate computation of the Borrowing Base, signed by each of the chief financial officer of the Borrower and M.R. Weiser, Inc., or another consultant satisfactory to the Borrower and the Agent, covering the period commencing with the first day following the last day of the period covered by the preceding Borrowing Base Certificate; and (B) following the Term-Out Date, a Borrowing Base Certificate or similar evidence of the computation of the Borrowing Base satisfactory in form and content to the Agent, with such certificate or other evidence being provided once every two weeks or at any other time upon the Agent's request; " "(j) not later than fifteen (15) days after the last day of each month, a delinquency report listing the Loans delinquent over 60 days and detailing the top ten delinquent Loans;" -26- "(k) not later than fifteen (15) Business Days after the last day of each 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 scope acceptable to the Agent;" "(o) upon the making of any payment required by Section 2.5(c)(ii)(B) hereof, the Borrowing Base Certificates required by Section 2.5(c)(ii)(B) hereof, evidencing the Borrower's compliance with Section 7.3 hereof and Medallion Financial's compliance with Section 7.3 of the Financial Agreement as of the date such payment is made; and (p) with reasonable promptness, such other information respecting the business, operations and financial condition of the Borrower (including, without limitation periodic commercial finance examinations) as the Agent or any of the Banks from time to time reasonably may request." "Section 6.6. Inspection by the Banks. The Borrower shall allow any ----------------------- representative of the Agent or any of the Banks to visit and inspect any of the properties of the Borrower, to examine and audit the books of account and other records and files of the Borrower, to make copies thereof and to discuss the affairs, business, finances and accounts of the Borrower with its officers and employees, all at such reasonable times and as often as the Agent or any of the Banks may request. Reasonable expenses incurred in connection with all such audits and inspections shall be paid by the Borrower. " "Section 6.16. Post-Closing Matters. (a) The Borrower shall, on or -------------------- prior to (i) February 19, 2002, execute and deliver to the Agent the Lockbox Agreements pursuant to which the Borrower shall direct all depository institutions to cause all funds of the Borrower to be transferred daily to, and only to, the Fleet Concentration Account, together with such other items, or take such other actions, as the Agent may require in order to effectuate arrangements contemplated by Section 6.21.1 hereof, and (ii) February 20, 2002, execute and deliver to the Agent the Guaranty of MFCC, the MFCC Security Agreement and the Borrower Pledge Agreement, together with such other items, or take such other actions, as the Agent may require in connection with the execution of such Loan Documents, including, but not limited to opinions of counsel, authorizing resolutions and officers' certificates, each in form and substance satisfactory to the Agent, (b) by January 31, 2002, Medallion Business Credit, LLC and Freshstart Venture Capital Corp. shall repay to the Borrower an amount equal to the Investments made by the Borrower in each such entity as set forth on Schedule III to this Agreement, and (c) no -------- --- later than March 15, 2002, the Borrower shall deliver to the Agent evidence, in form and substance satisfactory to the Agent, (i) of the consent of the Senior Note Holders (A) under the Collateral Agency Agreement, the Intercreditor Agreement and the Note Purchase Agreement to the provisions of Amendment No. 6 requiring such consent and the transactions contemplated thereby, and (B) under the Collateral Agency Agreement and the Note Purchase Agreement to the provisions of Amendment No. 3 (as such term is defined in the Financial -27- Agreement) requiring such consent and the transactions contemplated thereby, and (ii) of the waiver of any and all defaults (including defaults occurring under Sections 9.5, 10.7, 10.8(e), 10.10, 10.13 and 10.14 of the Note Purchase Agreement) under the Note Purchase Agreement existing immediately prior to the date such consents and waiver are given." "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 each certificate of a financial officer of the Borrower required by Section 6.1(f) hereof, and to provide reporting requested by the Agent with respect thereto, and 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." "Section 6.20. Effectiveness of Loan Documents. The Borrower shall ------------------------------- ensure that each of the Loan Documents, including, once executed and delivered, the Guaranties, 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." and (c) adding in proper numerical order therein the following new Sections 6.21 and 6.22: "6.21. Bank Accounts. ------------- 6.21.1. General. The Borrower agrees to establish a depository ------- account (the "Fleet Concentration Account") under the control of the Agent for the benefit of the Banks, the CP Holders and the Agent, in the name of the Borrower. The Borrower further agrees that it shall cause all account debtors and other obligors of the Borrower to remit all cash proceeds of Accounts Receivable, the Net Cash Proceeds of any Debt Offering, Equity Offering or sale, disposition or transfer of assets described in the definition of Net Cash Proceeds, Excess Dividend Payments and all other amounts paid or to be paid to the Borrower to be transferred to the Agent and the Banks hereunder to (i) concentration, depository or other accounts with financial institutions which have entered into lock box or agency account agreements with the Agent (collectively, the "Lockbox Agreements") with respect to such accounts, with each such agreement to be in form and substance satisfactory to the Agent, or (ii) the Fleet Concentration Account for transfer to the Operating Account or for application to the Bank Loans in accordance with Section 2B.1.2, Section 2B.1.3 or, as the case may be, Section 2B.2 hereof. The Borrower (a) on or prior to February 19, 2002, will deliver to the Agent fully executed Lockbox Agreements pursuant to which the Borrower shall direct all depository institutions to cause all funds of the Borrower to be transferred daily to, and only to, the Fleet Concentration Account, and (b) will at all times ensure that immediately upon the Borrower's receipt of any funds constituting cash proceeds of any Collateral, including Accounts Receivable, the Net -28- Cash Proceeds of any Debt Offering, Equity Offering or sale, disposition or transfer of assets described in the definition of Net Cash Proceeds, all such amounts shall have been deposited in the Fleet Concentration Account. In the event that the arrangements described in the foregoing sentence are not established by February 19, 2002, and without limiting any Event of Default arising from any such failure or the provisions of Section 2.3(c) hereof, the Borrower shall not be permitted to request LIBO Rate Loans until such time as the arrangements described in this paragraph have been established in form and substance satisfactory to the Agent. Notwithstanding the foregoing, the Borrower shall not be required by this Section 6.21.1 to enter into any Lockbox Agreement with those financial institutions with which it maintains a depository account the daily balance in which account is at all times less than $25,000, provided that the aggregate balance of all such accounts is at all times less than $150,000 (the "DeMinimis Accounts"). ------------------ 6.21.2. Acknowledgment of Application. The Borrower hereby agrees that ----------------------------- all amounts received by the Agent in the Fleet Concentration Account and the Operating Account will be the sole and exclusive property of the Agent, for the accounts of the Banks and the Agent, to be applied, in accordance with Section 2B.1.2 hereof, Section 2B.1.3 hereof or, as the case may be, Section 2B.2 hereof. Section 6.22. Independent Firm, etc. The Borrower agrees (a) not later --------------------- than the dates set forth in subsections (b)(i) and (ii) below for the delivery and presentation of the CMG Report (as defined below), to likewise deliver and present to the Agent and the Banks a six-month cash flow projection prepared by the Borrower and the Carl Marks Group ("CMG"), (b)(i) to deliver to the Agent a draft comprehensive business plan (to include, among other things, plans for refinancing the Indebtedness under both this Agreement and the Financial Agreement by May 15, 2002 (including anticipated lending institutions)) prepared by the Borrowers with the assistance of CMG (the "CMG Report") on or prior to February 21, 2002, and (ii) to deliver to the Agent and the Banks the final CMG Report on or prior to February 25, 2002, which shall also be presented by the Borrower's management and CMG to the Banks and the Agent on or prior to March 1, 2002, as well as to the Board of Directors at the Board of Directors meeting on March 12, 2002 and March 13, 2002, and (c) not later than January 1, 2002, to deliver to the Agent and the Banks a written report detailing the scope of the work and level of the tasks to be performed by CMG. The Required Banks and the Agent shall be reasonably satisfied with the scope and level of the work performed by CMG in connection with each of the items required by subsections (a), (b) and (c) of this Section 6.22. The Borrower further agrees to deliver to the Agent and the Banks, on or prior to February 25, 2002, a report detailing the actions the Borrower is taking in response to the CMG Report. If the Borrower does not intend to implement any of CMG's recommendations, such report by the Borrower shall include the Borrower's reasons for not implementing such recommendations. The Banks and the Agent shall have access to CMG at all times for, among other things, updates on the status of CMG's work and questions about the scope and substance thereof and shall have the right to hire at any time their own consulting firm at the request of the Agent (with the expenses of such other -29- consulting firm to be for the account of the Borrower following the occurrence of a Default or Event of Default)." 15. Amendment of Article 7 of the Loan Agreement. Article 7 of the Loan -------------------------------------------- Agreement is hereby amended by deleting Article 7 in its entirety and substituting the following new Article 7 in lieu thereof: "ARTICLE 7. FINANCIAL COVENANTS. ------------------- The Borrower covenants and agrees that, until the Notes, together with interest and all other Indebtedness of Borrower to the Agent, the Swing Line Lender or the Banks under this Agreement and the other Loan Documents, are paid in full and the Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term Loan Commitments are terminated, Borrower and its Subsidiaries shall not, without the prior written consent of the Agent and the Required Banks: Section 7.1. Minimum Tangible Net Worth. Suffer or permit Tangible Net -------------------------- Worth to be less than $65,000,000 at any time. Section 7.2. Maximum Liability Ratio. Suffer or permit the ratio of ----------------------- (a) Total Liabilities to (b) Tangible Net Worth to be more than 4.00:1 at any time. 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. Section 7.4. [Intentionally Omitted]. --------------------- Section 7.5. Minimum EBIT to Interest Expense Ratio. Suffer or permit -------------------------------------- the ratio, at the end of (a) each fiscal quarter of the Borrower ending during the period commencing October 1, 2001 and ending on June 30, 2002, of (i) EBIT of the Borrower for such fiscal quarter to (ii) Interest Expense of the Borrower for such fiscal quarter to be less than 1.2:1, and (b) any fiscal quarter of the Borrower ending after July 1, 2002, of (i) EBIT of the Borrower for such fiscal quarter to (ii) Interest Expense of the Borrower for such fiscal quarter to be less than 1.3:1. Section 7.6. Intercompany Receivables. Suffer or permit the aggregate ------------------------ principal amount of Total Intercompany Receivables to exceed $12,000,000 (comprised of the sum of $3,000,000 plus $9,000,000 of Yellow Cab Loans ---- transferred to MFCC) at any time." 16. Amendment of Article 8 of the Loan Agreement. Article 8 of the Loan -------------------------------------------- Agreement is hereby amended by deleting the initial paragraph of Article 8 in its entirety and substituting the following new initial paragraph in lieu thereof: "ARTICLE 8. NEGATIVE COVENANTS. ------------------ -30- The 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 Commitment and all Term Loan Commitments are terminated, the Borrower shall not, and shall not permit any of its Subsidiaries to:". 17. Amendment of Section 8.1 of the Loan Agreement. Section 8.1 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting subsection (a) thereof in its entirety and substituting in lieu thereof the following new subsection (a): "(a) (i) Liens created under the Borrower Security Agreement and other Liens in favor of the Agent or any of the Banks (including the Agent's Lien for the benefit of the Agent, the CP Holders and the Banks on Yellow Cab Loans which shall be retained following the Yellow Cab Transfer), and (ii) Liens with respect to Indebtedness permitted by Section 8.2(g) hereof, subject to the terms of the Intercreditor Agreement, and, if applicable, the terms of the Collateral Agency Agreement, and only to the extent that the Indebtedness secured thereby is permitted to be incurred by the Borrower;". 18. Amendment of Section 8.2 of the Loan Agreement. Section 8.2 of the Loan ----------------------------------------------- Agreement is hereby amended by adding the following new final paragraph at the end of Section 8.2: "Notwithstanding the foregoing, no additional Indebtedness not incurred prior to the Amendment No. 6 Effective Date (other than Indebtedness permitted by Section 8.2(a) hereof and Section 8.2(e) hereof) shall be incurred by the Borrower following the Amendment No. 6 Effective Date without the prior written consent of the Agent." 19. Amendment of Section 8.3 of the Loan Agreement. Section 8.3 of the Loan ---------------------------------------------- Agreement is hereby amended by: (a) deleting subsection (e) thereof in its entirety and substituting in lieu thereof the following new subsection (e): "(e)(i) 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. 6 Effective Date and listed on Schedule III hereto. For the avoidance of doubt, the Borrower shall not make, nor shall the Borrower permit any of its Subsidiaries to make, any Investment in Media or Business Lenders, LLC following the Amendment No. 6 Effective Date."; (b) deleting subsection (f) thereof in its entirety and substituting in lieu thereof the following new subsection (f): "(f) Sell, discount or otherwise dispose of Loans or any Collateral or sell, discount or otherwise dispose of other Receivables or obligations owing to a -31- Borrower or any of its Subsidiaries, with or without recourse, other than (i) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 hereof, and consistent in any event with past practices, (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 Media 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, (iv) Loans disposed of to Affiliates in compliance with Section 8.6 hereof and for cash for a price at least equal to the outstanding principal amount thereof (without discount thereon), and (v) with respect to the sales of Loans by the Borrower (A) to its Affiliates made prior to the Amendment No. 6 Effective Date and described on Schedule 8.3(f) hereto, and (B) to the Parent to --------------- repay to the Parent intercompany receivables and other amounts owed by the Borrower to the Parent in an aggregate amount not to exceed $5,090,378."; and (c) inserting, after subsection (h) thereof, the following new subsection (i): "(i) Acquire or commit to acquire any Loan from any Affiliate other than Loans acquired for a price no greater than the outstanding principal amount thereof.". 20. Amendment of Section 8.4 of the Loan Agreement. Section 8.4 of the ---------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.4 is hereby substituted in lieu thereof: "Section 8.4. Limitation on Subsidiaries. Own, beneficially or of -------------------------- record, or obligate itself to own, beneficially or of record, directly or indirectly, 50% or more of the Voting Interests of any Subsidiary, the Tangible Net Worth of which constitutes more than 5% of the Tangible Net Worth of Borrower." 21. Amendment of Section 8.6 of the Loan Agreement. Section 8.6 of the ---------------------------------------------- Loan Agreement is hereby amended by: (a) deleting subsection (b) thereof in its entirety and substituting in lieu thereof the following new subsection (b): "(b) Sell or otherwise dispose of an amount of Loans which, in aggregate principal amount, exceeds 10% of the aggregate principal amount of all Loans of the Borrower then outstanding unless, immediately upon such sale or disposition, the Borrower makes, in accordance with the provisions of Section 2.5(b) hereof, a mandatory prepayment of the outstanding Revolving Credit Loans (with the Revolving Credit Commitments being irrevocably reduced by an aggregate amount equal to the amount of such repayment) and Term Loans in an amount equal to the aggregate principal amount, plus accrued interest, of the Loans so sold or disposed of;"; and (b) deleting subsection (c) thereof in its entirety and substituting in lieu thereof the following new subsection (c): -32- "(c) Enter into any transaction of merger or consolidation or transfer, sell, assign, lease or otherwise dispose of all or substantially all of its properties or assets to any one or more Persons, without in each case, the prior written consent of the Agent and the requisite Banks in accordance with Section 10.2 hereof.". 22. Amendment of Section 8.10 of the Loan Agreement. Section 8.10 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.10 is hereby substituted in lieu thereof: "Section 8.10. Amendment of Agreements. Consent to any amendment, ----------------------- supplement, waiver or other modification of any of the terms (including acceleration, covenant, default, subordination, sinking fund, repayment, interest rate or redemption provisions) contained in, or applicable to, or any security for, any Permitted Debt, any instrument evidencing or applicable to Permitted Debt, including the Note Purchase Agreement, 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." 23. Amendment of Section 8.11 of the Loan Agreement. Section 8.11 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.11 is hereby substituted in lieu thereof: "Section 8.11. Transactions with Affiliates. (a) Enter into, or cause, ---------------------------- suffer, or permit to exist, any material transactions, including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service, with any Affiliate on terms that are less favorable to the Borrower than those that would be obtainable at the time from any Person who is not an Affiliate; or (b) become an Affiliated Person of any Bank or any Affiliated Person of any Bank known to the Borrower; and the Borrower shall use its best efforts to ensure that none of its Affiliated Persons is or becomes an Affiliated Person of any Bank or an Affiliated Person of any Bank known to the Borrower. Notwithstanding the foregoing, the Borrower shall be permitted to transfer Yellow Cab Loans to MFCC in an aggregate outstanding principal amount not to exceed $9,000,000, provided that the Agent shall retain its security interest for the benefit -------- of the Agent, the CP Holders and the Banks in the Yellow Cab Loans (the "Yellow Cab Transfer")." ------------------- 24. Amendment of Section 8.15 of the Loan Agreement. Section 8.15 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety, and the following new Section 8.15 is hereby substituted in lieu thereof: "Section 8.15. Bank Accounts. (i) Establish any bank accounts other ------------- than those listed on Schedule IV hereto, without the Agent's prior written -------- -- consent, with any such new bank account being subject, at the Agent's request, to Lockbox Agreements, and with Schedule IV hereto being deemed to -------- -- be revised to include any such additional accounts which are approved by the Agent and subject (if requested by the Agent) to the Lockbox Agreements, (ii) violate directly or indirectly any Lock -33- Box Agreement or any similar agreement in favor of the Agent for the benefit of the Banks, the CP Holders and the Agent with respect to any such account, (iii) deposit into any of the payroll accounts listed on Schedule -------- IV hereto any amounts in excess of amounts necessary to pay current payroll -- obligations from such accounts, or (iv) maintain a daily balance in any DeMinimis Account greater than $25,000, or an aggregate daily balance in all DeMinimis Accounts greater than $150,000." 25. 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: "Section 8.16. Portfolio Purchases and Acquisitions. Make or effect, ------------------------------------ or obligate itself to make or effect, any Portfolio Purchase or other asset acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) or stock (or other equity interest) acquisition, other than the acquisition by MFCC of Yellow Cab Loans pursuant to the Yellow Cab Transfer." 26. Amendment of Section 8.17 of the Loan Agreement. Section 8.17 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.17 is hereby substituted in lieu thereof: "Section 8.17. Securitizations. Enter into any securitization or --------------- similar transaction (i.e., any transfer of its assets in connection with any sale, assignment or other transfer of any receivables, including accounts receivable, loan receivables, lease receivables or other payment obligations or any interest in any of the foregoing, which may in each case include any collections and other proceeds thereof, any collection or deposit accounts related thereto, or any collateral, guarantees or other property or claims supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables) without the prior written consent of the Agent and the requisite Banks (as determined by reference to Section 10.2 hereof) or as otherwise permitted by Sections 8.3(f)(i) and (iii) hereof. Notwithstanding the foregoing, the Borrower may transfer Yellow Cab Loans to MFCC pursuant to the Yellow Cab Transfer." 27. Amendment of Section 8.18 of the Loan Agreement. Section 8.18 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.18 is hereby substituted in lieu thereof: "Section 8.18. Subsidiaries, etc. Form, acquire, create or otherwise ----------------- suffer to exist any Subsidiary other than MFCC, provided, however, that the -------- ------- Borrower and MFCC comply with the requirements of Section 6.16 hereof." 28. Amendment of Section 9.1 of the Loan Agreement. Section 9.1 of the ---------------------------------------------- Loan Agreement is hereby amended by: (a) deleting Section 9.1(b) in its entirety and substituting the following new Section 9.1(b) in lieu thereof: -34- "(b) if default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in Article VII or Section 6.9(d), 6.13, 6.16, 6.19, 6.20, 6.21 or 6.22 or Article 8 hereof, provided that if the excess repayment required by Section -------- 2.5(c)(ii) of this Agreement is made in accordance with the time period and other requirements set forth in such Section 2.5(c)(ii), no default shall occur as a result of the violation of Section 7.3(b) hereof resulting from the occurrence of the underlying violations with respect to which such excess repayment is made;"; and (b) deleting Section 9.1(f) in its entirety and substituting the following new Section 9.1(f) in lieu thereof: "(f) (i) if Borrower shall default in the payment of any principal, interest or premium with respect to any Indebtedness for borrowed money or any obligation which is the substantive equivalent thereof in excess of $250,000, other than Indebtedness in respect of the Revolving Credit Loans, the Swing Line Loans, the Term Loans, or the CP Debt, and such default shall continue for more than the period of grace, if any, therein specified, (ii) if Borrower shall default in the performance or observance of any other term, condition or agreement contained in any such obligation or in any agreement relating thereto if the effect thereof is to cause, or, with respect to any such obligation other than the Senior Note Debt, permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity, (iii) if Borrower shall default in the performance of or compliance with Section 10.4 (Minimum Tangible Net Worth), 10.5 (Maximum Liability Ratio), 10.6 (Minimum Net Finance Assets), 10.7 (Minimum Net Income to Interest Expense Ratio) or 10.13 (Net Finance Assets) of the Note Purchase Agreement, or (iv) if a Default or an Event of Default as defined in the Financial Agreement shall occur and continue." 29. Amendment of Section 10.2 of the Loan Agreement. Section 10.2 of the ----------------------------------------------- Loan Agreement is hereby amended by deleting Section 10.2(a)(iv) in its entirety and substituting the following new Section 10.2(a)(iv) in lieu thereof: "(iv) release all or substantially all of the Collateral (it being understood that release of either Guarantor from its guaranty obligations under the Guaranties, other than in accordance with the terms of this Agreement or any other Loan Document, shall require only the approval of the Agent and the Required Banks) (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);". 30. Amendment of Section 10.6 of the Loan Agreement. Section 10.6 of the ----------------------------------------------- Loan Agreement is hereby amended by: (a) deleting subsection (b) thereof in its entirety and substituting in lieu thereof the following new subsection (b): -35- "(b) The Borrower further agrees to indemnify and save harmless each Bank, the Swing Line Lender and the Agent and each of their respective officers, directors, employees, agents and Affiliates (each an "Indemnified ----------- Party" and collectively the "Indemnified Parties") from and against any and ----- ------------------- all actions, causes of action, suits, losses, liabilities and damages and expenses (including, without limitation, reasonable attorneys' fees actually incurred) in connection therewith (herein called the "Indemnified ----------- Liabilities") incurred by any Indemnified Party as a result of, or arising ----------- out of or relating to: (i) any of the transactions contemplated hereby or by the other Loan Documents, (ii) any Indemnified Party's providing payroll and other cash management services to the Borrower or its Subsidiaries, or (iii) the use of any proceeds of the Bank Loans made hereunder or any of the other Loan Documents, except for any Indemnified Liabilities arising on account of the gross negligence or willful misconduct of the Indemnified Party seeking indemnity under this Section 10.6(b); provided, however, -------- ------- that, if and to the extent such agreement to indemnify may be unenforceable for any reason, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which shall be permissible under applicable law. The parties hereto further hereby agree that such indemnification obligations provided in this Section 10.6(b) shall be Borrower Obligations under the Loan Documents. The agreements in this Section 10.6(b) shall survive the payment of the Revolving Credit Notes, the Swing Line Notes and the Term Notes and related obligations and the termination of the Revolving Credit Commitments, Swing Line Commitment and Term Loan Commitments."; and (b) adding in proper alphabetical order therein the following new subsection (c): "(c) The Borrower agrees to pay any Cash Management Item, fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Agent in establishing, maintaining or handling lock box accounts and other accounts for the collection of any of the Collateral." 31. Amendment of Article 12 of the Loan Agreement. Article 12 of the Loan --------------------------------------------- Agreement is hereby amended by: (a) deleting Section 12.1(b)(iii) of the Loan Agreement in its entirety and substituting in lieu thereof the following new Section 12.1(b)(iii): "(iii) [intentionally omitted]."; (b) deleting Section 12.2 in its entirety and substituting in lieu thereof the following new Section 12.2: "Section 12.2. New Banks. Without limiting the Banks' respective ------------ --------- rights to assign their interests pursuant to Section 12.1 hereof, any financial institution approved by the Borrower, the Agent and the Required Banks may join this Agreement as an additional Bank (such Person being herein referred to as the "New Bank") and be entitled to all the rights and --- ---- interests and obligated to perform all of -36- the obligations and duties of a Bank with respect to a specified additional amount of Revolving Credit Commitment and outstanding Bank Loans hereunder, with the Revolving Credit Commitment and outstanding Bank Loans of each other Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans proportionately reduced being reallocated in accordance with Section 2.1(d) hereof, provided, that -------- (a) the Borrower shall, in its sole discretion, have given its prior written consent to the addition of the New Bank as a party to this Agreement, (b) the Agent, the Swing Line Lender and the Required Banks shall have given their prior written consent (which consent shall not be unreasonably withheld). At the request of the Borrower, any Bank may elect to increase its Revolving Credit Commitment and outstanding Bank Loans, with the Revolving Credit Commitment and outstanding Bank Loans of each other Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans proportionately reduced being reallocated in accordance with Section 2.1(d) hereof; provided that (x) the Borrower shall, in its sole discretion, have given its prior written consent to the increase of such Bank's Revolving Credit Commitment and outstanding Bank Loans, and (y) the Agent, the Swing Line Lender and the Required Banks shall have given their prior written consent (which consent shall not be unreasonably withheld); and provided further that the Aggregate -------- ------- Revolving Credit Commitment and aggregate outstanding Bank Loans may not be increased pursuant to this Section 12.2."; and (c) adding the following new Section 12.3 in proper numerical order: "Section 12.3. Requirements for New Banks. Whether a New Bank as ------------ -------------------------- a result of Section 12.1 or Section 12.2 hereof, the joinder of any New Bank or assignee under Section 12.1 hereof may not result in an increase to the Aggregate Revolving Credit Commitment and aggregate outstanding Bank Loans (with the maximum amount of Bank Loans that such New Bank or assignee under Section 12.1 hereof agrees to provide hereunder (the "Additional Commitment Amount") being allocated to ---------- ---------- ------ reduce the Revolving Credit Commitment and outstanding Bank Loans of the other Banks in accordance with Section 2.1(d) hereof. Such New Bank or assignee under Section 12.1 hereof and the Borrower shall execute and deliver an instrument of adherence (the "Instrument of Adherence") ----------------------- in form and substance satisfactory to the Borrower and the Agent pursuant to which such New Bank or assignee under Section 12.1 hereof shall agree to be bound as a Bank by the terms and conditions hereof and the other Loan Documents, and to make Bank Loans to the Borrower in accordance with this Agreement. Such Instrument of Adherence shall specify the Additional Commitment and outstanding Bank Loans and such New Bank's or assignee's address for notices. In addition, the Additional Commitment Amount provided by any New Bank or assignee under Section 12.1 hereof must be at least $5,000,000, and (a) such New Bank or assignee under Section 12.1 hereof shall have received such opinions of counsel to the Borrower, such evidence of proper corporate organization, existence, authority and appropriate corporate proceedings with respect to the Borrower, and such other certificates, instruments, and documents, as it shall have requested in connection with such Instrument of Adherence, (b) such New Bank or assignee under Section 12.1 hereof shall have paid to the Agent an administrative fee in the sum of $3,500 for the account of the Agent, -37- and (c) such New Bank or assignee under Section 12.1 hereof shall have confirmed to and agreed with the Agent, the Swing Line Lender, the Banks and the Borrower as follows: (i) the Agent, the Swing Line Lender and the Banks have made no representation or warranty and shall have no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency, collectability or value of this Agreement, the other Loan Documents, and Collateral, or any other instrument or document furnished pursuant hereto; (ii) the Agent, the Swing Line Lender and the Banks have made no representation or warranty and shall have no responsibility with respect to the financial condition of the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of their obligations under this Agreement or any of the other Loan Documents, or the performance or observance by the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such New Bank or assignee under Section 12.1 hereof confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the most recent financial statements referred to in or delivered pursuant to Sections 4.18 and 6.1 hereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Instrument of Adherence; (iv) such New Bank or assignee under Section 12.1 hereof will, independently and without reliance upon the other Banks, the Swing Line Lender, or the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such New Bank or assignee under Section 12.1 hereof appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (vi) such New Bank or assignee under Section 12.1 hereof agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank; and -38- (vii) such New Bank or assignee under Section 12.1 hereof represents and warrants that it is legally authorized to enter into such Instrument of Adherence. Upon any New Bank's or assignee's execution of an Instrument of Adherence and the Borrower's, the Agent's, the Swing Line Lender's and the Required Banks' consent thereto (to the extent that any of the same may be required hereunder), the Percentage of each Bank shall be adjusted appropriately. Promptly thereafter, the Borrower shall notify each of the Banks and the Agent of the joinder hereunder of such New Bank or assignee under Section 12.1 hereof, and each Bank's new Percentage and provide each of the Banks and the Agent with a copy of the executed Instrument of Adherence and a copy of Exhibit A hereto --------- reflecting the necessary adjustments. Upon the effective date of any Instrument of Adherence, the New Bank or assignee under Section 12.1 hereof shall make all (if any) such payments to the other Banks as may be necessary to result in the Bank Loans made by such New Bank or assignee under Section 12.1 hereof being equal to such New Bank's or assignee's Percentage (as then in effect) of the aggregate principal amount of all Bank Loans outstanding to the Borrower as of such date. The Borrower hereby agrees that any New Bank or assignee so paying any such amount to the other Banks pursuant to this Section 12.3 shall be entitled to all the rights of a Bank hereunder and such payments to the other Banks shall constitute Bank Loans held by such New Bank or assignee hereunder and that such New Bank or assignee may, to the fullest extent permitted by law, exercise all of its right of payment (including the right of set-off) with respect to such amounts as fully as if such New Bank or assignee had initially advanced the Borrower the amount of such payments." 32. Amendments to Exhibits and Schedules to the Loan Agreement. The ---------------------------------------------------------- Exhibits and Schedules to the Loan Agreement are hereby amended by adding (a) the attached new Exhibit X in proper alphabetical order, and (b) the attached --------- new Schedules III, IV, V and 8.3(f) in proper numerical order. --------- --- -- - ------ 33. Forbearance and Waivers. ----------------------- (a) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrower's compliance with the covenant set forth in Section 7.3 of the Loan Agreement (as in effect prior to the Effective Date) for (i) the fiscal quarter of the Borrower ended September 30, 2001 and (ii) the month ended November 30, 2001 (if and to the extent any non-compliance with Section 7.3 of the Loan Agreement occurred as of such date); provided, however, that the -------- ------- aggregate unpaid balance of Senior Debt shall have exceeded the Borrowing Base (i) by no more than $486,684 for the fiscal quarter of the Borrower ended September 30, 2001 and (ii) by no more than $600,000 for the month ended November 30, 2001. (b) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrower's compliance with the covenant set forth in Section 7.5 of the Loan Agreement (as -39- in effect prior to the Effective Date) for the fiscal quarter of the Borrower ended September 30, 2001; provided, however, that as of September -------- ------- 30, 2001, the ratio of (i) the sum of EBIT for the Second FQ01 plus EBIT ---- for the Third FQ01 to (ii) the sum of Interest Expense for such fiscal quarters was no less than 0.76:1. (c) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrower's compliance with the covenants set forth in Sections 4.2, 8.3(e)(ii), 8.11 and 8.16 through 8.18 of the Loan Agreement (as in effect prior to the Effective Date) for the fiscal quarter of the Borrower ended December 31, 2001 solely with respect to the formation of MFCC and the implementation of the Yellow Cab Transfer; provided, however, -------- ------- that the Yellow Cab Loans transferred pursuant to the Yellow Cab Transfer shall remain subject to the Lien and security interest of the Agent, for the benefit of the Agent, the CP Holders and the Banks, and that the Borrower and MFCC comply with the requirements of Section 6.16 of the Loan Agreement. (d) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrower's compliance with the covenant set forth in Section 8.3(e) of the Loan Agreement solely with respect to the Investments made by the Borrower in Medallion Business Credit, LLC and in Freshstart Venture Capital Corp. as set forth on Schedule III to the Loan Agreement -------- --- (as in effect following the Effective Date); provided however, that by -------- ------- January 31, 2002, Medallion Business Credit, LLC and Freshstart Venture Capital Corp. shall have repaid to the Borrower an amount equal to the Investments made by the Borrower in each such entity as set forth on Schedule III to the Loan Agreement (as in effect following the Effective -------- --- Date) and in compliance with Section 6.16 of the Loan Agreement. (e) The Note Purchase Agreement requires the Borrower to ensure that the aggregate unpaid balance of all Senior Debt does not exceed Net Finance Assets (each as defined in the Note Purchase Agreement). The Borrower has reported that (i) as of September 30, 2001 Senior Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by $486,684, and (ii) as of November 30, 2001, Senior Debt may have exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $600,000 (the defaults in clauses (i) and (ii) collectively referred to as the "Specified Noteholder Defaults"). Subject ----------------------------- to the terms and conditions hereof, each of the Agent and the Banks: (i) until the earliest of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 33, hereby agrees (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 Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Specified Noteholder Defaults, (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 that are provided for in the Loan -40- 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Specified Noteholder Defaults) shall be determined without regard to any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Specified Noteholder Defaults, 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, provided that (1) as of September 30, 2001, Senior Debt exceeded -------- Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $486,684, and (2) as of November 30, 2001, Senior Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $600,000; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, hereby waives any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Specified Noteholder Defaults, provided that (A) as of September 30, 2001, Senior Debt exceeded -------- Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $486,684, (B) as of November 30, 2001, Senior Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $600,000, and (C) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(w) hereof no later than March 15, 2002. (f) The Note Purchase Agreement requires the Borrower to ensure that the ratio of (i) Net Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) is not less than 1.20:1. The Borrower has reported that as of September 30, 2001, the ratio of (i) Net Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) was 0.76:1 (such default referred to as the "Financial Noteholder -------------------- Default"). Subject to the terms and conditions hereof, each of the Agent and the - ------- Banks: (i) until the earliest of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 33, hereby agrees (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 Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Financial Noteholder Default, (x) that the Agent and the Banks will not demand accelerated payment of the obligations under Section -41- 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 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Financial Noteholder Default) shall be determined without regard to any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Financial Noteholder Default, 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, provided that as of September 30, 2001, the ratio of (1) -------- Net Income plus Interest Expense to (2) Interest Expense (each as defined in the Note Purchase Agreement) was no less than 0.76:1; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, hereby waives any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the Financial Noteholder Default, provided that (A) as of September 30, 2001, the ratio -------- of (i) Net Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) was no less than 0.76:1, and (B) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(w) hereof no later than March 15, 2002. (g) Pursuant to Section 2.2(b) of the Financial Agreement, all outstanding Revolving Credit Loans and Swing Line Loans matured on or before the Term-Out Date (November 5, 2001) (each term as defined in the Financial Agreement). As of the date hereof, such outstanding Revolving Credit Loans and Swing Line Loans (each term as defined in the Financial Agreement), and interest thereon, have not been repaid (the "Financial Non-Payment"). Subject to the terms and conditions hereof, each of the Agent and the Banks: (i) until the earliest of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 33, hereby agrees (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 Default or Event of Default which may occur under Section 9.1(f)(iv) of the Loan Agreement as a result of the Financial Non-Payment, (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 -42- all payments 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of any Default or Event of Default which occurred under Section 9.1(f)(iv) of the Loan Agreement as a result of the Financial Non-Payment) shall be determined without regard to any Default or Event of Default which occurred under Section 9.1(f)(iv) of the Loan Agreement as a result of the Financial Non-Payment, 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, provided that Medallion Financial and Medallion Business Credit, LLC -------- shall pay interest on such outstanding Revolving Credit Loans and Swing Line Loans at the Default Rate (each term as defined in the Financial Agreement) to the banks party to the Financial Agreement for the period from November 5, 2001 through February 20, 2002; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, hereby waives any Default or Event of Default which occurred under Section 9.1(f)(iv) of the Loan Agreement as a result of the Financial Non-Payment, provided -------- that (A) Medallion Financial and Medallion Business Credit, LLC shall have paid interest on such outstanding Revolving Credit Loans and Swing Line Loans at the Default Rate (each term as defined in the Financial Agreement) to the banks party to the Financial Agreement for the period from November 5, 2001 through February 20, 2002, and (B) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(w) hereof no later than March 15, 2002. (h) Section 8.16 of the Loan Agreement does not permit the Borrower to make any Portfolio Purchases. The Borrower has reported that as of January 31, 2002, the Borrower purchased $8,085,294.10 of Loans from Medallion Financial (such default referred to as the "Borrower Portfolio Default" and such purchase -------------------------- referred to as the "Borrower Portfolio Purchase"). Subject to the terms and --------------------------- conditions hereof, each of the Agent and the Banks: (i) until the earliest of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 33, hereby agrees (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 Default or Event of Default which may have occurred or may occur under Section 9.1(c) of the Loan Agreement as a result of the Borrower Portfolio Default, (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 -43- be required to make any and all payments 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of any Default or Event of Default which may have occurred or may occur under Section 9.1(c) of the Loan Agreement as a result of the Borrower Portfolio Default) shall be determined without regard to any Default or Event of Default which may have occurred or may occur under Section 9.1(c) of the Loan Agreement as a result of the Borrower Portfolio Default, 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, provided that as of January 31, 2002, the Borrower shall not have made -------- any Portfolio Purchase other than the Borrower Portfolio Purchase; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(w) hereof, hereby waives any Default or Event of Default which may have occurred or may occur under Section 9.1(c) of the Loan Agreement as a result of the Borrower Portfolio Purchase, provided that (A) as of January 31, 2002, the -------- Borrower shall not have made any Portfolio Purchase other than the Borrower Portfolio Purchase, and (B) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(w) hereof no later than March 15, 2002. (i) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrower's compliance with the covenant set forth in Section 8.5 of the Loan Agreement; provided, however, that the Borrower shall have made -------- ------- no Restricted Payments other than the prepayment of the Senior Note Debt as of February 11, 2002 in an aggregate amount not to exceed $1,000,000. 34. Amendment to Section 1.1 of the Security Agreement. Section 1.1 of -------------------------------------------------- the Borrower Security Agreement is hereby amended by (a) deleting the first paragraph of the definition of "Collateral" in its entirety and substituting in lieu thereof the following new first paragraph: "Collateral" shall mean all assets, including all of the following ---------- property and to the extent otherwise not included, all other personal and fixture property of every kind and nature, now owned or at any time hereafter acquired by the Borrower or in which the Borrower now has or at any time in the future may acquire any right, title or interest:"; (b) deleting the word "and" at the end of subsection (u) of the definition of "Collateral"; (c) adding the following new subsection (v) of the definition of "Collateral" in proper alphabetical order therein and relettering the current subsection (v) as subsection (w): -44- "(v) commercial tort claims (the Agent acknowledges that the attachment of its security interest in any commercial tort claim as original collateral is subject to the Borrower's compliance with Section 2.3(c) hereof); and"; and (d) deleting the first sentence of the definition of "Obligations" in its entirety and substituting in lieu thereof the following new first sentence: "Obligations" shall mean (i) all of the indebtedness, obligations ----------- and liabilities of the Borrower under any of the Loan Documents, and (ii) all Indebtedness of the Borrower to a Bank permitted to be incurred pursuant to Section 8.2(g) of the Loan Agreement, in each case whether direct or indirect, joint or several, fixed, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, now existing or hereafter arising, created, assumed, incurred or acquired including (A) any obligation or liability in respect of any breach of any representation or warranty, and (B) all post-petition interest and funding losses. 35. Amendment to Section 2.3 of the Security Agreement. Section 2.3 of -------------------------------------------------- the Security Agreement is hereby amended by (a) deleting the word "and" at the end of Section 2.3(b) of the Security Agreement, and (b) adding the following new Section 2.3(c) of the Security Agreement in proper alphabetical order therein and relettering the current Section 2.3(c) of the Security Agreement as Section 2.3(d): "(c) If the Borrower shall, now or at any time hereafter, hold or acquire a commercial tort claim, the Borrower shall immediately notify the Agent in a writing signed by the Borrower of the particulars thereof and grant to the Agent, for the benefit of the CP Holders, the Banks and the Agent, 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; and". 36. Amendment to Section 4.1 of the Security Agreement. Section 4.1 of -------------------------------------------------- the Security Agreement is hereby amended by (a) deleting the word "and" at the end of Section 4.1(j) of the Security Agreement, and (b) adding the following new Section 4.1(k) of the Security Agreement in proper alphabetical order therein and relettering the current Section 4.1(k) of the Security Agreement as Section 4.1(l): "(k) The Borrower holds no commercial tort claim except as indicated in writing to the Agent and the Banks; and". 37. Amendment to Section 5.2 of the Security Agreement. Section 5.2 of -------------------------------------------------- the Security Agreement is hereby amended by deleting the first paragraph of Section 5.2(d) of the Security Agreement and substituting in lieu thereof the following new first paragraph of Section 5.2(d) of the Security Agreement: "(d) Without limiting the provisions of Article 2B and Sections 6.21 and 8.15 of the Loan Agreement, upon the occurrence of an Event of Default, the Agent shall have the right to, and upon the direction of the Required Banks shall, require the Borrower to establish and maintain a lockbox service (which may be the Collateral Account) with such bank or banks as may be acceptable to the Agent. In the event the -45- Borrower (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or agents) shall receive any monies, checks, notes, drafts or any other items of payment relating to, or proceeds of, the Loans, the Borrower agrees with the Agent as follows:". 38. Amendment to Section 5.3 of the Security Agreement. Section 5.3 of -------------------------------------------------- the Security Agreement is hereby amended by deleting the first paragraph of Section 5.3(a) thereof and substituting in lieu thereof the following new first paragraph of Section 5.3(a) thereof: "(a) Upon receipt thereof in accordance with the terms of Section 5 of the Intercreditor Agreement, any proceeds of any lockbox collection or sale of, or other realization upon, all or any part of the Collateral shall be applied by the Agent in the following order of priority:". 39. Amendment to Section 5.4 of the Security Agreement. Section 5.4 of -------------------------------------------------- the Security Agreement is hereby amended by deleting the first sentence of Section 5.4 of the Security Agreement and substituting in lieu thereof the following new first sentence of Section 5.4 of the Security Agreement: "To the extent permitted by the Loan Agreement and the Intercreditor Agreement, the Agent, for the benefit of itself, the Banks and the CP Holders is hereby authorized, upon receipt of a request from the Company, to release any Collateral and to provide such releases and termination statements with respect to any Collateral in connection with any sale, exchange or other disposition thereof permitted under the Loan Agreement so long as (i) the Agent, for the benefit of itself, the Banks and the CP Holders, obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder." 40. Amendment to Section 7.2 of the Parent Pledge Agreement. Section ------------------------------------------------------- 7.2 of the Parent Pledge Agreement is hereby amended by deleting the last sentence of the first paragraph of Section 7.2 of the Parent Pledge Agreement and substituting in lieu thereof the following new last sentence of the first paragraph of Section 7.2 of the Parent Pledge Agreement: "The proceeds of any collection or sale of, or other realization upon, all or any part of the Stock Collateral shall be applied by the Agent, following application of such proceeds in accordance with the terms of Section 5 of the Intercreditor Agreement, in the following order of priority:". 41. Amendment to Section 8 of the Parent Pledge Agreement. Section 8 ----------------------------------------------------- of the Parent Pledge Agreement is hereby amended by deleting the last sentence of the first paragraph of Section 8 of the Parent Pledge Agreement and substituting in lieu thereof the following new last sentence of the first paragraph of Section 8 of the Parent Pledge Agreement: -46- "To the extent permitted by the Loan Agreement and the Intercreditor Agreement, the Agent, for the benefit of itself, the Banks, the Administrative Agent and the CP Holders is hereby authorized, upon receipt of a request from either the Company or Funding, to release any Stock Collateral and to provide such releases with respect to any Stock Collateral in connection with any sale, exchange or other disposition thereof permitted under the Loan Agreement so long as (i) the Agent, for the benefit of itself, the Banks, the Administrative Agent and the CP Holders obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Banks, the Agent may release any Stock Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law." 42. Amendment to Section 10 of the Guaranty. Section 10 of the --------------------------------------- Guaranty is hereby amended by deleting Section 10 in its entirety and substituting in lieu thereof the following new Section 10: "10. Termination; Reinstatement. This Guaranty shall remain in -------------------------- full force and effect until the Agent and the Required Banks release the Guarantor from the Guaranty or until all Borrower Obligations have been paid in full and all commitments to lend under the Loan Agreement have been terminated. Notwithstanding the foregoing, this Guaranty shall continue to be effective or be reinstated, notwithstanding any such repayment in full of the Obligations, and termination of all commitments to lend under the Loan Agreement, 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." 43. Consent to Financial Amendment, etc. (a) Each of the Agent and ----------------------------------- the Banks hereby consents to the amendment of the Financial Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement, Section 2 of the Intercreditor Agreement and Section 8.10 of the Loan Agreement, and (b) the Agent, in its capacity as Collateral Agent under each of the Intercreditor Agreement and the Collateral Agency Agreement, hereby consents to the amendment of the Financial Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement, Section 2 of the Intercreditor Agreement and Section 8.10 of the Loan Agreement. 44. Representations and Warranties, Etc. ----------------------------------- (a) Each of the Borrower and the Guarantor 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 45 below are met, as follows: (i) The execution and delivery by each of the Borrower and the Guarantor of this Amendment and all other instruments and agreements required to be -47- executed and delivered by each of the Borrower and the Guarantor in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment --------- Documents"), and the performance by each of the Borrower and --------- the Guarantor 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 Borrower and the Guarantor, as the case may be, have been duly authorized by all necessary proceedings on behalf of each of the Borrower and the Guarantor, as the case may be, and do not and will not contravene any provision of law or of any judgment, order or decree applicable to or binding on the Borrower or the Guarantor, or of the Borrower's or the Guarantor'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 or the Guarantor. (ii) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which the Borrower or the Guarantor 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. (iii) 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 each of the Borrower and the Guarantor of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by each of the Borrower and the Guarantor of the transactions among the parties contemplated hereby and thereby or referred to herein or therein. (iv) 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. (v) Each of the Borrower and the Guarantor 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 -48- Amendment and the other Amendment Documents, there exists no Event of Default or Default. (b) Each of the Borrower and the Guarantor 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. 45. Effectiveness. ------------- (a) Section 1(e), Section 1(g), Sections 2 - 4, Section 6(a), Sections 7 - 13, Sections 14(b) - 28(b) (other than the revisions to Section 9.1(f)(iii) of the Loan Agreement described therein), Sections 29 - 31, Sections 32(b) - 43(a), and Sections 44 - 47 of 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: (i) This Amendment shall have been duly executed and delivered by the Borrower, the Guarantor, the Agent and the Banks and shall be in full force and effect. (ii) The Agent shall have received from the Secretary of each of the Borrower and the Guarantor a copy, certified by such Secretary to be true and complete as of such date, of (A) its charter or other organizational documents as in effect on such date of certification, (B) its by-laws as in effect on such date, and (C) 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 (A) and (B) of this subsection (ii), 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. (iii) The Agent shall have received from each of the Borrower 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 Amendment Documents. (iv) The Agent shall have received from each of the Borrower and the Guarantor a good standing certificate for such Person, issued by the Secretary of State of New York, 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. -49- (v) 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 and the Guarantor, concerning corporate or other applicable entity authority matters and the enforceability of each of the Amendment Documents, and the Loan Agreement and the other Loan Documents as amended thereby, and such other matters as the Agent may request. (vi) The Agent shall have received, for the pro --- rata account of each Bank which executes and delivers its ---- signature pages to the Agent, by February 20, 2002 in facsimile (to be followed by originals) or original form, waiver fees equal, in the case of each such Bank, to 0.20% multiplied by such Bank's Revolving Credit Commitment as in effect immediately prior to the effectiveness of this Amendment, provided that amounts previously received by the -------- Banks as negotiation fees pursuant to the Fee Letter dated as of January 31, 2002, between the Borrower and the Agent shall be credited against such waiver fees. (vii) 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 connection with the preparation of this Amendment and ancillary documentation. (viii) All reports, statements, schedules, certificates and other documents required to be delivered to the Agent and each Bank pursuant to Section 6.1 of the Loan Agreement, as amended by this Amendment, shall have been so delivered. (ix) The Fee Letter (as defined in the Loan Agreement, as amended hereby) shall have been duly executed and delivered by each of the Borrower and the Agent and shall be in full force and effect, provided that amounts previously -------- received by the Agent as an agent's fee pursuant to the Fee Letter dated as of January 31, 2002, between the Borrower and the Agent shall be credited against such agent's fee. (x) The Agent shall have received evidence of the consent of the Financial Agreement banks under the Collateral Agency Agreement to this Amendment and the transactions contemplated hereby, and of the waiver of any defaults existing immediately prior to the Effective Date under the Financial Agreement. (xi) The Agent shall have received projections for the Borrower showing quarterly profits and loss, balance sheets and covenant calculations. (xii) The Agent shall have received a copy of the signed engagement letter dated as of December 14, 2001, and evidencing the hiring of the Carl Marks Group. -50- (xiii) 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. (b)(i) Sections 1(a) - (d), Section 1(f), Section 5, Section 6(b), Section 14(a), Section 32(a) and Section 43(b) of this Amendment shall become effective as of the Effective Date, and (ii) the revisions to Section 9.1(f)(iii) of the Loan Agreement described in Section 28(b) of this Amendment shall become effective as of the Effective Date; in each case described in clauses (i) and (ii) of this subsection (b), upon the satisfaction of each of the following conditions, in a manner satisfactory to, and in form and substance satisfactory to, the Agent: (v) The satisfaction of all conditions precedent set forth in Section 45(a) of this Amendment. (w) The Agent shall have received evidence of (A) the consent of the Senior Note Holders (1) under the Collateral Agency Agreement, the Intercreditor Agreement and the Note Purchase Agreement to this Amendment and the transactions contemplated hereby, and (2) under the Collateral Agency Agreement and the Note Purchase Agreement to Amendment No. 3 (as such term is defined in the Financial Agreement) and the transactions contemplated thereby, and (B) the waiver of any defaults (including defaults occurring under Sections 9.5, 10.7, 10.8(e), 10.10, 10.13 and 10.14 of the Note Purchase Agreement) existing under the Note Purchase Agreement immediately prior to the date such consents and waiver are given, provided that such waiver and consents are given no -------- later than March 15, 2002. (x) The Agent shall have received evidence of the effectiveness of an amendment to the Financial Agreement and an amendment to the Intercreditor Agreement. (y) The Agent (in its capacity as Agent under the Loan Agreement, in its capacity as Collateral Agent under the Intercreditor Agreement, and in its capacity as Collateral Agent under the Collateral Agency Agreement) and the Banks shall have consented to the amendment of the Note Purchase Agreement for purposes of Section 2 of the Collateral Agency Agreement, Section 2 of the Intercreditor Agreement and Section 8.10 of the Loan Agreement. (z) Bingham Dana LLP shall have received payment of all fees and expenses outstanding as of the date the conditions in this Section 45(b) are satisfied, including, but not limited to, fees and expenses in connection with the preparation of necessary documentation. (c) Each of the parties signatory hereto agrees that the failure to obtain the waiver and consents of the Senior Note Holders required by Section 45(b)(w) hereof by -51- March 15, 2002 shall cause all amounts owing under the Loan Agreement to be immediately due and payable and shall accordingly constitute a payment Default under Section 9.1(a) of the Loan Agreement, as well as a covenant Default under Section 9.1(b) of the Loan Agreement. (d) For the avoidance of doubt, each of the parties signatory hereto acknowledges that any acceleration by the Senior Note Holders of the Senior Note Debt will constitute a new Event of Default under Section 9.1(f)(ii) of the Loan Agreement. (e) For the avoidance of doubt, each of the parties signatory hereto acknowledges and agrees that any proceeds of any lockbox collection held by the Agent for the benefit of the Agent and the Banks pursuant to this Amendment, any credit enhancement and any additional Collateral granted to the Agent for the benefit of the Agent and the Banks pursuant to this Amendment (including the stock of MFCC and the assets of MFCC), shall constitute "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. (f) Until such time as the Senior Note Holders provide the waiver and consents required by Section 45(b)(w) hereof, the Borrower hereby agrees that if the Borrower makes any prepayment of Senior Note Debt (other than the prepayment permitted to be made pursuant to Section 33(i) hereof), the Borrower shall simultaneously make a prepayment of the Borrower Obligations owing to the Agent and the Banks under the Loan Agreement and the other Loan Documents in an amount equal to (i)(x) the amount of the prepayment of Senior Note Debt divided by (y) the principal amount outstanding of the Senior Note Debt ------- -- multiplied by (ii) the Aggregate Revolving Credit Commitment, which ---------- -- prepayment shall be shared pro rata by the Banks in accordance with --- ---- their respective Percentages. Simultaneously with any such prepayment, the Borrower hereby agree to voluntarily reduce the Aggregate Revolving Credit Commitment in accordance with Section 2.4 of the Loan Agreement, with the Aggregate Revolving Credit Commitment being irrevocably reduced by an amount equal to the amount of the prepayment to be made to the Agent and the Banks pursuant to this clause (f), and each Bank's Revolving Credit Commitment being irrevocably reduced by an amount equal to its pro rata share of such prepayment. In the event that no --- ---- Bank Loans or other Borrower Obligations are outstanding at the time of such a prepayment of Senior Note Debt, no prepayment shall be made to the Banks, provided that the Borrower voluntarily reduces the Aggregate -------- Revolving Credit Commitment as set forth above in this subsection (f). 46. 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, the Swing Line Bank, the Collateral 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, the Swing Line Bank, the Collateral Agent or any Bank; and (c) each of the -52- Agent, the Swing Line Bank, the Collateral 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, the Swing Line Bank's, the Collateral 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, the Swing Line Bank, the Collateral Agent or any Bank to such Person, except the obligations to be performed by the Agent, the Swing Line Bank, the Collateral 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, the Swing Line Bank, the Collateral 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. 47. Miscellaneous Provisions. ------------------------ (a) The Borrower hereby ratifies and confirms all of its obligations to the Agent and the Banks under the Loan Agreement and the other Loan Documents, in each case as amended hereby, including, without limitation, the Bank 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 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, the Borrower agrees to pay on demand all costs and expenses, including reasonable attorneys' fees, of the Agent incurred in connection with this Amendment. -53- (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. [signature pages immediately follow] 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 E. 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: Senior Vice President THE BANK OF NEW YORK, as Documentation Agent and as one of the Banks By: /s/ Edward J. DeSalvio ---------------------------------------- Name: Edward J. DeSalvio Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Michael S. Camell ---------------------------------------- Name: Michael S. Camell Title: Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Jeff Millar ---------------------------------------- Name: Jeff Millar Title: Vice President By: /s/ Glenn D. Kreutzer ---------------------------------------- Name: Glenn D. Kreutzer Title: Vice President JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank) By: /s/ Carol A. Kernblath ---------------------------------------- Name: Carol A. Kernblath Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: /s/ Howard Weinberg ---------------------------------------- Name: Howard Weinberg Title: Senior Vice President By: /s/ Matilde Reyes ---------------------------------------- Name: Matilde Reyes Title: Vice President CITIBANK, N.A. (f/k/a European American Bank) By: /s/ George L. Stirling ---------------------------------------- Name: George L. Stirling Title: Vice President BANK LEUMI USA By: /s/ Paul Tine ---------------------------------------- Name: Paul Tine Title: Vice President HSBC BANK USA By: /s/ Bruce Wicks ---------------------------------------- Name: Bruce Wicks Title: Vice President ACKNOWLEDGED AND AGREED, - ------------------------ including for purposes of amendments - ------------------------------------ to the Guaranty by Medallion Taxi Media, Inc.: - ---------------------------------------------- MEDALLION TAXI MEDIA, INC. By: /s/ Alvin Murstein -------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack ------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer EXHIBIT X --------- Excess Dividend Calculations ---------------------------- For the Fiscal Quarter Ended: - ---------------------------- _________________ A. Excess Dividends ------ --------- 1. Adjusted Net Investment Income $_________ Multiplied by ---------- -- 2. Ninety Percent (90%) $____________ 3. Amount of Dividends Paid During the Prior Quarter $_________ 4. Excess Dividends (Line A(3) minus Line A(1)) $_________ ----- If Line 4 is positive, proceed to Part B; if $0 or a negative number, no Dividend Prepayment is Required. B. Dividend Prepayment -------- ---------- 1. Payment Amount One a. $2,400,000 $2,400,000 b. (i) .009 (ii) Amount of Section 8.2(g) Indebtedness $_________ (iii) Line (B)(1)(b)(i) multiplied by ---------- -- Line B(1)(b)(ii) $_________ c. Total of Payment Amount One (Line B(1)(a) plus Line (B)(1)(b)(iii)) $_________ ---- 2. Payment Amount Two a. (i) 4 (ii) Line A(4)(a) (iii) Total (Line B(2)(a)(i) multiplied by Line ---------- -- B(2)(a)(ii)) $___________ -2- b. (i) 0.8 (ii) Excess Dividends (Line A(4)) $___________ (iii) Total (Line B(2)(b)(i) multiplied by Line ---------- -- B(2)(b)(ii)) $___________ c. (i) Section 8.2(g) Indebtedness $___________ (ii) $220,000,000 $220,000,000 (iii) Line B(2)(c)(i) divided by Line B(2)(c)(ii) $___________ ------- -- (iv) Line B(2)(c)(iii) multiplied by 4 multiplied by ---------- -- ---------- -- Line A(4) $___________ d. Payment Amount Two (Line B(2)(a)(iii) plus Line B(2)(b)(iii) plus ---- ---- Line B(2)(c)(iv)) $___________ 3. Dividend Prepayment- The greater of Line (B)(1)(c) and Line B(2)(c) $___________ Medallion Funding Corp ---------------------- Schedule III ------------ Investment in Medallion Funding Chicago Corp $ 8,951,000 ------------- Intercompany Receivables Medallion Financial Corp 1,339,508 Medallion Business Credit 7,274 ------------- Total Intercompany Receivables 1,346,782 ------------- ------------- Total Investments in Affiliates $ 10,297,782 ============= Balances subject to year-end audit MEDALLION FUNDING CORP Schedule IV Bank Accounts - ----------- -------------
Account Bank Number Purpose Location - ---------------------------------------------------------------------------------------------- Fleet Bank 2189-006536 Operating 100 Federal Street, Boston, MA 02110 Fleet Bank 259802-1322 Zero balance Golden Bridge, NY 10526 Chase Bank 007-097387 Depository 11 West 51 ST NY, NY 10019 Chase Bank 023-059742 Depository 349 5th Ave at 34th Str NY 10016 420 Lexington Avenue New York, NY Bank of Leumi 124152401 De Minimis 10170 HSBC Bank USA 006-87823-7 De Minimis 250 Park Ave, NY, NY 10177 PO Box 5870,Grand Central Station, Citibank 028-07357-5 De Minimis NY, NY 10163
SCHEDULE 5 ADDBACK TO EBIT CALCULATION FOR EXTRAORDINARY PROFESSIONAL FEES RECORDED DURING THE QUARTER ENDING MARCH 31, 2002 Combined Medallion Medallion Financial & Company Total Funding Business Credit - -------------------------------------------------------------------------------- Kaye Scholer 125,000 125,000 0 Bingham Dana 188,000 38,000 150,000 Willkie Farr & Gallagher 156,000 31,000 125,000 Carl Marks Group 250,000 0 250,000 Nightingale 344,000 344,000 0 -------------------------------------------------- 1,063,000 538,000 525,000 ================================================== Schedule 8.3(f) SALES OF LOANS MADE BY THE BORROWER TO AN AFFILIATE PRIOR TO THE AMENDMENT NO. ------------------------------------------------------------------------------ 6 EFFECTIVE DATE ---------------- Transaction ----------- Month Sale # Seller Purchaser Amount ----- ------ ------ --------- ------ January February March 1 Medallion Capitol Medallion Funding $ 625,000.00 2 Business Lenders Medallion Financial $29,747,702.49 3 Business Lenders Medallion Financial $10,726,850.30 April 4 Medallion Capitol Medallion Funding $ 950,000.00 5 Business Lenders Medallion Financial $ 1,578,800.00 May 6 Business Lenders Medallion Financial $ 1,371,566.12 June 7 Medallion Capitol Medallion Funding $ 7,000,000.00 8 Business Lenders Medallion Financial $ 3,690,616.39 July 9 Business Credit Medallion Funding $ 2,500,000.00 August 10 Medallion Capitol Medallion Funding $ 1,500,000.00 11 Business Lenders Medallion Financial $ 1,145,788.83 September 12 Business Lenders Medallion Financial $ 3,225,125.21 13 Medallion Financial Medallion Funding $ 5,984,455.25 14 Medallion Financial Medallion Funding $ 668,070.96 15 Medallion Financial Medallion Funding $ 5,325,710.82 October 16 Freshstart Medallion Funding $ 6,071,858.27 17 Business Lenders Medallion Financial $ 2,336,056.16 November 18 Business Lenders Medallion Financial $ 1,250,675.00 19 Medallion Financial Medallion Funding $ 4,412,778.02 December 20 Business Lenders Medallion Financial $ 5,180,175.45 21 Medallion Funding Freshstart $ 4,172,682.00 22 Medallion Funding Medallion Capitol $ 3,525,054.00 23 Medallion Financial Medallion Funding $ 387,828.80 24 Medallion Financial Medallion Funding $ 624,021.42 January 25 Business Lenders Medallion Financial $ 1,674,031.65 26 Medallion Funding Freshstart $ 571,849.66 -2- February 27 Business Lenders Medallion Financial $ 79,500.00 28 Medallion Funding Freshstart $ 1,074,489.37 March 29 Business Lenders Medallion Financial $ 313,532.15 May 30 Medallion Funding Medallion Capital $ 950,000.00 June 31 Medallion Funding Medallion Capital $ 450,000.00 32 Medallion Funding Medallion Capital $ 6,691,423.44 EX-10.32 6 dex1032.txt SECOND AMENDED & RESTATED LOAN AGREEMENT Exhibit 10.32 SECOND AMENDED AND RESTATED LOAN AGREEMENT by and among MEDALLION FINANCIAL CORP., MEDALLION BUSINESS CREDIT, LLC THE LENDERS PARTY HERETO, FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association) AS AGENT AND SWING LINE LENDER and FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association) AS ARRANGER Dated as of September 22, 2000 TABLE OF CONTENTS ARTICLE 1. DEFINITIONS.........................................................1 Section 1.1. Defined Terms................................................1 Section 1.2. Other Definitional Provisions...............................25 ARTICLE 2. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS........................25 Section 2.1. Commitments and Loans.......................................25 Section 2.2. Revolving Credit, Term Loan and Swing Line Notes............30 Section 2.3. Procedures Applicable to Borrowings and Conversions.........34 Section 2.4. Termination and Reduction of Aggregate Revolving Credit Commitment................................................................38 Section 2.5. Prepayments; Mandatory Payment of Term Loans................39 Section 2.6. Interest on Delinquent Payments.............................41 Section 2.7. Increased Costs.............................................42 Section 2.8. Use of Proceeds.............................................44 Section 2.9. Payment on Non-Business Days................................45 Section 2.10. Term of Revolving Credit Commitments.......................45 Section 2.11. Funding Losses.............................................47 Section 2.12. Alternate Rate of Interest.................................47 Section 2.13. Changes In Legality........................................48 Section 2.14. Participations.............................................48 ARTICLE 3. FEES AND PAYMENTS.................................................49 Section 3.1. Fees........................................................49 Section 3.2. Payments....................................................49 Section 3.3. Taxes.......................................................50 ARTICLE 4. REPRESENTATIONS AND WARRANTIES....................................52 Section 4.1. Corporate Status............................................52 Section 4.2. Subsidiaries................................................52 Section 4.3. Location of Offices, Books and Records......................52 Section 4.4. Corporate Power; Authorization..............................52 Section 4.5. Enforceable Obligations.....................................53 Section 4.6. No Violation of Agreements; Compliance with Law.............53 Section 4.7. Agreements..................................................53 Section 4.8. No Material Litigation......................................54 Section 4.9. Good Title to Properties....................................54 Section 4.10. Margin Regulations.........................................54 Section 4.11. [Reserved].................................................55 Section 4.12. Investment Company.........................................55 Section 4.13. Disclosure.................................................55 Section 4.14. Taxes and Claims...........................................55 Section 4.15. Licenses and Permits.......................................56 Section 4.16. Consents...................................................56 Section 4.17. Employee Benefit Plans.....................................56 Section 4.18. Financial Condition........................................57 -i- Section 4.19. Environmental Laws, Etc....................................57 Section 4.20. Event of Default...........................................57 Section 4.21. Solvency...................................................58 Section 4.22. Priority; Continued Effectiveness..........................58 Section 4.23. Advertising, Origination and Servicing Activities..........58 Section 4.24. Activities.................................................58 Section 4.25. [Reserved].................................................58 Section 4.26. [Reserved].................................................58 Section 4.27. Non-Affiliation with Banks.................................58 ARTICLE 5. CONDITIONS PRECEDENT..............................................59 Section 5.1. Conditions to Initial Revolving Credit Loan and Initial Swing Line Loan...........................................................59 Section 5.2. Conditions to All Revolving Credit and Term Loans...........62 ARTICLE 6. AFFIRMATIVE COVENANTS.............................................63 Section 6.1. Financial Statements and Other Information..................63 Section 6.2. Taxes and Claims............................................66 Section 6.3. Insurance...................................................67 Section 6.4. Books and Records...........................................68 Section 6.5. Properties in Good Condition................................68 Section 6.6. Inspection by the Banks.....................................68 Section 6.7. Pay Indebtedness to Agent and Perform Other Covenants.......68 Section 6.8. Compliance With Laws, Etc...................................69 Section 6.9. Notice of Certain Events....................................69 Section 6.10. Environmental Laws, Etc....................................69 Section 6.11. Further Assurances.........................................70 Section 6.12. ERISA......................................................70 Section 6.13. Corporate or Limited Liability Company Existence...........70 Section 6.14. Maintenance of Security Interest...........................71 Section 6.15. Maximum Percentage of Commercial Loans.....................71 Section 6.16. Reserved...................................................71 Section 6.17. Borrowers' Manuals.........................................71 Section 6.18. Principal Office of Clients................................71 ARTICLE 7. FINANCIAL COVENANTS...............................................73 Section 7.1. Maximum Consolidated Leverage Ratio.........................73 Section 7.2. Maximum Combined Leverage Ratio.............................73 Section 7.3. Borrowing Base..............................................73 Section 7.4. Minimum EBIT to Interest Expense Ratio......................73 Section 7.5. Minimum Asset Quality.......................................74 ARTICLE 8. NEGATIVE COVENANTS................................................74 Section 8.1. Liens.......................................................74 Section 8.2. Indebtedness................................................75 Section 8.3. Limitation on Loans and Investments.........................76 Section 8.4. [Reserved]..................................................78 Section 8.5. Restricted Payments.........................................78 -ii- Section 8.6. Merger, Consolidation, Sale or Transfers of Assets..........78 Section 8.7. Transfer of Proceeds........................................79 Section 8.8. Compliance with ERISA.......................................79 Section 8.9. Change in Business..........................................79 Section 8.10. Amendments of Agreements...................................79 Section 8.11. Transactions with Affiliates...............................79 Section 8.12. Negative Pledges...........................................80 Section 8.13. Inconsistent Agreements....................................80 Section 8.14. Capital Expenditures.......................................80 Section 8.15. [Reserved].................................................80 Section 8.16. Portfolio Purchases........................................80 ARTICLE 9. DEFAULTS AND REMEDIES.............................................81 Section 9.1. Events of Default...........................................81 Section 9.2. Suits for Enforcement.......................................85 Section 9.3. Rights and Remedies Cumulative..............................85 Section 9.4. Rights and Remedies Not Waived..............................85 Section 9.5. Further Payments............................................86 ARTICLE 10. MISCELLANEOUS....................................................86 Section 10.1. Collection Costs...........................................86 Section 10.2. Modification and Waiver....................................87 Section 10.3. Governing Law..............................................88 Section 10.4. Notices....................................................88 Section 10.5. Accounting Terms...........................................88 Section 10.6. Costs and Expenses; Indemnity..............................89 Section 10.7. Waiver of Jury Trial and Setoff............................90 Section 10.8. Captions...................................................91 Section 10.9. Lien; Setoff by Banks......................................91 Section 10.10. Security; Continued Effectiveness.........................92 Section 10.11. Jurisdiction; Service of Process..........................92 Section 10.12. Benefit of Agreement......................................93 Section 10.13. Counterparts..............................................93 Section 10.14. Interest..................................................93 Section 10.15. Attorneys' Fees...........................................94 Section 10.16. Severability..............................................94 Section 10.17. Confidentiality...........................................95 Section 10.18. Loss, Theft, Etc. of Notes................................95 ARTICLE 11. AGENCY...........................................................95 Section 11.1. Appointment and Actions....................................96 Section 11.2. Independent Credit Decisions...............................99 Section 11.3. Indemnification of Agent...................................99 Section 11.4. Closing Documents, etc....................................100 Section 11.5. Resignation and Succession................................100 ARTICLE 12. SALES AND TRANSFERS.............................................101 Section 12.1. Sales and Transfers.......................................101 Section 12.2. New Banks.................................................104 -iii- Section 12.3. Joint and Several Liability...............................106 ARTICLE 13. GUARANTEE.......................................................106 Section 13.1. Guarantee.................................................106 Section 13.2. Absolute Obligation.......................................107 Section 13.3. Repayment in Bankruptcy...................................109 Section 13.4. Miscellaneous.............................................109 Section 13.5. Subordination.............................................109 ARTICLE 14. BORROWER AGENCY.................................................110 Section 14.1. Appointment and Actions...................................110 ARTICLE 15. TRANSITIONAL ARRANGEMENTS.......................................110 15.1. Prior Credit Agreement Superseded................................110 15.2. Return and Cancellation of Notes.................................110 15.3. Fees Under Superseded Agreement..................................110 Exhibits and Schedules - ---------------------- Exhibit A Percentages; Agent Payment Office Exhibit B Form of Revolving Credit Note Exhibit C Form of Term Note Exhibit D Form of Swing Line Note Exhibit E Form of Loan Request Exhibit F Form of Security Agreement Exhibit G Form of Borrowing Base Certificate Exhibit H Form of Opinion of Counsel to Borrower Exhibit I Form of Assignment and Acceptance Schedule I Locations, Chief Executive Office Schedule II Subsidiaries Schedule III Investments in Affiliates -iv- SECOND AMENDED AND RESTATED LOAN AGREEMENT, dated as of September 22, 2000, 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 that from time to time are signatories hereto (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, MFC, the Agent, the Swing Line Lender and the Banks entered into a Loan Agreement dated as of July 31, 1998 (as amended, the "Original Agreement"); WHEREAS, MFC, MBC, the Agent, the Swing Line Lender and the Banks amended and restated the Original Agreement pursuant to an Amended and Restated Loan Agreement dated as of June 29, 1999, as amended as of December 31, 1999 and as further amended as of June 20, 2000 (as so amended, the "First Restatement"); WHEREAS, the parties to the First Restatement wish to amend and restate the First Restatement in its entirety as set forth herein to, among other things, increase the Aggregate Revolving Credit Commitment and extend the maturity of the First Restatement, all on the terms and conditions hereinafter set forth; and WHEREAS, for convenience, this Agreement is dated as of September 22, 2000, and references to certain matters related to the period prior thereto have been deleted; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1. DEFINITIONS Section 1.1. Defined Terms. ------------- As used in this Agreement, the terms defined in the recitals hereto shall have the respective meanings ascribed thereto in said recitals and the following terms shall have the following respective meanings: "Account Debtor" shall mean any Person which is or which may become obligated to a Client under or on account of a Receivable. "Accumulated Funding Deficiency" shall have the meaning set forth in Section 302 of ERISA. -1- "Additional Commitment Amount" shall have the meaning set forth in Section 12.2 hereof. "Adjusted LIBOR Rate" shall mean, with respect to any Interest Period applicable to any LIBOR Rate Loan, the rate of interest per annum, as determined by the Agent, equal to the quotient (rounded to the nearest 1/100 of 1.00% or, if there is no nearest 1/100 of 1.00%, then to the next higher 1/100 of 1.00%) obtained by dividing the LIBOR Base Rate by an amount equal to the result obtained by subtracting the Eurodollar Reserve Percentage (expressed as a decimal) from 1.00. The Adjusted LIBOR Rate shall be adjusted automatically on and as of the opening of business on the effective date of any change in the Eurodollar Reserve Percentage. "Adjusted Net Investment Income" shall mean, with respect to either Borrower, and calculated on a Consolidated or Unconsolidated basis, as otherwise specified herein, 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 such Borrower for such period, which shall be an amount equal to net revenues and other proper items of income less the aggregate for such 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; provided that with respect to the covenant contained in Section 7.4(b) hereof, such gains and losses shall only be calculated with respect to the Loans, and shall exclude any gains or losses related to equity investments or similar items. "Affiliate" shall mean any Person which, directly or indirectly, controls or is controlled by or is under common control with any other Person and, without limiting the generality of the foregoing, shall include any Person who (a) beneficially owns or holds 20% or more of the Voting Interests of such other Person (determined either by number of shares or number of votes) or (b) is an associate (as such term is defined in Rule 405 of the Securities Act of 1933, as in effect on the Second Restatement Effective Date) of such other Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Affiliated Person" has the meaning ascribed to that term in the 1940 Act and the rules and regulations thereunder. "Agent Payment Office" shall mean with respect to all amounts owing under the Loan Documents, initially, the office, branch, affiliate, or correspondent bank of the Agent designated as its "Payment Office" on Exhibit A to this Agreement and, -2- thereafter, such other office, branch, affiliate, or correspondent bank thereof as it may from time to time designate in writing as such to the Borrowers, the Swing Line Lender and each Bank. "Aggregate Revolving Credit Commitment" shall mean $110,000,000, as the same may be reduced, terminated or increased from time to time pursuant to Sections 2.1(d), 2.4, 2.10, 9.1 or 12.2 hereof. "Agreement" shall mean this Loan Agreement, as the same may be amended and supplemented from time to time. "Amount" shall mean, (a) with respect to any Loan, the principal amount of, plus all accrued and unpaid interest on, and all other amounts due in respect of, such Loan and (b) with respect to any Receivable, all amounts due in respect of such Receivable. "Applicable Facility Percentage" means 0.15%. "Applicable Prime Rate Margin" means 0.50% in the case of any Prime Rate Loan that is a Revolving Credit Loan and 0.25% in the case of any Prime Rate Loan that is a Term Loan. "Applicable LIBOR Margin" means 1.30% in the case of any LIBOR Rate Loan that is a Revolving Credit Loan and 1.50% in the case of any LIBOR Rate Loan that is a Term Loan. "Assignee" or "Assignees" shall have the meaning set forth in Section 12.1 hereof. "Assignment" or "Assignments" shall have the meaning set forth in Section 12.1 hereof. "Assignor" or "Assignors" shall have the meaning set forth in Section 12.1 hereof. "Authorized Representative" shall mean, with respect to either Borrower, its chairman, president, chief executive officer, chief operating officer, chief accounting officer, vice president or chief financial officer, or any other officer of such Borrower designated as such from time to time by such Borrower in a written notice to the Agent, accompanied by an incumbency certificate with specimen signature included. "Banking Day" shall mean any Business Day on which dealings in deposits in Dollars are transacted in the London interbank market. "BL" shall mean Business Lenders, LLC, a Delaware limited liability company, the sole member of which is MFC. "Board" shall mean the Board of Governors of the Federal Reserve System. -3- "Borrowing Base Certificate" shall mean a certificate substantially in the form of Exhibit G hereto, which Borrowing Base Certificate shall identify all such information separately for MFC and MBC. "Borrower Financing Statements" shall mean financing statements executed by either Borrower for filing in accordance with the Uniform Commercial Code, and all other titles, certificates, assignments and other documents that the Agent or any Bank may require, in each case in order to perfect the security interests to be granted under the Security Agreement. "Borrower Obligations" shall mean, with respect to MFC, all of the indebtedness, obligations and liabilities of MFC under any of the Loan Documents and, with respect to MBC, all of the indebtedness, obligations and liabilities of MBC under any of the Loan Documents, in each case whether direct or indirect, joint or several, fixed, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, now existing or hereafter arising, created, assumed, incurred or acquired including (i) any obligation or liability in respect of any breach of any representation or warranty, and (ii) all post-petition interest and funding losses. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which the Agent is not open for business at its offices set forth in this Agreement. "Capital Stock" with respect to any corporation, 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 corporation. "Change of Control" shall mean the occurrence of one or more of the following events: (i) MFC shall cease to own 100% of the Voting Interests or Capital Stock of MBC, (ii) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended), other than Alvin Murstein and Andrew M. Murstein, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 20% or more of the Voting Interests or Capital Stock of MFC, or (iii) the replacement of more than one-third of the board of directors of any Borrower over a one-year period from the directors who constituted the board of directors of such Borrower, as applicable, at the beginning of such period, and such replacement shall not (1) have been approved by a vote of at least a majority of the board of directors of such Borrower, as applicable, then still in office who either were members of such board of directors at the beginning of such period or whose election as a member of such board of directors was previously so approved, or (2) in the case of MBC, have been elected or nominated for election by MFC. "Client" shall mean, with respect to any Loan, any Person, not disapproved by the Agent or the Required Banks in writing in its or their sole discretion, which is obligated to make payments in respect of such Loan (other than any Account -4- Debtor). For purposes of this Agreement and the other Loan Documents, any Client that is an Affiliate of another Client shall be deemed to be one and the same Client. "Code" shall mean the Internal Revenue Code of 1986, and all rules and regulations promulgated pursuant thereto, as the same may be amended or supplemented from time to time. "Code Section 4975" shall mean, at any date, Section 4975 of the Code. "Collateral" shall mean and include the assets, property or interests in property of whatever nature whatsoever, real, personal or mixed, tangible or intangible, of MFC and/or MBC 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. "Combined MFC/MBC Tangible Net Worth" shall mean the sum of Unconsolidated Tangible Net Worth of MFC plus Unconsolidated Tangible Net Worth of MBC plus negative good will of MFC plus negative good will of MBC. "Commercial Loans" shall mean Loans that are secured in whole or in part by Real Property, Inventory, Equipment and/or Receivables and that are not Medallion Loans. "Commercial Paper" shall mean any and all commercial paper issued jointly and severally by the Borrowers to the CP Holders from time to time pursuant to a Commercial Paper Dealer Agreement and a Paying Agency Agreement. "Commercial Paper Dealer Agreement" shall mean one or more commercial paper dealer agreements between the Borrowers and a dealer for the issuance and sale of Commercial Paper by the Borrowers, as the same shall be amended from time to time, each as approved by the Agent and the Required Banks in writing in advance. "CP Debt" shall mean all Indebtedness of the Borrowers to the CP Holders in respect of Commercial Paper from time to time outstanding. "CP Holders" shall mean each of the holders from time to time of outstanding Commercial Paper. "Consolidated" or "consolidated" shall mean, with reference to any term defined herein, that term as applied to the accounts of MFC consolidated with each of its subsidiaries in accordance with GAAP or, as the case may be, that term as applied to the accounts of MBC consolidated with each of its subsidiaries (if any) in accordance with GAAP or, as the case may be, that term as applied to the -5- accounts of any other Person consolidated with each of its subsidiaries (if any) in accordance with GAAP. "Default" shall mean any of the events specified in Section 9.1 hereof, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Default Rate" shall have the meaning set forth in Section 2.6 hereof. "Delinquent Receivables Loan" shall mean a Loan secured by Receivables as to which any payment with respect to any amount due in connection with any such Receivable is not made within 90 calendar days after such payment was originally due (without regard to any stated grace period). "Derivative contract" of a Person shall mean every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, floors, collars and similar agreements, but excluding cap agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices. "Dividends" shall mean for the most recently completed four fiscal quarters of the applicable Borrower, the sum of all (a) paid cash dividends on Capital Stock of such Borrower plus (b) accrued and unpaid cash dividends on Capital Stock of such Borrower. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "Domestic Investment" shall mean an Investment in respect of a Person which is a resident of the United States, Canada or Bermuda or a Person (other than a Governmental Authority) organized or qualified under the laws of any state of the United States or the District of Columbia, excluding any such Investment that is a Portfolio Purchase. "Domestic Loan" shall mean a Loan that is denominated and payable only in Dollars and for which the Persons that are obligated to pay such Loan are residents of the United States, Canada or Bermuda or Persons (other than a Governmental Authority) organized or qualified under the laws of any state of the United States or the District of Columbia. "EBIT" shall mean, with respect to either Borrower for any period, and calculated on a Consolidated or Unconsolidated basis, as otherwise specified herein, the sum of (i) Adjusted Net Investment Income, plus (ii) Interest Expense, plus (iii) Federal, state and local income taxes, if any, in each case of such Borrower for such period, computed in accordance with GAAP. -6- "Eligibility Requirements" with respect to any Loan, shall mean the following requirements: (a) such Loan is made to, and is a recourse obligation of, the Person to whom such Loan is made, (b) such Loan is a Domestic Loan, (c) [Reserved], (d) such Loan is pledged in accordance with the Security Agreement, (e) such Loan is made to an Eligible Client, (f) the representations, warranties and covenants contained in the Security Agreement are true and correct, and have been complied with, with respect to such Loan, (g) the Agent, on behalf of the Banks, has a perfected, first priority security interest in such Loan, (h) such Loan is made in accordance with the credit policy of the applicable Borrower in existence at the time such Loan is made, and (i) the monetary terms, payment terms, financial covenants, negative covenants and any other material terms governing such Loan have not been amended, modified or waived more than once in any 12 month period on account of the Person to whom such Loan was made being unable to comply (for whatever reason) with such terms. Notwithstanding the foregoing, no Loan shall be deemed to have satisfied the Eligibility Requirements if the Agent or the Required Banks believe that such Loan may not be paid in accordance with its original terms or are insecure for any reason, including, without limitation, because of the Eligible Client's financial inability to pay or because the Eligible Client has disputed its liability, asserted any right of set-off or has made a claim with respect to any other Loan made to such Eligible Client by either Borrower, other than as a nominal adjustment in the ordinary course of business and in accordance with regular commercial practice. "Eligible Client" shall mean, on any date, any Client that meets all the following criteria: (a) such Client is not an Affiliate of a Borrower or its Subsidiaries, (b) less than 30% of the Amount of all Commercial Loans to such Client constitute Delinquent Receivables Loans, and -7- (c) the Amount of Loans to such Client in the aggregate does not exceed 20% of the applicable Borrower's Unconsolidated Tangible Net Worth as of such date. "Eligible Commercial Loan" shall mean any Commercial Loan that satisfies the Eligibility Requirements and (a) that is secured by Eligible Equipment, Eligible Inventory, Eligible Real Estate or Eligible Receivables and (b) that is made to an Eligible Client that is an ongoing business concern; provided that no Loan shall be an Eligible Commercial Loan (i) if a Borrower, in its reasonable business judgment, deems such Eligible Commercial 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 Loan or accrued interest thereon is more than 60 days past due. "Eligible Equipment" of any Borrower shall mean Equipment in which a perfected security interest has been obtained by such Borrower in accordance with its standard credit policy and underwriting criteria at such time to secure the obligations of a Client under a Loan by such Borrower to such Client, or in the case of Equipment of a beneficial owner of such Client, to secure a guaranty which shall have been made by such beneficial owner guaranteeing such Loan, and the same has been assigned to the Agent, for the benefit of the Banks, pursuant to the Security Agreement and the same is otherwise satisfactory to the Agent. "Eligible Inventory" of any Borrower shall mean Inventory in which a first priority perfected security interest has been obtained by such Borrower to secure the obligations of a Client under a Loan by such Borrower to such Client, or in the case of Inventory of a beneficial owner of such Client, to secure a guaranty which shall have been made by such beneficial owner guaranteeing such Loan, and the same has been assigned to the Agent, for the benefit of the Banks, pursuant to the Security Agreement. Notwithstanding the foregoing, Eligible Inventory does not include any of the following: (a) catalogs and other promotional materials of any kind; (b) work in process; (c) any returned items; (d) any damaged, defective or recalled items; (e) any obsolete items; (f) any items used as demonstrators, prototypes or salesmen's samples; (g) any items of inventory which have been consigned to a Client or as to which a Person claims a Lien or which is subject to any other legal encumbrance; (h) any items of inventory which have been consigned by the Client to a consignee; (i) packing and shipping materials; (j) inventory located on premises leased by the Client from a landlord with whom the applicable Borrower has not entered into a landlord's waiver on terms satisfactory to such Borrower; (k) inventory that is not located in the United States of America and (l) inventory which in the reasonable judgment of the applicable Borrower, in accordance with its standard criteria, is considered to be slow-moving or otherwise not merchantable. Eligible Inventory shall be valued at the lower of (a) cost, (b) market value, or (c) the valuation consistent with that employed in the preparation of the financial statements of the applicable Client. "Eligible Loans" shall mean any Loan that constitutes or comprises either an Eligible Medallion Loan or Eligible Commercial Loan. -8- "Eligible Medallion Loan" shall mean any Medallion Loan that satisfies the Eligibility Requirements and (a) that is secured by Medallion Rights and (b) that is made to an Eligible Client that is an ongoing business concern; provided, that, no Loan shall be an Eligible Medallion Loan (i) if a Borrower, in its reasonable business judgment, deems such Eligible Medallion 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 Loan or accrued interest thereon is more than 60 days past due. "Eligible Real Estate" of either Borrower shall mean Real Property in which a mortgage interest has been obtained (and continuously maintained) by such Borrower to secure the obligations of the Client under a Loan by such Borrower to such Client, or in the case of Real Property of a beneficial owner of such Client, to secure a guaranty which shall have been made by such beneficial owner guaranteeing the Loan, and assigned to the Agent, for the benefit of the Banks, pursuant to a Mortgage Assignment. "Eligible Receivables" of either Borrower shall mean Receivables (i) that are reasonably determined in good faith to be collectible by such Borrower, (ii) that arise in the ordinary course of a Person's business, (iii) that are net of credits, rebates, offsets, holdbacks or adjustments and (iv) in which a first priority perfected security interest has been obtained by such Borrower to secure the obligations of such Person under a Loan by such Borrower to such Person, or in the case of Receivables of a beneficial owner of such Client, to secure a guaranty which shall have been made by such beneficial owner guaranteeing such Loan, and the same has been assigned to the Agent, for the benefit of the Banks, pursuant to the Security Agreement. Notwithstanding the foregoing, no Receivable shall be an Eligible Receivable (a) if payment with respect to any amount due in connection therewith is not made within 90 calendar days after such payment was originally due (without regard to any stated grace period); (b) to the extent that such Receivable is subject to any offset, discount, counterclaim, contra-account or any other defense of any kind or character; or (c) if the Agent or the Required Banks believe that such Receivable may not be paid in accordance with its original terms or are insecure for any reason, including, without limitation, because of the Account Debtor's bankruptcy, death, incapacity or financial inability to pay or because the Account Debtor has disputed the liability, asserted any right of set-off or has made a claim with respect to any other Receivable payable by such Account Debtor to such Client, other than as a nominal adjustment in the ordinary course of business and in accordance with regular commercial practice. "Eligible Section 7a Loans" shall mean Eligible Commercial Loans which meet the requirements of the SBI Act and the SBA Regulations under its Section 7(a) loan program. -9- "Equipment" shall mean all machinery, equipment, fixtures, vehicles, office equipment, furniture, furnishings, inventories, supplies, computer equipment, and all other equipment whatsoever, wherever located, together with all attachments, components, parts, equipment and accessories installed therein or affixed thereto, including, but not limited to, all equipment as defined in Section 9-109(2) of the UCC and all products, profits, rents and proceeds of any of the foregoing; all whether now owned or hereafter created or acquired. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean an entity, whether or not incorporated, which controls, is controlled by, or is under common control with, either Borrower within the meaning of Section 4001 of ERISA. "ERISA Termination Event" shall mean (i) a Reportable Event, (ii) the withdrawal of either Borrower or any of its ERISA Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "Eurodollar Reserve Percentage" shall mean, with respect to the calculation of the Adjusted LIBOR Rate for any Interest Period, the percentage (expressed as a decimal) that is in effect on the date such calculation is made, as prescribed by the Board for determining the maximum reserve requirement (including without limitation any basic, marginal, special, supplemental or emergency reserves and determined without benefit of any credits for proration, exceptions, or offsets that may be available from time to time) for a member bank of the Federal Reserve System applicable to Eurocurrency funding by such member bank, currently referred to as "Eurocurrency liabilities" in Regulation D of the Board (or in respect of any other category of liabilities, which includes deposits by reference to which the interest rate on LIBOR Rate Loans is determined, or any category of extensions of credit or other assets, including loans by a non-United States office of any Bank to United States residents). "Event of Default" shall mean any of the events specified in Section 9.1 hereof. "Exposure Percentage" shall mean as of any date and with respect to the Swing Line Lender or any Bank, as the case may be, a fraction the numerator of which is the Exposures on such date of the Swing Line Lender or such Bank, as applicable, and the denominator of which is the aggregate Exposures on such date of the Swing Line Lender and all Banks. -10- "Exposures" shall mean, as of any date, with respect to the Swing Line Lender or any Bank, as the case may be, and, as the context requires, the Revolving Credit Loans, Swing Line Loans and/or Term Loans (each a "Loan Type"), an amount equal to (i) the outstanding principal amount on such date of all loans of such Loan Type owed to such Bank, plus (ii) with respect to the Swing Line Lender only and only when the Loan Type is a Swing Line Loan, the excess of (a) the outstanding principal amount on such date of all Swing Line Loans, minus (b) all payments made to the Swing Line Lender by the Borrowers and the Banks in repayment thereof or participation therein, as the case may be, plus (iii) with respect to each Bank, the excess of (a) the aggregate sum of all payments by such Bank in acquiring participations in Swing Line Loans, minus (b) all reimbursements of such Bank in respect thereof. "Facility Fee" shall mean the fee required to be paid pursuant to Section 3.1 hereof. "Federal Funds Rate" shall mean, for any day, a rate per annum (expressed as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that, (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average of the quotations for such day on such transactions received by the Agent. "Fee Letter" shall mean that certain letter agreement among the Borrowers and the Agent of even date herewith. "First Restatement" shall have the meaning set forth in the preamble hereto. "First Restatement Effective Date" shall mean June 29, 1999, which was the effective date of the First Restatement. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government, and any corporation or other entity owned or controlled (through ownership of Capital Stock or otherwise) by any of the foregoing. "Hazardous Materials" shall mean and include, without limitation, gasoline, petroleum products, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated -11- biphenyls or related or similar materials, asbestos or any material containing asbestos, or any other substance or material as may be defined as a hazardous or toxic substance by any Federal, state or local environmental law, ordinance, rule or regulation. "Increased Costs Notice" shall have the meaning set forth in Section 2.7(b) hereof. "Indebtedness" of a Person shall mean and include, without duplication, (i) all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date Indebtedness of such Person is to be determined, other than dividends on Capital Stock declared but not paid to the extent such dividends are not Restricted Payments, (ii) any liability secured by any Lien on property owned or acquired by such Person, whether or not such liability shall have been assumed by such Person, (iii) guaranties, endorsements (other than for collection in the ordinary course of business), reimbursement obligations in respect of undrawn letters of credit and other contingent obligations of such Person in respect of the obligations of others, (iv) all obligations of such Person in respect of Derivative Contracts. "Independent Public Accountants" shall mean Arthur Andersen LLP or such other nationally recognized firm of independent certified public accountants selected by the Borrowers. "Initial Revolving Credit Loan" shall mean the Revolving Credit Loan or Revolving Credit Loans made by the Banks to either or both of the Borrowers on the Second Restatement Effective Date. "Initial Term" shall mean the period from and including the Second Restatement Effective Date to and including September 21, 2001. "Instrument of Adherence" shall have the meaning set forth in Section 12.2 hereof. "Interest Expense" shall mean, for any period with respect to either Borrower, and calculated on a Consolidated or Unconsolidated basis, as otherwise specified herein, all interest paid or scheduled to be paid (including amortization of original issue discount and non-cash interest payments or accruals and the interest component of leases that, in accordance with GAAP, are capitalized leases) by such Borrower during such period on Indebtedness of such Borrower. "Interest Period" shall have the meaning set forth in Section 2.2(d) hereof. "Inventory" shall mean, with respect to any Person, all goods held by such Person for sale or lease by such Person, or to be furnished under contracts of service, in each case in the ordinary course of such Person's business. -12- "Inventory Loans" shall mean Loans secured in whole or in part by Inventory. "Investment" in any Person shall mean any loan, advance, or extension of credit to or for the account of; any guaranty, endorsement or other direct or indirect contingent liability in connection with the obligations, Capital Stock or dividends of; any ownership, purchase or acquisition of any assets, business, Capital Stock, obligations or securities of; or any other interest in or capital contribution to; such Person, but shall not include (a) any Loan, (b) any Investment permitted by Section 8.14 hereof and (c) any Portfolio Purchase. "LIBOR Base Rate" shall mean, with respect to any Interest Period, the rate per annum as determined on the basis of the offered rates for deposits in Dollars, for a period of time comparable to such Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m. London time on the day that is two Banking Days preceding the first day of such Interest Period; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR Base Rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in Dollars for a period of time comparable to such Interest Period which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) Banking Days preceding the first day of such Interest Period as selected by the Agent. The principal London office of each of the four major London banks will be requested to provide a quotation of its Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in Dollars to leading European banks for a period of time comparable to such Interest Period offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that is two Banking Days preceding the first day of such Interest Period. In the event that the Agent is unable to obtain any such quotation as provided above, it will be deemed that the LIBOR Base Rate for a LIBOR Rate Loan cannot be determined. "LIBOR Rate Loan" shall mean a Revolving Credit Loan or Term Loan bearing interest during an Interest Period applicable to such Revolving Credit Loan or Term Loan at a fixed rate of interest determined by reference to the Adjusted LIBOR Rate plus the applicable margin as specified in Section 2.2(c)(i) hereof in the case of a Revolving Credit Loan and as specified in Section 2.2(c)(iii) hereof in the case of a Term Loan. "Lien" shall mean any interest in property securing an obligation owed to a Person, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" includes reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases -13- and other similar title exceptions and encumbrances, including but not limited to mechanics', materialmen's, warehousemen's, carriers' and other similar encumbrances, affecting property. "Loan" shall mean any loan or advance made in the ordinary course of business by a Borrower (which for purposes of this definition shall include those acquired pursuant to a Portfolio Purchase that is permitted pursuant to the terms of this Agreement) to or for the account of any Client or customer of such Borrower, which loan, advance or extension of credit is permitted pursuant to the terms of this Agreement. Any loan, advance or extension of credit made at a different point in time than another loan, advance or extension of credit shall be deemed to be a separate and distinct 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 and each other document, instrument or agreement executed pursuant to, or in connection with, any Loan Document. "Loan Request" shall mean a request for one or more Revolving Credit Loans or Swing Line Loans or for the continuation or conversion of any Revolving Credit Loan, Term Loan or Swing Line Loan substantially in the form of Exhibit E hereto, executed by an Authorized Representative on behalf of a Borrower. "Material Adverse Effect" shall mean an event, action or condition affecting any Person or any of its properties or revenues that would (i) adversely affect the validity or enforceability of, or the authority of such Person to perform its obligations under, any of the Loan Documents to which it is a party, or (ii) materially adversely affect the business, operations, assets or condition (financial or otherwise) of such Person or the ability of such Person to perform its obligations under any of the Loan Documents to which it is a party or (iii) materially adversely affect the value of the Collateral. Unless the context otherwise requires, any reference to Material Adverse Effect shall mean and refer to a Material Adverse Effect with respect to either Borrower. "Maturity" shall have the meaning set forth in Section 2.2(b) hereof. "MBC" shall mean Medallion Business Credit, LLC, a Delaware limited liability company the sole member of which is MFC. "MBC Borrowing Base" shall mean, as determined pursuant to the most recently required Borrowing Base Certificate (i) cash and Short Term Investments shown on MBC's balance sheet as of such date, plus -14- (ii) 83.3% of the aggregate outstanding principal balances of, plus accrued interest on, all of MBC's Eligible Medallion Loans from time to time outstanding that are Retained Loans, plus (iii) 80% of the aggregate outstanding principal balances of, plus accrued interest on, all of MBC's Eligible Commercial Loans from time to time outstanding that are Retained Loans, provided, that, if all or any part of any Loan would be excluded as an Eligible Commercial Loan or Eligible Medallion 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. "Medallion" shall mean the plate which displays the license number of a licensed Taxicab on the outside of the vehicle and which is issued by the New York City Taxi and Limousine Commission, or by any other similar Governmental Authority for a jurisdiction other than New York City charged with the authority to issue licenses for the operation of Taxicabs. "Medallion Capital" shall mean Medallion Capital, Inc., a Minnesota corporation which is a wholly owned Subsidiary of MFC. "Medallion Funding" shall mean Medallion Funding Corp., a New York corporation which is a wholly owned Subsidiary of MFC. "Medallion Loans" shall mean Loans secured in whole or in part by Medallion Rights. "Medallion Rights" shall mean, as to either Borrower, all license, operating and/or subscription rights to Taxicab Medallion(s), and all license, operating and/or subscription rights evidenced by such Medallions, and all renewals thereof, in which a perfected security interest has been obtained by such Borrower to secure the Loan made by such Borrower to such Person (including pursuant to all applicable local regulations governing such Medallions), and assigned to the Agent, for the benefit of the Banks, pursuant to the Security Agreement, as the case may be. "MFC Borrowing Base" shall mean, as determined pursuant to the most recently required Borrowing Base Certificate: (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 -15- (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; provided, that, if all or any part of any Loan would be excluded as an Eligible Commercial Loan, Eligible Medallion 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. "Mortgage Assignment" shall mean a Mortgage Assignment between a Borrower and the Agent for the benefit of the Banks, in such form as the Agent shall determine as necessary or desirable under the law applicable to the property covered by such Mortgage Assignment, delivered from time to time by such Borrower to the Agent as contemplated by the definition of "Eligible Real Estate." "Multiemployer Plan" shall mean a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Realized Loss" as to any Loan shall mean the gross realized loss (as determined by GAAP) with respect to such Loan minus actual cash recoveries with respect to such Loan. "New Bank" shall have the meaning set forth in Section 12.2 hereof. "1940 Act" shall mean the Investment Company Act of 1940, as amended. "Notes" or "Revolving Credit Note(s)" or "Swing Line Note(s)" or "Term Notes" shall mean the promissory notes of the Borrowers referred to in Sections 2.2 and 12.2 hereof and shall include any replacements therefor issued pursuant to Section 10.18 or 12.1 hereof. "Original Agreement" shall have the meaning set forth in the preamble hereto. "Original Effective Date" shall mean July 31, 1998. "Original MBC Security Agreement" shall mean the "MBC Security Agreement", as defined in the First Restatement. "Original MFC Security Agreement" shall mean the "MFC Security Agreement", as defined in the First Restatement. "Other Taxes" shall have the meaning set forth in Section 3.3 hereof. -16- "Participant" or "Participants" shall mean any Person, including a Bank, that pursuant to the terms of this Agreement, buys a participation in any of the Indebtedness owing in connection with the Loan Documents. "Paying Agency Agreement" shall mean one or more issuing and paying agency agreements between MFC and a Paying Agent providing for the issuance of Commercial Paper by MFC to the CP Holders, as the same shall be amended from time to time, each as approved by the Agent and the Required Banks in accordance with the terms of this Agreement. "Paying Agent" shall mean one or more paying agents acting as paying agent under a Paying Agency Agreement with the Borrowers. "Payments" shall have the meaning set forth in Section 3.2 hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto. "Percentage" of each Bank shall mean, at any particular time, the percentage designated as such for such Bank on Exhibit A hereto, as adjusted from time to time pursuant to Section 12.1(e) or otherwise in accordance with the terms hereof. "Permitted Debt" shall mean (i) all unsecured Indebtedness of a Borrower owed to the Permitted Lenders and (ii) all CP Debt. "Permitted Lenders" shall mean the financial institutions approved from time to time by the Required Banks, which approval will not be unreasonably withheld. "Permitted Liens" shall have the meaning set forth in Section 8.1 hereof. "Person" or "person" shall mean any individual, partnership, film, corporation, limited liability company, association, joint venture, trust or other entity, or any Governmental Authority. "Plan" shall mean, as to either Borrower, at any particular time, any employee benefit plan which is covered by ERISA and in respect of which such Borrower or an ERISA Affiliate is (or, if such plan were terminated at such time, under Section 4069 of ERISA would be deemed to be) an "employer" as defined in Section 3(S) of ERISA. "Portfolio Purchase" shall mean, as to either Borrower, any purchase or acquisition by such Borrower, whether for cash, for stock, pursuant to financing or otherwise, of any assets, business, Capital Stock, obligations or securities of, any Person; or other interest in or capital contribution to, any Person that results in, or would result in (after taking into account the applicable Portfolio Purchase), such Borrower having any additional Loans. -17- "Prime Rate" shall mean the higher of (a) the annual variable rate of interest designated by Fleet from time to time as its "prime rate" in effect at its principal office and (b) Federal Funds Rate plus 0.50% per annum. The Prime Rate is determined as a means of pricing for United States based customers and is not directly fixed to any external rate of interest or index, nor is it necessarily the lowest rate of interest charged by Fleet at any given time for any particular class of customers or credit extensions. "Prime Rate Loan" shall mean, as of any date of determination, a Revolving Credit Loan, Swing Line Loan or Term Loan bearing interest, as of such date of determination, at a variable rate of interest determined by reference to the Prime Rate. "Principal Payments" shall have the meaning set forth in Section 2.5(b) hereof. "Prohibited Transaction" shall have the meaning set forth in Section 406 of ERISA or Code Section 4975. "Property" shall mean all Equipment, Real Property or other real or personal property, tangible or intangible, owned or operated by a Borrower. "Real Estate Loans" shall mean Loans that are secured in whole or in part by Real Property which Real Property complies with the requirements set forth in Section 4.19 hereof for Property owned by a Borrower. "Real Property" shall mean real property of a Person or an ultimate beneficial owner of such Person or machinery or Equipment of such Person or beneficial owner forming a part of, or affixed to, such real property. "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. "Receivables Loans" shall mean Loans secured in whole or in part by Receivables. "Registration Statement" shall mean that portion of the Registration Statement required to be filed by MFC with the SEC pursuant to the 1940 Act containing MFC's fundamental policies (that is, those policies that cannot be changed without the approval of the holders of a majority of MFC's outstanding voting securities, as defined under the 1940 Act), as amended from time to time, provided that the Agent and the Banks shall have received prior written notification of any such amendments. "Rejection of Renewal Deadline" shall have the meaning set forth in Section 2.10(b) hereof. -18- "Reportable Event" shall mean any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the 30-day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. 2615. "Renewal Fee" shall mean the fee payable pursuant to Section 3.1(c) hereof. "Renewal Reconsideration Deadline" shall have the meaning set forth in Section 2.10(b) hereof. "Renewal Deadline" shall have the meaning set forth in Section 2.10(b) hereof. "Renewal Term" shall have the meaning set forth in Section 2.10(b) hereof. "Required Banks" shall mean, as of any date of determination, the Agent and such Bank or Banks as have Revolving Credit Commitments or Term Loans outstanding in excess of 51% of the sum of the Aggregate Revolving Credit Commitment plus all Term Loans then outstanding. "Residential Construction Real Estate Loans" shall mean Real Estate Loans that are secured in whole or in part by Real Property used in whole or in part for residential purposes or on which is being constructed or renovated buildings to be used in whole or in part for residential purposes. "Restricted Investment" shall mean any Investment, to the extent it does not constitute a Short Term Investment. "Restricted Payment" shall mean, with respect to either Borrower, any of the following: (i) the payment of any dividend on or any distribution in respect of any Capital Stock of such 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 such 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, Swing Line Notes or the Term Notes or of any Indebtedness having a maturity date subsequent to the maturity of the Revolving Credit Notes, Swing Line Notes or the Term Notes (other than Permitted Debt and Indebtedness permitted by Sections 8.2(c), (e) and (g) 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(c), (e) and (g) hereof, (iv) the redemption, repurchase, retirement or other acquisition of any Capital Stock of such Borrower or of any warrants, rights or options to purchase or acquire any Capital Stock of such Borrower (other than pursuant to and in accordance with stock option plans and other benefit plans for management or employees of either Borrower, in an aggregate amount not in excess of $500,000 during any 12-month -19- period, provided that any such redemption, repurchase, retirement or other acquisition of any Capital Stock of such Borrower or of any warrants, rights or options to purchase or acquire any Capital Stock of such 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 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). "Retained Loans" as to either Borrower shall mean that portion of each Eligible Loan retained by such Borrower and not granted by such Borrower to any other Person as a participation in the principal amount and accrued interest of such Eligible Loan. "Revolving Credit Commitment" of a Bank shall mean, as of any date of calculation, an amount equal to the product of such Bank's Percentage times the Aggregate Revolving Credit Commitment. "Revolving Credit Commitment Period" at any date shall mean with respect to any Bank, the period from and including the Second Restatement Effective Date to, but excluding, the Term-Out Date with respect to such Bank's Revolving Credit Commitment. "Revolving Credit Exposure" shall mean with respect to any Bank as of any date, the sum as of such date of (i) the outstanding principal amount of such Bank's Revolving Credit Loans and (ii) such Bank's Swing Line Exposure. "Revolving Credit Loan" shall mean a loan or advance made pursuant to Section 2.1(a) hereof. "Revolving Credit Loans" shall mean, collectively, the Revolving Credit Loans from time to time outstanding and unpaid. "Revolving Credit Obligations" shall have the meaning set forth in Section 2.10(b) hereof. "Satisfactory Subordinated Debt" shall mean Subordinated Debt; provided, that, no such Subordinated Debt shall be deemed Satisfactory Subordinated Debt unless and until the Agent has provided written notice to the Borrowers that same shall be deemed Satisfactory Subordinated Debt for purposes of this Agreement. -20- "SBA" shall mean the Small Business Administration. "SBA Regulations" shall mean the regulations set forth at 13 CFR 107 implementing the SBI Act, as the same may be amended from time to time, and all related guidelines, directives, treaties and interpretations thereof by any Governmental Authority charged with the administration or interpretation thereof. "SBI Act" shall mean Title III of the Small Business Investment Act of 1958, as amended, 15 U.S.C. 681 et seq. "Scheduled Swing Line Commitment Termination Date" shall mean the fifth Business Day preceding the Term-Out Date. "SEC" shall mean the United States Securities and Exchange Commission. "Second Restatement Effective Date" shall mean September 22, 2000, provided that (i) counterparts of this Agreement executed and delivered by the parties hereto shall have been received by the Agent and (ii) the conditions precedent set forth in Article V hereof shall have been satisfied or waived in writing by all of the Banks. "Security Agreement" shall mean the Amended and Restated Security Agreement dated the Second Restatement Effective Date, among MBC, MFC and the Agent for the benefit of the Banks, the Swing Line Lender and the CP Holders, substantially in the form of Exhibit F hereto, as the same may be amended or supplemented from time to time, provided that in the event a stock pledge agreement is executed pursuant to Section 6.19(b) hereof, all references to "Security Agreement" in any of the Loan Documents shall be deemed to include such stock pledge agreement. "Security Documents" shall mean the Security Agreement, any Mortgage Assignment, the Borrower Financing Statements and each other document, instrument or agreement executed pursuant to, or in connection with, any of the foregoing. "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. "Short Term Investment" shall mean an Investment in (i) direct obligations of the United States of America; (ii) negotiable certificates of deposit issued by, or negotiable bankers' acceptances (eligible for discount at Federal Reserve Banks) of, or repurchase agreements in respect of obligations described in clause (i) with, any bank or trust company organized under the laws of the United States of America or any state thereof having capital and surplus of not less than $250,000,000; and (iii) readily marketable commercial paper which, at the time of acquisition, is rated at least A-1 by Standard & Poor's Corporation or P-1 by -21- Moody's Investor Services, Inc.; provided, that all of such Investments described in clauses (i), (ii) and (iii) shall be payable in Dollars and shall mature within twelve months after the date of acquisition thereof. "Single Employer Plan" shall mean any Plan which is covered by Title IV of ERISA, but is not a Multiemployer Plan. "Solvent" shall mean, as to any Person, that such Person has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature and owns property having a value both at fair valuation and at present fair saleable value, greater than the amount required to pay its debts (including contingencies). "Subordinated Debt" shall mean all Indebtedness of either or both of the Borrowers for borrowed money that is subordinated to the Revolving Credit Loans, Swing Line Loans and the Term Loans on terms (including monetary and payment terms) that are, and pursuant to a form of subordination that is, acceptable in form and substance to the Agent and the Required Banks. "Subsidiary" or "Subsidiaries" of a Borrower shall mean any corporation or entity more than 50% of the outstanding Voting Interests (or similar rights to the extent the Subsidiary is not a corporation) of which is at the time owned, directly or indirectly, by such Borrower and/or by one or more of its Subsidiaries; provided, however, that the term "Subsidiary" shall be deemed to exclude all Subsidiaries the Consolidated Tangible Net Worth of which constitutes less than 5% of the Consolidated Tangible Net Worth of such Borrower. "Super-majority Banks" shall mean, as of any date of determination, the Agent and such Bank or Banks as have Revolving Credit Commitments or Term Loans outstanding equal to or in excess of 75% of the sum of the Aggregate Revolving Credit Commitment plus all Term Loans then outstanding. "Swing Line Commitment" shall mean the undertaking of the Swing Line Lender during the Swing Line Commitment Period to make Swing Line Loans, subject to the terms and conditions hereof, in an aggregate outstanding principal amount not in excess of the Swing Line Commitment Amount, and the commitment of the Banks to participate therein as set forth in Section 2.1(c), as the same may be adjusted from time to time pursuant to Sections 2.4 and Article 12. "Swing Line Commitment Amount" shall mean $5,000,000. "Swing Line Commitment Period" shall mean the period from the Second Restatement Effective Date until the Swing Line Commitment Termination Date. "Swing Line Commitment Termination Date" shall mean the earlier of the Business Day immediately preceding the Scheduled Swing Line Commitment -22- Termination Date or such other date upon which the Swing Line Commitment shall have been terminated in accordance with Section 2.4 or Section 9.1. "Swing Line Exposure" shall mean at any time, in respect of any Bank, an amount equal to the aggregate outstanding principal amount of the Swing Line Loans at such time, multiplied by such Bank's Percentage at such time. "Swing Line Interest Period" shall mean with respect to any Swing Line Loan requested by a Borrower, the period commencing on the borrowing date with respect to such Swing Line Loan and ending not in excess of ten days thereafter, as selected by such Borrower in the applicable Loan Request therefor, provided, however, that (i) if any Swing Line Interest Period would otherwise end on a day that is not a Business Day, such Swing Line Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day would be a date on or after the Scheduled Swing Line Commitment Termination Date, in which event such Swing Line Interest Period shall end on the next preceding Business Day, and (ii) no Swing Line Interest Period shall end after the Scheduled Swing Line Commitment Termination Date. Interest shall accrue from and including the first day of a Swing Line Interest Period to, but excluding, the last day of such Swing Line Interest Period. "Swing Line Loan" and "Swing Line Loans" shall have the meaning set forth in Section 2.1(c). "Swing Line Maturity Date" shall mean the Scheduled Swing Line Commitment Termination Date, or such earlier date on which the Swing Line Loans shall become due and payable, whether by acceleration or otherwise. "Swing Line Participation Amount" shall have the meaning set forth in Section 2.1(c)(iii). "Swing Line Rate" shall mean with respect to each Swing Line Loan, the rate per annum equal to, (i) at all times during the period, if any, commencing on the date of delivery of a notice of an Event of Default by the Agent to the Banks and terminating on the date on which such Event of Default shall no longer be continuing, the Prime Rate plus 2.00%, and (ii) at all other times, the Prime Rate minus 0.75%, provided that in no event shall the Swing Line Rate be less than the Federal Funds Rate plus 0.50%. "Tangible Net Worth" shall mean, as to any Person and calculated on a Consolidated or Unconsolidated Basis, as otherwise specified herein, the sum of capital surplus, earned surplus, capital stock minus deferred charges, intangibles, treasury stock, all determined in accordance with GAAP and, to the extent applicable thereto, the regulations of the SEC applicable to investment companies, provided that the Unconsolidated Tangible Net Worth of any Person shall not include any Investments of such Person in its Subsidiaries. "Taxes" shall have the meaning set forth in Section 3.3 hereof. -23- "Taxicab" shall mean a motor vehicle carrying passengers for hire, duly licensed as a taxicab by the New York City Taxi and Limousine Commission, or any other Governmental Authority for a jurisdiction other than New York City, and permitted to accept hails from passengers in the street. "Term Loan" shall mean a loan or advance pursuant to Section 2.1 (b) hereof. "Term Loans" shall mean, collectively, the Term Loans from time to time outstanding and unpaid. "Term Loan Commitment" shall mean, in respect of any Bank, its commitment, pursuant to Section 2.1 (b) hereof, to make a Term Loan to each Borrower on such Bank's Term-Out Date equal to the principal amount of its Revolving Credit Loans then outstanding to such Borrower. "Termination Date" shall mean the earlier of (i) the date on which this Agreement shall terminate in accordance with the provisions of Section 2.10 hereof or (ii) the Business Day, if any, on which all of the Revolving Credit Commitments are terminated in accordance with Section 2.4 or 9.1 hereof. "Term Loan Period" shall mean, with respect to each Term Loan, the period from the Term-Out Date with respect to the Revolving Credit Loan or Loans replaced by such Term Loan through the date of such Term Loan's Maturity. "Term-Out Date" shall mean, with respect to each Revolving Credit Loan, September 21, 2001, subject, however, in each case, to the renewal provisions set forth in Section 2.10 hereof. "Total Liabilities" shall mean, with respect to any Person as of any date of calculation, and calculated on a Consolidated or Unconsolidated basis as otherwise specified herein, the aggregate outstanding Indebtedness of such Person determined in accordance with GAAP. "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code as then in effect in that jurisdiction. "Unconsolidated" or "unconsolidated" shall mean, with reference to any term defined herein, that term as applied to the accounts of MFC or MBC, as applicable, without taking into account the Subsidiaries of such Person. "Underlying Collateral" shall mean, as to either Borrower, all of such Borrower's rights with respect to, or interest in, any and all present and future Medallion Rights, Equipment, Inventory, Real Property, Receivables, machinery, future accounts, accounts receivable, receivables, contracts, contract rights, general intangibles, books, desks, notes, bills, drafts, acceptances, chooses in action, chattel paper, instruments, documents and other forms of obligations and property, real, personal or mixed, tangible or intangible, at any time owing to or -24- owned by any Client to whom such Borrower has made a Loan, or any guarantor of such Client. "Voting Interests" shall mean securities, as defined in Section 2(1) of the Securities Act of 1933, as amended, of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of the corporate directors (or Persons performing similar functions). References in this Agreement to percentages of Voting Interests, unless otherwise noted, refer to percentages of votes to which such Voting Interests are entitled in the election of corporate directors (or Persons performing similar functions) rather than to the number of shares. Section 1.2. Other Definitional Provisions. ----------------------------- (a) All terms defined in this Agreement in the singular shall have comparable meanings when used in the plural, and vice versa. (b) The words "hereof," "hereby," "herein," and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provisions of this Agreement, the term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of this Agreement, and "Article," "Section," "Schedule," "Exhibit," "Annex" and like references are to this Agreement unless otherwise specified. (c) Any defined term which relates to a document shall include within its definition any amendments, modifications, renewals, restatements, extensions, supplements, or substitutions which may have been heretofore or may be hereafter executed in accordance with the terms thereof and hereof. (d) References in this Agreement to particular sections of the Code, ERISA or any other legislation shall be deemed to refer also to any successor sections thereto or other redesignations for codification purposes. (e) All terms defined in the UCC and not otherwise defined or modified herein shall have the same respective meanings as are given to such terms in the UCC. ARTICLE 2. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS Section 2.1. Commitments and Loans. --------------------- (a) Revolving Credit Loans. Subject to the terms and conditions 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 each Borrower from time to time during the Revolving Credit Commitment Period in an aggregate amount at any one -25- time outstanding not to exceed for both Borrowers such Bank's Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Borrowers 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 to MFC plus the aggregate unpaid balance of all Revolving Credit Loans to MFC plus the aggregate unpaid balance of all Term Loans to MFC shall not exceed the MFC Borrowing Base, (iii) the aggregate unpaid balance of all Swing Line Loans to MBC plus the aggregate unpaid balance of all Revolving Credit Loans to MBC plus the aggregate unpaid balance of all Term Loans to MBC shall not exceed the MBC Borrowing Base, (iv) the aggregate unpaid balance of all Swing Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans to the Borrowers shall not exceed the Aggregate Revolving Credit Commitment, (v) the aggregate unpaid balance of all Swing Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans to the Borrowers made by the Swing Line Lender shall not exceed the Revolving Credit Commitment of the Swing Line Lender, and (vi) the MFC Borrowing Base plus the MBC 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 and relying upon the representations, warranties and covenants herein set forth, each Bank severally (and not jointly) agrees to make a Term Loan to each 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 such Borrower (after which the amount of such Bank's Revolving Credit Commitment shall be $0); provided, that immediately prior to making each Term Loan, the Borrowers execute 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 Borrowers shall not exceed the aggregate of the Term Loan Commitments of all the Banks, (ii) the aggregate unpaid balance of all Swing Line Loans to MFC plus the aggregate unpaid balance of all Revolving Credit Loans to MFC plus the aggregate unpaid balance of all Term Loans to MFC shall not exceed the MFC Borrowing Base, (iii) the aggregate unpaid balance of all Swing Line Loans to MBC plus the aggregate unpaid balance of all Revolving Credit Loans to MBC plus the aggregate unpaid balance of all Term Loans to MBC shall not exceed the MBC Borrowing Base, (iv) the aggregate unpaid balance of all Swing Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans to the Borrowers plus the aggregate unpaid balance of all Term Loans to the Borrowers shall not exceed the sum of the Aggregate Revolving Credit Commitment and the aggregate unpaid balance of all outstanding Term Loans, (v) the aggregate unpaid balance of all Swing -26- Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans to the Borrowers made by the Swing Line Lender plus the aggregate unpaid balance of all Term Loans to the Borrowers 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 (vi) the MFC Borrowing Base plus the MBC 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 each Term Loan to a Borrower shall be made available to such 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 such 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, each 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 each 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 for both Borrowers the Swing Line Commitment Amount, provided, however, that, immediately after making each Swing Line Loan, (u) the aggregate unpaid balance of the Swing Line Loans to the Borrowers would not exceed the Swing Line Commitment Amount, (v) the aggregate unpaid balance of all Swing Line Loans to MFC plus the aggregate unpaid balance of all Revolving Credit Loans to MFC plus the aggregate unpaid balance of all Term Loans to MFC shall not exceed the MFC Borrowing Base, (w) the aggregate unpaid balance of all Swing Line Loans to MBC plus the aggregate unpaid balance of all Revolving Credit Loans to MBC plus the aggregate unpaid balance of all Term Loans to MBC shall not exceed the MBC Borrowing Base, (x) the aggregate unpaid balance of all Swing Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans to the Borrowers shall not exceed the Aggregate Revolving Credit Commitment, (y) the aggregate unpaid balance of all Swing Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans made by the Swing Line Lender to the Borrowers shall not exceed the Revolving Credit Commitment of the Swing Line Lender, and (z) the MFC Borrowing Base plus the MBC 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, the Borrowers may borrow, prepay in whole or in part and reborrow under the Swing -27- 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 on the Second Restatement Effective Date. (ii) The Swing Line Lender shall not be obligated to make any Swing Line Loan at a time when any Bank shall be in default of its obligations under this Agreement unless arrangements to eliminate the Swing Line Lender's risk with respect to such defaulting Bank's participation in such Swing Line Loan shall have been made for the benefit of the Swing Line Lender and such arrangements are in all respects satisfactory to the Swing Line Lender. The Swing Line Lender will not make any Swing Line Loan if the Agent or any Bank, by notice to the Swing Line Lender and the Borrowers no later than one Business Day prior to the borrowing date with respect to such Swing Line Loan, shall have determined that the conditions set forth in ARTICLE 5 have not been satisfied and such conditions remain unsatisfied as of the requested time of the making of such Swing Line Loan. Each Swing Line Loan shall be due and payable on the earlier to occur of the last day of the Swing Line Interest Period applicable thereto and the Swing Line Maturity Date. (iii) Upon (1) a request by the Swing Line Lender, (2) receipt by a Bank of notice of an Event of Default from the Agent, or (3) the acceleration of any loan or termination of the Revolving Credit Commitments, the Term Loan Commitments or the Swing Line Commitments, each Bank shall make Revolving Credit Loans constituting Prime Rate Loans to each Borrower having outstanding Swing Line Loans, on the next succeeding Business Day following such notice, in an amount equal to the product of such Bank's Percentage and the aggregate outstanding principal amount of the Swing Line Loans, provided that all accrued and unpaid interest thereon shall be paid in accordance with the provisions hereunder. In the event that it is impracticable for such Revolving Credit Loans to be made for any reason by any Bank on the date otherwise required above, such Bank shall purchase unconditionally, irrevocably, and severally (and not jointly) from the Swing Line Lender a participation in the outstanding Swing Line Loans (including accrued interest thereon) in an amount (the "Swing Line Participation Amount") equal to the product of its Percentage and the aggregate outstanding principal amount of the Swing Line Loans plus all accrued and unpaid interest thereon. Each Bank shall also be liable to make Revolving Credit Loans or purchase participations, as set forth above, for an amount equal to the product of its Percentage and any amounts paid by a Borrower pursuant to this Section that are subsequently rescinded or avoided, or must be otherwise restored or returned. Such liabilities to make Revolving Credit Loans or purchase participations as set in this Section -28- 2.1(c)(iii) shall be absolute and unconditional and without regard to the occurrence of any Default or the compliance by the Borrowers with any of their obligations under the Loan Documents. (iv) In furtherance of this Section 2.1(c), upon the occurrence of any event set forth in Section 2.1(c)(iii) hereof, such Bank shall promptly make available its Revolving Credit Loans or Swing Line Participation Amount, as applicable, to the Agent for the account of the Swing Line Lender at the applicable Agent Payment Office, in Dollars, and in immediately available funds. The Agent shall deliver the payments made by each Bank pursuant to the immediately preceding sentence to the Swing Line Lender promptly upon receipt thereof in like funds as received. Each Bank shall indemnify and hold harmless the Agent and the Swing Line Lender from and against any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, costs and expenses resulting from any failure on the part of such Bank to pay, or from any delay in paying the Agent any amount such Bank is required to pay in accordance with this Section 2.1(c)(iv) (except in respect of losses, liabilities, actions, suits, judgments, demands, costs and expenses suffered by the Agent or the Swing Line Lender, as the case may be, resulting from the gross negligence or willful misconduct of the Agent or the Swing Line Lender, as the case may be), and such Bank shall be required to pay interest to the Agent for the account of the Swing Line Lender from the date such amount was due until paid in full, on the unpaid portion thereof, at a rate of interest per annum equal to the Federal Funds Rate payable upon demand by the Swing Line Lender. The Agent shall distribute such interest payments to the Swing Line Lender upon receipt thereof in like funds as received. (v) Whenever the Agent is reimbursed by a Borrower, for the account of the Swing Line Lender, for any payment (including interest payments) in connection with Swing Line Loans and such payment relates to an amount previously paid by a Bank pursuant to this Section, the Agent will promptly pay over such payment to such Bank. (d) Limited Increase In Aggregate Revolving Credit Commitment. Unless a Default or Event of Default has occurred and is continuing, the Borrowers may request that the Aggregate Revolving Credit Commitment be increased to $120,000,000 hereunder, subject to the approval of the Agent, provided, however, that (i) any Bank which is a party to this Agreement prior to such increase may elect to fund a share of the increase (as allocated by the Agent), thereby increasing its Revolving Credit Commitment hereunder, but no Bank shall be required to do so, (ii) in the event that it becomes necessary to include a new Bank to provide additional funding under this Section 2.1(d), such new Bank must be reasonably acceptable to the Agent and the Borrowers, and (iii) the Banks' Percentages -29- shall be correspondingly adjusted, the new Bank shall make all (if any) such payments to the other Banks as may be necessary to result in the Revolving Credit Loans made by such new Bank being equal to such new Bank's Percentage (as then in effect) of the aggregate principal amount of all Revolving Credit Loans outstanding to the Borrowers as of such date), and Notes issued or amended and such other changes shall be made to the Loan Documents, as necessary, to reflect any such increase in the Aggregate Revolving Credit Commitment. Any such increase (whether to $120,000,000 or to a lesser amount) shall require, among other things, the satisfaction of such conditions precedent as the Agent may require, including, without limitation, the obtaining by any Bank of requisite internal approvals, the Agent's receipt of evidence of applicable corporate authorization and other corporate documentation from the Borrowers and the legal opinion of counsel to the Borrowers, each in form and substance satisfactory to the Agent, such Banks as are participating in such increase and the Borrowers. Section 2.2. Revolving Credit, Term Loan and Swing Line Notes. ------------------------------------------------ (a) (i) Revolving Credit Notes. The Revolving Credit Loans of each Bank to each Borrower shall be evidenced by a separate Revolving Credit Note of such Borrower, in substantially the form of Exhibit B hereto, payable to the order of such Bank and representing the obligation of such Borrower to pay the aggregate principal amount of the Revolving Credit Loans from time to time outstanding from such Bank to such Borrower, together with interest thereon. Each Bank is hereby authorized to endorse the date, amount and loan type of each Revolving Credit Loan, the Interest Periods during which such Revolving Credit Loan is a Prime Rate Loan or a LIBOR Rate Loan, and each payment or prepayment of principal thereof on the schedule (including additional pages thereto added by such Bank as required) annexed to and constituting a part of each of its Revolving Credit Notes, which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of any Bank to insert any such date or amount or other information on such schedule shall not in any manner affect the obligation of either Borrower to repay its Revolving Credit Loans in accordance with the terms of this Agreement. (ii) Term Loan Notes. The Term Loan of each Bank to each Borrower shall be evidenced by separate Term Note of such Borrower, in substantially the form of Exhibit C hereto, payable to the order of such Bank and representing the obligation of such Borrower to pay the aggregate principal amount of the Term Loan from time to time outstanding from such Bank to such Borrower, together with interest thereon. Each Bank is hereby authorized to endorse the date, amount and loan type of each Term Loan, the Interest Periods during which such Term Loan is a Prime Rate Loan or LIBOR Rate Loan, and each payment or prepayment of principal thereof on the schedule (including additional pages thereto added by such Bank as required) -30- annexed to and constituting a part of each of its Term Notes, which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of any Bank to insert any such date or amount or other information on such schedule shall not in any manner affect the obligation of either Borrower to repay its Term Loans in accordance with the terms of this Agreement. (iii) Swing Line Note. The Swing Line Loans of the Swing Line Lender to each Borrower shall be evidenced by a Swing Line Note of such Borrower, in substantially the form of Exhibit D, payable to the order of the Swing Line Lender and representing the obligation of such Borrower to pay the aggregate principal amount of the Swing Line Loans from time to time outstanding from such Swing Line Lender to such Borrower, together with interest thereon. The Swing Line Lender is hereby authorized to endorse the date, amount and Swing Line Interest Period of each Swing Line Loan, and each payment or prepayment of principal thereof on the schedule (including additional pages thereto added by the Swing Line Lender as required) annexed to and constituting a part of each of its Swing Line Notes, which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the Swing Line Lender to insert any such date or amount or other information on such schedule shall not in any manner affect the obligation of either Borrower to repay its Swing Line Loans in accordance with the terms of this Agreement. (b) Date and Maturity of Each Note. Each Note shall, except as otherwise provided in Section 12.1 or 12.2 hereof, be dated (A) the Second Restatement Effective Date in the case of the Revolving Credit Notes and Swing Line Notes and (B) the applicable Term-Out Date, in the case of each Term Note issued in replacement of a Revolving Credit Note, and shall be payable at its Maturity. For purposes of this Agreement, the term "Maturity" shall mean, with respect to (i) any Revolving Credit Loan, the earliest of (A) the Term-Out Date for such Revolving Credit Loan, (B) the Termination Date and (C) any other date on which such Revolving Credit Loan shall be or become due and payable in accordance with the terms of this Agreement, whether by declaration, acceleration, or otherwise, (ii) with respect to any Swing Line Loan, on the earlier of (A) the date such Swing Line Loan shall be or become due and payable, in whole or in part, in accordance with the terms of this Agreement whether by stated maturity, required or optional prepayment, declaration, acceleration, or otherwise, and (B) the Swing Line Commitment Termination Date and (iii) with respect to any Term Loan made by a Bank to replace its existing Revolving Credit Loans pursuant to Section 2.1 (b) hereof, the earlier of (A) the first anniversary of the Term-Out Date applicable to such replaced Revolving Credit Loans and (B) any other date on which such Term Loan shall be or become due and payable, in whole -31- or in part, in accordance with the terms of this Agreement, whether by required or optional prepayment, declaration, acceleration, or otherwise. (c)(i) Interest Rate on the Revolving Credit Notes. Each Revolving Credit Note shall bear interest, subject to the provisions of Section 10.14 hereof, until its Maturity on the principal amount thereof from time to time outstanding at an annual rate elected by the Borrower issuing such Revolving Credit Note in accordance with the notice provisions set forth in Section 2.3 hereof equal to either (a) the Prime Rate minus the Applicable Prime Rate Margin, provided that in no event shall the interest rate hereunder be less than the Federal Funds Rate plus 0.50%, or (b) the Adjusted LIBOR Rate plus the Applicable LIBOR Margin. The rate of interest of each Revolving Credit Note shall be computed on the basis of a 360-day year for the actual number of days elapsed. (c)(ii) Interest Rate on Swing Line Notes. Each Swing Line Note shall bear interest, subject to the provisions of Section 10.14 hereof, until its Maturity on the principal amount thereof from time to time outstanding at an annual rate equal to the Swing Line Rate for the applicable Swing Line Interest Period. The rate of interest of the Swing Line Notes shall be computed on the basis of a 360-day year for the actual number of days elapsed. (c)(iii) Interest Rate on the Term Notes. Each Term Note shall bear interest, subject to the provisions of Section 10.14 hereof, until its Maturity on the principal amount thereof from time to time outstanding at an annual rate elected by the Borrower issuing such term Note in accordance with the notice provisions set forth in Section 2.3 hereof equal to either (a) the Prime Rate minus the Applicable Prime Rate Margin, provided that in no event shall the interest rate hereunder be less than the Federal Funds Rate plus 0.50%, or (b) the Adjusted LIBOR Rate plus the Applicable LIBOR Margin. The rate of interest of each Term Note shall be computed on the basis of a 360-day year for the actual number of days elapsed. (c) (iv) Interest Rate after Maturity. The unpaid principal balance of each Note shall bear interest from and including its Maturity and thereafter until paid at the rate specified in Section 2.6 hereof. (d) The Interest Period. The interest period (the "Interest Period") with respect to (i) any Prime Rate Loan, shall be a period continued from day to day until terminated by the Borrower which borrowed such Prime Rate Loan, such termination to be effective two business days after the selection of a LIBOR Rate Loan to replace such Prime Rate Loan and (ii) any LIBOR 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, two, three or six months thereafter, as set forth in the Loan Request. Notwithstanding the foregoing: -32- (A) (I) 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 LIBOR Rate Loan, if such day falls in the succeeding calendar month, such Interest Period shall end on the first preceding day that is a Banking Day and (II) if there is no numerically corresponding date in the appropriate month, such Interest Period shall end on the last Banking Day in such month, (B) in the case of any LIBOR Rate Loan made on or after the Term-Out Date, the Interest Period shall be limited to a period of one month, and (C) Reserved. (D) in no case shall the Interest Period of either a Revolving Credit Loan or a Term Loan end on a date subsequent to such loan's Maturity. (e) Payment of Interest. Interest accrued on each Revolving Credit Loan, Swing Line Loan or Term Loan shall be payable, without duplication, on: (i) the Maturity of such loan; (ii) with respect to any portion of any Revolving Credit Loan, Swing Line Loan or Term Loan repaid or prepaid pursuant to this Agreement, the date of such repayment or prepayment, as the case may be; (iii) with respect to the Swing Line Loans and with respect to any portion of the outstanding principal amount of Revolving Credit Loans and Term Loans maintained as Prime Rate Loans, the first Business Day of each calendar month, payable monthly and in arrears, commencing with the first such date following the date of the making of such Revolving Credit Loans, Swing Line Loans or Term Loans as, or, with respect to Revolving Credit Loans and Term Loans, their conversion into, Prime Rate Loans; (iv) with respect to the portion of the outstanding principal amount of all Revolving Credit Loans or Term Loans maintained as LIBOR Rate Loans, the last day of each applicable Interest Period and, in connection with any such Revolving Credit Loan having a six-month Interest Period, the day that would be the last day of a three-month Interest Period commencing on the same day as such six-month Interest Period commences; and -33- (v) with respect to that portion of the outstanding principal amount of all Revolving Credit Loans or Term Loans that is converted to Prime Rate Loans or LIBOR Rate Loans on a day when interest otherwise would not have been payable pursuant to Section 2.2(c)(iii) or (iv), the date of such conversion. Section 2.3. Procedures Applicable to Borrowings and Conversions. --------------------------------------------------- (a) (i) Revolving Credit Loans. Subject to the limitations applicable to Interest Periods for LIBOR Rate Loans and to the provisions of Section 2.4(b) hereof and otherwise contained herein, each Borrower may borrow Revolving Credit Loans on any Business Day (in the case of LIBOR Rate Loans, on any Banking Day) during the Revolving Credit Commitment Period; provided, however, that such Borrower shall give the Agent irrevocable written notice in the form of a Loan Request (which may be sent via teletransmission) substantially in the form of Exhibit E hereto, specifying the aggregate amount of the loan it is seeking as follows: (A) in the case of a borrowing of a Revolving Credit Loan as a Prime Rate Loan, on or before 11:00 a.m., prevailing New York City time, on the first Business Day preceding the requested borrowing date, which borrowing date shall be a Business Day (or irrevocable oral notice on or before 11:00 a.m., prevailing New York City time, on such date, confirmed in a Loan Request (which may be sent via teletransmission) no later than 5:00 p.m., prevailing New York City time, on such first Business Day preceding such borrowing date); and (B) in the case of a borrowing of a Revolving Credit Loan as a LIBOR Rate Loan, on or before 11:00 a.m., prevailing New York City time, on the third Banking Day preceding the first day of the requested Interest Period (or irrevocable oral notice on or before 11:00 a.m., prevailing New York City time, on such date, confirmed in a Loan Request (which may be sent via teletransmission) no later than 5:00 p.m., prevailing New York City time, on such third Banking Day preceding the first day of the requested Interest Period). If a Borrower furnishes a Loan Request to the Agent, but no election is made as to either the loan type or Interest Period to be applicable thereto, the Revolving Credit Loan will be made as a Prime Rate Loan. Each borrowing of a given loan type shall be in an aggregate principal amount, together with Revolving Credit Loans of the same loan type to be continued as such and Revolving Credit Loans of other loan types to be converted to such loan type on the same Business Day, of at least (x) $1,000,000 or any integral multiple of $100,000 in excess thereof in the case of LIBOR Rate Loans and (y) $100,000 or any integral multiple of $50,000 in excess thereof in the case of Prime Rate Loans. (ii) Term Loans. The date on which each Term Loan shall be made shall be the Term-Out Date applicable to the Revolving Credit -34- Loan or Loans which such Term Loan shall replace. Each Term Loan shall, for its first Interest Period, be a Prime Rate Loan unless the Borrower borrowing such Term Loan gives irrevocable written notice to the Agent that it wants such loan, for its first Interest Period, to be a LIBOR Rate Loan. Such notice specifying a LIBOR Rate Loan must be received by the Agent on or before 11:00 a.m., prevailing New York City time, on the third Banking Day preceding the date on which such Term Loan is to be made (or irrevocable oral notice must be given on or before 11:00 a.m., prevailing New York City time, on such date, confirmed in writing (which may be sent via teletransmission) no later than 5:00 p.m., prevailing New York City time, on such third Banking Day preceding the date on which such Term Loan is to be made). Such first Interest Period shall continue until such Borrower has notified the Agent, in accordance with Section 2.3(c) hereof, of its selection of the next succeeding loan type and Interest Period. Within five Business Days after any Term Loan has been made, the Agent shall revise Exhibit A hereto to reflect the corresponding reduction in the Aggregate Revolving Credit Commitment. Each Term Loan shall be as provided in Section 2.5(b) hereof. (iii) Swing Line Loans. Each Borrower may borrow under the Swing Line Commitment on any Business Day during the Swing Line Commitment Period, provided that such Borrower shall notify the Agent and the Swing Line Lender (by telephone or facsimile confirmed promptly by the delivery to the Agent and the Swing Line Lender of a Loan Request manually signed by such Borrower) no later than 3:00 p.m. on the requested borrowing date, specifying a) the aggregate principal amount to be borrowed under the Swing Line Commitment, b) the requested borrowing date, and c) the amount of, and the length of the Swing Line Interest Period for, each Swing Line Loan. The Swing Line Lender will then, subject to its determination that the terms and conditions of this Agreement have been satisfied, make the requested amount available, in Dollars and in immediately available funds, promptly on that same day, to the Agent at the applicable Agent Payment Office who, thereupon, will promptly make such amount available to such Borrower at the such Agent Payment Office, in Dollars, and in immediately available funds. Each borrowing of Swing Line Loans shall be in an aggregate principal amount equal to $100,000 or such amount plus an integral multiple of $50,000 in excess thereof or, if less, the unused portion of the Swing Line Commitment Amount. (b)(i) Designation of Use of Funds; Funding of Revolving Credit Loans and Term Loans. Notwithstanding anything to the contrary contained in this Agreement, each Loan Request shall be executed and acknowledged by the Borrower requesting the loan(s) to which such Loan Request relates. Upon receipt of each Loan Request requesting Revolving Credit Loans or Term Loans, the Agent shall promptly notify each Bank -35- thereof. Subject to its receipt of the notice referred to in the preceding sentence, each Bank will make the amount of its Percentage of the requested Revolving Credit Loans, or Term Loans, as the case may be, available to the Agent for the account of the Borrower requesting such loan(s) at the applicable Agent Payment Office in Dollars not later than 2:00 p.m. (New York City time), on the relevant borrowing date requested by such Borrower, in funds immediately available to the Agent at such Agent Payment Office. The amounts so made available to the Agent on such borrowing date will then, subject to the satisfaction of the terms and conditions of this Agreement, as determined by the Agent, be made available on such borrowing date to such Borrower by the Agent at such Agent Payment Office, in Dollars, and in immediately available funds, no later than 3:00 p.m. (New York City time). (b)(ii) Failure to Fund. Unless the Agent shall have received prior notice from a Bank (by telephone or otherwise, such notice to be promptly confirmed by facsimile or other writing) that such Bank will not make available to the Agent such Bank's Percentage of the Revolving Credit Loans or Term Loans, as the case may be, to be made on a borrowing date, the Agent may assume that such Bank has made such amount available to the Agent on the borrowing date in accordance with this Section, provided that such Bank received notice thereof from the Agent in accordance with the terms hereof, and the Agent may, in reliance upon such assumption, make available on such borrowing date to the Borrower requesting such loan(s) a corresponding amount. If and to the extent such Bank shall not have so made such amount available to the Agent, such Bank and the Borrower requesting such loan(s) severally agree to pay to the Agent, forthwith on demand, such corresponding amount (to the extent not previously paid by the other), together with interest thereon for each day from the date such amount is made available to such Borrower until the date such amount is paid to the Agent, at a rate per annum equal to, in the case of such Borrower, the applicable interest rate then applicable to such loan(s), and, in the case of such Bank, to the extent such amount is paid to the Agent (A) no later than the second day after the date such amount is made available to such Borrower, the Federal Funds Rate and (B) after the second day after the date such amount is made available to such Borrower, the applicable interest rate then applicable to such loan(s). Such payment by such Borrower, however, shall be without prejudice to its rights against such Bank. If such Bank shall pay to the Agent such corresponding amount, such amount so paid shall constitute such Bank's Revolving Credit Loan or Term Loan, as the case may be, as part of such Revolving Credit Loans and Term Loans for purposes of this Agreement, which Revolving Credit Loan and Term Loan, as the case may be, shall be deemed to have been made by such Bank on such borrowing date. No Bank's obligation to fund any Revolving Credit Loan or Term Loan shall be affected by any other Bank's failure to fund any Revolving Credit Loan or Term Loan, nor shall any -36- Bank's Revolving Credit Commitment or Term Loan Commitment be increased as a result of any such failure of any other Bank. (c) Subject to the limitations applicable to Interest Periods for LIBOR Rate Loans, a Borrower may continue any of its LIBOR Rate Loans as such for an additional Interest Period or convert any of its Revolving Credit Loans or Term Loans of a given loan type into Revolving Credit Loans or Term Loans of a different loan type on any Business Day (in the case of LIBOR Rate Loans to be continued or converted, on any Banking Day) during the Revolving Credit Commitment Period or Term Loan Period applicable to such LIBOR Rate Loan; provided, however, that: (i) Such Borrower shall give the Agent the irrevocable written notice in the form of a Loan Request in the manner and by the applicable time specified in Section 2.3(a) hereof for the borrowing of a Revolving Credit Loan of the loan type to be converted to or continued and, if applicable, the Interest Period therefor; (ii) in the case of the continuation of less than all of the outstanding Revolving Credit Loans or of only a portion of a Term Loan of a given loan type on the same Business Day, the aggregate. principal amount of the Revolving Credit Loans or the Term Loan of such loan type to be continued as such, together with any Revolving Credit Loans or portion of a Term Loan to be made as or converted to the same loan type on such Business Day, shall not be less than $1,000,000 or any integral multiple of $100,000 in excess thereof; (iii) in the case of the conversion of less than all of the outstanding Revolving Credit Loans or of only a portion of a Term Loan of a given loan type to another loan type on the same Business Day, the aggregate principal amount of Revolving Credit Loans or the portion of the Term Loan of such loan type to be converted to another loan type together with any Revolving Credit Loans or any portion of the Term Loan of such other loan type to be made or continued as such on such Business Day, shall not be less than $1,000,000; (iv) LIBOR Rate Loans may be converted only at the end of the then applicable Interest Period; (v) no LIBOR Rate Loan may be continued as such, nor may any Revolving Credit Loan or Term Loan be converted to a LIBOR Rate Loan, for less than the minimum applicable Interest Period therefor; and (vi) no LIBOR Rate Loan may be continued as such, nor may any Revolving Credit Loan or Term Loan be converted to a LIBOR Rate Loan, if any Default or Event of Default shall have occurred and be continuing as of any date during the period commencing on the -37- date the Loan Request is required to be submitted to the Agent and ending on the first day of the requested Interest Period. If a Borrower fails, in connection with the expiration of an Interest Period applicable to a Revolving Credit Loan or Term Loan made to such Borrower that is a LIBOR Rate Loan, to furnish a Loan Request to the Agent for the continuation or conversion thereof or fails to elect a loan type or permitted Interest Period therefor, or if the continuation or conversion of any Revolving Credit Loan or Term Loan as a LIBOR Rate Loan is prohibited due to the occurrence and continuance of a Default or Event of Default, such Revolving Credit Loan or Term Loan (unless prepaid in accordance with the provisions of Section 2.5 hereof or accelerated in accordance with Section 9.1 hereof) shall be converted automatically to a Prime Rate Loan as of the expiration of the then applicable Interest Period. Section 2.4. Termination and Reduction of Aggregate Revolving Credit Commitment. ---------- (a) Subject to the provisions of Section 2.5 hereof, the Borrowers shall have the option to terminate, and from time to time to reduce permanently, the Aggregate Revolving Credit Commitment, upon irrevocable written notice to the Agent and the Banks at least five Business Days prior to the proposed Termination Date or reduction date, as the case may be, specifying such date, whether a termination or reduction is being requested and, if a reduction is being requested, the amount thereof. On the date specified in such notice, such termination or reduction shall be effected; provided, however, that (i) in the case of a termination, such termination must also include a termination of the Swing Line Commitment and such termination must be accompanied by repayment of all outstanding Revolving Credit Loans, Swing Line Loans and outstanding Term Loans in full (which shall include all such loans payable by MFC and all such loans payable by MBC), together with all other amounts owed to the Agent or any Bank or the Swing Line Lender pursuant to any of the Loan Documents and (ii) in the case of any reduction, such reduction is accompanied by (A) 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 (allocated between the loans of MFC and MBC as they shall specify in the notice of such reduction, provided that such allocation otherwise complies with the terms of this Agreement) and (B) repayment of an amount of all Term Loans then outstanding (allocated between the loans of MFC and MBC as they shall specify in the notice of such reduction, provided that such allocation otherwise complies with the terms of this Agreement) equal to the percentage by which the Aggregate Revolving Credit Commitment is to be reduced multiplied by the aggregate principal amount, together with accrued interest on all Term Loans then being repaid. Any such repayment shall be subject to the provisions of Section 2.5(a) hereof. Any reduction of the Aggregate Revolving Credit Commitment shall be in an aggregate amount of $500,000 or an integral multiple thereof and shall be applied by the Agent pro rata among the Banks in proportion to their Revolving Credit Commitments. Any repayment of -38- outstanding Term Loans required by a reduction in the Aggregate Revolving Credit Commitment shall be applied by the Agent pro rata among the Banks in proportion to the amount of the principal plus accrued interest of their Term Loans then outstanding. Within five Business Days after any reduction in the Aggregate Revolving Credit Commitment pursuant to this Section 2.4(a), the Agent shall revise Exhibit A hereto to reflect such reduction and shall promptly send a copy thereof to the Banks. Upon termination of the Aggregate Revolving Credit Commitment pursuant to this Section 2.4(a) and upon payment of all amounts due by the Borrowers to the Agent, the Swing Line Lender and the Banks under the Loan Documents, the obligations of the parties hereto, except as otherwise provided herein, shall be deemed terminated; provided, however, that this Agreement and the other Loan Documents shall continue to be effective or shall be reinstated, as the case may be, if any payment hereunder or in connection with any of the Loan Documents at any time is rescinded or otherwise must be returned as a result of the bankruptcy, insolvency or reorganization of either Borrower or otherwise, all as if such payment had not been made. Upon any reduction of the Aggregate Revolving Credit Commitment, in the event that the Borrowers shall fail to specify in the notice of such reduction the allocation of prepayments between the loans of MFC and MBC in accordance with the terms of this Agreement, it shall be in the Agent's discretion as to whether to apply any prepayments of loans in connection therewith against (i) MFC's obligations to the Agent, the Swing Line Lender and the Banks and/or (ii) MBC's obligations to the Agent, the Swing Line Lender and the Banks. Section 2.5. Prepayments; Mandatory Payment of Term Loans. -------------------------------------------- (a) Voluntary Prepayments. Each Borrower from time to time may prepay its Revolving Credit Loans, Swing Line Loans, or Term Loans, in whole or in part, without premium or penalty, upon irrevocable written notice to the Agent given at least as early before the proposed date of such prepayment as the corresponding time specified in Section 2.3(a) hereof for notice of the borrowing of a Revolving Credit Loan of the loan type to be prepaid, specifying the date of prepayment and the amount of the prepayment; provided, however, that (i) the entire Aggregate Revolving Credit Commitment may not be terminated (although all Revolving Credit Loans may be paid off in full) while any Term Loan remains outstanding, (ii) except for prepayments necessitated by Section 8.6(b) hereof, each partial prepayment of the Revolving Credit Loans or Swing Line Loans shall be in an amount not less than $500,000 or any integral multiple of $100,000 in excess thereof, (iii) except for prepayments necessitated by the Borrowers' election to reduce the Aggregate Revolving Credit Commitment pursuant to Section 2.4 hereof, without the prior written approval of the Required Banks, neither Borrower may prepay any Term Loan unless all Revolving Credit Loans have been paid off in full and the Aggregate Revolving Credit Commitment terminated, (iv) neither Borrower may prepay any LIBOR Rate Loan prior to the last day of the Interest Period therefor and neither Borrower may prepay any Swing Line Loan prior to the last day of the Swing Line Interest Period therefor. To the extent possible, the Borrowers -39- shall, in connection with any voluntary prepayment, prepay Prime Rate Loans first and LIBOR Rate Loans second. Any prepayment of LIBOR Rate Loans shall be subject to Section 2.11 hereof. If any notice of prepayment is given, the amount specified in such notice shall be due and payable in the manner and by the time provided in Section 3.2 hereof on the date specified in such notice, together with accrued interest thereon to such date as provided in Section 2.2(c) hereof. Any such prepayment of a Revolving Credit Loan may be reborrowed, subject to the terms and conditions of this Agreement, from time to time. Any prepayment of a Term Loan may not be reborrowed. (b) Mandatory Payment of Term Loans. Principal on each Term Loan shall be repaid by the Borrower borrowing such Term Loan in equal monthly installments, with each such installment calculated to be 1/12th of the amount necessary to amortize such Term Loan over a twelve-month period. Such payments (the "Principal Payments") shall be paid by such Borrower to the Agent on the last day of each month during which such Term Loan is outstanding, commencing with the month during which such Term Loan is made pursuant to Section 2.1(b) hereof. Any prepayments of principal on any Term Loan pursuant to Sections 2.5(a) and (c) hereof shall not reduce the amount of each monthly Principal Payment. Any prepayments of principal on the Term Loans pursuant to Sections 2.5(a) and (c) hereof shall be applied against the monthly Principal Payments in inverse order of the dates on which such Principal Payments are to be made. (c) Mandatory Prepayments. --------------------- (i) If, at any time, (A) the aggregate outstanding principal balance of the Revolving Credit Loans, plus the aggregate outstanding principal balance of all Swing Line Loans, exceeds the Aggregate Revolving Credit Commitment, or (B) the aggregate outstanding principal balance of the Swing Line Loans exceeds the Swing Line Commitment, or (C) the aggregate principal balance of all Revolving Credit Loans, plus the aggregate principal balance of all Swing Line Loans, plus the aggregate principal balance of all Term Loans, exceeds the sum of the Aggregate Revolving Credit Commitment and the aggregate principal balance of all Term Loans, (D) the aggregate outstanding principal balance of the Revolving Credit Loans of the Swing Line Lender, plus the aggregate outstanding principal balance of all Swing Line Loans, exceeds the Revolving Credit Commitment of the Swing Line Lender, or (E) the aggregate unpaid balance of all Senior Debt exceeds the MFC Borrowing Base plus the MBC Borrowing Base, the Borrowers shall make a prepayment of such Revolving Credit Loans, or Swing Line Loans, as the case may be (or if no such loans shall then be outstanding, the Borrowers shall make a prepayment of the Term Loans), in the amount of such excess (rounded upwards to the next higher integral multiple of $100,000), together with accrued interest -40- thereon to the date of prepayment as provided in Section 2.2(c) hereof. Such prepayment shall be allocated between the loans of MFC and MBC as they shall specify in connection with such prepayment, provided that such allocation otherwise complies with the terms of this Agreement. In the event that the Borrowers shall fail so to specify such allocation, it shall be in the Agent's discretion as to whether to apply any such prepayments against (i) MFC's obligations to the Agent, the Swing Line Lender and the Banks and/or (ii) MBC's obligations to the Agent, the Swing Line Lender and the Banks. To the extent possible, the Borrowers shall, in connection with such mandatory prepayment, prepay Prime Rate Loans first, and LIBOR Rate Loans second. Any prepayment of LIBOR Rate Loans shall be subject to Section 2.11 hereof. (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 MBC shall exceed the MBC Borrowing Base, (B) 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 MFC shall exceed the MFC Borrowing Base, or (C) the aggregate unpaid balance of all Senior Debt shall exceed the MFC Borrowing Base plus the MBC Borrowing Base, within five days of the first day there exists any such deficiency the relevant Borrower shall make payment to the Agent (to be applied against such 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) hereof. To the extent possible, each Borrower shall, in connection with any such mandatory prepayment, prepay Prime Rate Loans first, and LIBOR Rate Loans second. Any prepayment of LIBOR Rate Loans shall be subject to Section 2.11 hereof. (d) Application of Payments. With respect to all payments pursuant to subsections (a), (b) and (c) above, upon receipt of any notice of payment and/or any such payment, the Agent shall promptly notify each Bank thereof and, with respect to Revolving Credit Loans and Term Loans of a Borrower, each such prepayment shall be effected pro rata amongst all the Banks in proportion to each Bank's then outstanding Revolving Credit Loans or Term Loans to such Borrower, as the case may be. Section 2.6. Interest on Delinquent Payments. ------------------------------- All unpaid amounts due under the Notes or any other Loan Document that are not paid when due (including, to the extent permitted by law, unpaid interest on the Notes) shall bear interest, subject to the provisions of Section 10.14 hereof, from and including its due date until paid in full (whether before or after the -41- occurrence of any Event of Default described in Sections 9.1(h) or 9.1(i) hereof) at an annual rate equal to the sum of (i) in the case of any Prime Rate Loan, 2% plus the Prime Rate applicable to such Prime Rate Loan then in effect, (ii) in the case of any LIBOR Rate Loan, 2% in excess of the rate then applicable to such LIBOR Rate Loan. Such rate of interest (the "Default Rate") shall be computed on the basis of a 360-day year for the actual number of days elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate to be charged shall change when and as the Prime Rate is changed, and any such change in the Prime Rate shall become effective at the opening of business on the day on which such change is adopted. At the end of the applicable Interest Period for a LIBOR Rate Loan on which the Default Rate is being charged, such LIBOR Rate Loan shall be automatically converted to a Prime Rate Loan, and the Default Rate to be charged in respect of such Loan. shall be computed based on the Prime Rate. Section 2.7. Increased Costs. --------------- (a) In the event any applicable existing or future law, regulation, guideline, treaty or directive or condition or interpretation thereof (including, without limitation, any request, guideline or policy; whether or not having the force of law) by any Governmental Authority charged with the administration or interpretation thereof, or any change in any of the foregoing: (i) subjects any Bank, or the Swing Line Lender, to any tax levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to its Revolving Credit and/or Term Loan and/or Swing Line Commitment to make Loans or any Revolving Credit Loan or Term Loan or Swing Line Loan; or (ii) changes the basis of taxation of payments to such Bank of principal of and/or interest on its Loans or its Revolving Credit and/or Term Loan and/or Swing Line Commitment to make Loans and/or fees and other amounts payable hereunder in respect of its Loans or its Revolving Credit or Term Loan or Swing Line Commitment to make Loans ; or (iii) imposes, modifies or deems applicable or results in the application of or increases any reserve, special-deposit, assessment, liquidity or similar requirement (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans or commitments to lend Loans by any office of any Bank (based upon such Bank's or such Participant's reasonable allocation of the aggregate of such requirements); or (iv) imposes upon such Bank any other condition or requirement with respect to its Revolving Credit and/or Term Loan and/or Swing Line Commitment to make Loans or any Revolving -42- Credit Loan or Term Loan or Swing Line Loan of which any Loan forms a part; and the result of any of the foregoing is to increase the actual cost to such Bank of making or maintaining its Revolving Credit and/or Term Loan and/or Swing Line Commitment to make Loans or its Revolving Credit Loans or Term Loans or Swing Line Loans hereunder that are Loans or to reduce the amount of any payment (whether of principal, interest, or otherwise) received or receivable by such Bank in respect of any Loan or its Revolving Credit or Term Loan or Swing Line Commitment to make Loans or to require such Bank to make any payment, then and in any such case set forth in paragraphs (i) through (iv) above: (1) such Bank, or the Swing Line Lender, as the case may be, shall promptly notify the Borrowers in writing of the happening of such event; (2) such Bank, or the Swing Line Lender, as the case may be, shall promptly deliver to the Borrowers a certificate of such Bank, or the Swing Line Lender, stating the event that has occurred or the reserve or requirements or other conditions that have been imposed on such Bank, or the Swing Line Lender, the request, directive, guideline or requirement with which it has complied, together with the date thereof and the amount (based upon such Bank's, or the Swing Line Lender's, as the case may be, reasonable policies as to the allocation of capital and costs, as applicable) of such increased cost, reduction or payment for one or more periods ending not later than the date of such certificate; and (3) The Borrowers shall pay within 10 days after demand therefor such amount or amounts as will compensate such Bank, or the Swing Line Lender, as the case may be, for such additional cost, reduction or payment. (b) If, after the Second Restatement Effective Date, any Bank or the Swing Line Lender, as the case may be, shall have determined that any change in any present (or any adoption, application, or change in any future) applicable law, governmental rule, regulation, policy, guideline, or directive or request (whether or not having the force of law), or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, of general application regarding capital adequacy, capital maintenance, capital ratios or other similar requirements (whether or not having the force of law), increases or otherwise affects the amount of capital required or expected to be maintained by any of the Banks, or the Swing Line Lender, as the case may be, or any corporation controlling any of the Banks or the Swing Line Lender, as the case may be, or such Bank, or the Swing Line Lender, as the case may be, determines that the amount of capital required is increased by or based upon the existence of the revolving credit, swing line -43- and term loan facilities or commitments established hereunder or any loans made pursuant hereto or upon agreements or loans of the type contemplated hereby, then such Bank or the Swing Line Lender, as the case may be, may give written notice to the Borrowers of such fact (the "Increased Costs Notice"). To the extent that the costs of such increased capital requirements are not then reflected in the Prime Rate or the LIBOR Base Rate, the Borrowers shall thereafter attempt to negotiate in good faith an adjustment of the compensation payable hereunder which will adequately compensate such Bank, or the Swing Line Lender, as the case may be, in light of such changed circumstances. Each Bank and the Swing Line Lender, as the case may be, hereby agrees that any Increased Cost Notice from it to the Borrowers shall be delivered to the Borrowers no later than 90 days following the end of any financial period with respect to which such compensation is sought. If the Borrowers and such Bank, or the Swing Line Lender, as the case may be, are unable to agree to an adjustment within 30 days of the day on which the Borrowers receive such notice, then, commencing on such thirtieth day and retroactive to the date of such notice (but not earlier than the effective date of any such change), the fees payable to such Bank, or the Swing Line Lender, as the case may be, hereunder shall increase by an amount which will, in such Bank's, or the Swing Line Lender's, as the case may be, reasonable determination, provide adequate compensation. Such Bank, or the Swing Line Lender, as the case may be, shall allocate such cost increases among its customers in good faith and on an equitable basis. (c) The certificate of such Bank, or the Swing Line Lender, as the case may be as to the additional amounts payable pursuant to this Section 2.7 delivered to the Borrowers, in the absence of manifest error, shall be conclusive as to the amount thereof. A claim by any Bank, or the Swing Line Lender, as the case may be, for all or any part of any additional amount required to be paid by the Borrowers under this Section 2.7 may be made at any time and from time to time as the occasion therefor may arise. The protection of this Section 2.7 shall be available to such Bank and the Swing Line Lender regardless of any possible contention of invalidity or inapplicability of the law, regulation or condition that has been imposed. In the event that any such law, regulation or condition is subsequently held to be invalid or inapplicable and the result thereof is to eradicate any such additional cost, reduction or payment, such Bank, or the Swing Line Lender, as the case may be, shall promptly pay to the Borrowers an amount equal to the amount of compensation paid by the Borrowers to such Bank, or the Swing Line Lender, as the case may be, for its account as a result of such invalid or inapplicable law, regulation or condition. Section 2.8. Use of Proceeds. --------------- The proceeds of all Revolving Credit Loans, Swing Line Loans and Term Loans made to the Borrowers hereunder shall be used only (i) to fund Medallion Loans and Commercial Loans of MFC and MBC made in the ordinary course of -44- business of MFC and MBC, (ii) to refinance any outstanding Commercial Paper, provided that such proceeds shall only be used to refinance Commercial Paper so long as (and without in any way limiting the requirements of Section 5.1 hereof with respect to the initial Revolving Credit Loans, Swing Line Loans and Term Loans and of Section 5.2 hereof) no Default or Event of Default then exists or would exist as a result thereof, and (iii) for other working capital purposes of the Borrowers; provided, that, in no event shall proceeds of Revolving Credit Loans be used for the direct or indirect benefit of any Subsidiary of MFC (other than MBC) or of MBC, except as would otherwise be permitted by Section 8.3(e) hereof. Section 2.9. Payment on Non-Business Days. ---------------------------- Whenever any payment to be made under the Notes (other than principal of or any interest on LIBOR Rate Loans), this Agreement, or any other Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding business Day, and such extension of time in such case shall be included in the computation of payment of interest or fees, as the case may be, and such extension of time shall be included in computing interest and fees in connection with such payment. Section 2.10. Term of Revolving Credit Commitments. ------------------------------------ (a) Subject to the other provisions of this Section 2.10, (i) with respect to the Initial Term, the Revolving Credit Commitment and other obligations of each Bank under this Agreement with respect to Revolving Credit Loans shall terminate on the last day of the Initial Term, and (ii) with respect to each Renewal Term (as defined in Section 2.10(b) below), the Revolving Credit Commitment and other obligations of each Bank under this Agreement with respect to Revolving Credit Loans shall terminate on the date which is 364 days after the date on which such Renewal Term commenced. (b) Each Bank's Revolving Credit Commitment and other obligations under this Agreement with respect to Revolving Credit Loans (collectively, "Revolving Credit Obligations") shall be terminated on the last day of the Initial Term (or, in the event of a renewal, the last day of the then current Renewal Term) unless such Bank gives written notice of renewal, for a 364-day period, of its Revolving Credit Obligations to the Borrowers by the date which is 45 days prior to the date on which such obligations are to be terminated (August 8, 2001, in the case of the Initial Term) (the "Renewal Deadline"). Any Bank that does not give such notice in accordance with the preceding sentence shall be deemed to have elected not to renew its Revolving Credit Obligations. The Borrowers shall then have until the fifth Business Day following the Renewal Deadline to reject (by written notice, which must be received by no later than 5:00 p.m., prevailing New York City time, on such fifth Business Day) any Bank's offer of renewal (the "Rejection of Renewal Deadline"). If any Bank has elected not to renew its Revolving Credit Obligations, then, not later than three Business Days after the -45- Rejection of Renewal Deadline the Borrowers shall provide each Bank and the Agent a list indicating each Bank that has elected to renew its Revolving Credit Obligations and all Banks who originally elected to renew their Revolving Credit Obligations shall have until the tenth Business Day following the Rejection of Renewal Deadline to reverse their decision and elect instead (by written notice to the Borrowers, which must be received by no later than 5:00 p.m., prevailing New York City time, on such tenth Business Day) not to renew such obligations (the "Renewal Reconsideration Deadline"). The foregoing procedure with respect to the renewal of the Revolving Credit Obligations of each Bank under this Agreement shall be repeated for each 364-day term following the Initial Term (each such term, a "Renewal Term") with the Renewal Deadline, the Rejection of Renewal Deadline and the Renewal Reconsideration Deadline to be applicable with respect to each such term, until there are no longer any Revolving Credit Commitments outstanding. In the event that any Bank elects to extend its Revolving Credit Obligations for a Renewal Term or Terms, (i) the expiration, termination, Maturity and Term-Out Date of such Obligations outstanding at the commencement of, or made during, the Renewal Term shall be the date which is 364 days after the date on which such Renewal Term commenced, and (ii) each Revolving Credit Note shall be deemed amended to reflect the extended Maturity. If any Bank elects not to renew its Revolving Credit Obligations, or if the Borrowers reject any Bank's offer to renew its Revolving Credit Obligations, then, on the Term-Out Date of such Bank's Revolving Credit Loan(s), such Bank shall make a Term Loan to each Borrower in accordance with the provisions of Section 2.1(b) hereof and the Aggregate Revolving Credit Commitment shall be reduced by an amount equal to the aggregate principal amount of such Term Loans. The procedures set forth above shall also separately apply to the Swing Line Lender with respect to the Swing Line Commitment; provided, that, in the event all Banks extending Revolving Credit Loans elect not to renew as set forth above, the Swing Line Lender shall be deemed to have made a similar election. (c) Within five Business Days after the commencement of any Renewal Term, the Agent shall revise Exhibit A hereto if required in connection with any change in the Aggregate Revolving Credit Commitment. (d) Notwithstanding the foregoing provisions of this Section 2.10, upon the occurrence of an Event of Default, the provisions of Article IX hereof shall apply and the Agent may take any action permitted or required thereunder. (e) The occurrence of the Termination Date shall not release, terminate or limit the rights or remedies of the Agent, or any Bank, or the obligations under this Agreement or any other Loan Document of the Borrowers, and such rights and remedies and such obligations shall survive until the Borrowers shall have fully paid and performed all their obligations hereunder and thereunder in full. -46- Section 2.11. Funding Losses. -------------- (a) The Borrowers shall pay, within 10 days after demand therefor, such amount as will compensate the Banks for any loss or reasonable expense they may sustain as a consequence of (i) the receipt or recovery or conversion for any reason (including, without limitation, as a consequence of acceleration pursuant to Article IX hereof, a termination, reduction or increase of the Aggregate Revolving Credit Commitment pursuant to Sections 2.1(d) or 2.4 hereof, a voluntary or mandatory payment pursuant to Section 2.5 hereof, or a mandatory conversion pursuant to Section 2.13 hereof) of all or any part of a LIBOR Rate Loan prior to the last day of the applicable Interest Period therefor, or (ii) any failure to borrow, convert to or continue any LIBOR Rate Loan as such after submitting a Loan Request (whether oral or written) relating thereto, including, but not limited to, (A) any loss or expense sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain a LIBOR Rate Loan or any part thereof but excluding (B) any loss of margin on reemployment of the funds so received or recovered. (b) Each Bank shall be entitled to fund its Revolving Credit Loans and Term Loans in such manner as it may determine in its sole discretion, including without limitation the London interbank market and the New York secondary market; provided, however, that, for the purposes of calculations under this Section 2.11, each LIBOR Rate Loan shall be deemed to have been funded by the purchase in the London interbank market of a Dollar deposit in an amount comparable to the principal amount of such LIBOR Rate Loan and having a maturity comparable to the applicable Interest Period therefor. (c) A certificate of any Bank or the Swing Line Lender, as the case may be, as to any additional amounts payable pursuant to this Section 2.11 setting forth in reasonable detail the basis and method of determining such amounts shall be conclusive, absent manifest error, as to the determination by such Bank set forth therein. A claim by any Bank or the Swing Line Lender for all or any part of any additional amount required to be paid by the Borrowers under this Section 2.11 may be made at any time and from time to time as often as the occasion therefor may arise. Section 2.12. Alternate Rate of Interest. -------------------------- (a) In the event, and on each occasion prior to the commencement of any Interest Period for any LIBOR Rate Loans, (i) the Required Banks shall have notified the Agent that they have determined, or the Agent or Fleet shall have determined, that Dollar deposits in an amount comparable to the principal amount of such LIBOR Rate Loan and having a scheduled maturity comparable to the Interest Period set forth in the related Loan Request are not generally available in the London interbank market or (ii) the Agent or Fleet shall determine that reasonable means do not exist for -47- ascertaining the LIBOR Base Rate, the Agent, as soon as practicable thereafter, shall give oral notice of such determination to the Borrowers, promptly confirmed in writing (which may be by teletransmission). In the event of any such determination and until the Agent notifies the Borrowers (and provides a copy of this notice to the Banks) that the circumstances giving rise to such notice no longer exist, no Revolving Credit Loans or Term Loans will be made as LIBOR Rate Loans and no Revolving Credit Loans or Term Loans will be converted to or continued as LIBOR Rate Loans, but shall convert to Prime Rate Loans at the end of the applicable Interest Period, if any, therefor. Each determination by a Bank, or the Agent or Fleet, as the case may be, hereunder shall be conclusive absent manifest error. Section 2.13. Changes In Legality. ------------------- (a) If, anything to the contrary herein contained notwithstanding, any applicable existing or future law, regulation, guideline, treaty or directive or condition or interpretation thereof (including, without limitation, any request, guideline or policy, whether or not having the force of law), by any Governmental Authority charged with the administration or interpretation thereof, or any change in any of the foregoing shall make it unlawful or improper for any Bank to make or maintain any Revolving Credit Loans or any Term Loan as LIBOR Rate Loans, then, by oral notice to the Borrowers and the Agent, promptly confirmed in writing (which may be by teletransmission), such Bank may: (i) declare that its Revolving Credit Loans or Term Loans thereafter will not be made by it as LIBOR Rate Loans, whereupon the Borrowers shall be prohibited from requesting Revolving Credit Loans or Term Loans as LIBOR Rate Loans unless and until such declaration is withdrawn; and (ii) require that all its outstanding Revolving Credit Loans or its Term Loan that are LIBOR Rate Loans be converted to Prime Rate Loans, in which event all such Revolving Credit Loans or Term Loans shall be converted automatically to Prime Rate Loan(s) as of the end of their applicable Interest Periods or as of such earlier date as may be required of such Bank for the lawful or proper conduct of its lending activities. Section 2.14. Participations. -------------- Each Borrower may grant participations to other Persons of such Borrower's choosing in a portion of its rights and/or obligations under any Loan; provided, however, that any such participation shall be granted pursuant to a form of participation agreement which shall provide, among other things, that (a) such Borrower shall service such Loan, (b) any participant thereunder shall be entitled to no more than its pro rata share of the Underlying Collateral securing such Loan and to no more than principal and interest under such Loan, (c) such -48- Borrower's interest shall be pari passu or superior in right of payment to the interest of such participant in such Loan or otherwise in accordance with such Borrower's standard underwriting criteria and credit policy at the time thereof and (d) such Borrower's rights to any payment under such Loan shall be prior to, or pro-rata with, any such participant. Upon request by the Agent or the Required Banks, the Borrowers shall provide the Banks in writing with a description of all Loans in respect of which participations have been granted. Notwithstanding the foregoing, neither Borrower shall grant a participation to any Subsidiary or Affiliate of either Borrower in any Medallion Loan originated by such Borrower, except that MFC may grant participations in any of its Medallion Loans to MBC. ARTICLE 3. FEES AND PAYMENTS Section 3.1. Fees. ---- (a) Annual Facility Fee. The Borrowers 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), an annual fee (the "Facility Fee") equal to the Applicable Facility Percentage of the average daily Aggregate Revolving Credit Commitment (regardless of usage). Such fee shall be payable to the Agent for the period from the Second Restatement 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 Second Restatement 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. (b) Agent Fees. The Borrowers agree to pay to the Agent, for its own account, all the fees set forth in the Fee Letter. (c) Renewal Fee. The Borrowers agree to 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 of $180,000 (the "Renewal Fee") on the Second Restatement Effective Date. Section 3.2. Payments. -------- (a) Routine Payments. Except as otherwise specifically provided in this Agreement, each payment (including each prepayment) by each Borrower pursuant to this Agreement or the Notes, whether in respect of principal, interest, or increased costs and the Facility Fee, the Renewal Fee and all other fees to be paid to the Agent, the Swing Line Lender and the Banks in connection with the Loan Documents (collectively, "Payments"; and the portion of such payments that are on account of the Facility Fee and the Renewal Fee together with all of such other fees, is sometimes hereinafter collectively referred to as the "Fees") shall be made by such Borrower without set-off, withholding, deduction, or counterclaim to the Agent at the -49- applicable Agent Payment Office in Dollars in funds immediately available to the Agent at such office by 12:00 noon (local time in the city in which such Agent Payment Office is located) on the due date for such Payment. The failure of such Borrower to make any such Payment by such time shall not constitute a default hereunder, provided that such payment is made on such due date, but any such Payment made after 12:00 p.m. (local time in the city in which such payment is to be made in accordance with the terms hereof) on such due date shall be deemed to have been made on the next Business Day for the purpose of calculating interest on amounts outstanding on the applicable loans. Subject to Section 9.5, promptly upon receipt thereof by the Agent, (a) each Payment of principal and interest on the Revolving Credit Loans, Term Loans and Swing Line Loans shall be remitted by the Agent in like funds as received to each Bank and the Swing Line Lender, as the case may be, pro rata according to its Exposure Percentage of such loans, and (b) each payment of the Facility Fee and Renewal Fee shall be remitted by the Agent in like funds as received to each Bank pro rata according to such Bank's Revolving Credit Commitment. (b) Alternate Payment Dates. If any Payment hereunder shall be due and payable on a day which is not a Business Day, the due date thereof (except as otherwise provided in this Agreement) shall be extended to the next Business Day and (except with respect to Payments in respect of the Fees) interest shall be payable at the applicable rate specified herein during such extension, provided, however, that, if such next Business Day is after the Maturity of such loan, any such payment shall be due on the immediately preceding Business Day. Section 3.3. Taxes. ----- (a) Any and all payments by the Borrowers pursuant to this Agreement, the Revolving Credit Notes, the Term Notes or the Swing Line Notes shall be made, in accordance with the terms hereof and thereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding franchise taxes imposed on the Agent, the Swing Line Lender or any Bank by the jurisdiction under the laws of which the Agent, the Swing Line Lender or such Bank is organized or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If either Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Agent, or the Swing Line Lender or any Bank, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.3) the Agent, the Swing Line Lender or such Bank shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other -50- authority in accordance with applicable law, and (iv) such Borrower shall deliver to the Agent evidence of such payment to the relevant Governmental Authority. (b) In addition, the Borrowers agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes") and to deliver to the Agent and the Banks evidence of such payment to the relevant Governmental Authority. (c) The Borrowers will indemnify the Agent, the Swing Line Lender and the Banks for the full amount of Taxes and Other Taxes (including without limitation Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.3) paid by the Agent, the Swing Line Lender or any Bank (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 10 days after written demand therefor by the Agent, the Swing Line Lender or any Bank. Should the Borrowers elect to contest whether or not the Taxes or Other Taxes giving rise to their indemnification obligation hereunder were correctly or legally asserted, the Agent, the Swing Line Lender or the Bank being indemnified agrees to cooperate in such contest, at the Borrowers' expense, and to make available to the Borrowers such books and records as may be reasonably necessary and useful in connection with such contest. (d) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 3.3 shall survive the payment in full of principal, interest, fees and other amounts hereunder and under the other Loan Documents. (e) Each Bank, if any, that is not organized under the laws of the United States of America or any state of the United States or the District of Columbia agrees (i) prior to the first payment to such Bank of any amounts due to such Bank under the Loan Documents, upon request by the Borrowers, to execute and deliver to the Borrowers completed counterparts of IRS Form W-8, 1001, or 4224 (or any successor thereto or substitute therefor), as applicable, and (ii) thereafter, upon request by the Borrowers from time to time in order to maintain the effectiveness and accuracy of such tax forms and otherwise to comply with United States tax laws, to execute and deliver to the Borrowers additional or supplemental tax forms with respect to amounts due to such Bank under the Loan Documents. -51- ARTICLE 4. REPRESENTATIONS AND WARRANTIES In order to induce the Agent, the Swing Line Lender and the Banks to enter into this Agreement and to make the Revolving Credit Loans, Swing Line Loans and Term Loans, each Borrower hereby makes the following representations and warranties, which shall survive the execution and delivery of the Loan Documents and (except to the extent that any of such representations and warranties expressly relates to earlier dates, in which case it shall continue to be true as of such dates) shall be deemed repeated and confirmed as of each date on which any Revolving Credit Loans, Swing Line Loans or Term Loans are requested by either Borrower or made by any Bank or the Swing Line Lender, as the case may be: Section 4.1. Corporate Status. ---------------- MFC is a duly organized and validly existing corporation and MBC is a duly organized and validly existing limited liability company, and each is in good standing under the laws of its state of organization, is properly licensed and has the corporate, or limited liability company, as the case may be, power and authority and the legal right to own its property and conduct the business in which it is engaged or presently proposes to engage and 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. Section 4.2. Subsidiaries. ------------ Except as set forth on Schedule II hereof (as the same may be amended from time to time to include entities the Consolidated Tangible Net Worth of which constitute more than 5% of the Consolidated Tangible Net Worth of MFC), there are no corporations of which MFC owns, directly or indirectly, shares of capital stock having in the aggregate 50% or more of the total combined voting power of the issued and outstanding shares of capital stock entitled to vote generally in the election of directors of such corporation; nor are there any corporations, partnerships, joint ventures or other entities in which MFC or MBC has, or pursuant to any agreement has the right to acquire at any time by any means, directly or indirectly, an equity interest or investment. Section 4.3. Location of Offices, Books and Records. -------------------------------------- Schedule I annexed hereto, as amended from time to time pursuant to Section 6.9 hereof, completely and accurately lists all places at which (i) each Borrower maintains its books and records relating to, among other things, its Loans, (ii) either Borrower has any places of business and (iii) each Borrower has its chief executive office. Section 4.4. Corporate Power; Authorization. ------------------------------ -52- Each Borrower has the corporate, or limited liability company, as the case may be, power and authority and the legal right to make, deliver and perform this Agreement and the other Loan Documents to which it is a party. Each Borrower has taken all necessary corporate, or limited liability company, as the case may be, action (including, but not limited to, the obtaining of any consent of stockholders required by law or by the Certificate of Incorporation or By-Laws in the case of MFC and obtaining of any consent of members required by law or by the Certificate of Formation or Operating Agreement in the case of MBC) to authorize the execution, delivery and performance of the Loan Documents to which it is a party or by which it is otherwise affected and to authorize the transactions contemplated hereby and thereby. Section 4.5. Enforceable Obligations. ----------------------- Each Loan Document, and each other instrument and document executed by a Borrower and delivered to the Agent pursuant to Section 5.1 hereof, constitutes the legal, valid and binding obligation of such Borrower, enforceable in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and general principles of equity, and there are no actions, suits or proceedings pending or, to the knowledge of such Borrower, threatened against, or affecting, a Borrower or any of its officers or directors calling into question the legality, validity or enforceability of any thereof. Section 4.6. No Violation of Agreements; Compliance with Law. ----------------------------------------------- Neither Borrower is in default under any indenture, mortgage, deed of trust, agreement or other instrument to which it is a party or by which it or any of its properties may be bound. Neither the execution and delivery of the Loan Documents nor any of the instruments and documents to be delivered by a Borrower pursuant to this Agreement or the other Loan Documents, nor the consummation of the transactions herein and therein contemplated, nor compliance with the provisions hereof or thereof will violate any law or regulation, or any order or decree of any court or governmental instrumentality, or will conflict with, or result in the breach of, or constitute a default under, in the case of MFC, the Registration Statement and, in the case of either Borrower, any indenture, mortgage, deed of trust, agreement or other instrument to which a Borrower is a party or by which it may be bound, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property of a Borrower except as expressly permitted by this Agreement, or violate any provision of the Certificate of Incorporation, By-Laws or any preferred stock provisions of MFC or violate any provision of the Certificate of Formation or Operating Agreement of MBC. Section 4.7. Agreements. ---------- -53- Neither Borrower is a party to any agreement or instrument or subject to any corporate or limited liability company (as the case may be) restriction (including any restriction set forth in the Certificate of Incorporation, By-Laws, preferred stock provisions or Registration Statement in the case of MFC or set forth in the Certificate of Formation or Operating Agreement in the case of MBC) that could have a Material Adverse Effect. Section 4.8. No Material Litigation. ---------------------- There are no actions, suits or proceedings pending or, to the knowledge of either Borrower, threatened, against, or affecting either Borrower or any of its officers or directors before any court, arbitrator or governmental or administrative body or agency which, if adversely determined, might have a Material Adverse Effect. No injunction, writ, restraining order or other order of any nature adverse to either Borrower or the conduct of its business or inconsistent with the due consummation of such transactions has been issued by any Governmental Authority. Neither Borrower is in default under any applicable statute (including without limitation, the 1940 Act), rule, order, decree or regulation of any court, arbitrator or governmental body or agency having jurisdiction over such Borrower. Section 4.9. Good Title to Properties. ------------------------ Each Borrower has good and marketable title to all its properties and assets, subject to no Liens of any kind (except as expressly permitted under this Agreement). Section 4.10. Margin Regulations. ------------------ Neither Borrower is obligated to register with the Board as a "lender" as such term is defined in Regulation U as amended (12 C.F.R. Part 207), issued by the Board. The proceeds of the borrowings made pursuant to this Agreement will be used by the Borrowers only for the purposes set forth in Section 2.8 hereof. None of such proceeds and none of the proceeds of any loan or advance made by a Borrower will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" as such term is defined in Regulation U as amended (12 C.F.R. Part 221), issued by the Board, or for the purposes of maintaining, reducing or retiring any Indebtedness that originally was incurred to purchase or carry margin stock or for any other purpose that might constitute any of the Revolving Credit Loans, Swing Line Loans or Term Loans under this Agreement or any such loans or advances a "purpose credit" within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither a Borrower nor any agent acting on behalf of either of them has taken or will take any action that might cause this Agreement or any of the documents or instruments delivered pursuant hereto or other Loan Documents to violate any regulation of the Board or to violate the Securities Exchange Act of 1933, as amended. -54- Section 4.11. [Reserved] -------- Section 4.12. Investment Company. ------------------ MFC is a closed-end management investment company registered under the 1940 Act and has elected to be treated as a "business development company" under and as defined in the 1940 Act. MFC is an "investment company," as such term is defined in the 1940 Act. MBC is not a "business development company" and is not an "investment 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 Borrowers 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. Section 4.13. Disclosure. ---------- No representation or warranty made by either Borrower in any Loan Document or any other document furnished from time to time in connection herewith or therewith contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact known to either Borrower or any of its officers or directors which has, or which in the future might have, in the reasonable judgment of either Borrower, a Material Adverse Effect, except as set forth or referred to in this Agreement or in another document or instrument heretofore furnished to the Banks. Section 4.14. Taxes and Claims. ---------------- MFC has elected to be treated as and qualifies as a "regulated investment company" within the meaning of the Code. Each Borrower has filed or caused to be filed, all Federal, state and local tax returns and reports which are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or charges imposed on it or any of its property by any Governmental Authority (other than those the amount or validity of which are currently being diligently contested in good faith by appropriate proceedings and in respect of which adequate reserves in conformity with GAAP have been provided on the books of the applicable Borrower); and no tax liens have been filed and, to the knowledge of each Borrower, no claims are being asserted with respect to any such taxes, fees or other charges. Each Borrower, to the best of its knowledge, has paid and discharged all lawful claims for labor, material, supplies and anything else which might or could, if unpaid, become a Lien on any of its properties (other than those the amount or validity of which are currently being diligently contested in good faith by appropriate proceedings and in respect of which adequate reserves in conformity with GAAP have been provided on the books of the applicable Borrower). -55- Section 4.15. Licenses and Permits. -------------------- Each Borrower possesses all the licenses, permits, approvals and consents of Federal, state and local governments and regulatory authorities and rights in any thereof, adequate for the conduct of its business as now conducted, without conflict with the rights or claimed rights of others. Neither Borrower has received any notice nor does either Borrower have any knowledge or reason to believe that any appropriate authority intends to cancel, terminate or modify any of such licenses or permits or that valid grounds for such cancellation, termination or modification exist. Section 4.16. Consents. -------- No consent, authorization or action of, or filing with, any Governmental Authority or any other Person is required to authorize, or is otherwise required of either Borrower in connection with, the execution, delivery, performance, validity or enforceability of the Loan Documents or any of the instruments or documents to be delivered pursuant to the Loan Documents. Section 4.17. Employee Benefit Plans. ---------------------- (a) None of the Plans maintained at any time by either Borrower, or any ERISA Affiliate thereof or the trusts created thereunder has engaged in a Prohibited Transaction which could subject any such Plan or trust to a material tax, liability or penalty on or resulting from Prohibited Transactions imposed under Code Section 4975 or ERISA. (b) None of the Plans which are employee pension benefit plans maintained at any time by either Borrower, or any ERISA Affiliate thereof, or the trusts created thereunder has been terminated in a manner that results or could result in a liability to either Borrower in excess of $50,000, nor has either Borrower, any ERISA Affiliate thereof, or any such Plan of either Borrower or any ERISA Affiliate incurred any liability to the PBGC in excess of $50,000, other than for required insurance premiums which have been paid when due; neither a Borrower nor any ERISA Affiliate thereof has withdrawn from or caused a partial withdrawal to occur with respect to any Multiemployer Plan within the meanings of Sections 4203 and 4205 of ERISA the effect of which was a liability or potential liability to either Borrower in excess of $50,000; and each Borrower and each ERISA Affiliate has made or provided for all contributions to all employee pension benefit plans which they maintain and which were required under ERISA or the Code as of the end of the most recent fiscal year under each such plan; no such employee pension benefit plan has incurred any Accumulated Funding Deficiency the effect of which was a liability or potential liability to either Borrower in excess of $50,000, whether or not waived; nor has there been any Reportable Event, or other event or condition which presents a risk of termination of any such Plan by the PBGC, which termination could result in a potential liability to either Borrower in excess of $50,000. -56- (c) The present value of all accrued benefits under the Plans, if any, which are employee pension benefit plans did not, as of the most recent valuation date for each such Plan, exceed by more than $50,000 the then current value of the assets of such Plans allocable to such accrued benefits. (d) Each employee pension benefit plan maintained by each Borrower and each ERISA Affiliate has been administered in accordance with its terms and is in compliance in all material respects with all applicable requirements of ERISA and other applicable laws, regulations and rulings. (e) As used in this Section 4.17 the term "employee Pension benefit Plan" and "accrued benefits" shall have the respective meanings assigned to them in ERISA. Section 4.18. Financial Condition. ------------------- The consolidated balance sheets of MFC for the fiscal years ended December 31, 1998 and December 31, 1999 and the related consolidated statements of income, retained earnings and cash flow for the fiscal years ended on said dates, as certified by the Independent Public Accountants present fairly the consolidated financial condition of MFC as at the date of such balance sheets, and the results of its operations for such periods. All such financial statements have been prepared in accordance with GAAP applied on a basis consistent with that of the comparable preceding period, and since the dates of the financial statements relating to the fiscal year ended December 31, 1999 mentioned above, there has been no material adverse change in the consolidated condition, financial or otherwise, of either Borrower. Section 4.19. Environmental Laws, Etc. ----------------------- (a) All Property heretofore, now or hereafter owned or operated by each Borrower complied, complies and will comply in all material respects with all applicable Federal, state and local, environmental, health and safety statutes, guidelines, codes, ordinances and regulations; (b) such Property does not contain and is not being and has not been used to generate, manufacture, refine, produce, store, handle, transfer, process, dispose of, or transport, any Hazardous Materials in violation of any material applicable Federal, state or local law or regulation; and (c) there are no underground storage tanks or surface impoundments located on, under, or within such Property in violation of any material applicable Federal, state or local law or regulation. Section 4.20. Event of Default. ---------------- -57- No event has occurred and is continuing that constitutes a Default or an Event of Default or would constitute such a Default or Event of Default after notice or lapse of time or both. Section 4.21. Solvency. -------- Each Borrower is Solvent, and will not, as a result of the transactions contemplated hereby or by the Loan Documents cease to be Solvent. Section 4.22. Priority; Continued Effectiveness. --------------------------------- Except as otherwise permitted hereunder, the Agent, for the ratable benefit of the Banks and the Swing Line Lender, has a valid and perfected first priority security interest 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 and the Swing Line Lender, a valid and perfected first priority (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 Restatement Effective Date. No additional Borrower Financing Statements are required to be filed as of the Restatement Effective Date in order to maintain the perfection and priority of the security interests created pursuant to the Security Agreement. Section 4.23. Advertising, Origination and Servicing Activities. ------------------------------------------------- All advertising, origination and servicing activities, procedures and materials used with regard to any Loan made or accounts acquired, collected or serviced by either Borrower comply with all applicable Federal, state and local laws, ordinances, rules and regulations, including but not limited to those related to usury, truth in lending, real estate settlement procedures, consumer protection, equal credit opportunity, fair debt collection, rescission rights and disclosures, except where failure to comply would not have a Material Adverse Effect. Section 4.24. Activities. ---------- The only transactions engaged in by each Borrower in the ordinary course of its business consist of: (i) the making and servicing of Loans and Investments; and (ii) transactions incidental to the foregoing. Section 4.25. [Reserved]. -------- Section 4.26. [Reserved]. -------- Section 4.27. Non-Affiliation with Banks. -------------------------- -58- So far as appears from the records of the Borrowers, neither any Bank nor any Affiliated Person of any Bank known to either Borrower is an Affiliated Person of such Borrower or a person related to such Borrower in the manner described in subsection (b) or (e) of Section 57 of the 1940 Act, and none of the Borrowers or any Affiliated Person of the Borrowers is an Affiliated Person of any Bank or any Affiliated Person of any Bank known to either Borrower. ARTICLE 5. CONDITIONS PRECEDENT Section 5.1. Conditions to Initial Revolving Credit Loan and Initial Swing Line Loan. --------------- The obligation of (i) the Banks to make the initial Revolving Credit Loan and (ii) the Swing Line Lender to make its first Swing Line Loan under the Original Agreement, were each subject to the satisfaction on the Original Effective Date of the conditions precedent set forth in Section 5.1 of the Original Agreement. The obligation of (i) the Banks to make the initial Revolving Credit Loan on the First Restatement Effective Date and (ii) the Swing Line Lender to make its first Swing Line Loan under the First Restatement, were each subject to the satisfaction on the First Restatement Effective Date of the conditions precedent set forth in Section 5.1 of the First Restatement. The obligation of (i) the Banks to make the Initial Revolving Credit Loan and (ii) the Swing Line Lender to make its first Swing Line Loan hereunder, are each subject to the satisfaction on the Second Restatement Effective Date of the following conditions precedent: (a) The Agent and the Swing Line Lender shall have received, on or before making the initial Swing Line Loan, Swing Line Notes conforming to the requirements hereof in the form of Exhibit D hereto, executed by an Authorized Representative of MFC and MBC, respectively; and the Agent and each Bank shall have received, on or before making the Initial Revolving Credit Loan, the following, each in form and substance satisfactory to the Agent and each Bank in all respects: (i) for each Bank, Revolving Credit Notes conforming to the requirements hereof in the form of Exhibit B hereto, executed by an Authorized Representative of MFC and MBC, respectively; (ii) evidence satisfactory to the Banks that there is no outstanding Indebtedness or Liens except Permitted Indebtedness and Permitted Liens; (iii) (A) the Security Agreement in the form of Exhibit F, executed by an Authorized Representative of MBC and MFC and (B) perfection certificates executed by each of MBC and MFC; (iv) evidence satisfactory to the Banks that such additional Borrower Financing Statements as the Agent and the Banks require in connection with the amendments effected by this Agreement have -59- been executed and delivered to the Agent in a form acceptable to the Agent, such that the security interests described in the Security Documents constitute valid and perfected first priority security interests, subject only to Liens permitted pursuant to Section 8.1 hereof; (v) the results of a search of all filings made against MFC and MBC under the UCC as in effect in any relevant state, indicating that the Collateral is free and clear of any Lien or encumbrance, other than Permitted Liens; (vi) an opinion of counsel to the Borrowers substantially in the form of Exhibit H hereto; such opinion shall also cover such other matters incident to the transactions contemplated by this Agreement and the other Loan Documents as the Required Banks reasonably may require; (vii) (A) a copy of the Certificate of Incorporation of MFC and all amendments thereto, certified as of the date hereof by the Chief Financial Officer of MFC and (B) a copy of the Certificate of Formation of MBC and all amendments thereto, certified as of the date hereof by the Chief Financial Officer of MBC; (viii) (A) a copy of the By-laws of MFC certified as of the date hereof by the Chief Financial Officer of MFC and (B) a copy of the Operating Agreement of MBC in effect as of the Restatement Effective Date, certified as of the date hereof by the Chief Financial Officer of MBC; (ix) certified copies of the resolutions of the Board of Directors of MFC and of the Managers or applicable governing body of MBC, each approving each of the Loan Documents and each of the other instruments and documents to be executed by it and delivered to the Banks pursuant to this Agreement or any other Loan Document, certified by the Chief Financial Officer of the applicable Borrower, and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect thereto; (x) certificates of the Chief Financial Officer of each Borrower certifying the names and true signatures of the officers of such Borrower authorized to sign each document to which it is a signatory and which is to be delivered by it hereunder or pursuant to any other Loan Document to which it is a party; (xi) a certificate of the Chief Financial Officer of each Borrower to the effect that (A) the financial statements referred to in Section 4.18 hereof present fairly the financial condition of such -60- Borrower as of the date and for the period of such financial statements and (B) no material adverse change in the condition, financial or otherwise, of such Borrower has occurred since the date of such financial statements; (xii) a certificate of an Authorized Representative of each Borrower to the effect that such Borrower has in effect all insurance coverage required pursuant to Section 6.3 hereof; (xiii) originals of instruments and other documents constituting part of the Collateral or Underlying Collateral as the Agent may request in order to perfect its security interest, on behalf of the Banks, in such Collateral; (xiv) copies of all other documents, instruments and agreements requested by the Agent in connection with the transactions contemplated by this Agreement and the other Loan Documents; and (xv) a Borrowing Base Certificate in the form of Exhibit G from each Borrower. (b) MFC shall be a corporation, and MBC shall be a limited liability company, each duly organized and validly existing, shall have all licenses, permits and authorizations necessary to own its properties and to conduct its business as now conducted and proposed to be conducted and shall be in good standing in the jurisdiction of its organization and in each other jurisdiction in which the nature of its business or ownership or use of its property requires such qualification and the Agent shall have received such evidence thereof, as it or the Required Banks may request. (c) All requisite corporate or limited liability company (as applicable) action and proceedings in connection with the Loan Documents shall be satisfactory in form and substance to the Agent and the Banks, and the Agent and the Banks shall have received all information and copies of all documents, including without limitation, records of requisite corporate action and proceedings which the Agent, the Banks and Bingham Dana LLP, as counsel to the Agent, may have requested in connection therewith, such documents, where so requested, to be certified by appropriate corporate officers or Governmental Authorities. (d) All necessary approvals, authorizations and consents, if any be required, of any Governmental Authority having jurisdiction with respect to any of the Collateral and the transactions contemplated by this Agreement and the other Loan Documents shall have been obtained. In addition, each Borrower shall be in compliance, both before and after the making of the Initial Revolving Credit Loans, with all laws, rules, regulations, orders and -61- administrative guidelines applicable to the operation of its business, including, without limitation, those of the SBA. (e) All representations, warranties, covenants and agreements contained in any Loan Document shall be true and correct in all material respects, and shall have been performed (to the extent required to be performed on or prior to the Second Restatement Effective Date), as of the Second Restatement Effective Date. (f) Each Borrower shall have paid to the Agent and each Bank party to the First Restatement all amounts which are required to be paid to the Agent and each such Bank on or before the Second Restatement Effective Date pursuant to the First Restatement. (g) The Borrowers shall have paid the Renewal Fee as required pursuant to Section 3.1(c) hereof. (h) The rights of the Agent and the Banks under each of the Security Agreement, the Mortgage Assignments and the Borrower Financing Statements shall be and continue in full force and effect after the Second Restatement Effective Date (subject to the filing of any continuation statements required by the UCC). Section 5.2. Conditions to All Revolving Credit and Term Loans. ------------------------------------------------- The obligation of the Banks to make any Revolving Credit Loans (including the Initial Revolving Credit Loan) and any Term Loans and the obligation of the Swing Line Lender to make any Swing Line Loan (including any initial Swing Line Loan) is further subject to the satisfaction of the following conditions precedent: (a) each of the representations and warranties made by a Borrower in or pursuant to any Loan Document or which are contained in any agreement, instrument, certificate, document or other writing furnished at any time under or in connection herewith or therewith shall be true and correct in all material respects when made and on and as of the date of the making of such Revolving Credit Loan or Term Loan or Swing Line Loan (except to the extent any representation or warranty expressly relates to an earlier date, in which case it shall continue to be true as of such date) and after giving effect thereto; (b) no Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Revolving Credit Loans or Term Loans or Swing Line Loans to be made on such date; (c) no event, action or condition has occurred that would adversely affect the validity or enforceability of, or the authority of either Borrower to -62- perform its obligations under, any of the Loan Documents to which it is a party. (d) after taking into account Revolving Credit Loans and/or Term Loans and/or Swing Line Loans to be made on such date, (i) the aggregate unpaid balance of all Swing Line Loans to MFC plus the aggregate unpaid balance of all Revolving Credit Loans to MFC plus the aggregate unpaid balance of all Term Loans to MFC shall not exceed the MFC Borrowing Base and (ii) the aggregate unpaid balance of all Swing Line Loans to MBC plus the aggregate unpaid balance of all Revolving Credit Loans to MBC plus the aggregate unpaid balance of all Term Loans to MBC shall not exceed the MBC Borrowing Base. Each borrowing by the Borrowers hereunder shall constitute a representation and warranty by each Borrower as of the date of such borrowing that the conditions in clauses (a), (b), (c) and (d) of this Section 5.2 have been satisfied. ARTICLE 6. AFFIRMATIVE COVENANTS 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 the Loan Documents are paid in full and the Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term Loan Commitments are terminated, unless specifically waived in writing by the Agent and the Required Banks: Section 6.1. Financial Statements and Other Information. ------------------------------------------ The Borrowers shall furnish to the Agent and each Bank: (a) as soon as practicable and in any event within 45 days after the close of each calendar quarter, beginning with the calendar quarter ending September 30, 2000, a detailed schedule of all outstanding Loans of each Borrower setting forth (i) the aging, on a contractual basis, of each Loan, (ii) the aggregate dollar amount of Loans as to which any amendments or modifications to or waivers of any terms thereof have been made during the quarter as a result of the Person to whom such Loan was made being unable to comply (for whatever reason) with the terms thereof, (iii) information satisfactory to the Agent with respect to the concentration of the Loans in any given industry (determined in accordance with the Standard Industrial Classification promulgated by the United States Office of Management and Budget), and (iv) information satisfactory to the Agent with respect to Loan concentrations, rewrites, charge-offs under any Loans, delinquent Loans and Loan loss reserve analysis; (b) at the request of the Agent (which request shall not be made, unless an Event of Default has occurred and is continuing, on more than -63- one occasion in each calendar year), a schedule setting forth as to each Borrower (i) the number of Medallion Rights pledged to such Borrower as security for Loans made by it, (ii) the then outstanding aggregate principal amount of the Loans secured by such Medallion Rights and (iii) such Borrower's good-faith best estimate (along with supporting documentation) of the current fair market value of the operating rights and licenses evidenced by Medallions included in such Medallion Rights; (c) monthly, and not later than 20 Business Days after the last day of each month, a Borrowing Base Certificate indicating a separate computation of the MFC Borrowing Base and the MBC Borrowing Base, covering the immediately preceding month; (d) as soon as practicable and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of MFC, beginning with the fiscal quarter ending September 30, 2000 a consolidated and consolidating balance sheet, a statement of income and retained earnings and a statement of cash flow of each Borrower, as at the end of and for the quarterly period then ended and for the period commencing at the end of the previous fiscal year and ending with such quarter, setting forth the corresponding figures for the appropriate periods of the previous fiscal year in comparative form, all in reasonable detail (which detail, if requested by the Agent, shall include data as to non-accruals and related collateral, repossessions, charge-offs and reconciliation for allowance for losses) and be reviewed by the Independent Public Accountants and certified by the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of each Borrower to be true and correct and to have been prepared in accordance with GAAP (except for the omission of footnotes), subject to normal recurring year-end audit adjustments; (e) as soon as practicable and in any event within 90 days after the end of each fiscal year of MFC commencing with the fiscal year ending December 31, 2000, a consolidated and consolidating balance sheet, a statement of income and retained earnings and a statement of cash flow, and an annual budget, of each Borrower, as at the end of and for the fiscal year just closed, setting forth the corresponding figures of the previous fiscal year in comparative form, all in reasonable detail (which detail, if requested by the Agent, shall include data as to non-accruals and related collateral, repossessions, charge-offs and reconciliation for allowance for losses), presented in a manner consistent with the financial statements of each Borrower for the preceding fiscal year, and, with respect to such consolidated statements, certified (without any qualification or exception deemed material by the Agent or any Bank) by the Independent Public Accountants; and concurrently with such financial statements, a written statement, addressed to the Agent and the Banks, signed by such Independent Public Accountant to the effect that, in making the examination necessary for their certification of such financial statements, they have not obtained, as of the end of such fiscal year, any knowledge of -64- the existence of any Default or Event of Default, or, if such accountants shall have obtained from such examination any such knowledge, they shall disclose in such written statement the Default or Event of Default; (f) concurrently with the delivery of the schedules or financial statements required to be furnished under Sections 6.1(a) or 6.1(d) hereof, a certificate signed by the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of each Borrower, and concurrently with the delivery of the financial statements required to be furnished under Section 6.1(e) hereof, a certificate signed by the Independent Public Accountants, and promptly upon the occurrence of any Default or Event of Default, a certificate signed by the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of each Borrower or such Independent Public Accountants, if a Default or Event of Default shall have occurred during the period of their review, in each case stating (i) that a review of the activities of each Borrower during such period has been made under his or their, as the case may be, immediate supervision with a view to determining whether each such Borrower has observed, performed and fulfilled all of its obligations under this Agreement, and (ii) that there existed during such period no Default or Event of Default (provided that, as to a certificate prepared by the Independent Public Accountants, such period, as it relates to the compliance by each Borrower with covenants contained in Articles VII and VIII hereof shall apply to the fiscal period covered by their review) or if any such Default or Event of Default exists, specifying the nature thereof, the period of existence thereof and what action the Borrowers propose to take, or have taken, with respect thereto; each such certificate shall be accompanied by a schedule setting forth the computations as of the end of such period of each of the financial ratios, tests or covenants specified in Article VII and Sections 6.15, 8.2, 8.3, and 8.14 hereof; (g) concurrently with the delivery of the financial statements required to be furnished under Section 6.1(e) hereof, (i) any management letters prepared by the Independent Public Accountants described above, setting forth weaknesses in the accounting and control procedures of either Borrower and (ii) projections (in a format satisfactory to the Agent) for the fiscal year immediately following the fiscal year for which such financial statements were provided; (h) promptly upon receipt thereof with respect to each Borrower, copies of (i) all financial reports (including, without limitation, management letters), if any, submitted to such Borrower by its auditors in connection with each annual, interim or special audit of its books by such auditors, (ii) all "vault count opinions" submitted to such Borrower in connection with each inspection by such auditors of the documents evidencing such Borrower's Loans and the Underlying Collateral securing such Loans, (iii) all audits submitted to such Borrower by the SBA or any other Governmental Authority and (iv) all reports, letters or other -65- documents submitted to such Borrower by the SBA or any other Governmental Authority relating to a material change in such Borrower's business or the rules and regulations promulgated by any Governmental Authority applicable thereto, including, without limitation, the SBI Act, the SBA Regulations, the 1940 Act and the Code; (i) promptly upon the filing thereof with the SEC or the mailing thereof to shareholders of MFC, copies of all reports to shareholders, amendments and supplements to the Registration Statement, proxy statements and other materials of a financial or otherwise material nature; (j) annually, when furnished to MFC, a copy of the Independent Public Accountant's annual management letter provided to MFC; (k) quarterly, (i) a listing of the Loans over $3,000,000, (ii) a detailed listing of accounts charged-off for the quarter, (iii) a report detailing all accounts that have been restructured or modified, including delinquent rewrites and troubled debt restructuring Loans, as well as non-distressed Loans, and listing the number and amount of such Loans and whether such Loans are Medallion Loans or Commercial Loans, (iv) a loss reserve analysis in the form used by the Borrowers as of the Second Restatement Effective Date, (v) a listing of accounts delinquent by more than twelve (12) months, and (vi) a delinquency analysis report in the form currently prepared by the Borrowers, with the addition of (A) an over one hundred twenty (120) days category and (B) a separate analysis for Section 7a Loans similarly aged, in each case in form and content satisfactory to the Agent; (l) no later than December 15, 2000, a commercial finance examination in form and substance satisfactory to the Agent; and (m) with reasonable promptness, such other information respecting the business, operations and financial condition of either Borrower (including, without limitation periodic commercial finance examinations) as the Agent or any of the Banks from time to time reasonably may request. Section 6.2. Taxes and Claims; Investment Company Status. ------------------------------------------- (a) Each Borrower shall pay promptly when due, (i) all material sales, use, excise, personal property, income, withholding, corporate franchise and all other taxes, assessments and governmental charges upon or against or relating to such Borrower or its ownership or use of any of its properties, assets, income or gross receipts unless and to the extent that such charges are being diligently contested in good faith by appropriate proceedings and adequate reserves in conformity with GAAP have been provided therefor on the books of such Borrower, and (ii) all lawful claims, whether for labor, materials, supplies, services or anything else which might or could, if unpaid, become a Lien or charge upon the properties or assets of -66- such Borrower or any of its Subsidiaries, which Lien would not be permitted under this Agreement, unless and to the extent such claims are being diligently contested in good faith by appropriate proceedings and adequate reserves in conformity with GAAP have been provided therefor on the books of such Borrower. MFC will maintain its status as a "regulated investment company" under the Code at all times and will make sufficient distributions to qualify to be taxed as a "regulated investment company" pursuant to subchapter M of the Code or, prior to any change in status as a "regulated investment company", MFC shall demonstrate to the satisfaction of the Agent that it is able to comply on a pro forma basis with the financial covenants in Article 7 hereof. (b) Neither Borrower shall permit, or suffer to remain, and will promptly discharge, any Lien (other than a Permitted Lien) arising from any unpaid tax, assessment, levy or governmental charge. (c) In the event either Borrower shall fail to pay any such tax, assessment, levy or governmental charge or to discharge any such Lien (other than a Permitted Lien), then the Agent, without waiving or releasing any obligation or default of the Borrowers hereunder, may at any time or times hereafter, but shall be under no obligation to do so, make such payment, settlement, compromise or release or cause to be released any such Lien, and take any other action with respect thereto which the Agent deems advisable. All sums paid by the Agent in satisfaction of, or on account of any tax, levy or assessment or governmental charge, or to discharge or release any Lien, and any, expenses, including reasonable attorneys' fees actually incurred, court costs and other charges relating thereto, shall become a part of the Obligations secured by the Collateral, payable on demand. Section 6.3. Insurance. --------- (a) Each Borrower shall (i) keep all of its properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards and (ii) maintain adequate insurance at all times with responsible carriers against liability on account of damage to persons and property and under all applicable workers' compensation laws. For the purposes of this Section 6.3(a), insurance shall be deemed adequate if the same is not less extensive in coverage and amount than is customarily maintained by other persons engaged in the same or similar business similarly situated and if it is in at least such amounts as are required to be maintained by the 1940 Act. (b) Each Borrower, from time to time upon request of the Agent or any Bank, promptly shall furnish or cause to be furnished to the Agent and any such requesting Bank evidence, in form and substance satisfactory to the Agent and such Bank (if requested by a Bank), of the maintenance of all insurance required by this Section 6.3 to be maintained, including, but not limited to, such originals or copies as the Agent or such Bank may request of -67- policies, certificates of insurance, riders and endorsements relating to such insurance and proof of premium payments. Section 6.4. Books and Records. ----------------- Each Borrower shall maintain, at all times, true and complete books, records and accounts in which true and correct entries shall be made of its transactions in accordance with GAAP consistently applied and in compliance with the regulations of any governmental regulatory body having jurisdiction over it. Section 6.5. Properties in Good Condition. ---------------------------- Each Borrower shall keep its properties in good repair, working order and condition (subject to such wear and tear as may occur in the ordinary course of business) and, from time to time, make all needful and proper repairs, renewals, replacements, additions and improvements thereto, so that the business carried on may be properly and advantageously conducted at all times in accordance with prudent business management. Section 6.6. Inspection by the Banks. ----------------------- Each Borrower shall allow any representative of the Agent or any of the Banks to visit and inspect any of the properties of such Borrower to examine and audit the books of account and other records and files of such Borrower, to make copies thereof and to discuss the affairs, business, finances and accounts of such Borrower with its officers and employees, all at such reasonable times and as often as the Agent or any of the Banks may request; provided, that, (a) at least once each calendar year such an inspection shall be conducted by the Agent at the request of the Required Banks (or without such a request if the Agent shall deem it necessary or advisable), and (b) the first such inspection shall occur no later than December 31, 2000. Reasonable expenses incurred in connection with one such audit and inspection requested by the Required Banks or the Agent each year shall be paid by the Borrowers, with any additional audits to be at the expense of the Bank performing the same, or at the expense of all Banks if conducted by the Agent, except that, if an Event of Default shall have occurred and be continuing, all such additional audits shall be at the expense of the Borrowers. Section 6.7. Pay Indebtedness to Agent and Perform Other Covenants. ----------------------------------------------------- Each Borrower shall (a) make full and timely payments to the Agent, for the ratable benefit of the Banks, and the Swing Line Lender, as the case may be, of the principal of and interest on the Notes of such Borrower and all other amounts owed by such Borrower under or pursuant to the Loan Documents, whether now existing or hereafter arising and (b) duly comply with all the terms and covenants contained in each of the instruments and documents furnished in connection with or pursuant to this Agreement or the other Loan Documents, all at the times and places and in the manner set forth therein. -68- Section 6.8. Compliance With Laws, Etc. ------------------------- Each Borrower shall comply with all applicable laws and regulations, including but not limited to, those of the SBA and Federal, state and local laws and regulations relating to consumer lending, disclosure, collection and licensing where the failure so to comply would have a Material Adverse Effect (other than those the validity of which are being diligently contested in good faith by appropriate proceedings and adequate reserves in conformity with GAAP have been provided therefor on the books of the applicable Borrower). The Borrowers will at all times comply with ss.61 of the 1940 Act and will at all times comply in all material respects with the investment objectives, limitations and policies set forth (or incorporated by reference) in the Registration Statement. Section 6.9. Notice of Certain Events. ------------------------ Each Borrower shall promptly, but in no event later than three Business Days after obtaining knowledge thereof, give written notice to the Agent and the Banks of (a) any material litigation, including arbitrations, and of any investigations or proceedings before any Governmental Authority brought against a Borrower, whether or not the claim is considered by a Borrower to be covered by insurance, which might, if determined adversely, have a Material Adverse Effect, or where the amount involved, when added together with all other amounts involved in any other litigation, investigation, arbitration or proceeding affecting such Borrower, would exceed $500,000, and each Borrower shall, if requested by the Agent or the Required Banks, set up such reserves as it deems necessary (provided, that, such reserves shall be in such amounts such that neither the Agent nor the Required Banks has informed either such Borrower that such reserves are not satisfactory to protect the Agent or the Banks against loss); (b) any written notice of a violation received by a Borrower from any Governmental Authority which, if such violation were established, might have a Material Adverse Effect; (c) any material attachment, judgment, lien, levy or order which may be placed on or assessed against or threatened against a Borrower or the Collateral; (d) any Default or Event of Default or any event that, after notice or lapse of time or both, would become a Default or Event of Default; (e) any other matter that has or causes or may have or cause a Material Adverse Effect with respect to a Borrower; and (f) any change in the corporate name or corporate form of a Borrower, or any change in the information disclosed on Schedule I annexed hereto. Section 6.10. Environmental Laws, Etc. ----------------------- (a) Each Borrower shall keep all Property owned or operated by it free of Hazardous Materials and comply with the requirements of all applicable Federal, state and local environmental, health, safety and sanitation laws, ordinances, regulatory and administrative authorities with respect thereto. Except to the extent it does so on the date hereof and in strict compliance with all applicable laws, neither Borrower shall use any Property to generate, manufacture, refine, transport, treat, store, handle, dispose of, transfer, produce, process or in any manner deal with, -69- Hazardous Materials, and neither Borrower shall cause or permit, as a result of any intentional or unintentional act or omission on the part of a Borrower or any occupant, tenant or subtenant, the installation or placement of Hazardous Materials onto any Property or onto any other property or suffer the presence of Hazardous Materials on any Property. Each Borrower shall undertake promptly and pursue diligently to completion appropriate remedial clean-up action in the event of any release of Hazardous Materials on, upon or into any real property owned or operated by a Borrower or any real property adjacent thereto. (b) Each Borrower agrees to provide the Banks with copies of any notifications of releases of Hazardous Materials that are given by or on behalf of a Borrower to any Governmental Authority with respect to any real property owned or operated by a Borrower. Such copies shall be sent to the Banks concurrently with the mailing or delivery of such copies to the Governmental Authority. Section 6.11. Further Assurances. ------------------ Upon the request of the Agent or the Required Banks, each Borrower at its cost and expense shall duly execute and deliver, or cause to be duly executed and delivered, to the Agent and the Banks such further instruments and do and cause to be done such further acts as may be reasonably necessary or proper in the opinion of the Agent or the Required Banks to carry out more effectually the provisions and purposes of this Agreement and the other Loan Documents. Section 6.12. ERISA. ----- Each Borrower shall deliver to the Agent and the Banks, promptly after (i) the occurrence thereof, notice that an ERISA Termination Event or a Prohibited Transaction with respect to any Plan has occurred, which notice shall specify the nature thereof and such Borrower's proposed response thereto, and (ii) actual knowledge thereof, copies of any notice of the PBGC's intention to terminate or to have a trustee appointed to administer any Plan. Section 6.13. Corporate or Limited Liability Company Existence. ------------------------------------------------ Each Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate or limited liability company (as applicable) existence (except as otherwise may be permitted by Section 8.6 hereof) and all rights, licenses, permits and franchises, the termination of which would have a Material Adverse Effect; comply with all laws, regulations, ordinances, rules and orders applicable to it, noncompliance with which would have a Material Adverse Effect; conduct and operate its business in substantially the manner in which it is presently conducted and operated without material alteration or change in the nature of such business; at all times maintain and preserve all property used or useful in the conduct of its business and keep the same in appropriate repair and condition, and from time to time make, or cause to -70- be made, all appropriate repairs, renewals and replacements thereto, so that the business carried on in connection therewith may be properly conducted at all times. MFC will maintain in full force and effect its status as a registered investment company. MFC will not at any time withdraw its election to be a business development corporation under the 1940 Act unless it first shall have delivered to the Agent and the Banks a legal opinion from counsel to MFC satisfactory to MFC and in form and substance satisfactory to the Agent that states that such withdrawal shall not have an adverse effect on the validity or enforceability of the Loan Documents or the legality of the joint and several nature of the Borrowers' liability under the Loan Documents, or otherwise adversely effect the Borrowers' compliance with the 1940 Act. Section 6.14. Maintenance of Security Interest. -------------------------------- Each Borrower shall maintain perfected, first priority security interests in the Collateral in favor of the Agent for the benefit of the Banks and the Swing Line Lender in accordance with the terms of the Security Agreement, subject only to the Liens permitted pursuant to Section 8.1 hereof and taking into account the time required for such Borrower to deliver Collateral to the Agent (which Collateral shall be delivered to the Agent promptly upon receipt thereof by such Borrower); provided, that, the Borrowers shall have no responsibility for a breach of this covenant if caused by the gross negligence of the Agent. Section 6.15. Maximum Percentage of Commercial Loans. -------------------------------------- For so long as amounts are owed by either Borrower to the Banks, the Swing Line Lender or the Agent under the Loan Documents or any of the Revolving Credit Commitments remain in effect, not more than 80% of the aggregate principal amount of all Loans made by the Borrowers and then outstanding shall be Commercial Loans and not fewer than 20% of the aggregate principal amount of all Loans made by the Borrowers and then outstanding shall be Medallion Loans. Section 6.16. Reserved. -------- Section 6.17. Borrowers' Manuals. ------------------ Each Borrower shall notify the Agent and each Bank of any and all material changes to its then operative credit policy manual from those most recently delivered. Section 6.18. Principal Office of Clients. --------------------------- Within five Business Days of any request therefor from the Agent, each Borrower shall update Schedule II to this Agreement to provide, to the best of such Borrower's knowledge, each location at which each Client has its principal or chief executive office. 6.19. Post-Closing Matters. -------------------- -71- Each of the Borrowers agrees to: (a) promptly execute upon the request of the Agent, UCC-1 and/or UCC-3 filings in form and substance satisfactory to the Agent, as well as any payoff letters or other evidence of termination requested by the Agent to release any non-Permitted Liens; (b) no later than October 27, 2000, (i) execute a stock pledge agreement or an amendment to the Security Agreement, in form and substance satisfactory to the Agent, pledging or confirming the pledge of all of the Capital Stock of its direct and indirect Subsidiaries to the Agent for the benefit of itself and the Banks, 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, and (ii) in connection therewith, deliver to the Agent (A) all stock certificates or other certificates evidencing such Borrower's equity interests together with undated stock powers or other instruments of endorsement duly executed in blank, (B) resolutions authorizing such pledge(s), and (C) opinions of counsel, in each case as the Agent deems appropriate and in form and substance satisfactory to the Agent; (c) deliver to the Agent no later than October 6, 2000 the results of such UCC filing searches in Massachusetts and Illinois as the Agent shall request; (d) deliver to the Agent no later than October 6, 2000, certificates from the Secretary of State of each of Massachusetts and Illinois as to MFC's qualification to do business in such jurisdiction; (e) deliver to the Agent no later than October 6, 2000, a certificate of the insurer of each Borrower to the effect that such Borrower has in effect all insurance coverage required pursuant to Section 6.3 hereof; (f) deliver to the Agent and each Bank no later than October 6, 2000, a copy of its then operative credit policy manual; and (g) no later than fifteen Business Days after the direct or indirect formation or acquisition of a new Subsidiary by either Borrower, (i) execute a stock pledge agreement or an amendment to the Security Agreement, in form and substance satisfactory to the Agent, pledging or confirming the pledge of all of the Capital Stock of such Subsidiary to the Agent for the benefit of itself and the Banks, 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, and (ii) in connection therewith, deliver to the Agent (A) all stock certificates or other certificates evidencing such Borrower's equity interests together with undated stock powers or other instruments of endorsement duly -72- executed in blank, (B) resolutions authorizing such pledge(s), and (C) opinions of counsel, in each case as the Agent deems appropriate and in form and substance satisfactory to the Agent. ARTICLE 7. FINANCIAL COVENANTS 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 and the other Loan Documents, are paid in full and the Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term Loan Commitments are terminated, neither Borrower shall, without the prior written consent of the Agent and the Required Banks: Section 7.1. Maximum Consolidated Leverage Ratio. ----------------------------------- Suffer or permit as of the end of any fiscal quarter the ratio of (A) Consolidated Total Liabilities of MFC to (B) Consolidated Tangible Net Worth of MFC to be more than 4:1 at any time. Section 7.2. Maximum Combined Leverage Ratio. ------------------------------- Suffer or permit the ratio of (A) the sum of Unconsolidated Total Liabilities of MFC plus Unconsolidated Total Liabilities of MBC to (B) Combined MFC/MBC Tangible Net Worth to be more than 3:1 at any time. 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 sum of the MFC Borrowing Base and the MBC Borrowing Base, or (B) 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 that have been used directly or indirectly by MBC to exceed the MBC Borrowing Base, (C) 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 that have been used directly or indirectly by MFC to exceed the MFC Borrowing Base, or (D) the aggregate unpaid balance of all Senior Debt to exceed the MFC Borrowing Base plus the MBC Borrowing Base. Section 7.4. Minimum EBIT to Interest Expense Ratio. -------------------------------------- (a) Suffer or permit the ratio, at the end of each fiscal quarter of MFC, of (a) the sum of Consolidated EBIT of MFC for such fiscal quarter plus Consolidated Interest Expense of MFC for such fiscal quarter to (b) Consolidated Interest Expense of MFC for such fiscal quarter to be less than 1.50:1. -73- (b) Suffer or permit the ratio, at the end of each fiscal quarter of MFC, of (a) 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 (b) the sum of Unconsolidated Interest Expense of MFC for such fiscal quarter plus Unconsolidated Interest Expense of MBC for such fiscal quarter to be less than 1.20:1. Section 7.5. Minimum Asset Quality. --------------------- Suffer or permit as of the end of any fiscal quarter, on a rolling twelve-month period, its aggregate Net Realized Loss to be greater than (i) with respect to Medallion Loans, 3% of the average aggregate principal balances of all outstanding Medallion Loans during any applicable period of determination, or (ii) with respect to Commercial Loans, 5% of the average aggregate principal balances of all outstanding Commercial Loans during any applicable period of determination. ARTICLE 8. NEGATIVE COVENANTS 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, without the prior written consent of the Agent and the Required Banks: Section 8.1. Liens. ----- Create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided, however, that the foregoing restriction and limitation shall not apply to the following Liens (the "Permitted Liens"): (a) Liens created under the Security Agreement and other Liens in favor of the Agent or the Banks; (b) Liens existing on property at the time acquired by a Borrower after the date of the financial statements referred to in Section 4.18 hereof, provided that such Lien was not incurred, directly or indirectly, in anticipation or contemplation of such acquisition; (c) Liens constituting renewals, extensions or refundings of Liens permitted by clause (b) above, provided that the principal amount of the Indebtedness secured by any such new Lien does not exceed the principal amount of the Indebtedness being renewed, extended or refunded at the time -74- of renewal, extension or refunding thereof and that such new Lien attaches only to the same property theretofore subject to such earlier Lien; (d) Liens securing taxes, assessments or governmental charges or levies, or the claims or demands of materialmen, mechanics, carriers, workmen, repairmen, warehousemen, landlords and other like Persons, not yet delinquent or which are being actively contested in good faith by appropriate proceedings and in respect of which adequate reserves in conformity with GAAP have been provided on the books of the applicable Borrower; (e) other Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of its property or assets, or materially impair the use thereof in the operation of its business; (f) attachment, judgment and other similar Liens arising in connection with court proceedings, provided that execution or other enforcement of such Liens is effectively stayed, the claims secured thereby are being actively contested in good faith by appropriate proceedings and adequate reserves in conformity with GAAP have been provided on the books of the applicable Borrower; and (g) Liens arising in connection with, and securing the cost of, the acquisition of Equipment, provided, that such Lien attaches to such Equipment concurrently with or within 90 days after the acquisition thereof (by purchase, construction or otherwise), and provided, further, that the aggregate amount of Indebtedness securing all such Liens shall not at any time exceed $1,000,000. Section 8.2. Indebtedness. ------------ Create, incur, assume or suffer to exist, contingently or otherwise, any Indebtedness, except: (a) Indebtedness of the Borrowers to the Agent, the Swing Line Lender and the Banks arising hereunder or under any of the other Loan Documents; (b) Subordinated Debt of the Borrowers in an aggregate amount not to exceed fifty percent (50%) of the Aggregate Revolving Credit Commitment; (c) Permitted Debt; -75- (d) Indebtedness secured by Liens described in Section 8.1(b), (c) or (g) hereof; (e) Unsecured current liabilities incurred in the ordinary course of business and paid within 90 days after the due date thereof (unless diligently contested in good faith by appropriate proceedings and, if requested by the Agent, reserved against in conformity with GAAP) other than liabilities that are for money borrowed or are evidenced by bonds, debentures, notes or other similar instruments; (f) Indebtedness in respect of Derivative Contracts which are incurred in the ordinary course of business in order to protect against interest rate or currency fluctuations, and which are non-speculative in nature, and with notional amounts not exceeding $50,000,000 in the aggregate or such other amount as may be approved by the Agent; and (g) Indebtedness of any Subsidiary or Affiliate reflecting Investments permitted under Section 8.3(e) hereof. Section 8.3. Limitation on Loans and Investments. ----------------------------------- (a) Make, or obligate itself to make, any loan or advance or Investment that is not a Domestic Loan or a Domestic Investment. (b) Make, or obligate itself to make, any loan or advance or Investment that is not in compliance with the Registration Statement with respect to MFC and any rules and regulations promulgated by any Governmental Authority to which it is subject, including, without limitation, the SBI Act and the SBA Regulations promulgated thereunder and the 1940 Act. (c) Make, or obligate 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 would exceed 20% of Unconsolidated Tangible Net Worth of such Borrower. (d) Make, or commit to make, or acquire or commit to acquire, any Commercial Loan to or from any Person if, as a result of such Loan, the applicable Borrower's Commercial Loan concentration in any given industry (determined in accordance with the Standard Industrial Classification promulgated by the Office of Management and Budget) would exceed in principal amount 35% of such Borrower's total Loans outstanding. (e) Make any Investment 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) such Investments existing on the Second Restatement Effective Date listed on Schedule III hereto, provided that to the extent that the -76- aggregate amount of Investments listed on Schedule III exceeds $100,000,000 (the amount of such excess amount is hereinafter referred to as the "Excess Amount"), the Borrowers may repay Investments listed on Schedule III and subsequently reinvest the proceeds of Investments listed on Schedule III in Subsidiaries from time to time in an aggregate amount not to exceed the Excess Amount, (iii) Investments made after the Second Restatement Effective Date which do not in the aggregate at any time for both Borrowers exceed $15,000,000, (iv) Investments in Subsidiaries or Affiliates made after the Second Restatement Effective Date where the consideration for such Investment is (A) the stock of MFC, or (B) cash proceeds of additional equity issued by MFC provided that the total consideration (whether cash, stock or otherwise) paid by the Borrowers with respect to each such Investment permitted by this subclause (B) shall not exceed $25,000,000, provided further that the total consideration (whether cash, stock or otherwise) paid by the Borrowers with respect to all Investments permitted by this clause (iv) when aggregated with the total consideration paid by the Borrowers with respect to all other Investments permitted by this clause (iv), shall not exceed $50,000,000. (f) Make, or commit to make, or acquire or commit to acquire, any Residential Construction Real Estate Loan to or from any Person if, as a result of such Loan, the aggregate amount of all Residential Construction Real Estate Loans made by the Borrowers would exceed in principal amount 7% of the Borrowers' total Loans outstanding. (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 or (iii) to the Agent for the benefit of the Banks. (h) Make, or commit to make, or acquire or commit to acquire, any Loan to or from any Person unless the applicable 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 the Loan that would otherwise cause the breach is not in a material amount and in any event is not included in the MBC Borrowing Base or the MFC Borrowing Base. (i) 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 -77- material amount and in any event is not included in the MBC Borrowing Base or the MFC Borrowing Base. Section 8.4. [Reserved]. -------- Section 8.5. Restricted Payments. ------------------- Make, or obligate itself to make, any Restricted Payment. Section 8.6. Merger, Consolidation, Sale or Transfers of Assets. -------------------------------------------------- (a) Sell, discount or otherwise dispose of Loans or any Collateral if a Default or Event of Default has occurred and is continuing or if the effect of such sale, discount or disposal would be to put the applicable Borrower in violation of any of the covenants and agreements contained in this Agreement; (b) Sell or otherwise dispose of an amount of Loans which, in aggregate principal amount, exceeds 10% of the aggregate principal amount of all Loans of the applicable Borrower then outstanding unless, immediately upon such sale or disposition, the Borrowers make, in accordance with the provisions of Section 2.5(a) hereof, a voluntary prepayment on all then outstanding Revolving Credit Loans and Term Loans owing by them equal to the aggregate principal amount, plus accrued interest, of the Loans so sold or disposed of; (c) Enter into any transaction of merger or consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or substantially all of its properties or assets to any Person, except that either Borrower may merge or consolidate with any other Person, provided that (A) a Borrower shall be the surviving and continuing corporation, (B) no Default or Event of Default shall have occurred and be continuing and (C) after giving effect to such consolidation or merger, each Borrower would be Solvent and, except for good will adjustments, would have Consolidated Tangible Net Worth at least equal to the Consolidated Tangible Net Worth such Borrower had immediately before such consolidation or merger; (d) Sell, discount or otherwise dispose of, to any Subsidiary or Affiliate of either Borrower, any Medallion Loan originated by such Borrower, except that MFC may make such transfers to MBC, provided that no such transfer shall cause the principal amount of the Revolving Credit Loans, Swing Line Loans and Term Loans outstanding to MFC to exceed the MFC Borrowing Base or of Revolving Credit Loans, Swing Line Loans and Term Loans to MBC to exceed the MBC Borrowing Base; or (e) Sell, transfer or otherwise dispose of any assets (including the Capital Stock of Subsidiaries, but excluding Loans) having a book value (when aggregated with the book value of all other sales, transfers and -78- dispositions under this subsection (e)) in excess of ten percent (10%) of the book value of the total assets (as of the Second Restatement Effective Date) owned by the Borrower making such sale, transfer or other disposal. Section 8.7. Transfer of Proceeds. -------------------- Except in accordance with the provisions of Section 8.3(e) hereof, transfer, or commit itself to transfer, any portion of the proceeds of the Revolving Credit Loans, Swing Line Loans and Term Loans to be made to the Borrowers from time to time hereunder to any Affiliate. Section 8.8. Compliance with ERISA. --------------------- Take any of the following actions or permit any of the following events to exist if, as a result thereof, a Borrower would, or would be likely to, incur a liability in excess of $50,000: terminate, or permit or suffer any of its ERISA Affiliates to terminate (other than a standard termination, as defined in Section 4041 (b) of Title IV of ERISA, of a Single Employer Plan), any Plans maintained by a Borrower or any of its ERISA Affiliates so as to incur any liability to the PBGC; permit or suffer to exist any Prohibited Transaction involving any of such Plans or any trust created thereunder which would subject a Borrower to a tax, liability or penalty on Prohibited Transactions imposed under Code Section 4975 or ERISA; fail to pay, or permit or suffer any of its ERISA Affiliates to fail to pay, to any such Plan (including any Multiemployer Plan) any contribution which it or such ERISA Affiliate is obligated to pay under the terms of such Plan; permit any Accumulated Funding Deficiency, whether or not waived, with respect to any Plan; or permit or suffer to exist any occurrence of a Reportable Event, or any other event or condition, which presents a material risk of termination by the PBGC of any such Plan. Section 8.9. Change in Business. ------------------ Materially change or alter the nature of its business as conducted as of the Original Effective Date. Section 8.10. Amendments of Agreements. ------------------------ Consent to any amendment, supplement, or other modification of any of the terms (including acceleration, covenant, default, subordination, sinking fund, repayment, interest rate or redemption provisions) contained in, or applicable to, or any security for, any Permitted Debt or other instrument evidencing or applicable to Permitted Debt if such amendment, supplement, or other modification materially adversely affects the interests of the Agent, the Swing Line Lender or any Bank. Section 8.11. Transactions with Affiliates. ---------------------------- -79- (a) Enter into, or cause, suffer, or permit to exist, any material transactions, including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service, with any Affiliate on terms that are less favorable to such Borrower than those that would be obtainable at the time from any Person who is not an Affiliate; or (b) become an Affiliated Person of any Bank or any Affiliated Person of any Bank known to the Borrowers and the Borrowers will use their best efforts to ensure that none of their Affiliated Persons is or becomes an Affiliated Person of any Bank or an Affiliated Person of any Bank known to the Borrowers. Section 8.12. Negative Pledges. ---------------- Enter into any agreement (excluding this Agreement and the other Loan Documents) prohibiting the creation or assumption of any Lien upon its properties, revenues, or assets, whether now owned or hereafter acquired, except any agreement providing for the creation or assumption of any Lien permitted under Section 8.1(b), (c) or (g) hereof. Section 8.13. Inconsistent Agreements. ----------------------- Enter into any agreement containing any provisions which would be violated or breached by any borrowing hereunder or by the performance by either Borrower of its obligations under any of the Loan Documents where the potential consequences of such violation or breach would have a Material Adverse Effect. Section 8.14. Capital Expenditures. -------------------- Expend or commit to expend for itself more than an aggregate of $1,000,000 in any fiscal year for capital expenditures, for the acquisition of Equipment or for leasehold improvements. Section 8.15. [Reserved]. -------- Section 8.16. Portfolio Purchases. ------------------- Make, or obligate itself to make, any Portfolio Purchase unless: (i) no Default or Event of Default exists or would exist after giving effect to the applicable Portfolio Purchase; (ii) the applicable Borrower has provided the Agent and each of the Banks with a pro forma certificate of the chief financial officer of such Borrower evidencing each Borrower's computation of compliance with each of the financial ratios, tests or covenants specified in Article VII and Sections 8.2, 8.3 and 8.14 hereof after giving effect to the applicable Portfolio Purchase; (iii) the applicable Portfolio Purchase has the approval of the seller; -80- (iv) (1) the seller of the loans constituting such Portfolio Purchase is in the business of making loans secured by New York City taxicab medallions and the loans to be acquired in connection therewith are secured by New York City taxicab medallions, or (2) the Portfolio Purchase is being made from a Person in any other line of business; provided, that, to the extent the Portfolio Purchase does not entirely involve loans secured by New York City taxicab medallions, in addition to the foregoing, each such Portfolio Purchase shall be subject to the following additional limitations: (A) if the consideration for such Portfolio Purchase shall be Capital Stock of MFC, the fair market value of such Capital Stock, less the aggregate outstanding principal balances of all loans included in such Portfolio Purchase that are secured by New York City taxicab medallions, if any, shall not exceed $50,000,000 with respect to any one such Portfolio Purchase or $100,000,000 in any fiscal year with respect to all such Portfolio Purchases in the aggregate in such fiscal year; and (B) if the consideration for such Portfolio Purchase shall be other than Capital Stock of MFC, the consideration therefor, less the aggregate outstanding principal balances of all loans included in such Portfolio Purchase that are secured by New York City taxicab medallions, if any, shall not exceed $25,000,000 with respect to any one such Portfolio Purchase or $50,000,000 in any fiscal year with respect to all such Portfolio Purchases in the aggregate in such fiscal year. ARTICLE 9. DEFAULTS AND REMEDIES Section 9.1. Events of Default. ----------------- If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), that is to say: (a) if default shall be made by either Borrower in the due and punctual payment of the principal of or interest on any of its Revolving Credit Loans, Swing Line Loans or Term Loans or any other amounts due and owing by such Borrower to the Agent, the Swing Line Lender or the Banks, when and as the same shall become due and payable and, with respect to defaults in payment other than payment of principal, such default shall continue for more than five days; -81- (b) if default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in Article VII or Sections 6.9(d), 6.13, 6.14, 6.19, 8.1, 8.2, 8.5, 8.6, 8.9, 8.10 or 8.12 hereof; (c) if default shall be made by either Borrower in the performance or observance of, or shall occur under, any other covenant, agreement or provision of this Agreement (other than Section 6.7 hereof) and such default shall not have been remedied within 30 days after such failure shall first have become known to any officer of either Borrower; (d) if default shall be made by either Borrower in the performance or observance of, or shall occur under, any covenant, agreement or provision of any other Loan Document or in any other agreement, instrument or document delivered to the Agent, the Swing Line Lender or the Banks and such default shall not have been remedied within such grace or cure period, if any, as may be provided therefor; (e) if a Default or an Event of Default shall occur and continue under and as defined in that certain Amended and Restated Loan Agreement dated as of December 24, 1997 by and among MFC's Subsidiary, 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 the same has been or may hereafter be amended, modified, restated or supplemented from time to time; (f) if either Borrower shall (i) default in the payment of any principal, interest or premium with respect to any Indebtedness for borrowed money or any obligation which is the substantive equivalent thereof in excess of $250,000, other than Indebtedness under the Revolving Credit Loans, the Swing Line Loans, or the Term Loans, and such default shall continue for more than the period of grace, if any, therein specified or (ii) default in the performance or observance of any other term, condition or agreement contained in any such obligation or in any agreement relating thereto if the effect thereof is to cause, or permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity; (g) if any representation or warranty or any other statement of fact herein or in the other Loan Documents, or in connection with the transactions contemplated hereby or thereby, or in any writing, certificate, report or statement at any time furnished by either Borrower to the Agent, the Swing Line Lender or any Bank pursuant to or in connection with this Agreement or the other Loan Documents shall prove to have been false or misleading in any material respect when made; -82- (h) if either Borrower shall file a petition or seek relief under or take advantage of any insolvency law; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator, custodian or conservator of itself or of the whole or substantially all of its property; file a petition or an answer to a petition under any chapter of the United States Bankruptcy Code, as amended (11 U.S.C. ss.101 et seq.), or file a petition or seek relief under or take advantage of any other similar law or statute of the United States of America, any state thereof or any foreign country; (i) if a court of competent jurisdiction shall enter an order, judgment or decree appointing or authorizing a receiver, trustee, liquidator, custodian or conservator of either Borrower or of the whole or substantially all of its property, or enter an order for relief against either Borrower in any case commenced under any chapter of the United States Bankruptcy Code, as amended, or grant relief under any other similar law or statute of the United States of America, any state thereof or any foreign country; or if, under the provisions of any law for the relief or aid of debtors, a court of competent jurisdiction or a receiver, trustee, liquidator, custodian or conservator shall assume custody or control or take possession of either Borrower or of the whole or substantially all of its property; or if there is commenced against either Borrower any proceeding for any of the foregoing relief or if a petition is filed against either Borrower under any chapter of the United States Bankruptcy Code, as amended, or under any other similar law or statute of the United States of America or any state thereof or any foreign country and such proceeding or petition remains undismissed for a period of 60 days; or if either Borrower by any act indicates its consent to, approval of or acquiescence in any such proceeding or petition; (j) if any judgment or judgments against either Borrower or any attachment or execution against any of its property for any amount or amounts in excess of $250,000 in the aggregate remains unpaid, unstayed, undismissed or unbonded for a period of more than 30 days; (k) (i) any Person shall engage in any Prohibited Transaction involving any Plan, (ii) any Accumulated Funding Deficiency, whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Banks likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA (other than a standard termination as defined in Section 4041(b) thereof), (v) either Borrower or any of its ERISA Affiliates shall, or is, in the reasonable opinion of the Agent or the Required Banks, likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan or (vi) any other event -83- or condition shall occur or exist with respect to a Plan; and in case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could subject either Borrower to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of either Borrower; (l) if there shall occur any change in the Collateral or in the business of either Borrower, or the operation, conduct or prospects thereof, that individually or in the aggregate, could have or result in a Material Adverse Effect and the Agent has been directed to declare such Event of Default by the Super-majority Banks as set forth below in this Section 9.1; (m) a Change of Control shall have occurred; or (n) (i) if the Agent and the Banks have not received by December 15, 2000 a written progress report by Arthur Andersen LLP with respect to issues raised in the March 29, 2000 management letter, or (ii) if such written progress report is unsatisfactory to the Super-majority Banks in their sole discretion; then, (A) in the case of an Event of Default described in clause (h) or (i) above, the Aggregate Revolving Credit Commitment, the Swing Line Commitment, and each Term Loan Commitment shall automatically terminate and (i) the unpaid balance of the Revolving Credit Notes, the Swing Line Notes, the Term Notes and all interest accrued thereon, and (ii) any accrued and unpaid fees and expenses due and payable hereunder or under any other Loan Document shall automatically (without any action on the part of the Agent or the Banks and without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived) forthwith become due and payable, and, (B) in the case of an Event of Default described in clause (l) above, at any time thereafter, if such Event of Default shall then be continuing the following action may be taken: the Agent, upon the direction of the Super-majority Banks, shall, declare (i) the Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term Loan Commitments to be terminated, whereupon the obligation of the Agent, the Banks and the Swing Line Lender to make further Revolving Credit Loans or Term Loans or Swing Line Loans, as the case may be, hereunder shall terminate immediately and (ii) the Revolving Credit Notes, Swing Line Notes and Term Notes to be due and payable, whereupon the maturity of the then unpaid balance of the Revolving Credit Notes, Swing Line Notes and Term Notes shall be accelerated and the same, and all interest accrued thereon and any accrued and unpaid fees and expenses due and payable hereunder, shall forthwith become due and payable without presentment. demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or in Revolving Credit Notes, Swing Line Notes or Term Notes to the contrary notwithstanding, and, (C) in the case of any other Event of Default, then and in any such event, and at -84- any time thereafter, if such or any other Event of Default shall then be continuing the following action may be taken: the Agent may (but shall not be obligated to), and upon the direction of the Required Banks shall, declare (i) the Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term Loan Commitments to be terminated, whereupon the obligation of the Agent, the Banks and the Swing Line Lender to make further Revolving Credit Loans or Term Loans or Swing Line Loans, as the case may be, hereunder shall terminate immediately and (ii) the Revolving Credit Notes, Swing Line Notes and Term Notes to be due and payable, whereupon the maturity of the then unpaid balance of the Revolving Credit Notes, Swing Line Notes and Term Notes shall be accelerated and the same, and all interest accrued thereon and any accrued and unpaid fees and expenses due and payable hereunder, shall forthwith become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or in Revolving Credit Notes, Swing Line Notes or Term Notes to the contrary notwithstanding. Section 9.2. Suits for Enforcement. --------------------- In case any one or more Events of Default shall occur and be continuing, the Agent may (but shall not be obligated to), and at the request of the Required Banks shall, proceed to protect and enforce the rights or remedies of the Agent, the Swing Line Lender and the Banks either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein, in the other Loan Documents, or in any document or instrument delivered in connection with or pursuant to this Agreement or the other Loan Documents or to enforce the payment of the Notes or any other legal or equitable right or remedy. Section 9.3. Rights and Remedies Cumulative. ------------------------------ No right or remedy herein conferred upon the Banks, the Swing Line Lender or the Agent is intended to be exclusive of any other right or remedy contained herein or in the other Loan Documents or in any instrument or document delivered in connection with or pursuant to this Agreement or the other Loan Documents, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. Section 9.4. Rights and Remedies Not Waived. ------------------------------ No course of dealing between either Borrower and any of the Banks, the Swing Line Lender or the Agent or any failure or delay on the part of any Bank, the Swing Line Lender or the Agent in exercising any rights or remedies hereunder shall operate as a waiver of any rights or remedies of such or any other Bank, the Swing Line Lender or the Agent and no single or partial exercise of any rights or -85- remedies hereunder shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder. Section 9.5. Further Payments. ---------------- In the event that the Revolving Credit Commitments, the Swing Line Commitment and the Term Loan Commitments shall have been terminated or the Revolving Credit Loans, Swing Line Loans and the Term Loans and all other amounts owing under the Loan Documents shall have been declared due and payable pursuant to the provisions of this Section, any funds received by the Agent, the Swing Line Lender and the Banks from or on behalf of the Borrowers shall be remitted to, and applied by, the Agent in the following manner and order: (a) first, to the payment of interest on, and then the principal portion of, any Revolving Credit Loans or Term Loans which the Agent may have advanced on behalf of any Bank for which the Agent has not then been reimbursed by such Bank or the Borrowers; (b) second, to reimburse the Agent and the Swing Line Lender for any expenses due from the Borrowers pursuant to the provisions of Section 10.6, (c) third, to the payment of the outstanding principal amount of the Swing Line Loans (together with all interest thereon), (d) fourth, to the payment of the Fees, (e) fifth, to the payment of any other fees, expenses or amounts (other than the principal of and interest on the Revolving Credit Loans, Swing Line Loans or Term Loans) payable by the Borrowers to the Agent, the Swing Line Lender or any of the Banks under the Loan Documents, (f) sixth, to the payment, pro rata according to the Exposure Percentage of each Bank, of interest due on the Revolving Credit Loans and Term Loans, (g) seventh, to the payment, pro rata according to Exposure Percentage of each Bank, of principal on the Revolving Credit Loans and Term Loans, of such principal, (h) eighth, any remaining funds shall be paid to whomsoever shall be entitled thereto or as a court of competent jurisdiction shall direct. ARTICLE 10. MISCELLANEOUS Section 10.1. Collection Costs. ---------------- In the event that the Banks, the Swing Line Lender or the Agent or any of them shall retain or engage an attorney or attorneys to collect or enforce or protect its interests with respect to this Agreement, any of the other Loan Documents, or any instrument or document delivered pursuant to this Agreement or the other Loan Documents, including, without limitation, each of the documents referred to in Section 5.1 hereof, or to protect the rights of any holder or holders with respect thereto, the Borrowers shall pay, within 10 days after demand therefor, all of the costs and expenses of such collection, enforcement or protection, including reasonable attorneys' fees actually incurred (including, without limitation, the reasonable allocated costs of in-house counsel) and disbursements, and the Agent on behalf of such Banks, the Agent on behalf of the Swing Line Lender, the Swing Line Lender, the Agent or the holders of such Notes, as the case may be, may take judgment for all such amounts, in addition to the unpaid principal balance of the -86- Notes and accrued interest thereon and any accrued and unpaid fees and expenses due and payable hereunder. Section 10.2. Modification and Waiver. ----------------------- With the written consent of the Required Lenders, the Agent and the Borrowers may, from time to time, enter into written amendments, supplements or modifications of the Loan Documents and, with the consent of the Required Lenders, the Agent on behalf of the Banks and the Swing Line Lender may execute and deliver to the Borrowers a written instrument waiving or a consent to a departure from, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of the Loan Documents or any Default and its consequences; provided, however, that: (a) no such amendment, supplement, modification, waiver or consent shall, without the consent of each Bank affected thereby, (i) increase the Revolving Credit Commitment or Term Loan Commitment of any Bank or the Aggregate Revolving Credit Commitment (except as expressly permitted by Section 2.1(d) hereof, (ii) decrease the rate or extend the time of payment of interest on, or change or forgive the principal amount or extend the time of payment of, any Revolving Credit Loan or Term Loan, or decrease the rate, or extend the time of payment, of the Facility Fee, (iii) change the provisions of Sections 3.3, 9.1, this 10.2, or 10.9, change the definition of "Eligible Loan," "Required Banks," "Event of Default," "Prime Rate," "Adjusted LIBOR Rate" "Revolving Credit Commitment Periods," "Revolving Credit Loans," "Term Loans," "Term Loan Commitment" or any defined terms included in such definitions, (iv) change any of the provisions of Article II (other than Section 2.14 thereof) or Article III hereof, or (v) release all or substantially all of the Collateral and no such amendment, supplement, modification, waiver or consent shall, without the consent of each of the Banks affected thereby, change any provision hereof which expressly requires the consent, approval or waiver by each Bank affected thereby; (b) without the written consent of the Agent, no such amendment, supplement, modification or waiver shall amend, modify or waive any provision of Article 11 or otherwise change any of the rights or obligations of the Agent hereunder or under the Loan Documents; (c) without the written consent of the Swing Line Lender, no such amendment, supplement, modification or waiver shall change the Swing Line Commitment or change any other term or provision that relates to the Swing Line Commitment or the Swing Line Loans; and (d) none of the following shall require the consent, authorization or approval of the Borrowers: (i) amendment or modification of any agreement to which neither Borrower is a party, and (ii) with respect to the -87- agency relationship between the Agent and the Banks, Article XI (other than Section 11.5) hereof. Any such amendment, supplement, modification or waiver shall apply equally to the Agent, the Swing Line Lender, and each of the Banks and shall be binding upon the parties to the applicable Loan Document, the Banks, the Swing Line Lender and all future holders of the Revolving Credit Loans, Term Loans and/or Swing Line Loans. In the case of any waiver, the parties to the applicable Loan Document, the Banks, the Swing Line Lender and the Agent shall be restored to their former position and rights hereunder and under the Loan Documents to the extent provided for in such waiver, and any Default waived shall not extend to any subsequent or other Default, or impair any right consequent thereon. The Loan Documents may not be amended orally or by any course of conduct. No notice to or demand on either Borrower in any case shall entitle either Borrower to any other or further notice or demand in similar or other circumstances. Section 10.3. Governing Law. ------------- THIS AGREEMENT, THE REVOLVING CREDIT NOTES, THE SWING LINE NOTES AND THE TERM NOTES AND THE RIGHTS AND DUTIES OF THE PARTIES THEREUNDER AND WITH RESPECT TO INTEREST, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE TO THE EXERCISE OF REMEDIES OR THE PERFECTION OF SECURITY INTERESTS UNDER THE UCC. Section 10.4. Notices. ------- All notices, requests, consents, demands or other communications provided for herein shall be in writing and shall be deemed to have been given (i) five Business Days after the date mailed if sent by registered or certified mail, postage prepaid, return receipt requested, or (ii) on the day of delivery if personally delivered or sent by overnight courier service, or (iii) on the day of transmission if sent by telecopier and confirmed, on the same day as such notice is sent, by telephonic notice or by one of the other two methods listed above, and shall be addressed, as the case may be, as follows: to the Agent at its address set forth on Exhibit A, with a copy to Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02114 (Attention: Marijane Benner Browne, Esq.), Telecopier No. (617) 951-8736, and to any Bank at its address specified for such Bank on Exhibit A; and to the Borrowers c/o Medallion Financial Corp., 437 Madison Avenue, 38th Floor, New York, New York 10022 (Attention: Alvin Murstein, Chief Executive Officer and Daniel Baker, Treasurer and Chief Financial Officer), Telecopier No. (212) 328-2121, or to such other person or address as either party shall designate to the other from time to time in writing forwarded in like manner. Section 10.5. Accounting Terms. ---------------- -88- All accounting terms not specifically defined herein shall be construed in accordance with GAAP, consistently applied. Where any accounting determination or calculation is required to be made under this Agreement, such determination or calculation (unless otherwise provided) will be made in accordance with GAAP, consistently applied except that if because of a change in GAAP, the Borrowers would have to alter a previously utilized accounting method or policy in order to remain in compliance with GAAP, such determination or calculation will continue to be made in accordance with the Borrowers' previous accounting methods or policy. Unless otherwise specified herein all financial statements required to be delivered hereunder, shall be prepared and all financial records shall be maintained in accordance with GAAP. Section 10.6. Costs and Expenses; Indemnity. ----------------------------- (a) The Borrowers agree to pay on demand all reasonable out-of-pocket costs and expenses incurred by the Banks, the Swing Line Lender and the Agent in connection with the preparation, negotiation, administration, filing and recording of any amendments, waivers or consents which may be requested by the Borrowers, all out-of-pocket costs and expenses, if any, in connection with the preparation, negotiation, syndication, administration and enforcement (whether in the context of a civil action, adversary proceeding, workout or otherwise) of this Agreement, the other Loan Documents, and such other instruments and documents, including, without limitation, reasonable attorneys' fees actually incurred, audit charges (provided, that audit charges will be subject to a cap agreed to between the Agent and the Borrowers prior to the audit being conducted), appraisal fees, search fees and filing fees and all out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees) of the Agent in connection with its duties as Agent under this Agreement, the Security Agreement and the other Loan Documents. The Borrowers also agree to pay on demand all reasonable attorneys' fees actually incurred, and any expenses, costs and charges relating thereto of the Agent if at any time or times hereafter the Agent employs counsel for advice with respect to this Agreement or the other Loan Documents, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any other Loan Document (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or the other Loan Documents) or to represent the Agent in any pending or threatened litigation with respect to the affairs of the Borrowers in any way relating to any of the Borrowers' obligations hereunder or to enforce any rights of the Agent or any Bank or the Swing Line Lender or liabilities of the Borrowers, any Person to whom either Borrower has made a Loan, or any Person which may be obligated to the Agent or the Banks or the Swing Line Lender by virtue of this Agreement or any other Loan Document, instrument or document now or hereafter delivered to the Agent or any Bank or the Swing Line Lender by or for the benefit of the Borrowers. The Borrowers agree to be responsible for payment of the amounts referred to in this Section 10.6(a) whether or not any -89- Revolving Credit Loans, Swing Line Loans or Term Loans are made hereunder. (b) The Borrowers further agree to indemnify and save harmless each Bank, the Swing Line Lender and the Agent and each of their respective officers, directors, employees, agents and Affiliates (each an "Indemnified Party" and collectively the "Indemnified Parties") from and against any and all actions, causes of action, suits, losses, liabilities and damages and expenses (including, without limitation, reasonable attorneys' fees actually incurred) in connection therewith (herein called the "Indemnified Liabilities") incurred by any Indemnified Party as a result of, or arising out of or relating to any of the transactions contemplated hereby or by the other Loan Documents or relating to the use of any proceeds of the loans made hereunder or any of the other Loan Documents, except for any Indemnified Liabilities arising on account of the gross negligence or willful misconduct of the Indemnified Party seeking indemnity under this Section 10.6(b); provided, however, that, if and to the extent such agreement to indemnify may be unenforceable for any reason, the Borrowers shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which shall be permissible under applicable law. The agreements in this Section 10.6(b) shall survive the payment of the Revolving Credit Notes, the Swing Line Notes and the Term Notes and related obligations and the termination of the Revolving Credit Commitment, Swing Line Commitment and Term Loan Commitment. Section 10.7. Waiver of Jury Trial and Setoff; Consequential Damages. ------------------------------------------------------ EACH OF MFC, MBC, THE AGENT, THE SWING LINE LENDER AND EACH BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE, HOWSOEVER ARISING, BETWEEN EITHER OR BOTH BORROWERS AND ANY OF THE BANKS, THE SWING LINE LENDER OR THE AGENT, BETWEEN ANY BANKS, AND BETWEEN THE AGENT AND/OR ANY BANKS; AND EACH BORROWER HEREBY WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION). TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT 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 -90- OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH WAIVER SET FORTH IN THIS SECTION 10.7 CONSTITUTES A MATERIAL INDUCEMENT FOR EACH OF THE AGENT, THE SWING LINE LENDER AND EACH BANK TO EXTEND CREDIT HEREUNDER. Section 10.8. Captions. -------- The captions of the various sections and paragraphs of this Agreement have been inserted only for the purpose of convenience; such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement. Section 10.9. Lien; Setoff by Banks. --------------------- (a) Each Borrower hereby grants to the Agent, the Swing Line Lender and the Banks a continuing lien for its Indebtedness to each of the Agent, the Swing Line Lender and the Banks upon any and all monies, securities and other property of such Borrower and the proceeds thereof, now or hereafter held or received by or in transit to, the Agent, the Swing Line Lender or any of the Banks from or for such Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special) and credits of such Borrower with, and any and all claims of such Borrower against the Swing Line Lender or the Banks, at any time existing. Upon the occurrence of any Event of Default, the Agent, the Swing Line Lender and the Banks are hereby authorized at any time and from time to time, without notice to the Borrowers, to setoff, appropriate and apply any or all items hereinabove referred to with respect to each Borrower against all Indebtedness of such Borrower to the Agent, the Swing Line Lender and the Banks, whether under this Agreement, the Revolving Credit Notes, the Term Notes, the Swing Line Notes or otherwise, and whether now existing or hereafter arising. The Agent, the Swing Line Lender and each Bank agree promptly to notify the Borrowers after any such set-off and application is made by such Bank or Swing Line Lender, as the case may be, provided, that, the failure to give such notice shall not affect the validity of such setoff and application. (b) Each holder of a Note agrees that if it shall, through the exercise of a right of banker's lien, setoff, counterclaim or otherwise, obtain payment with respect to any Note which results in its receiving more than its pro rata share of the aggregate payments or reductions of all Notes (based on such holder's Exposure Percentage), it shall forthwith purchase from such other holders a participation in all of the Notes held by such other holders so that the amount of all unpaid Notes and participations therein held by all holders shall be pro rata (based on each holder's Exposure Percentage). (c) Each Borrower expressly consents to the foregoing arrangements in Section 10.9(b) hereof and agree that any holder of a -91- participation in a Note so acquired may exercise any and all rights of banker's lien, setoff, counterclaim or otherwise with respect to any and all monies owing by such holder to such Borrower as fully as if such holder were a holder of a Note in the amount of such participation. If all or any portion of any such excess payment is thereafter recovered from the holder which received the same, the purchase provided for in Section 10.9(b) hereof shall be rescinded to the extent of such recovery, without interest. (d) Each Bank and the Swing Line Lender agrees that if and to the extent that any amount received by the Agent, the Swing Line Lender or any Bank from a Borrower or any other obligor or from the Collateral is subsequently invalidated, declared to be fraudulent or preferential, set aside or judicially required to be repaid to a trustee, receiver or any other Person under any applicable creditors' remedy proceeding, including without limitation any bankruptcy proceeding, the other Banks hereto shall purchase from the Bank or Swing Line Lender from which said amount is recovered an additional participation in such amount equal to such Bank's Exposure Percentage of that amount. The amount invalidated, declared to be fraudulent or preferential, set aside or judicially required to be repaid to a trustee, receiver or any other person under any applicable creditors' remedy proceeding shall be deemed to be an amount immediately due and owing from such Borrower. Section 10.10. Security; Continued Effectiveness. --------------------------------- (a) As security for the payment of any and all sums owing under the Notes and all other obligations of each Borrower hereunder and under the other Loan Documents, each Borrower shall execute and deliver to the Agent, the Banks and the Swing Line Lender, on the Second Restatement Effective Date the Security Agreement, which shall amend and restate the Original MBC Security Agreement and the Original MFC Security Agreement and pursuant to which each Borrower confirms and continues (and each Borrower hereby confirms and continues) its grant to the Agent, on behalf of the Banks and the Swing Line Lender, a valid and perfected first priority (except as otherwise permitted hereunder) security interest in all of its interests in the Collateral and Underlying Collateral described therein, and each Borrower shall cause to be properly filed in all pertinent jurisdictions the additional Borrower Financing Statements contemplated by Section 5.1(a)(iv) hereof. (b) No transfers of the proceeds of the Revolving Credit Loans, Swing Line Loans or Term Loans were made by MFC to BL prior to the Restatement Effective Date. Section 10.11. Jurisdiction; Service of Process. -------------------------------- Each Borrower hereby irrevocably consents to the non-exclusive jurisdiction of the courts of the State of New York, County of New York and of any Federal -92- Court located in the Southern District of New York, and agrees that venue in each of such Courts is proper, in connection with any action or proceeding arising out of or relating to this Agreement, the other Loan Documents, or any document or instrument delivered pursuant to this Agreement or the other Loan Documents. In any such action or proceeding, each Borrower waives personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to the Borrowers at the address set forth in Section 10.4 hereof. Nothing herein shall affect the right of the Agent, the Swing Line Lender or any Bank to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against a Borrower in any other jurisdiction. Section 10.12. Benefit of Agreement. -------------------- This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Agent, the Swing Line Lender and the Banks and their respective successors and assigns, and all subsequent holders of the Notes except that the obligation of the Banks to make Revolving Credit Loans or Term Loans hereunder and the obligation of the Swing Line Lender to make any Swing Line Loan hereunder shall not inure to the benefit of any successors or assigns of either Borrower. Section 10.13. Counterparts. ------------ This Agreement may be executed by the parties hereto individually or in any combination, in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same agreement. Section 10.14. Interest. -------- (a) Usury Limitation. It is the intention of the parties hereto to conform strictly to the usury laws now in force in the appropriate controlling jurisdiction. Accordingly, if the transactions contemplated hereby would be usurious, under any controlling law, then, in that event, notwithstanding anything to the contrary in this Agreement, the Notes or any other instrument or agreement entered into in connection therewith, it is agreed as follows: (i) the aggregate of all charges which constitute interest under the laws of the controlling jurisdiction that are contracted for, chargeable or receivable under this Agreement or under any of the other aforesaid instruments or agreements or otherwise in connection with the Notes ("Interest") shall under no circumstances exceed the maximum amount of interest permitted by law (the "Maximum Amount"), and any Interest in excess of the Maximum Amount shall be cancelled automatically and shall not be payable under this Agreement, the Notes or the aforesaid instruments or agreements and, if theretofore paid, shall be either refunded to the Borrowers or credited ratably on the principal of the Notes; and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the Required Banks resulting from any Event of Default under -93- this Agreement or otherwise, or in the event of any voluntary or mandatory prepayment by the Borrowers permitted or required by this Agreement, the Notes or any of the other aforesaid instruments or agreements, then Interest may never include more than the Maximum Amount, and excess Interest, if any, shall be cancelled automatically as of the date of such acceleration or prepayment, and if theretofore paid, shall be either refunded to the Borrowers or credited ratably on the principal of the Notes; provided, that, nothing contained in this Section 10.14 shall be deemed to imply that the laws of any state other than the State of New York shall govern this Agreement or the Notes. (b) Recapture. If, at any time, Interest would exceed the Maximum Amount but for the foregoing limitation, Interest shall remain at the Maximum Amount, notwithstanding any subsequent reduction of Interest, until the total amount of Interest equals the amount of Interest which would have accrued if Interest had not been limited to the Maximum Amount, but nothing in this paragraph shall affect or extend the maturity of any of the Notes. If, at maturity or final payment of any of the Notes, the total amount of Interest paid is less than the total amount of Interest which would have accrued had Interest not been limited to the Maximum Amount, the Borrowers agree, to the full extent permitted by law, to pay to the Agent for the ratable benefit of the Banks and the Swing Line Lender, as the case may be, an amount equal to the positive difference, if any, derived by subtracting (x) the amount of Interest which accrued on the Notes pursuant to the provisions of the foregoing two paragraphs from (y) the lesser of (i) the amount of Interest which would have accrued on such Notes if the Maximum Amount had at all times been in effect, and (ii) the amount of Interest which would have accrued if Interest on such Notes, not limited to the Maximum Amount, had at all times been in effect. Section 10.15. Attorneys' Fees. --------------- As used in this Agreement, "attorneys' fees" shall include, without limitation, all reasonable fees of counsel (including, without limitation, those incurred on appeals) actually incurred arising from such services and all reasonably incurred expenses, costs, charges and other fees of such counsel, and all such fees shall constitute Indebtedness of the Borrowers to the Agent, the Swing Line Lender and the Banks under this Agreement. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: paralegal fees, costs and expenses; accountants' fees, costs and expenses; court costs and expenses; photocopying and duplicating expenses; long distance telephone charges; air express and courier charges; telegram and telecopier charges; secretarial overtime charges; and, expenses for travel, lodging and food paid or incurred in connection with the performance of such legal services. Section 10.16. Severability. ------------ -94- Any provision of this Agreement prohibited by the laws of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, or modified to conform with such laws, without invalidating the remaining provisions of this Agreement, and any such prohibition in any jurisdiction shall not invalidate such provisions in any other jurisdiction. Section 10.17. Confidentiality. --------------- The Agent, the Swing Line Lender and each Bank are hereby authorized to deliver a copy of any financial statement or any other information relating to the business, operations or financial condition of either or both of the Borrowers which may be furnished to it hereunder or otherwise, to any regulatory body or agency having jurisdiction over the Agent, the Swing Line Lender or such Bank or to any Person which shall, or shall have any right or obligation to, succeed to all or any part of the interest of the Agent, the Swing Line Lender or such Bank in, this Agreement, the other Loan Documents and any security herein or therein provided for or otherwise securing the Notes, including, without limitation, any assignee or participant (or prospective assignee or participant). Except as provided above, the Agent, the Swing Line Lender and the Banks agree that from the date hereof, they will not, without the prior written consent of the Borrowers, submit or disclose to or file with any Person other than the Agent, the Swing Line Lender or a Bank or any of its or such Bank's Affiliates or a Person that may become a Bank, or such Person's Affiliates, any confidential or non-public information relating to either Borrower, except where disclosure may be required by law or pursuant to valid legal process, or where such disclosure is to such Person's professionals or regulators. Section 10.18. Loss, Theft, Etc. of Notes. -------------------------- Upon receipt by the Borrowers of (i) an affidavit of an authorized officer of any Bank or the Swing Line Lender setting forth the fact of loss, theft or destruction of any Note and of its ownership of the Note at the time of such loss, theft or destruction or (ii) a mutilated Note, such affidavit or mutilated Note shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note without expense to the holder thereof, provided that such Bank, or the Swing Line Lender, as the case may be, agrees in writing to indemnify the Borrowers from all expenses, claims and liabilities (including without limitation, reasonable attorneys' fees actually incurred) in the defense of any such claims resulting from the loss, theft, destruction or mutilation of the old Note and the execution and delivery of the new Note. ARTICLE 11. AGENCY Each Borrower, the Banks and the Swing Line Lender agree with the Agent as follows: -95- Section 11.1. Appointment and Actions. ----------------------- (a) Each of each Bank and the Swing Line Lender hereby irrevocably designates and appoints Fleet National Bank as the Agent of such Bank and the Swing Line Lender under the Loan Documents (including any additional documents referred to therein as "Loan Documents"), and each of such Bank and the Swing Line Lender hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions hereof and thereof and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms hereof and thereof together with such other powers as are reasonably incidental thereto. The Agent shall hold the security pledged under the Security Agreement in accordance with the terms thereof. Notwithstanding any provision to the contrary in this Agreement or any of the other Loan Documents, the Agent shall not have any duties or responsibilities except those expressly set forth herein or therein, nor any fiduciary relationship with any Bank or the Swing Line Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Loan Documents or otherwise exist against the Agent. (b) The relationship between the Agent and each of the Banks is that of an independent contractor. The use of the term "Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Agent and each of the Banks. Nothing contained in this Agreement or the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Agent and any of the Banks. (c) As an independent contractor empowered by the Banks to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Agent is nevertheless a "representative" of the Banks, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Banks and the Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Banks and the Agent. (d) The Agent may execute any of its duties by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. -96- (e) Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitaken by it or such person under or in connection with any of the Loan Documents (except for its or such person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any Bank or the Swing Line Lender or any Participant for any recitals, statements, representations or warranties made by either Borrower contained herein or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with any of the Loan Documents, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any of the Loan Documents or for any failure of either Borrower to perform its obligations under any of the Loan Documents. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of any of the Loan Documents, or to inspect the properties, books or records of either Borrower. (f) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons and upon advice and statements of legal counsel (including, without limitation, counsel to a Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. (g) The Agent shall be fully justified in failing or refusing to take any action under any of the Loan Documents unless it shall first receive such advice or concurrence of the Banks as it deems appropriate or as required by the specific terms of this Agreement or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Loan Documents in accordance with a request of the Required Banks (or all Banks if specifically required by the terms of this Agreement), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks, the Swing Line Lender and all future holders of the Notes and all Participants. (h) The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default or any default under any document, agreement or instrument delivered in connection therewith, unless the Agent shall have actual knowledge thereof or shall have received -97- notice from any Bank or either Borrower, describing such event, act or condition, Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent has such actual knowledge or receives such a notice, the Agent shall give notice thereof to the Swing Line Lender and the Banks. The Agent shall take such action with respect to such event, act or condition or Default or Event of Default as shall be reasonably directed by the Required Banks (or all Banks if specifically required by the terms of this Agreement) in writing; provided, that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event, act or condition, Default or Event of Default as it shall deem advisable in the best interests of the Banks and the Swing Line Lender. (i) Until such time as the Agent shall have been notified in writing duly executed on behalf of any Bank by an officer thereof duly authorized to take such action, that such Bank has sold all or a portion of the Revolving Credit Loans or the Term Loans made by, or Revolving Credit Commitment or Term Loan Commitment of, such Bank, the Agent may treat such Bank as the owner or holder of such Bank's share of the Revolving Credit Loans or Aggregate Revolving Credit Commitment, or of such Bank's Term Loan or Term Loan Commitment, as applicable, in accordance with the percentages thereof advanced by such Bank. The foregoing shall also apply to the Swing Line Lender with respect to the Swing Line Loans and the Swing Line Commitment. (j) At any time or times, in order to comply with any legal requirement in any jurisdiction, the Agent may appoint another bank or trust company or one or more other Persons, either to act as co-agent or co-agents, jointly with the Agent, or to act as separate agent or agents on behalf of the Banks with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of this Article XI). (k) Each Bank party to the Original Agreement expressly consented to the Agent's, on behalf of such Bank, entering into the Original MFC Security Agreement and each other Bank expressly agrees that the Agent shall act as agent for such Bank in connection therewith. Each Bank party to the First Restatement expressly (i) consented to the Agent's, on behalf of such Bank, entering into the Original MBC Security Agreement, provided the Original MBC Security Agreement was substantially similar to the form of such document attached as an Exhibit thereto and (ii) agreed that to the extent either the Original MFC Security Agreement or the Original MBC Security Agreement expressly imposed any obligation on any Bank it would comply with each such obligation. Each Bank party hereto expressly (i) consents to the Agent's, on behalf of such Bank, entering into the Security -98- Agreement, which amends and restates the Original MFC Security Agreement and the Original MBC Security Agreement, provided the Security Agreement is substantially similar to the form of such document attached as an Exhibit hereto and (ii) agrees that to the extent the Security Agreement expressly imposes any obligation on any Bank it shall comply with each such obligation. Section 11.2. Independent Credit Decisions. ---------------------------- Each Bank and the Swing Line Lender expressly acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of either Borrower shall be deemed to constitute any representation or warranty by the Agent to any Bank or the Swing Line Lender. Each of each Bank and the Swing Line Lender represents to the Agent that it has, independently and without reliance upon the Agent, or the Swing Line Lender, or the other Banks, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of each Borrower and made its own decision to enter into this Agreement. Each of each Bank and the Swing Line Lender also represents that it will, independently and without reliance upon the Agent, the Swing Line Lender, or the other Banks, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action hereunder, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of each Borrower. Except for notices, reports and other documents expressly required to be furnished to the Banks and/or the Swing Line Lender by the Agent hereunder, the Agent shall have no duty or responsibility to provide any Bank or the Swing Line Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of either Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates, provided that the Agent shall supply the Banks and the Swing Line Lender with a copy of any financial audit of the Borrowers actually received by the Agent. Section 11.3. Indemnification of Agent. ------------------------ Each Bank jointly and severally agrees to indemnify Fleet and its Affiliates, in Fleet's capacity as Agent (to the extent not reimbursed by the Borrower), ratably according to its percentage of the sum of (i) the Aggregate Revolving Credit Commitment and (ii) the principal amount of the outstanding Term Loans from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of any of the Notes) be imposed on, incurred by or asserted against the -99- Agent in any way relating to or arising out of this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's bad faith, willful misconduct or gross negligence. The agreements in this subsection shall survive the payment of the Notes and the related obligations and the termination of the Revolving Credit Commitment, the Swing Line Commitment and the Term Loan Commitment. Section 11.4. Closing Documentation, etc. -------------------------- For purposes of determining compliance with the conditions set forth in Section 5.1 hereof, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document and matter either sent, or made available, by the Agent to such Bank for consent, approval, acceptance or satisfaction, unless an officer of the Agent active upon the Borrowers' account shall have received notice from such Bank prior to the Second Restatement Effective Date specifying such Bank's objection thereto and such objection shall not have been withdrawn by notice to the Agent to such effect on or prior to the Second Restatement Effective Date. Section 11.5. Resignation and Succession. -------------------------- The Agent may resign as Agent upon ten days' written notice to the Banks, the Swing Line Lender and the Borrowers, provided, however, that such resignation shall not become effective until a successor agent shall have accepted its appointment hereunder; and provided, further, that if no successor shall have so accepted within 30 days from the date of such notice, the Agent may apply to a court of competent jurisdiction for the appointment of a successor agent. If the Agent shall resign as Agent, then the Borrowers (or the Required Banks, if the Borrowers fail to do so) shall appoint a successor agent, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Notes. Any such successor agent selected by the Borrowers shall require the prior written consent of the Required Banks, which consent shall not be unreasonably withheld. Any successor agent must be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XI shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. In the event that the Agent becomes subject to the receivership of the Federal Deposit Insurance Corporation or any successor entity, such receiver commences the liquidation of the Agent, and Banks holding at least 10% of the sum of the Aggregate Revolving Credit Commitment plus the amount of all Term Loans then outstanding request the Agent to resign -100- because of such receivership, the Agent's agency under this Agreement shall terminate. ARTICLE 12. SALES AND TRANSFERS Section 12.1. Sales and Transfers. ------------------- (a) Subject to the provisions of this Section 12.1, any Bank may execute an assignment and acceptance, which assignment and acceptance shall be substantially in the form of Exhibit I hereto (herein individually called an "Assignment" and collectively called the "Assignments"), whereby such Bank (herein individually called an "Assignor" and collectively called the "Assignors") shall assign, without recourse and without representation or warranty except as specifically set forth in said Assignment, to one or more banks or other entities (herein individually called an "Assignee" and collectively called the "Assignees") all or any part of the Assignor's rights and benefits, and delegate all or any part of the Assignor's obligations, under this Agreement, such Assignor's Revolving Credit and/or Term Loan Commitment, the Revolving Credit Loans and Term Loans and the Notes. (b) Any Assignment pursuant to this Section 12.1 shall (i) be in an aggregate principal amount of not less than $5,000,000; (ii) be of a constant, and not a varying percentage of the Assignor's rights and obligations under the Loan Documents; (iii) require the prior written consent of the Borrowers, which consent shall not be unreasonably withheld (it being the understanding of the parties hereto that a refusal to consent to an Assignment to an entity which is a significant competitor of either Borrower shall not be considered unreasonable); provided, that, such consent shall not be required if a Default shall have occurred and then be continuing, or such Assignee is a subsidiary or affiliate of such Assignor, or such Assignee is a subsidiary or affiliate of another Bank, or such Assignee is another Bank; (iv) require the prior written consent of the Agent and the Swing Line Lender, which consent shall not be unreasonably withheld; provided, that, such consent shall not be required if such Assignee is another Bank; (v) be subject to the requirement that after giving effect to such Assignment, the Revolving Credit Commitment and Term Loan Commitment of such Assignor remaining is not less than $5,000,000 and (vi) be subject to the delivery to the Agent of an Assignment signed by the Assignor and the Assignee, along with an assignment fee in the sum of $3,500 for the account of the Agent. (c) Upon execution, delivery and acceptance of each Assignment and the satisfaction of the conditions set forth in subclauses (a) and (b) above, from and after the effective date specified therein, which effective date shall be at least five Business Days after the execution thereof, the Borrowers, the Agent, and the Banks agree that, to the extent of any such Assignment, -101- (i) the Assignee shall, in addition to any rights, benefits and obligations hereunder held by it immediately prior to such effective date, have the rights, benefits and obligations of a Bank under this Agreement, the Assignor's Revolving Credit and/or Term Loan Commitment, the Revolving Credit Loans, the Term Loans and the Notes as it would have if it were a Bank hereunder to the extent that the same have been assigned and delegated to it pursuant to such Assignment, and (ii) the Assignor shall, to the extent that rights, benefits and obligations hereunder have been assigned and delegated by it pursuant to such Assignment, relinquish its rights and benefits and be released from its obligations under this Agreement (and, in the case of an Assignment covering all or the remaining portion of the Assignor's rights, benefits and obligations under this Agreement, the Assignor shall cease to be a Bank hereunder), except that in all cases the Assignor shall remain entitled to the rights and benefits arising under Section 10.6, and shall remain liable with respect to any of its obligations arising under Article XI, with respect to any matters arising prior to the effective date of any such Assignment; provided, that the Agent, the Borrowers and each Bank shall be entitled to continue to deal solely and directly with the assigning Bank in connection with the interests so assigned and delegated to the Assignee until written notice of such Assignment, together with addresses and related information with respect to the Assignee, shall have been given to the Agent, the Borrowers and each Bank by the assigning Bank and the Assignee. (d) Upon its receipt of an Assignment executed by the Assignor and an Assignee, together with the Note(s) subject to such Assignment, the Agent shall, if such Assignment has been completed and conforms to the requirements of this Section 12.1, forward a photostatic copy thereof to the Borrowers. Within 5 Business Days after its receipt of a photostatic copy of such Assignment, the Borrowers shall execute and deliver to the Agent, to be exchanged for the applicable Note(s) delivered to the Agent by the Assignor, a new Note or new Notes payable to the order of the Assignee in an amount equal to and of the same type as the Note or Notes assumed by it pursuant to such Assignment and, if the Assignor has retained a Revolving Credit Commitment or a portion of the Term Loan hereunder, a new Revolving Credit Note or Term Note, as the case may be, payable to the order of the Assignor in an amount equal to the Revolving Credit Commitment or the amount of the Term Loan retained by it hereunder. Such new Note or Notes shall be of the same type as, and in aggregate principal amount equal to the aggregate principal amount of, such Note or Notes, shall be dated the effective date of such Assignment, shall be payable to the order of the Assignee and, if applicable, the Assignor, shall otherwise be in substantially the form of such surrendered Note(s), and shall constitute Revolving Credit Note(s) or a Term Note under this Agreement, as the case may be. Such new -102- Revolving Credit Note(s) or Term Note shall be in replacement and substitution for, and not in payment of, the Revolving Credit Note(s) or Term Note delivered to the Agent by the Assignor. The Agent shall deliver such new Revolving Credit Note(s) or Term Note to the payee or payees thereof and shall mark the Revolving Credit Note(s) or Term Note previously held by the Assignor as "replaced" and shall deliver the same to the Borrower. (e) Within five Business Days after each Assignment has been accepted by the Agent in accordance with the terms hereof, the Borrowers and the Agent shall revise Exhibit A hereto to set forth (i) the Percentage or amount of the Term Loan of each Assignee and such Assignee's name and address and (ii) the Percentage or amount of the Term Loan, if any, retained by the Assignor, and the appropriate officer of each Borrower and the Agent shall initial each such revision. (f) The foregoing provisions shall be equally applicable to the Swing Line Lender, Swing Line Notes and Swing Line Commitment with such changes necessary to conform the foregoing to the Swing Line Lender, Swing Line Notes and Swing Line Commitment. (g) In addition to the participations provided for in this Agreement, including those set forth in Section 2.1(c) and Section 10.9 hereof, each Bank may grant participations in all or any part of its rights under the Loan Documents to one or more parties that would be eligible to be an Assignee, provided that (i) such Bank's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties to this Agreement and the other Loan Documents for the performance of such obligations, (iii) the Borrowers, the Agent, the Swing Line Bank and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and the other Loan Documents, (iv) neither the granting nor the offering of such participation would require that any additional loss, cost or expense be borne by the Borrowers at any time or would require any registration or qualification under any applicable federal or state securities laws, and (v) the voting rights of any holder of any participation shall be limited to the those matters requiring the consent of all Banks as set forth under Section 10.2 hereof. (h) No Bank shall, as between and among the Borrowers, the Agent, the Swing Line Lender and such Bank, as the case may be, be relieved of any of its obligations under the Loan Documents as a result of any Assignment (except as provided in Section 12.1(c)(ii)) hereof or the granting of any participation in all or any part of its rights under the Loan Documents. (i) Subject to Section 12.1(h) hereof, any Bank may at any time or from time to time assign all or any portion of its rights under the Loan -103- Documents to any Federal Reserve Bank organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341, provided that any such assignment shall not release such assignor from its obligations thereunder. Section 12.2. New Banks. --------- Any financial institution approved by the Borrowers, the Agent and the Required Banks may join this Agreement as an additional Bank (such Person being herein referred to as the "New Bank") and be entitled to all the rights and interests and obligated to perform all of the obligations and duties of a Bank with respect to a specified additional amount of Revolving Credit Commitment hereunder, provided, that (a) the Borrowers shall, in its sole discretion, have given their prior written consent to the addition of the New Bank as a party to this Agreement, (b) the Agent, the Swing Line Lender and the Required Banks shall have given their prior written consent (which consent shall not be unreasonably withheld; provided, that, if the joinder of such New Bank would result in an increase to the Aggregate Revolving Credit Commitment, other than as permitted by Section 2.1(d) hereof, or the Term Loan Commitment; such joinder shall require the consent of each Bank and such consent shall be in the sole and absolute discretion of each Bank), (c) such New Bank and the Borrowers shall have executed and delivered an instrument of adherence (the "Instrument of Adherence") in form and substance satisfactory to the Borrowers and the Agent pursuant to which such New Bank shall agree to be bound as a Bank by the terms and conditions hereof and the other Loan Documents, and to make Revolving Credit Loans and a Term Loan to the Borrowers in accordance with this Agreement, and which Instrument of Adherence shall specify the maximum amount of additional Revolving Credit Loans that such New Bank agrees to provide hereunder (the "Additional Commitment Amount") and the New Bank's address for notices, (d) the Additional Commitment Amount provided by any New Bank must be at least $5,000,000, (e) such New Bank shall have received such opinions of counsel to the Borrowers, such evidence of proper corporate organization, existence, authority and appropriate corporate proceedings with respect to the Borrowers, and such other certificates, instruments, and documents, as it shall have requested in connection with such Instrument of Adherence, (f) such New Bank shall have paid to the Agent an administrative fee in the sum of $3,500 for the account of the Agent, and (g) such New Bank shall have confirmed to and agreed with the Agent, the Swing Line Lender and the Banks and the Borrowers as follows: (i) the Agent, the Swing Line Lender and the Banks have made no representation or warranty and shall have no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency, collectability or value of this Agreement, the other Loan Documents, and Collateral, or any other Instrument or document furnished pursuant hereto; -104- (ii) the Agent, the Swing Line Lender and the Banks have made no representation or warranty and shall have no responsibility with respect to the financial condition of either Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of their obligations under this Agreement or any of the other Loan Documents, or the performance or observance by either Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such New Bank confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the most recent financial statements referred to in Sections 4.18 and 6.1 hereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Instrument of Adherence; (iv) such New Bank will, independently and without reliance upon the other Banks, the Swing Line Lender, or the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such New Bank appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (vi) such New Bank agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank; and (vii) such New Bank represents and warrants that it is legally authorized to enter into such Instrument of Adherence. Upon any New Bank's execution of an Instrument of Adherence and the Borrowers', the Agent's, the Swing Line Lender's and the Required Banks' consent thereto, the Percentage of each Bank and the Aggregate Revolving Credit Commitment shall be adjusted appropriately. Promptly thereafter, the Borrowers shall notify each of the Banks and the Agent of the joinder hereunder of such New Bank, the resulting increase in the Aggregate Revolving Credit Commitment and each Bank's new Percentage and provide each of the Banks and the Agent with a copy of the executed Instrument of Adherence and a copy of Exhibit A reflecting the necessary adjustments. -105- Upon the effective date of any Instrument of Adherence, the New Bank shall make all (if any) such payments to the other Banks as may be necessary to result in the Revolving Credit Loans made by such New Bank being equal to such New Bank's Percentage (as then in effect) of the aggregate principal amount of all Revolving Credit Loans outstanding to the Borrowers as of such date. The Borrowers hereby agree that any New Bank so paying any such amount to the other Banks pursuant to this Section 12.2 shall be entitled to all the rights of a Bank hereunder and such payments to the other Banks shall constitute Revolving Credit Loans held by such New Bank hereunder and that such New Bank may, to the fullest extent permitted by law, exercise all of its right of payment (including the right of set-off) with respect to such amounts as fully as if such New Bank had initially advanced the Borrowers the amount of such payments. Section 12.3. Joint and Several Liability. --------------------------- Except to the extent otherwise expressly provided, the liability of the Borrowers under this Agreement and each other Loan Document shall be joint and several without regard to which party receives the proceeds of the loans. Each Borrower hereby acknowledges that it expects to derive substantial economic benefit from the loans. ARTICLE 13. GUARANTEE Section 13.1. Guarantee. --------- (a) Subject to the limitations of Section 13.1(b) hereof, each Borrower hereby absolutely, irrevocably and unconditionally guarantees the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of the Borrower Obligations of the other Borrower. This guaranty constitutes a guaranty of payment and neither the Agent nor any Bank shall have any obligation to enforce any Loan Document or exercise any right or remedy with respect to any collateral security thereunder by any action, including making or perfecting any claim against any Person or any collateral security for any of the Borrower Obligations, prior to being entitled to the benefits of this Article 13. The Agent may, at its option, proceed against any Borrower in the first instance, to enforce the Borrower Obligations without first proceeding against the other Borrower or any other Person, and without first resorting to any other rights or remedies, as the Agent may deem advisable. In furtherance hereof, if the Agent or any Bank is prevented by law from collecting or otherwise hindered from collecting or otherwise enforcing any Borrower Obligation from any Borrower in accordance with its terms, the Agent or such Bank, as the case may be, shall be entitled to receive hereunder from the other Borrower after demand therefor, the sums which would have been otherwise due had such collection or enforcement not been prevented or hindered. (b) Notwithstanding anything to the contrary contained herein, the maximum aggregate amount of the obligations of each Borrower under -106- this Section 13.1 shall not, as of any date of determination, exceed the lesser of (i) the greatest amount that is valid and enforceable against such Borrower under principles of New York State contract law and (ii) the greatest amount that would not render such Borrower's liability hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any provisions of applicable state law (collectively, the "Fraudulent Transfer Laws"), in each case after giving effect to all other liabilities of such Borrower, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however (provided that, as to either Borrower, each such exclusion shall apply only to the extent such exclusion would result in this Agreement's being enforceable against such Borrower under Fraudulent Transfer Laws), any liability (A) in respect of intercompany indebtedness to either Borrower, any Subsidiary or any other Affiliate of either Borrower, to the extent that such intercompany indebtedness would be discharged in an amount equal to the amount paid by such Borrower hereunder, and (B) under any guarantee of (1) senior unsecured indebtedness or (2) indebtedness subordinated in right of payment to any Borrower Obligation, in either case which contains a limitation as to maximum liability similar to that set forth in this Section 13.1(b) and pursuant to which the liability of such Borrower hereunder is included in the liabilities taken into account in determining such maximum liability) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Borrower pursuant to applicable law or any agreement providing for an equitable allocation among such Borrower, the Subsidiaries and the other Affiliates of the Borrowers of obligations arising under guarantees by such parties. NOTWITHSTANDING THE LIMITATION OF LIABILITY PROVIDED IN THIS SECTION 13.1(b), IT IS EXPRESSLY AGREED THAT SUCH LIMITATION SHALL ONLY APPLY TO A BORROWER'S OBLIGATIONS AS GUARANTOR UNDER THIS ARTICLE 13 AND SHALL NOT IN ANY CIRCUMSTANCE LIMIT OR IN ANY WAY AFFECT ANY BORROWER'S OTHER LIABILITIES OR OBLIGATIONS UNDER OR IN CONNECTION WITH ANY LOAN DOCUMENT. (c) Each Borrower agrees that the Borrower Obligations may at any time and from time to time exceed the maximum liability of such Borrower hereunder without impairing this Article 13 or affecting the rights and remedies of the Agent or any Bank hereunder. Section 13.2. Absolute Obligation. ------------------- No Borrower shall be released from liability hereunder unless and until the Termination Date shall have occurred and the outstanding principal balance of all Revolving Credit Loans, Swing Line Loans and Term Loans shall have been paid in full in cash, together with all accrued interest thereon and all other sums then due and owing under the Loan Documents. Each Borrower acknowledges and agrees that (i) neither the Agent nor any Bank has made any representation or -107- warranty to such Borrower with respect to the other Borrower, its Subsidiaries, any Loan Document, or any agreement, instrument or document executed or delivered in connection therewith, or any other matter whatsoever, and (ii) such Borrower shall be liable hereunder, and such liability shall not be affected or impaired, irrespective of (A) the validity or enforceability of any Loan Document, or any agreement, instrument or document executed or delivered in connection therewith, or the collectability of any of the Borrower Obligations, (B) the preference or priority ranking with respect to any of the Borrower Obligations, (C) the existence, validity, enforceability or perfection of any security interest or collateral security under any Loan Document, or the release, exchange, substitution or loss or impairment of any such security interest or collateral security, (D) any failure, delay, neglect or omission by the Agent or any Bank to realize upon, enforce or protect any direct or indirect collateral security, indebtedness, liability or obligation, any Loan Document, or any agreement, instrument or document executed or delivered in connection therewith, or any of the Borrower Obligations, (E) the existence or exercise of any right of set-off by the Agent or any Bank, (F) the existence, validity or enforceability of any other guaranty with respect to any of the Borrower Obligations, the liability of any other Person in respect of any of the Borrower Obligations, or the release of any such Person or any other guarantor of any of the Borrower Obligations, (G) any act or omission of the Agent or any Bank in connection with the administration of any Loan Document, or any of the Borrower Obligations, (H) the bankruptcy, insolvency, reorganization or receivership of, or any other proceeding for the relief of debtors commenced by or against, any Person, (I) the disaffirmance or rejection, or the purported disaffirmance or purported rejection, of any of the Borrower Obligations, any Loan Document, or any agreement, instrument or document executed or delivered in connection therewith, in any bankruptcy, insolvency, reorganization or receivership, or any other proceeding for the relief of debtor, relating to any Person, (J) any law, regulation or decree now or hereafter in effect which might in any manner affect any of the terms or provisions of any Loan Document, or any agreement, instrument or document executed or delivered in connection therewith or any of the Borrower Obligations, or which might cause or permit to be invoked any alteration in the time, amount or manner of payment or performance of any of the Borrower Obligations and liabilities, (K) the merger or consolidation of either Borrower into or with any Person, (L) the sale by either Borrower of all or any part of its assets, (M) the fact that at any time and from time to time none of the Borrower Obligations may be outstanding or owing to the Agent or any Bank, (N) any amendment or modification of, or supplement to, any Loan Document or (O) any other reason or circumstance which might otherwise constitute a defense available to or a discharge of a Borrower in respect of their respective obligations or liabilities (including the Borrower Obligations), or any other fact or circumstance which would excuse the obligation of a guarantor or surety, other than by the performance in full thereof. Each Borrower waives, in its capacity as a guarantor hereunder, (i) presentment, demand, protest and notice of any kind (including, without limitation, notice of dishonor); (ii) any defense based upon or arising out of any defense which the other Borrower may have to the payment or performance of any part of its Borrower Obligations; (iii) any defense -108- based upon any disbursements by the Agent or the Banks to either Borrower pursuant to any agreements or instruments governing the Borrower Obligations whether same be deemed an additional advance or be deemed to be paid out of any special interest or other fund accounts, as constituting unauthorized payments hereunder or amounts not guaranteed by this guaranty; (iv) all suretyship defenses generally, (v) until the indefeasible payment in full of the Borrower Obligations, all rights of each Borrower in its capacity as guarantor to proceed against the other Borrower, including but not limited to all rights of subrogation and all rights to enforce any remedy that the Agent or any Bank may have against such Borrower and (vi) all rights to participate in any security held by the Agent on behalf of the Banks or by any Bank for the Borrower Obligations. Section 13.3. Repayment in Bankruptcy. ----------------------- If, at any time or times subsequent to the payment of all or any part of the Borrower Obligations, any Bank shall be required to repay any amounts previously paid by or on behalf of a Borrower in reduction thereof by virtue of an order of any court having jurisdiction in the premises, including as a result of an adjudication that such amounts constituted preferential payments or fraudulent conveyances, the other Borrower unconditionally agrees to pay to the Agent, within 10 days after demand, a sum in cash equal to the amount of such repayment, together with interest on such amount from the date of such repayment by Bank to the date of payment to the Agent at the applicable Default Rate. Section 13.4. Miscellaneous. ------------- Each Borrower agrees that any statement of account with respect to the Borrower Obligations from any Bank that binds either Borrower shall be binding upon both Borrowers, and that copies of said statements of account maintained in the regular course of such Bank's business may be used in evidence against each Borrower in order to establish its obligations in respect of its guaranty provided for in this Article 13. Section 13.5. Subordination. ------------- Each Borrower agrees that any and all Indebtedness owed to it by, and claims it may have against, the other Borrower, whether such Indebtedness or claims are in connection with the guaranty contemplated by this Article 13 or the Borrower Obligations, or are completely independent thereof, will be subordinate to the claims of the Agent and the Banks under this Article 13 and all Indebtedness guaranteed hereby, and that such Borrower will not assert any such claim against, or collect any amounts in respect thereof from, the other Borrower until all Borrower Obligations have been indefeasibly satisfied in full in cash. Notwithstanding such subordination, and without affecting or impairing in any manner the liability of either Borrower under the other provisions of this Article 13, any Indebtedness of either Borrower to the other Borrower, if the Agent so requests, shall be collected, enforced and received by such Borrower as trustee for -109- the Agent and the Banks and paid over to the Agent on account of the Borrower Obligations. ARTICLE 14. BORROWER AGENCY Section 14.1. Appointment and Actions. ----------------------- Each Borrower hereby irrevocably designates and appoints the other Borrower as the agent of such Borrower under the Loan Documents for the purpose of taking any action, giving or receiving any notice, making any election, exercising any other rights or powers and fulfilling any obligations of a Borrower under this Agreement or any other Loan Document, all as effectively as such Borrower could do, and agrees that any notice given to or received by one Borrower shall be deemed to have been given to or received by (as the case may be) both Borrowers. ARTICLE 15. TRANSITIONAL ARRANGEMENTS 15.1. Prior Credit Agreement Superseded. This Agreement shall supersede the First Restatement in its entirety, except as provided in this ss.15. On the Second Restatement Effective Date, the rights and obligations of the parties under the First Restatement and the "Notes" (as defined in the First Restatement) issued in favor of the "Banks" (as defined in the First Restatement) under the First Restatement (other than any rights available to the "Agent" and the "Banks" (each as defined in the First Restatement) under Section 10.6 of the First Restatement), shall be subsumed within and be governed by this Agreement and the other Loan Documents, provided, however, that each of the "Revolving Credit Loans", "Swing Line Loans" and "Term Loans" (each as defined in the First Restatement) outstanding under the First Restatement on the Second Restatement Effective Date shall, for purposes of this Agreement, be loans hereunder, and shall continue to bear interest or be subject to fees at the respective rates in effect immediately prior to the Second Restatement Effective Date, with each Borrower being responsible for, and hereby confirming its obligation to pay, any breakage costs associated with the payment of "LIBO Rate Loans" (as defined in the First Restatement) under the First Restatement on a date which is not the last day of the applicable "Interest Period" (as defined in the First Restatement) with respect thereto. 15.2. Return and Cancellation of Notes. Upon its receipt of its Note or Notes hereunder on the Second Restatement Effective Date, each Bank will promptly return to the Borrowers, marked "Canceled", any notes of the Borrowers held by such Bank pursuant to the First Restatement. 15.3. Fees Under Superseded Agreement. All Facility, Agent's and other fees and expenses owing or accruing under or in respect of the First Restatement through the Second Effective Restatement Date shall be calculated as of the Second Effective Restatement Date (prorated in the case of any fractional periods), and shall be paid in accordance with the method, and on the dates, specified in the First Restatement, as if the First Restatement were still in effect. -110- ARTICLE 16. ACTION BY CONSENT OF THE SOLE MEMBER As of the date hereof, MFC, as the sole member and through its officers Alvin Murstein and Daniel F. Baker, hereby consents to MBC's entering into this Agreement and the other Loan Documents, the assumption by MBC of all Obligations hereunder and the consummation of all transactions contemplated hereby, effective as of the date first set forth above. THIS AGREEMENT CONTAINS A WAIVER OF TRIAL BY JURY. SEE SECTION 10.7 HEREOF. [Remainder of page intentionally left blank] -111- IN WITNESS WHEREOF, the Borrowers, the Agent, the Swing Line Lender and the Banks have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first above written. MEDALLION FINANCIAL CORP. By: /s/ ALVIN MURSTEIN ------------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ DANIEL F. BAKER ------------------------------------- Name: Daniel F. Baker Title: Treasurer and Chief Financial Officer MEDALLION BUSINESS CREDIT, LLC By: /s/ ALVIN MURSTEIN ------------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ DANIEL F. BAKER ------------------------------------- Name: Daniel F. Baker Title: 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: Illegible -------------------------------------- Title: Vice President -112- HSBC BANK USA By: /s/ Bruce Wicks -------------------------------------- Name: Bruce Wicks Title: Vice President CITIZENS BANK By: /s/ Marie C. Duprey -------------------------------------- Name: Marie C. Duprey Title: Vice President THE BANK OF NEW YORK By: /s/ Scott E. Silverstein -------------------------------------- Name: Scott E. Silverstein Title: Vice President THE CHASE MANHATTAN BANK By: /s/ William F. Saya -------------------------------------- Name: William F. Saya Title: Vice President ISRAEL DISCOUNT BANK By: /s/ Robert J. Fainelli -------------------------------------- Name: Robert J. Fainelli Title: Vice President By: /s/ Barry Shivak -------------------------------------- Name: Barry Shivak Title: Vice President EUROPEAN AMERICAN BANK By: Illegible -------------------------------------- Title: Vice President -113- BANK LEUMI USA By: /s/ Paul Tine -------------------------------------- Name: Paul Tine Title: Vice President By: /s/ John Koenigsbery -------------------------------------- Name: John Koenigsbery Title: F.V.P THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: /s/ Jeffrey Millar -------------------------------------- Name: Jeffrey Millar Title: Vice President -114- Schedule I Locations, Chief Executive Office 437 Madison Avenue, 38th Fl New York, NY 10022 -115- Schedule II Subsidiaries Medallion Taxi Media, Inc., a New York corporation Medallion Funding Corp., a New York corporation Medallion Capital, Inc., a Minnesota corporation Business Lenders, LLC, a Delaware limited liability company Medallion Business Credit, LLC, a Delaware limited liability company FS Merger Corp., a Delaware corporation AMTC Merger Corp., a Delaware corporation Firestone Financial, LLC, a Delaware limited liability company Medallion Taxi LLC, a Delaware limited liability -116- Schedule III Investments EQUITY BREAKDOWNS MEDALLION FUNDING CORP 75,703,000 MEDALLION CAPITAL CORP 17,800,000 BUSINESS LENDERS LLC 6,400,000 MEDALLION TAXI MEDIA, INC 4,153,000 INTERCO RECEIVABLES BUSINESS LENDERS LLC 25,700,000 -117- EXHIBIT A Revolving Credit Name and Address of Bank Facility Available Percentage Fleet National Bank. $35,000,000 31.8181% 1185 Avenue of the Americas New York, New York 10036 The Bank of New York $10,000,000 9.0909% 1290 Avenue of the Americas New York, New York 10104 European American Bank $10,000,000 9.0909% 335 Madison Avenue New York, New York 10017 Israel Discount Bank $10,000,000 9.0909% 511 Fifth Avenue New York, New York 10022 Bank of Tokyo-Mitsubishi Trust $10,000,000 9.0909% 1251 Avenue of the Americas New York, NY 10020 The Chase Manhattan Bank $10,000,000 9.0909% 600 Fifth Avenue New York, New York 10036 Citizens Bank of Massachusetts $10,000,000 9.0909% One Citizens Plaza Providence, RI 02903 HSBC Bank USA $10,000,000 9.0909% 140 Broadway New York, NY 10005 Bank Leumi USA $5,000,000 4.5454% 562 Fifth Avenue New York, New York 10036 -118- EXHIBIT B REVOLVING CREDIT NOTE $__________________ No. ____ September 22, 2000 FOR VALUE RECEIVED, the undersigned, [MEDALLION BUSINESS CREDIT, LLC, a Delaware limited liability company] [MEDALLION FINANCIAL CORP., a Delaware corporation] (the "Borrower"), hereby unconditionally promises to pay on the date of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on such earlier date as may be required under the Loan Agreement, to the order of ______________________ (the "Bank") at the Agent Payment Office (as defined in the Loan Agreement), in lawful money of the United States of America and in immediately available funds, an amount equal to the lesser of (a) ________________ DOLLARS ($______________) and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Bank to the Borrower pursuant to the Second Amended and Restated Loan Agreement, dated as of September 22, 2000, as amended, among the Borrower, [Medallion Financial Corp./Medallion Business Credit, LLC], the banks that from time to time are signatories thereto, the Swing Line Lender and Fleet National Bank, as Arranger and Agent (as amended, modified or supplemented from time to time in accordance with its terms, the "Loan Agreement"). The Borrower further promises to pay interest (computed on the basis of a 360-day year for the actual number of days elapsed) in like money on the unpaid principal balance of this Note from time to time outstanding at such rates and times as provided in the Loan Agreement. All Revolving Credit Loans made by the Bank pursuant to the Loan Agreement and all payments of the principal thereof shall be endorsed by the holder of this Note on the schedule annexed hereto (including any additional pages such holder may add to such schedule), which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the holder of this Note to insert any date or amount or other information on such schedule shall not in any manner affect the obligation of the Borrower to repay any Revolving Credit Loans in accordance with the terms of the Loan Agreement. On and after the stated or any accelerated maturity hereof, and until paid in full (whether before or after the occurrence of any Event of Default described in Sections 9.1 (h) and 9.1(i) of the Loan Agreement), (a) the outstanding principal amount of this Note which at such time is a Prime Rate Loan (including, to the extent permitted by law, unpaid interest thereon) shall bear interest at an annual rate equal to the sum of 2% plus the rate of interest then applicable to such Prime Rate Loan then in effect and (b) the outstanding principal amount of this Note which is a LIBOR Rate Loan (including, to the extent permitted by law, unpaid interest thereon) shall bear interest at an annual rate equal to the sum of 2% plus the rate of interest then applicable to such LIBOR Rate Loan then in effect, in each case payable on demand, but in no event shall such rate of interest (the "Default Rate") be in excess of the maximum rate of interest permitted under applicable law. The Default Rate shall be computed on the basis of a 360-day year for the actual number of days elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate to be charged shall change when and as the Prime Rate is changed, and any such change in the Prime Rate shall become effective .at the opening of business on the day on which such change is adopted. At the end of the applicable Interest Period for a LIBOR Rate Loan on which the Default Rate is being charged, such LIBOR Rate Loan shall be automatically converted to a Prime Rate Loan, and the Default Rate to be charged in respect of such Loan shall be computed based on the Prime Rate. This Note is one of the Revolving Credit Notes referred to in the Loan Agreement, is secured as provided therein, is entitled to the benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. [This Note has been issued as a replacement and in exchange for (but not in payment or satisfaction of) the Revolving Credit Note dated [ ] by the Borrower in favor of the Bank in the aggregate principal amount of $[__________].] The Borrower shall make when due any and all payments and prepayments on this Revolving Credit Note required under the Loan Agreement. Reference is herein made to the-Loan Agreement for the rights of the holder to accelerate the unpaid balance hereof prior to maturity. Borrower hereby waives diligence, demand, presentment, protest and notice of any kind, release, surrender or substitution of security, or forbearance or other indulgence, without notice. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Loan Agreement. -2- This Note may not be changed, modified, or terminated orally, but only by an agreement in writing signed by the party to be charged. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE, THE BORROWER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF BORROWER AND INURE TO THE BENEFIT OF THE BANK AND ITS SUCCESSORS AND ASSIGNS. If any term or provision of this Revolving Credit Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the date first above written. [MEDALLIONFINANCIAL CORP.] [MEDALLION BUSINESS CREDIT, LLC] a Delaware [corporation] [limited liability company] By:______________________________________ Name: Title: By:______________________________________ Name: Title:
Grid Schedule for Revolving Credit Note Attached to and made part of the Revolving Credit Note, dated September 22, 2000, by [Medallion Financial Corp.] [Medallion Business Credit, LLC] to the order of ____________ (the "Bank") pursuant to the Second Amended and Restated Loan Agreement, dated as of September 22, 2000 among Medallion Financial Corp. Medallion Business Credit, LLC, the banks that from time to time are signatories thereto and Fleet National Bank, as Arranger, Swing Line Lender and Agent - ------------------------------------------------------------------------------------------------------------------------------------ Loan Type Unpaid (LIBOR Rate Loan or Interest Period Amount of Principal Prime Rate Loan) and Interest Rate Principal Paid Balance Name of Principal (Borrowed or (LIBOR Rate or Prepaid or (Balance Person Making Date Amount (Converted to) Loans only) Converted Continued) Notation - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C TERM NOTE $________________ No.___________ [Date] FOR VALUE RECEIVED, the undersigned, [MEDALLION FINANCIAL CORP., a Delaware corporation] [MEDALLION BUSINESS CREDIT, LLC, a Delaware limited liability company] (the "Borrower"), hereby unconditionally promises to pay on _________________, or on such earlier date as may be required under the Loan Agreement (hereinafter referred to), to the order of __________________ (the "Bank") at the Agent Payment Office (as defined in the Loan Agreement), in lawful money of the United States of America and in immediately available funds, an amount equal to the lesser of (a) _________________ DOLLARS ($____________) and (b) the aggregate unpaid principal amount of the Term Loan made by the Bank to the Borrower pursuant to the Second Amended and Restated Loan Agreement, dated as of September 22, 2000, among the Borrower, [Medallion Financial Corp./Medallion Business Credit, LLC], the banks that from time to time are signatories thereto, Fleet National Bank as Arranger, Swing Line Lender and Agent (as amended, modified or supplemented from time to time in accordance with its terms, the "Loan Agreement"). The Borrower further promises to pay interest (computed on the basis of a 360-day year for the actual number of days elapsed) in like money on the unpaid principal balance of this Note from time to time outstanding at such rates and times as provided in the Loan Agreement. All payments of the principal on the Term Loan represented by this Note ("Principal Payments") shall be made at such times as provided in the Loan Agreement. All Principal Payments shall be endorsed by the holder of this Note on the schedule annexed hereto (including any additional pages such holder may add to such schedule), which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the holder of this Note to insert any date or amount or other information on such schedule shall not in any manner affect the obligation of the Borrower to repay the Term Loan in accordance with the terms of the Loan Agreement. Amounts repaid on this Term Note cannot be reborrowed. On and after the stated or any accelerated maturity hereof, and until paid in full (whether before or after the occurrence of any Event of Default described in Sections 9.1(h) and 9.1(i) of the Loan Agreement), (a) the outstanding principal amount of this Note which at such time is a Prime Rate Loan (including, to the extent permitted by law, unpaid interest thereon) shall bear interest at an annual rate equal to the sum of 2% plus the rate of interest then applicable to such Prime Rate Loan then in effect and (b) the outstanding principal amount of this Note which is a LIBOR Rate Loan (including, to the extent permitted by law, unpaid interest thereon) shall bear interest at an annual rate equal to the sum of 2% plus the rate of interest then applicable to such LIBOR Rate Loan then in effect, in each case payable on demand, but in no event shall such rate of interest (the "Default Rate") be in excess of the maximum rate of interest permitted under applicable law. The Default Rate shall be computed on the basis of a 360-day year for the actual number of days elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate to be charged shall change when and as the Prime Rate is changed, and any such change in the Prime Rate shall become effective at the opening of business on the day on which such change is adopted. At the end of the applicable Interest Period for a LIBOR Rate Loan on which the Default Rate is being charged, such LIBOR Rate Loan shall be automatically converted to a Prime Rate Loan, and the Default Rate to be charged in respect of such Loan shall be computed based on the Prime Rate. This Note is one of the Term Notes referred to in the Loan Agreement, is secured as provided therein, is entitled to the benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. [This Note has been issued as a replacement and in exchange for (but not in payment or satisfaction of) the Term Note dated [ ] by the Borrower in favor of the Bank in the aggregate principal amount of $[__________].] The Borrower shall make when due any and all payments and prepayments on this Term Note required under the Loan Agreement. Reference is herein made to the Loan Agreement for the rights of the holder to accelerate the unpaid balance hereof prior to maturity. Borrower hereby waives diligence, demand, presentment, protest and notice of any kind, release, surrender or substitution of security, or forbearance or other indulgence, without notice. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Loan Agreement. -2- This Note may not be changed, modified, or terminated orally, but only by an agreement in writing signed by the party to be charged. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS TERM LOAN NOTE, THE BORROWER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK COUNTY OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS TERM NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF BORROWER AND INURE TO THE BENEFIT OF THE BANK AND ITS SUCCESSORS AND ASSIGNS. If any term or provision of this Term Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the date first above written. [MEDALLION FINANCIAL CORP.] [MEDALLION BUSINESS CREDIT, LLC] a Delaware [corporation] [limited liability company] By:______________________________________ Name: Title: By:______________________________________ Name: Title:
Grid Schedule for Term Note Attached to and made part of the Term Note, dated _____________, by [Medallion Financial Corp.] [Medallion Business Credit, LLC] to the order of ____________ (the "Bank") pursuant to the Second Amended and Restated Loan Agreement, dated as of September 22, 2000 among Medallion Financial Corporation, Medallion Business Credit, LLC, the banks that from time to time are signatories thereto and Fleet National Bank, as Arranger, Swing Line Lender and Agent - ------------------------------------------------------------------------------------------------------------------------------------ Loan Type Unpaid (LIBOR Rate Loan or Interest Period Amount of Principal Prime Rate Loan) and Interest Rate Principal Paid Balance Name of Principal (Borrowed or (LIBOR Rate or Prepaid or (Balance Person Making Date Amount (Converted to) Loans only) Converted Continued) Notation - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT D SWING LINE NOTE $5,000,000.00 No. September 22, 2000 FOR VALUE RECEIVED, the undersigned, [MEDALLION FINANCIAL CORP., a Delaware corporation] [MEDALLION BUSINESS CREDIT, LLC, a Delaware limited liability company] (the "Borrower"), hereby unconditionally promises to pay on the date of Swing Line Maturity Date, as defined in the Loan Agreement (hereinafter referred to) or on such earlier date as may be required under the Loan Agreement, to the order of FLEET NATIONAL BANK (the "Bank") at the Agent Payment Office (as defined in the Loan Agreement), in lawful money of the United States of America and in immediately available funds, an amount equal to the lesser of (a) FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00) and (b) the aggregate unpaid principal amount of all Swing Line Loans made by the Bank to the Borrower pursuant to the Second Amended and Restated Loan Agreement, dated as of September 22, 2000, as amended, among the Borrower, [Medallion Financial Corp./Medallion Business Credit, LLC], the banks that from time to time are signatories thereto, the Swing Line Lender and Fleet National Bank as Arranger and Agent (as amended, modified or supplemented from time to time in accordance with its terms, the "Loan Agreement"). The Borrower further promises to pay interest (computed on the basis of a 360-day year for the actual number of days elapsed) in like money on the unpaid principal balance of this Note from time to time outstanding at such rates and times as provided in the Loan Agreement. All Swing Line Loans made by the Bank pursuant to the Loan Agreement and all payments of the principal thereof shall be endorsed by the holder of this Note on the schedule annexed hereto (including any additional pages such holder may add to such schedule), which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the holder of this Note to insert any date or amount or other information on such schedule shall not in any manner affect the obligation of the Borrower to repay any Swing Line Loans in accordance with the terms of the Loan Agreement. On and after the stated or any accelerated maturity hereof, and until paid in full (whether before or after the occurrence of any Event of Default described in Sections 9.1(h) and 9.1(i) of the Loan Agreement), the outstanding principal amount of this Note (including, to the extent permitted by law, unpaid interest thereon) shall bear interest (the "Default Rate") at an annual rate equal to the sum of 2% plus the Prime Rate then in effect and the Prime Rate to be charged shall change when and as the Prime Rate is changed, and any such change in the Prime Rate shall become effective at the opening of business on the day on which such change is adopted. In each case, interest at the Default Rate shall be payable on demand, but in no event shall such rate of interest be in excess of the maximum rate of interest permitted under applicable law. The Default Rate shall be computed on the basis of a 360-day year for the actual number of days elapsed. This Note is the Swing Line Note referred to in the Loan Agreement, is secured as provided therein, is entitled to the benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. [This Note has been issued as a replacement and in exchange for (but not in payment or satisfaction of) the Swing Line Note dated [ ] by the Borrower in favor of the Bank in the aggregate principal amount of $[__________].] The Borrower shall make when due any and all payments and prepayments on this Swing Line Note required under the Loan Agreement. Reference is herein made to the Loan Agreement for the rights of the holder to accelerate the unpaid balance hereof prior to maturity. Borrower hereby waives diligence, demand, presentment, protest and notice of any kind, release, surrender or substitution of security, or forbearance or other indulgence, without notice. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Loan Agreement. This Note may not be changed, modified, or terminated orally, but only by an agreement in writing signed by the party to be charged. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS SWING LINE NOTE, THE BORROWER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK 1N CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SWING LINE NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF BORROWER AND INURE TO THE BENEFIT OF THE BANK AND ITS SUCCESSORS AND ASSIGNS. If any term or provision of this Swing Line Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the date first above written. [MEDALLION FINANCIAL CORP.] [MEDALLION BUSINESS CREDIT, LLC] a Delaware [corporation] [limited liability company] By:______________________________________ Name: Title: By:______________________________________ Name: Title: Grid Schedule for Swing Line Note Attached to and made part of the Swing Line Note, dated September 22, 2000, by [Medallion Business Credit, LLC][Medallion Business Credit, LLC] to the order of Fleet National Bank (the "Bank") pursuant to the Second Amended and Restated Loan Agreement, dated as of September 22, 2000 among Medallion Financial Corporation, Medallion Business Credit, LLC, the banks that from time to time are signatories thereto and Fleet National Bank, as Arranger, Swing Line Lender and Agent - -------------------------------------------------------------------------------- Unpaid Principal Amount of Balance Name of Principal Principal Paid (Balance Person Making Date Amount or Prepaid Continued) Notation - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT E FORM OF LOAN REQUEST -------------------- ___________, 200_ Fleet National Bank, as Agent for the Banks referred to below 100 Federal Street Boston, MA 02110 Attention:_________________ Re: Second Amended and Restated Loan Agreement, dated as of September 22, 2000 by and among Medallion Financial Corp. ("MFC"), Medallion Business Credit, LLC ("MBC"), the banks that from time to time are signatories thereto and Fleet National Bank as Swing Line Lender. Arranger and Agent the "Loan Agreement") ----------------- Dear Sir or Madam: Reference is made to the Loan Agreement (capitalized terms used but not defined herein having the meaning ascribed thereto in the Loan Agreement). I. Advances ----------- [In case all or a portion of a Revolving Credit borrowing is made as a Prime Rate Loan.] Please advance $____________ as a Prime Rate Loan effective on __________________, 20__. [Note: loan request must be received by no later than 11:00 a.m.,. New York City time, on the Business Day prior to this day in order for the loan to be advanced on the day requested.] [In the case all or a portion of a Revolving Credit borrowing is made as a LIBOR Rate Loan.] Please advance $_____________ as a LIBOR Rate Loan effective on _________________, 20__ (which is not less than three Banking Days from the date hereof). The Interest Period for such LIBOR Rate Loan will commence on and include the date of advance and will end, subject to the limitations applicable to Interest Periods contained in the definition of Interest Period in the Loan Agreement, on the numerically corresponding date that is [one] [two] [three] [six] months thereafter. [In the case all or a portion of a borrowing is made as a Swing Line Loan.] Please advance $____________ as a Swing Line Loan effective on __________________, 20__. [Note: loan request must be received by no later than 3:00 p.m.,. New York City time in order for the loan to be advanced on the same day as the request.] The Swing Line Interest Period for such Swing Line Loan will commence on and include the date of advance and will end on the numerically corresponding date that is [insert number between one and ten, inclusive] days thereafter. II. Conversions --------------- [In the case of the conversion of all [or a portion] of a Prime Rate Loan into a LIBOR Rate Loan.] Please convert $____________ [, which amount represents the entire outstanding principal amount] of the Prime Rate Loan or Loans of the undersigned, into a LIBOR Rate Loan effective on __________________, 20__ (which is not less than three Banking Days from the date hereof). The Interest Period for such LIBOR Rate Loan will commence on and include the date of such conversion and will end, subject to the limitations applicable to Interest Periods contained in the definition of Interest Period in the Loan Agreement, on the numerically corresponding date that is [one] [two] [three] [six] months thereafter. [Note: Term Loans that are LIBOR Rate Loans may only have an Interest Period of one month.] [Please continue $ ____________ (the balance) of such Prime Rate Loan or Loans not so converted as a Prime Rate Loan.] [In the case of the conversion of all [or a portion] of a LIBOR Rate Loan into a Prime Rate Loan.] Please convert $____________ , which amount represents the entire outstanding principal amount] of the LIBOR Rate Loan or Loans of the undersigned, the Interest Period with respect to which ends on (the "Conversion Date"), into a Prime Rate Loan effective on the Conversion Date (which is not less than three Banking Days from the date hereof). All of the proceeds of the advance described above will be used directly or indirectly by [MFC] [MBC]. III. Continuations ------------------ [In the case of the continuation of all [or a portion] of a LIBOR Rate Loan.] Please continue $____________ [, which amount represents the entire outstanding principal amount] of the LIBOR Rate Loan or Loans of the undersigned, the Interest Period with respect to which ends on _________________ (which is not less than three Banking Days from the date hereof), as a LIBOR Rate Loan with an Interest Period commencing on and including such date and ending, subject to the limitations applicable to Interest Periods contained in the definition of Interest Period in the Loan Agreement, on the numerically corresponding date that is [one] [two] [three] [six] months thereafter. [Note: Term Loans that are LIBOR Rate Loans may only have an Interest Period of one month]. [MFC] [MBC] hereby represents and warrants to the Bank that: (a) Each and every of the representations and warranties set forth in the Loan Agreement and the other Loan Documents is true as of the date hereof and with the same effect as though made on the date hereof, and is hereby incorporated herein in full by reference as if fully restated herein in its entirety. (b) No Default or Event of Default and no event or condition which, with the giving of notice or lapse of time or both, would constitute such a Default or Event of Default, now exists or, after giving effect to the borrowings contemplated hereby, would exist. (c) Each request for a loan as provided above, after taking into account the loans) requested, are within the [MFC] [MBC] Borrowing Base limitations set forth in the Loan Agreement. [MEDALLION FINANCIAL CORP.] [MEDALLION BUSINESS CREDIT, LLC] a Delaware [corporation] [limited liability company] By:______________________________________ By:______________________________________ Exhibit F SECURITY AGREEMENT among MEDALLION FINANCIAL CORP., as debtor, MEDALLION BUSINESS CREDIT, LLC, as debtor and FLEET NATIONAL BANK (f/k/a, Fleet Bank, National Association) as Agent and secured party, for the benefit of THE BANKS AND SWING LINE LENDER SIGNATORY TO THE SECOND AMENDED AND RESTATED LOAN AGREEMENT, DATED AS OF SEPTEMBER 22, 2000, AMONG MEDALLION FINANCIAL CORP., MEDALLION BUSINESS CREDIT, LLC, THE BANKS SIGNATORY THERETO, THE SWING LINE LENDER AND FLEET NATIONAL BANK, AS ARRANGER AND ADMINISTRATIVE AGENT and THE HOLDERS OF COMMERCIAL PAPER ISSUED BY MEDALLION FINANCIAL CORP. ------------------------------- dated as of September 22, 2000 ------------------------------- SECURITY AGREEMENT This SECURITY AGREEMENT, dated as of September 22, 2000, is among MEDALLION FINANCIAL CORP., a Delaware corporation ("MFC"), MEDALLION BUSINESS CREDIT, LLC, a Delaware limited liability company ("MBC" and, together with MFC, the "Borrowers" and, each of MFC and MBC individually, a "Borrower"), and FLEET NATIONAL BANK (f/k/a FLEET BANK, National Association), a national banking association, as collateral agent for the banks that from time to time are signatories to the Loan Agreement (hereinafter defined) (collectively, the "Banks" and individually, a "Bank;" which term as used in this Security Agreement shall be deemed to include the Swing Line Lender set forth in such Loan Agreement, unless the context clearly indicates otherwise) and as collateral agent for the CP Holders (as defined in the Loan Agreement) (in such capacity, the "Agent"). RECITALS WHEREAS, Fleet National Bank, as Agent (in such capacity, the "Administrative Agent") and the Banks have entered into a Second Amended and Restated Loan Agreement, dated as of even date herewith (as the same may be amended, modified, supplemented or restated from time to time, or replaced in connection with any refinancing thereof, the "Loan Agreement"), with the Borrowers providing for revolving credit loans (including the Initial Revolving Credit Loan) (the "Revolving Credit Loans," which term as used in this Security Agreement shall be deemed to include the Swing Line Loans (as defined in the Loan Agreement) unless the context clearly indicates otherwise) and term loans (the "Term Loans") not to exceed the amounts provided in the Loan Agreement. WHEREAS, the Loan Agreement is an amendment and restatement of the First Restatement dated as of the First Restatement Date, which is an amendment and restatement of the Original Agreement dated as of the Original Effective Date. WHEREAS, in connection with the Original Agreement, MFC entered into a Security Agreement (as the same may have been amended, modified, supplemented or restated prior to the effectiveness hereof, the "MFC Security Agreement") with the Administrative Agent to secure the "Obligations" as defined in the MFC Security Agreement, including, without limitation, its obligations under the Original Agreement and the "Notes" as defined in the Original Agreement. WHEREAS, in connection with the First Restatement, MBC entered into a Security Agreement (as the same may have been amended, modified, supplemented or restated prior to the effectiveness hereof, the "MBC Security Agreement") with the Administrative Agent to secure the "Obligations" as defined in the MBC Security Agreement, including, without limitation, its obligations under the First Restatement and the "Notes" as defined in the First Restatement. WHEREAS, in connection with the First Restatement, MFC confirmed that the MFC Security Agreement continued to secure its obligations under the First Restatement and under the "Notes" as defined in the First Restatement. WHEREAS, a condition precedent to the obligation of the Banks to make the Revolving Credit Loans or Term Loans under the Loan Agreement is that each of the Borrowers confirm and continue its grant to the Administrative Agent of perfected security interests in all of the Collateral to secure the payment and performance of all of the obligations of each Borrower owing to the Administrative Agent and the Banks under the Loan Agreement and other Loan Documents by amending and restating the MFC Security Agreement and MBC Security Agreement in their entirety pursuant hereto. WHEREAS, in partial satisfaction of each Borrower's obligation under Sections 5.1 and 5.2 of the Loan Agreement and otherwise as an inducement necessary to the Banks' making the Revolving Credit Loans and/or Term Loans to the Borrowers under the Loan Agreement, each Borrower agrees to confirm its prior grant and grant to the Administrative Agent in favor of the Banks a security interest in the Collateral pursuant to the terms set forth herein. WHEREAS, the Banks are willing to consent to the grant of the security interest in the Collateral to the Agent for the benefit of the CP Holders (in addition to the Banks and the Administrative Agent), provided that in the case of each of the CP Holders such security interest granted to the Agent for such CP Holder's benefit shall only be effective to the extent that such CP Holder has (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on terms and conditions satisfactory to the Agent and with duties consistent with those necessary to enable the Agent (in its -2- opinion) to perform its duties as collateral agent under this Agreement, (b) consented to and agreed to be bound by the terms of this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in its capacity as collateral agent, in a manner satisfactory to the Agent, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. WHEREAS, by accepting the security granted by, and the other benefits of, this Agreement, each CP Holder shall be deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to the terms of this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in its capacity as collateral agent, pursuant to the terms of this Agreement, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. NOW, THEREFORE, in consideration of the willingness of the Administrative Agent and the Banks to enter into the Loan Agreement and to agree, subject to the terms and conditions thereof, to make the Revolving Credit Loans and/or Term Loans to the Borrowers pursuant thereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Borrower and the Agent hereby covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Defined Terms. Capitalized terms defined in the foregoing caption and recitals shall have the respective meanings ascribed thereto. Capitalized terms defined in the Loan Agreement and not otherwise defined in this Agreement shall have the meanings ascribed to those terms in the Loan Agreement. In addition, as used herein, the following terms shall have the following meanings: "Accounts" shall have the meaning assigned to it in Section 9-106 of the UCC. "Books and Records" shall mean all books, records, computer files and other Information relating to any of the Collateral. -3- "Chattel Paper" shall have the meaning assigned to it in Section 9-105(1)(b) of the UCC. "Collateral" shall mean all of the following property and to the extent otherwise not included, all other personal and fixture property of every kind and nature, now owned or at any time hereafter acquired by either Borrower or in which either Borrower now has or at any time in the future may acquire any right, title or interest: (a) all Loans; (b) all property and rights, including, but not limited to, Underlying Collateral, which now or hereafter secure any of the Loans; (c) all Books and Records; (d) all amounts deposited in any Collateral Account; (e) all Contracts; (f) all rights and remedies of each Borrower with respect to, or in connection with, any contract, security interest, guaranty or other document, instrument or agreement relating to or affecting any Loans or any Underlying Collateral; (g) all General Intangibles; (h) all Instruments; (i) all Chattel Paper; (j) all Equipment; (k) all Inventory; (l) all Investments; (m) all Investment Property; (n) all Accounts; (o) all Receivables; -4- (p) all Documents; (q) all property and rights, including, but not limited to, items described in clauses (b) through (o) hereof, repossessed, or otherwise acquired in connection with any Loans or the exercise by either Borrower of any rights of a secured party under or with respect to any of the Loans or this Agreement or arising out of the sale or disposition of any Loans, any other Collateral, or in connection with the sale of any repossessed property; (r) all parts, accessions, accessories, goods, appurtenant or related to any of the foregoing, replacement parts, trade names, closes in action, now or hereafter affixed thereto, arising therefrom, used in connection therewith, or related to the use, possession or operation thereof; (s) all cash and Short-Term Investments; (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 (v) to the extent not otherwise included, all Proceeds, products, substitutions and replacements of any and all of the foregoing. "Collateral Account" shall mean the one or more accounts of the Borrowers maintained with the Agent and containing such reasonable terms as shall be agreed to by the Agent. "Contracts" shall mean all contracts and agreements, including, but not limited to, loan agreements, security agreements, guaranties, intercreditor agreements, office leases, lease agreements for mobile goods (as defined in the UCC) (whether or not covered by a certificate of title), indemnity agreements, license agreements, rental agreements and all other contracts and agreements of every kind and nature whatsoever. "Depository Accounts" shall mean accounts of either Borrower containing any deposits or other sums credited to such Borrower, whether in regular or special depository accounts or otherwise. -5- "Documents" shall have the meaning assigned to it in Section 9-105(1)(i) of the UCC. "Equipment" shall mean all machinery, equipment, fixtures, vehicles, office equipment, furniture, furnishings, inventories, supplies, computer equipment and all other equipment whatsoever, wherever located, together with all attachments, components, parts, equipment and accessories installed therein or affixed thereto, including, but not limited to, all equipment as defined in Section 9-109(2) of the UCC and all products, profits, rents and proceeds of any of the foregoing; all whether now owned or hereafter created or acquired. "General Intangibles" shall have the meaning assigned to it in Section 9-106 of the UCC and shall include, but not be limited to, all interests in and to Permits and Licenses, Medallion Rights, tax refund claims, patents, patent applications, rights to sue and recover for past infringement of patents, trademarks, tradenames, trademark applications, copyrights, copyright applications, trade secrets, licenses and know-how. "Information" shall mean books, records, delivery receipts, copies of checks and stubs, security documents, division of interest files, bank reconciliation statements, remittances, revenue accounting records, invoices, leases, licenses, authorizations for expenditures, contracts and such other documents, and all other recorded information and data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics. "Instruments" shall have the meaning assigned to it in Section 9-105(1)(i) of the UCC. "Inventory" shall mean all inventory, goods, raw materials, components and other personal property, wherever located, including, but not limited to, all inventory as defined in Section 9-109(4) of the UCC. "Investment" in any Person shall mean any loan, advance, or extension of credit to or for the account of; any guaranty, endorsement or other direct or indirect contingent liability in connection with the obligations, Capital Stock or dividends of; any ownership, purchase or acquisition of any assets, business, Capital Stock, obligations or -6- securities of; or any other interest in or capital contribution to; such Person. "Investment Property" shall have the meaning assigned to it in Section 9-115 of the UCC, including, without limitation, securities as defined in the UCC. "Law" shall mean any law, regulation, guideline, treaty or directive or condition or interpretation thereof, including without limitation, any request, guideline or policy, whether or not having the force of law. "Loan" shall mean any loan, advance or extension of credit made in the ordinary course of business by either Borrower to or for the account of any client or customer of such Borrower. Any loan, advance or extension of credit made at a different point in time shall be deemed to be a separate and distinct Loan. "Loan Documents" shall mean and collectively refer to the Loan Documents (as defined in the Loan Agreement) and all other agreements, instruments and documents, including, without limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust account agreements and all other written matters whether heretofore, now or hereafter executed by or on behalf of either Borrower and/or delivered to the Agent, the Administrative Agent or the Banks, with respect to this Agreement, or the transactions contemplated by this Agreement. "Medallion" shall mean the plate which displays the license number of a licensed Taxicab on the outside of the vehicle and which is issued by the New York City Taxi and Limousine Commission or by any other Governmental Authority for a jurisdiction other than New York City with the authority to issue licenses for the operation of Taxicabs. "Medallion Rights" shall mean (a) all license, operating and/or subscription rights to Taxicab Medallion(s), and all license, operating and/or subscription rights evidenced by such Medallion(s) and (b) all renewals thereof. "Obligations" shall mean any and all present and future indebtedness, liabilities and all performance obligations which may at any time be owing by either Borrower to the Agent, the -7- Administrative Agent or any Bank, however arising, under the Loan Agreement, this Agreement or any other Loan Document between or among the Agent, the Administrative Agent and/or any Bank and any Borrower in connection with any of the foregoing or in connection with any Loan Document, whether now in existence or incurred hereafter, whether incurred directly or incurred by others and assumed by Borrower, whether secured by mortgage, pledge, or lien upon or security interest in any property of either Borrower, or any other Person, whether such indebtedness or other obligation is absolute or contingent, joint or several, matured or unmatured, direct or indirect, fixed, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising, created, assumed, incurred or acquired and whether either 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 each Borrower to any Bank for all balances owing to any Bank in any account maintained on such Bank's books under the Loan Agreement or under any other agreement or arrangement now or hereafter entered into between Borrower and the Agent, the Administrative Agent or any Bank in connection therewith, and, in connection with this Agreement or the Loan Agreement, (i) indebtedness owing by either Borrower to the Agent, the Administrative Agent or any Bank, (ii) the liability of either Borrower to the Agent, the Administrative Agent or any Bank as maker or endorser of any promissory note or other instrument for the payment of money, and (iii) the liability of either Borrower to the Agent, the Administrative Agent or any Bank under any instrument of guaranty or indemnity, or arising under any guarantee, endorsement, or undertaking which the Agent, the Administrative Agent or any Bank may make or issue to others for the account of either Borrower, including without limitation, any accommodation extended to either Borrower with respect to letters of credit, acceptance of drafts, or endorsement of notes or other instruments by the Agent, the Administrative Agent or such Bank for the account and benefit of such Borrower. The Obligations shall also include interest, premium (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 Agent and the Administrative Agent and the costs and expenses of filing, perfecting, preserving, retaking, holding, and preparing any of the Collateral for sale chargeable to either Borrower and due from either Borrower under this Agreement, the Loan Agreement or under any other agreement or arrangement which may be now or hereafter entered -8- into between either Borrower and the Agent, the Administrative Agent or the Banks and shall also include (i) any obligation or liability in respect of any breach of any representation or warranty, and (ii) all post-petition interest and funding losses. "Other Agreements" shall mean collectively any of the Loan Documents other than this Agreement. "Percentage of the Obligations" shall mean with respect to the Administrative Agent or any Bank the percentage which is equal to the product of (x) 100 times (y) a fraction, the numerator of which is the total amount of Obligations owing to the Administrative Agent or such Bank, as the case may be, at the time of computation and the denominator of which is the total amount of the Obligations as of such time. "Permits and Licenses" shall mean (a) all applicable authorizations, consents, certificates, licenses, rights-of-way permits, approvals, waivers, exemptions, encroachment agreements, variances, franchises, permissions, and permits of any Governmental Authority or any other Person and all documents and applications filed in connection therewith, and (b) all renewals thereof. "Permitted Liens" shall mean the Liens permitted pursuant to Section 8.1 of the Loan Agreement. "Proceeds" shall have the meaning assigned to it in Section 9-306(1) of the UCC and shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty existing from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Real Property" shall mean real property of a Person or an ultimate beneficial owner of such Person or machinery or Equipment of such Person or beneficial owner forming a part of, or affixed to, such real property. -9- "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. "Taxicab" shall mean a motor vehicle carrying passengers for hire, duly licensed as a taxicab by the New York City Taxi and Limousine Commission, or any other Governmental Authority for a jurisdiction other than New York City, and permitted to accept hails from passengers in the street. "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code as then in effect in that jurisdiction. Unless the context otherwise requires, references to the UCC contained herein shall mean the Uniform Commercial Code as then in effect in the State of New York. "Underlying Collateral" shall mean all of each Borrower's rights with respect to, or interest in, any and all present and future Medallion Rights, Equipment, Real Property, machinery, Inventory, Receivables, Accounts, future accounts, accounts receivable, contracts, contract rights, General Intangibles, books, desks, notes, bills, drafts, acceptances, choses in action, Chattel Paper, Instruments, Documents and other forms of obligations, and property, real, personal or mixed, tangible or intangible, at any time owing to or owned by any Person to whom either Borrower has made a Loan, or any guarantor of such Person. SECTION 1.2. Accounting Terms. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP. SECTION 1.3. Rules of Construction. (a) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders, and words importing the singular number shall mean and include the plural number and vice versa. (b) The terms "hereby," "hereto," "hereof," "herein," and "hereunder" and any similar words refer to this Agreement as a whole and not to any particular provisions of this Agreement. The term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of this Agreement, and "Article," "Section," "Schedule," -10- "Exhibit" and like references are to this Agreement unless otherwise specified. (c) Any defined term that relates to a document shall include within its definition any amendments, modifications, renewals, restatements, extensions, supplements, or substitutions which may have been heretofore or may be hereafter executed in accordance with the terms thereof. (d) References in this Agreement to particular sections of the UCC or to any other legislation shall be deemed to refer also to any successor sections thereof or other redesignations for codification purposes. Unless otherwise indicated, references in this Agreement to the UCC shall mean the UCC as in effect in the State of New York. (e) All terms used in this Agreement that are not capitalized shall have the meanings provided by the UCC as in effect in the State of New York to the extent the same are used or defined therein. ARTICLE II CREATION OF SECURITY INTEREST SECTION 2.1. Grant of Security Interest to Agent. To induce the Banks to make the Revolving Credit Loans and/or Term Loans to the Borrowers and, as security for any and all Obligations of each Borrower, and as security for the Borrowers' Permitted Debt owing to the CP Holders, each Borrower hereby grants to the Agent for the ratable benefit of the Agent, the Administrative Agent, the Banks and the CP Holders a continuing lien on and security interest in the Collateral, which shall be a first priority lien (except for the Permitted Liens entitled to priority under applicable law) and, in furtherance of such grant, each Borrower hereby assigns for security all of the Collateral to the Agent for the ratable benefit of the Agent, the Administrative Agent, the Banks and the CP Holders. Without limiting the foregoing, each of the Borrowers confirms and continues in favor of the Agent its prior grant to the Administrative Agent of perfected security interests in all of the Collateral to secure the payment and performance of all of the Obligations pursuant to the MFC Security Agreement and MBC Security Agreement, which security agreements are hereby restated in their entirety pursuant to this Agreement. -11- SECTION 2.2. Perfection. At any time or times each Borrower shall execute and deliver to the Agent, at the Agent's request, all assignments, certificates of title, conveyances, assignment statements, financing statements, renewal financing statements, security agreements, affidavits, mortgages, mortgage assignments, trust deeds, notices and all other agreements, instruments and documents that the Agent reasonably may request, in form satisfactory to the Agent, and shall take any and all other steps reasonably requested by the Agent, in order to perfect and maintain the security interests and liens granted herein, and to consummate fully all of the transactions contemplated under this Agreement and any Other Agreements. SECTION 2.3. Recording, Registering, Filing, Etc. At any time or times when the Agent reasonably deems it necessary, each Borrower will perform, or will cause to be performed, each of the following: (a) Record, register and file such notices, certificates of title, financing statements, mortgage assignments, trust deeds and other documents or instruments as may, from time to time, be requested by the Agent to carry out fully the intent of this Agreement, with such administrations or governmental agencies as may be necessary or advisable in order to perfect, establish, confirm, and maintain the security interests and liens created hereunder, as legal, valid, and binding security interests and liens upon the Collateral; (b) Furnish to the Agent evidence of every such recording, registration and filing; (c) Execute and deliver or perform, or cause to be executed and delivered or performed, such further and other instruments or acts as the Agent reasonably determines are necessary or desirable to carry out fully the intent and purpose of this Agreement or to subject the Collateral to the security interest and lien created hereunder, including, without limitation, defending the title of each Borrower to the Collateral by means of negotiation with and, if necessary, appropriate legal proceedings against, each party claiming an interest therein contrary or adverse to either Borrower's title to same; and (d) In case of certain revisions to Article 9 of the UCC described in Section 6.16 hereof, comply with all of the requirements of and its agreements contained within such Section 6.16. -12- SECTION 2.4. Delivery of Documents. (a) As promptly as practicable after the date hereof (but in no event later than 10 Business Days after the date hereof), each Borrower shall deliver to the Agent all instruments evidencing all Loans (collectively, the "Collateral Notes") of each Borrower then outstanding and if any such Loan is secured by Real Property, a Mortgage Assignment with respect to each such Loan. In addition, each time either Borrower shall make a new Loan, such Borrower shall immediately deliver to the Agent the Collateral Note evidencing such Loan and if such Loan is secured by Real Property, a Mortgage Assignment with respect to each Loan. The Agent shall keep all Collateral Notes and Mortgage Assignments at its office in Farmington, Connecticut in a vault or other place of similar security. Each Borrower and its authorized agents and representatives, which shall include its Independent Public Accountants, shall at all times, during normal business hours, have full access to examine, but not to remove, without the prior consent of the Agent, the Collateral Notes and Mortgage Assignments; provided, however, that (i) the Borrowers and/or their authorized agent shall have given the Agent at least one (1) Business Day's prior notice, or such other notice as may be required by applicable provisions of the Investment Company Act of 1940, as amended, before seeking access to the Collateral Notes and Mortgage Assignments and (ii) the Agent shall, in its sole discretion, be entitled to have one of its employees, agents or representatives present at all times or from time to time during any such period of access. (b) Upon the Agent's request, each Borrower shall immediately deliver to the Agent or its designee, at the Borrowers' joint and several expense, copies of all Documents, Chattel Paper, security agreements, guarantees and other writings evidencing any Loan or its related Underlying Collateral. (c) Upon the Agent's request, each Borrower shall immediately endorse and deliver to the Agent or its designee all Documents, Instruments, Chattel Paper, security agreements, guarantees and other writings so requested by the Agent evidencing any Collateral of either Borrower, such Documents, Instruments, Chattel Paper, security agreements, guarantees and other writings to be held as Collateral under the terms of this Agreement. (d) The Agent shall have no obligation to inspect or examine any of the Collateral Notes, Mortgage Assignments or other documents delivered to it by either Borrower hereunder, and shall be entitled to assume, and shall be fully protected in assuming, without -13- inspection or examination, that each Borrower has complied in full with its delivery obligations hereunder. SECTION 2.5. Further Assurances. (a) At any time or times, upon request by the Agent, in addition to the acts specifically required to be performed by either Borrower elsewhere under this Agreement, each Borrower shall do all other things and sign and deliver all other documents and instruments reasonably requested by the Agent to perfect, protect, maintain and enforce the security interests and liens of the Agent in the Collateral, and the first priority of such security interests and liens, and other rights granted hereunder or under any other present or future agreement between or among either Borrower or both Borrowers and the Agent, including, without limitation, the Loan Documents. Such acts shall include but not be limited to the marking of each Borrower's Books and Records, Chattel Paper and Instruments to show the Agent's security interests and liens and the recording of Mortgage Assignments and/or the filing of financing, renewal and/or continuation statements under the UCC or other documents evidencing the Agent's liens under applicable law and the delivery of any Collateral the physical possession of which is necessary or desirable in order for the Agent to perfect its liens. Each Borrower authorizes the Agent to execute, file and/or record, any financing, renewal and/or continuation statement, any Mortgage Assignment or any other document or instrument which the Agent may require to perfect, protect, continue or enforce in accordance herewith any security interest, lien or other right hereunder or under any of the other Loan Documents and authorizes the Agent to sign either Borrower's name on the same. Upon payment in full by each Borrower of all the Obligations in accordance with the terms thereof, the security interests and liens granted by the Borrowers hereunder shall terminate, except that if, at any time, all or part of the payment of the monetary Obligations theretofore made by either Borrower or any other Person is rescinded or otherwise must be returned by the Agent or any Bank for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of either Borrower or such other Person), the security interests and liens granted hereunder or under any other present or future agreement between or among either Borrower and the Agent, and all rights of the Agent and all Obligations shall be reinstated as to monetary Obligations which were satisfied by the payment to be rescinded or returned, all as though such payment had not been made, and each Borrower shall sign and deliver to the Agent all documents and things necessary to perfect all terminated liens -14- subject to the intervening liens, if any, granted by either Borrower to any Person. (b) A carbon, photographic, or other reproduction of this Agreement shall be sufficient as a UCC financing statement and may be filed at any time in any appropriate office in lieu thereof. (c) To the extent requested by the Agent, each Borrower will use its best efforts to cause each mortgagee of any and all real estate under any lease included in any Underlying Collateral and each landlord under any lease included in any Underlying Collateral to execute and deliver to the Agent assignments, in form and substance satisfactory to the Agent, by which such mortgagee or landlord waives its rights, if any, to the Collateral. SECTION 2.6. Appointment of Agent as Attorney-in-Fact. Each Borrower does hereby irrevocably make, constitute and appoint the Agent and any of its officers, employees or agents as the true and lawful attorneys of such Borrower with power to: (a) sign the name of such Borrower on any financing statement, renewal financing statement, notice or other similar document that in the Agent's opinion must be filed in order to perfect or continue perfected the security interests granted in this Agreement or any Other Agreements and to effect such filing; (b) receive, endorse, assign and deliver, in such Borrower's name or in the name of the Agent, all checks, notes, drafts and other instruments relating to any Collateral, including receiving, opening and properly disposing of all mail addressed to such Borrower concerning the Collateral and, during the existence of an Event of Default (as hereinafter defined), to notify postal authorities to change the address for delivery of mail to such address as the Agent may designate; (c) sign such Borrower's name on any notices to any of such Borrower's clients or customers; and (d) upon the occurrence and during the continuance of an Event of Default, take or bring at such Borrower's cost, in such Borrower's name or in the name of the Agent, all steps, actions and suits deemed by the Agent necessary or desirable to effect collections in connection with any Loans, to enforce payment in connection with any Loans, to settle, compromise or release in whole or in part, any -15- amounts owing in connection with any Loans, to prosecute any action or proceeding with respect to any Loans, to extend the time of payment in connection with any Loans, to make allowances and adjustments with respect thereto, to secure credit in the name of the Agent, and to do all other things necessary or desirable to realize upon the Collateral, including but not limited to the Underlying Collateral, and to carry out this Agreement and all Other Agreements. Neither the Agent nor its agents or attorneys will be liable for any act or omission nor for any error of judgment or mistake of fact unless such act, omission, error or mistake shall occur as a result of their gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable so long as the Obligations remain unpaid. SECTION 2.7. Indemnity. In addition to all of the Agent's, the Administrative Agent's and Banks' other rights and remedies under the Loan Documents, each Borrower will hold the Banks, the Administrative Agent and the Agent harmless from and indemnify the Banks, the Administrative Agent and the Agent or other designee of the Agent against all losses, damages, costs and expenses (including, without limitation, attorneys' fees, costs and expenses) incurred by any of them, whether prior to or from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or relating to any suit, investigation, action or proceeding by any Person, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any Person under any statute or regulation, including without limitation, any Federal or state antitrust laws, or under any common law or equitable cause or otherwise, all to the extent arising from or in connection with this Agreement or the other Loan Documents or the enforcement of the rights of the Agent hereunder, other than losses, damages, costs and expenses resulting from, but only to the extent resulting from, the willful misconduct or gross negligence of the Person seeking indemnification. Each of the Banks and the CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) severally agree (i) to reimburse the Agent, on demand, in the amount of its pro rata share, for any expenses referred to in this Section 2.7 which shall not have been reimbursed or paid by the Borrowers or paid from the proceeds of Collateral as provided herein and (ii) to indemnify and hold harmless the Agent and its directors, officers, employees and -16- agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this Section 2.7, to the extent the same shall not have been reimbursed by the Borrowers or paid from the proceeds of Collateral as provided herein; provided that no Bank or CP Holder shall be liable to the Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or any of its directors, officers, employees or agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this Section 2.7, pro rata shares at any time shall be determined based upon the aggregate Exposures (in the case of the Banks), or the Commercial Paper (in the case of the CP Holders) at the time such expenses were incurred. SECTION 2.8. Borrowers Remain Liable. Anything herein to the contrary notwithstanding, (i) each Borrower shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Agent, the Administrative Agent or the Banks of any rights under this Agreement or any of the other Loan Documents shall not release either Borrower from any of its duties or obligations under the contracts and agreements included in the Collateral, and (iii) neither the Agent, the Administrative Agent nor the Banks shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any of the other Loan Documents nor shall the Agent, the Administrative Agent or any Bank be obligated to perform any of the obligations or duties of either Borrower thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 2.9. Banks' Freedom of Dealing. Each CP Holder agrees, with respect to the Obligations, any and all guaranties thereof and any and all Collateral, that the Borrowers and the Banks may agree to increase the amount of the Obligations or otherwise modify or waive the terms of any of the Loan Agreement, the Obligations or the other Loan Documents, and the Banks may grant extensions of the time of payment or performance to and make compromises, including releases of guaranties, collateral which is not Collateral, and settlements with the Borrowers and all other Persons, in each case without the consent of any CP Holder or the Paying Agent for which it -17- acts and without affecting the agreements of the CP Holders or the Borrowers contained in this Agreement. SECTION 2.10. Agent May Perform; Actions of Agent. If either Borrower fails to perform any agreement contained herein, the Agent may (but shall not be required to) itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be jointly and severally payable by the Borrowers, together with interest thereon at the rate specified in Section 2.6 of the Loan Agreement, and until so paid shall be deemed part of the Obligations. The Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Agent shall take any action under or with respect to this Agreement which is requested by the Required Banks and which is not inconsistent with or contrary to the provisions of this Agreement or the Loan Documents. The Agent shall have the right to decline to follow any such direction if the Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Loan Documents, may not lawfully be taken or would involve it in personal liability, and the Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement, the Agent may rely on any such direction given to it by the Required Banks and shall be fully protected, and shall under no circumstances (absent the gross negligence and willful misconduct of the Agent) be liable to the Borrower, any Bank, any CP Holder, the Paying Agent or any other Person for taking or refraining from taking action in accordance therewith. The Agent may consult with counsel and shall be fully protected in taking any action hereunder in accordance with any advice of such counsel. The Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Collateral from any court of competent jurisdiction. At such time as all Obligations have been repaid in full and there are no commitments to incur further Obligations, the Agent shall take instructions from the holders of a majority of CP Debt or their representative. SECTION 2.11. Agent's Duties. The powers conferred on the Agent hereunder are solely to protect its interest and the interests of -18- the Banks and the CP Holders in the Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Agent makes no representation as to the value or condition of the Collateral or any part thereof, as to the title of the Borrowers to the Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Agent shall incur no liability or responsibility in respect of any such matters. The Agent shall not be responsible for insuring the Collateral, for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such Person may be liable due to its willful misconduct or gross negligence. Neither the Agent nor any officer, agent or representative thereof shall be personally liable for any action taken by any such Person in accordance with any notice given by the Required Banks pursuant to the terms of this Agreement even if, at the time such action is taken by any such Person, the Required Banks are not entitled to give such notice, except where the account officer of the Agent active upon the Borrowers' accounts has actual knowledge that such Required Banks are not entitled to give such notice. SECTION 2.12. Perfection of Security Interest. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Agent's security interest in the Collateral for the benefit of itself, the -19- Administrative Agent, the Banks and the CP Holders. The Collateral and the Agent's rights with respect to the Collateral (to the extent such Collateral is included in the MFC Borrowing Base or the MBC Borrowing Base) are not subject to any setoff, claims, withholdings or other defenses. One or both of the Borrowers is the owner of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. ARTICLE III PRIORITY OF SECURITY INTERESTS SECTION 3.1. Priority of Security Interests. Each Borrower warrants and represents to the Agent, the Administrative Agent and the Banks that, as to those assets for which perfection may be accomplished by filing or by possession under the UCC, the security interests granted to the Agent hereunder constitute and will constitute at all times a valid and perfected security interest vested in the Agent in and upon the Collateral. Each Borrower further warrants and represents that the Agent's security interests in the Collateral for the benefit of itself, the Administrative Agent, the Banks and the CP Holders are not and hereinafter shall not become subordinate or junior to the security interests, liens or claims of any other Person, firm or corporation, including the United States or any department, agency or instrumentality thereof, or any state, county or local governmental agency, except for the Permitted Liens. Neither Borrower shall grant (without the prior written approval of the Required Banks) a security interest in or permit a lien or encumbrance upon any of the Collateral to anyone except the Agent for the benefit of itself, the Administrative Agent, the Banks and the CP Holders as long as any of the Obligations remain unpaid or any commitments to lend have not been terminated, except for the Permitted Liens. ARTICLE IV COLLATERAL SECTION 4.1. Representations, Covenants and Warranties. Each Borrower hereby makes the following representations, warranties and covenants to the Agent, the Administrative Agent and the Banks, which shall survive the execution and delivery of the Loan Documents and (except to the extent that any of such representations, and warranties and covenants expressly relate to earlier dates) shall be deemed repeated and confirmed as of each date on which any -20- Revolving Credit Loans or Term Loans are requested by either Borrower or made by any Bank: (a) Each Borrower is now and at all times hereafter shall be the absolute owner, free and clear of all Liens (other than Permitted Liens) except security interests and rights of the Agent, the Administrative Agent, the Banks and the CP Holders granted herein, of indefeasible title to all of the Collateral belonging to it (as opposed to the other Borrower), except for that portion of such Borrower's rights and/or obligations under any Loan in which such Borrower has granted a participation to any Person in accordance with Section 2.14 of the Loan Agreement; (b) To the best of each Borrower's knowledge, each outstanding Loan does, and each future Loan will, represent a bona fide, valid and legally enforceable indebtedness according to its terms, and each Loan, at the time of creation thereof, except with the consent of the Agent, the Administrative Agent and the Banks, will be subject to no offsets, discounts, counterclaims, contra-accounts or any other defense of any kind or character that materially adversely affects the value of the Loan; (c) With respect to each outstanding and future Loan, the Agent, the Administrative Agent and the Banks may rely on all statements or representations made by either Borrower on or with respect to such Loans delivered hereunder or under the Loan Agreement, and, unless otherwise indicated in writing by the Borrowers, each outstanding Loan is, and each future Loan will be, genuine and in all respects what it purports to be, and, to each Borrower's knowledge, there are no, and, at the time of creation of each Loan there will not be any, to either Borrower's knowledge, facts, events or occurrences that would in any way materially impair the validity or enforcement thereof; (d) All of the outstanding Loans have been, and all future Loans will be, created, and are (or in the case of future Loans, will be) in compliance in all material respects with, and the form and content of each document related to all outstanding and future Loans, the security related thereto, and the transactions from which they arose comply (or, in the case of future Loans, will comply) in all material respects with, any and all applicable laws, ordinances, rules and regulations, Federal, state and/or local, with respect to the extension of credit and charging of interest, including, without limitation, as applicable, the Federal Consumer Credit Protection Act, the Federal -21- Fair Credit Reporting Act, the Federal Trade Commission Act, the Federal Equal Credit Opportunity Act and all Federal, state and local laws related to licensing, usury, truth in lending, real estate settlement procedures, consumer protection, equal credit opportunity, fair debt collection, unfair and deceptive trade practices, rescission rights and disclosures, and with all rules and regulations thereunder, all as amended, and any disclosures required with respect to any Loan the failure to make which would have a Material Adverse Effect on either Borrower were and will continue to be made properly and in a timely manner; (e) The original amount and unpaid balance of each Loan shown on each Borrower's books and records and on any statement or schedule delivered to the Agent are and will be true and correct, and the unpaid balance is and will be the amount actually owing to such Borrower; (f) If requested by the Required Banks at any time or from time to time, each Borrower shall cause a Lien search against each Person to whom a Loan has been made, satisfactory to the Agent, to be performed and delivered directly to the Agent, which Lien search shall indicate the absence of any Liens against such Person or the property of the Person on which such Borrower has a Lien, other than Liens in favor of such Borrower which have been assigned to the Agent, the Administrative Agent or the Banks or Liens in favor of the Agent, the Administrative Agent or the Banks and other than Permitted Liens; (g) Neither Borrower has extended or will extend any credit of any kind or in any manner to any Person in connection with the transactions from which the Loans arose or will arise other than as such Borrower has indicated on and has had evidenced by, or will indicate or have evidenced by, in the case of future Loans, such Borrower's files related to the Loans; (h) Each security agreement, UCC filing, mortgage, title retention instrument, and other document and instrument, if any, which is security for the Loans contains, or will contain, in the case of future Loans, a correct and sufficient description of the Underlying Collateral covered thereby and each lien, mortgage or security interest which secures any outstanding Loan is, or any future Loan will be, valid; -22- (i) To the best knowledge of each Borrower, except as disclosed to the Agent, any and all policies of insurance related to the property securing any obligation of a Person to whom such Borrower has made a Loan, or any guarantor of such Loan, in connection with any Loan and any credit life insurance, credit disability insurance, or credit unemployment insurance are in full force and effect in accordance with the terms of all agreements between such Borrower and such Person or guarantor; (j) Neither Borrower has any knowledge of any fact which would impair in any material respect the value or validity of any Loan except as disclosed to the Agent; and (k) The transactions contemplated herein, including the granting of security interests herein and the enforcement by the Agent of its rights hereunder if a Default or Event of Default occurs, do not and will not affect the validity of the pledges of the Underlying Collateral and the Loans secured by the Underlying Collateral are and will still be valid against the Obligors of such Loans. SECTION 4.2. Collections. (a) Subject to the provisions of this Agreement and the other Loan Documents, each Borrower shall service, manage, enforce, and make Collections in connection with the Loans. "Collections," as used herein, means the collection of payment of principal and interest on the Loans, other payments made with respect to Loans, the cash proceeds realized from the enforcement of Loans and any security therefor, or the collateral, proceeds of credit or group life insurance, and all proceeds of insurance of any real or personal property which secures any of the Loans. (b) With respect to each of the Collections, each Borrower shall collect all Collections, receive all payments thereon and immediately deposit the proceeds thereof into a Depository Account. The Borrower in whose name such account is kept may withdraw funds from such account to use in the ordinary course of its business. SECTION 4.3. Rights of Agent Regarding Collateral. Upon the occurrence and during the continuance of an Event of Default, the Agent shall have the right to, and upon the direction of the Required Banks shall, at any time and from time to time thereafter, without notice to either Borrower, (a) notify, and upon the direction of the Agent to the Borrowers, each Borrower will notify, (i) all Persons to whom either Borrower has made Loans that the Agent has a security interest in such Collateral and direct all such Persons to make -23- payments to the Agent or its designee, and to such banks and accounts (which may be the Collateral Account) as designated by the Agent or such designee, of all sums owing by them to either Borrower, and (ii) all banks in which either Borrower has any Depository Accounts of the occurrence of an Event of Default and direct all such Banks to transfer into the Collateral Account, or to such other account at such bank as shall be designated by the Agent or its designee, all amounts on deposit from time to time in the related Depository Accounts; (b) to settle, compromise, sell, assign, extend or renew any debt owing by any Persons to whom either Borrower has made a Loan; (c) to sell or assign such Collateral upon such terms as the Agent may deem advisable; and (d) to discharge and release in the name of either Borrower and the Agent any such debt. Any and all disbursements for costs and expenses incurred or paid by the Agent with respect to the enforcement, collection or protection of its interest in the Collateral, or against either Borrower, whether by suit or otherwise, notification of Persons to whom either Borrower has made Loans, including reasonable attorneys' fees actually incurred, court costs and similar expenses, if any, shall become a part of the Obligations secured by the Collateral, payable on demand. ARTICLE V DEFAULT SECTION 5.1. Events of Default. Any one of the following events will constitute an "Event of Default": (a) failure of either Borrower to observe, perform or comply with any of the terms, provisions, conditions or covenants, or, in any material respect, any warranties or representations, contained in this Agreement other than in Section 4.1 hereof; (b) failure of either Borrower to observe, perform or comply with any of the terms, provisions, conditions, covenants, warranties or representations contained in Section 4.1 of this Agreement, which failure shall not have been remedied within 30 days after such failure shall first have become known to any officer of either Borrower; (c) the occurrence of an "Event of Default" as defined in the Loan Agreement; or (d) any of the Loan Documents shall cease to be in full force and effect. -24- SECTION 5.2. Remedies. (a) Upon the occurrence of any Event of Default, the Agent shall have, in addition to any other rights and remedies contained in this Agreement or in any of the Other Agreements, all the rights and remedies of a secured party under the UCC, and all other rights and remedies provided by law, all of which shall be cumulative to the extent permitted by law. Upon the occurrence of any Event of Default and at any time thereafter if such or any other default shall then be continuing, the Agent shall have the right without further notice to either Borrower to, and upon the direction of the Required Banks shall, appropriate, take possession and control of, set off and apply to the payment of any or all of the Obligations, any or all Collateral, subject to and in the manner set forth in Section 5.3 hereof to enforce payment in connection with the Loans or any other Collateral to settle, compromise or release, in whole or in part, any amounts owing on the Collateral, to prosecute any action, suit or proceeding with respect to the Collateral, to extend the time of payment of any and all Collateral, to make allowances and adjustment with respect thereto, to issue credits in the name of either Borrower or the Agent, to sell, assign and deliver the Collateral (or any part thereof), at public or private sale, at broker's board, for cash, upon credit or otherwise, at the Agent's sole option and discretion and the Agent, the Administrative Agent and any Bank or other Person interested in the Obligations may bid or become purchaser at any such sale, if public, free from any right of redemption, which is hereby expressly waived. Each Borrower agrees that the giving of ten days notice by the Agent, sent by certified mail, return receipt requested postage prepaid, to the address set forth below, designating the place and time of any public sale or of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be deemed to be reasonable notice thereof and each Borrower waives any other notice with respect thereto. The net cash proceeds resulting from the exercise of any of the foregoing rights or remedies shall be applied by the Agent in accordance with Section 5.3 hereof, and each Borrower shall remain liable to the Agent, the Administrative Agent, the Banks and the CP Holders for any deficiency, together with interest thereon at the rate provided in the Loan Agreement with respect to the Obligations and in the Commercial Paper with respect to the CP Debt and the cost and expenses of collection of such deficiency, including (to the extent permitted by law), without limitation, reasonable attorneys' fees actually incurred, expenses and disbursements. (b) If at any time or times hereafter the Agent employs counsel for advice with respect to this Agreement or any Other -25- Agreements, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any Other Agreements (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or any Other Agreements), or relating to any Collateral; or to protect, take possession of, or liquidate any Collateral, or to attempt to enforce any security interest or lien in any Collateral, or to represent the Agent in any pending or threatened litigation with respect to the affairs of either Borrower in any way relating to any of the Collateral or to the Obligations or to enforce any rights of the Agent, the Administrative Agent, any Bank, the Paying Agent or the CP Holders or liabilities of either Borrower, any Person to whom either Borrower has made a Loan, or any Person which may be obligated to the Agent or such Bank by virtue of this Agreement or any Other Agreement, instrument or document now or hereafter delivered to the Agent, the Administrative Agent, any Bank, the Paying Agent or any CP Holder by or for the benefit of either Borrower, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations secured by the Collateral. (c) Upon the occurrence of an Event of Default, the Agent shall have the right to require each Borrower to assemble all Collateral not already in the Agent's possession and make it reasonably available to the Agent at one or more places to be designated by the Agent which are reasonably convenient to both parties, and to take possession of such Collateral and to enter and remain upon the various premises of each Borrower without cost or charge to the Agent, and to use the same, together with materials, supplies, books and records of each Borrower for the purpose of collecting such Collateral or liquidating such Collateral (plus any Collateral already in the Agent's possession), whether by foreclosure, auction or otherwise. In addition, the Agent may remove from such premises such Collateral, and any records with respect thereto, to the premises of the Agent or any Custodian for such time as the Agent may desire, in order to effectively collect or liquidate such Collateral. (d) Upon the occurrence of an Event of Default, the Agent shall have the right to, and upon the direction of the Required Banks shall, require each Borrower to establish and maintain a lockbox service (which may be the Collateral Account) with such bank or banks as may be acceptable to the Agent. In the event either Borrower (or any of its Affiliates, subsidiaries, stockholders, directors, officers, -26- employees or agents) shall receive any monies, checks, notes, drafts or any other items of payment relating to, or proceeds of, the Loans, such Borrower agrees with the Agent as follows: (i) such Borrower shall hold all such items of payment in trust for the Agent, the Administrative Agent, the Banks and the CP Holders and as the property of Agent, the Administrative Agent, the Banks and the CP Holders, separate from the funds of such Borrower, and such Borrower shall immediately forward, or cause to be forwarded, the same to the lockbox service for application to the Revolving Credit Loans or Term Loans; (ii) such Borrower shall forward to the Agent, on a daily basis, deposit slips related to all such items of payment received by such Borrower and, if requested by the Agent, copies of such checks and other items, together with a statement showing the application of that portion of such items of payment relating to payment in connection with the Loans and a collection report with regard thereto in form and substance satisfactory to the Agent; (iii) All such items of payment shall be the sole and exclusive property of the Agent for the benefit of the Banks, the Administrative Agent and the CP Holders immediately upon the earlier of receipt of such items by the Agent or the receipt of such items by such Borrower; (iv) The lockbox service shall be subject to the sole control of the Agent and the Agent shall have the right at all times in its sole discretion to apply all or part of such items of payment to the payment in accordance with Section 5.3 hereof. The Agent may, and upon the direction of the Required Banks shall, release to such Borrower all or any part of such items of payment; and (v) The Agent assumes no responsibility for such lockbox arrangement, including, without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any bank thereunder. (e) Each of the Banks and CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acknowledges and -27- agrees that (i) it shall only have recourse to the Collateral through the Agent and that it shall have no independent recourse to the Collateral and (ii) the Agent shall have no obligation to take any action, or refrain from taking any action, except upon instructions from the Required Banks in accordance with the provisions hereunder. To the extent that the Agent, acting as Agent hereunder, exercises any rights or omits to exercise any rights under this Agreement at any time for the benefit of the Administrative Agent or the Banks (whether requested by the Required Banks thereunder or otherwise) with respect to any of the Collateral, such exercise or omission shall likewise be deemed to be authorized by the CP Holders and the Paying Agent for performance (or omission) by the Agent hereunder for the benefit of the CP Holders. In furtherance of the foregoing, the Agent may exercise (or omit to exercise) all rights requested by the Required Banks under this Agreement without first giving notice or consulting with any CP Holder or the Paying Agent. SECTION 5.3. Application of Proceeds. (a) The proceeds of any lockbox collection or sale of, or other realization upon, all or any part of the Collateral shall be applied by the Agent in the following order of priority: first, to payment of the expenses of such lockbox or sale or other realization, including reasonable compensation to the Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations and the CP Debt (to the extent it constitutes Permitted Debt), pro rata in accordance with the respective outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations and all CP Debt, to payment to Borrower or its successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Agent may make distributions hereunder in cash or in kind, but such distributions to the Banks shall in all events be made pro rata on the basis of the respective Exposure Percentages of the Obligations. Distributions made under clause "second" above may -28- also be made in a combination of cash or property, but distributions to the Banks shall be made pro rata on the basis of the respective Exposure Percentages of the Obligations. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations, shall continue to be Obligations for which each Borrower remains liable. (b) In making the determinations and allocations required by this Section 5.3 or otherwise by this Agreement, the Agent may rely upon information supplied by the Banks as to the amounts of the Obligations held by them and supplied by the CP Holders or the Paying Agent as to the amounts owed on the CP Debt, or as to other matters (with each such matter being conclusively deemed to be proved or established by a certificate executed by an officer of such Person), and the Agent shall have no liability to any of the Banks, the Paying Agent or any of the CP Holders for actions taken in reliance upon such information. All distributions made by the Agent pursuant to this Section 5.3 shall be final, and the Agent shall have no duty to inquire as to the application by the Banks, the Paying Agent or the CP Holders of any amount distributed to them. However, if at any time the Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Agent may in its discretion, but shall not, subject to Section 5.3(d), be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Banks and the CP Holders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Agent hereunder or under any Security Document, the Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. (c) If any Bank, the Paying Agent or any CP Holder (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acquires custody, control or possession of any Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Bank, the Paying Agent or such CP Holder shall promptly cause such Collateral or proceeds to be delivered to or put in the custody, -29- possession or control of the Agent or, if the Agent shall so designate, an agent of the Agent (which agent may be a branch or affiliate of the Agent, the Administrative Agent or any Bank) in the same form of payment received, with appropriate endorsements, in the country in which such Collateral is held for distribution in accordance with the provisions of this Section 5.3. Until such time as the provisions of the immediately preceding sentence have been complied with, such Bank, the Paying Agent or such CP Holder shall be deemed to hold such Collateral and proceeds in trust for the Agent. (d) If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations and the CP Debt, the Agent shall nonetheless apply the proceeds for the benefit of the Banks and the CP Holders in the proportion and subject to the priorities of Section 5.3(a) hereof. To the extent that the Agent distributes proceeds collected with respect to one Obligation to or on behalf of the holder of another Obligation or a Bank or the Administrative Agent obtains the equivalent of proceeds through the exercise of any right of setoff, counterclaim, cross action, voluntary payment by the Borrowers, enforcement of claim, proceedings in bankruptcy, reorganization, liquidation or otherwise, the holder of the former Obligation shall be deemed to have purchased a participation in the latter Obligation or shall be subrogated to the rights of the holder thereof to receive any subsequent payments and distributions made with respect to the portion thereof paid or to be paid by the application of such proceeds; provided that if all or any part of such excess payment is thereafter recovered, such distribution and arrangements shall be rescinded and the amount restored to the extent of such recovery, without interest. If any Bank or CP Holder exercises any right of setoff, banker's lien or similar right with respect to any Collateral for payment of any Obligations or any Commercial Paper, each of the Banks and CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) agrees with each other Bank and CP Holder that if an amount to be set off is to be applied to Indebtedness of the Borrowers to such Bank or CP Holder, other than Indebtedness evidenced by the Notes or Commercial Paper held by such Bank or CP Holder, as applicable, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes or Commercial Paper held by such Bank or CP Holder. -30- SECTION 5.4. Release of Collateral; Subordination of Lien. The Agent for the benefit of itself, the Administrative Agent, the Banks and the CP Holders is hereby authorized, upon receipt of instructions from the Required Banks or such other percentage of the Banks as may be required by the Loan Agreement, to release any Collateral and to provide such releases and termination statements with respect to any Collateral in connection with any sale, exchange or other disposition thereof so long as (i) the Agent obtains a perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Banks, the Agent may release any Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Loan Agreement, the Agent shall, on the written instructions of the Required Banks, subordinate by written instrument the Lien on all or any portion of the Collateral to any other lender extending to the Borrowers indebtedness permitted by the terms of the Loan Agreement. SECTION 5.5. Waiver by Agent or Banks. The Agent's or any Bank's failure at any time or times hereafter to require strict performance by either Borrower of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Other Agreements shall not waive, affect or diminish any right of the Agent, the Administrative Agent or any Bank at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement or any of the Other Agreements, and any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any Other Agreement shall be deemed to have been waived by any act or knowledge of the Agent, the Administrative Agent or any Bank, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Agent, the Administrative Agent or such Bank and directed to the Borrowers specifying such waiver. ARTICLE VI MISCELLANEOUS -31- SECTION 6.1. Continuing Lien. The Collateral described in this Agreement secures all present and future Obligations of each Borrower. There is included within the term "Collateral;" as used herein, all other property and all interests therein of any kind hereafter acquired by each Borrower, meeting or falling within the general description of the Collateral set forth herein and also the proceeds and products thereof. SECTION 6.2. Waivers by Borrowers. (a) Each Borrower irrevocably waives the right to direct the application of any and all payments which may be received by the Agent during the continuance of an Event of Default, and each Borrower does hereby irrevocably agree that, during the continuance of an Event of Default, the Agent shall have the continuing exclusive right to apply and reapply any and all such payments received in such manner as the Agent may deem advisable, notwithstanding any entry upon any of its books and records. (b) Each Borrower also waives any and all notices of demand, notice or protest that such Borrower might be entitled to receive with respect to this Agreement by virtue of any applicable statute or law, and waives demand, protest, notice of protest, notice of default, release, compromise, settlement, extension or renewal of all commercial paper, accounts, contract rights, instruments, guaranties, and otherwise, at any time held by the Agent, the Administrative Agent or the Banks on which either Borrower may in any way be liable, notice of nonpayment at maturity of any and all Loans, and notice of any action taken by the Agent, the Administrative Agent or the Banks unless expressly required by this Agreement. SECTION 6.3. Parties. This Agreement and any of the Other Agreements, instruments and documents executed and delivered pursuant hereto or to consummate the transactions contemplated hereunder shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. SECTION 6.4. CP Holders. By accepting the security granted by, and the other benefits of, this Agreement, each CP Holder is hereby deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to and agreed to be bound by the terms of this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) -32- agreed to indemnify the Agent, in its capacity as collateral agent, pursuant to the terms of this Agreement, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. SECTION 6.5. GOVERNING LAW. THIS AGREEMENT AND ANY OTHER AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE TO THE EXERCISE OF REMEDIES OR THE PERFECTION OF SECURITY INTERESTS UNDER THE UCC. SECTION 6.6. WAIVER OF JURY TRIAL AND SETOFF. EACH OF THE AGENT AND EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER AGREEMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER AGREEMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE, HOWSOEVER ARISING, BETWEEN OR AMONG EITHER BORROWER AND ANY OF THE BANKS, THE ADMINISTRATIVE AGENT, THE CP HOLDERS, THE PAYING AGENT OR THE AGENT, BETWEEN OR AMONG ANY BANKS, THE ADMINISTRATIVE AGENT, THE PAYING AGENT AND ANY CP HOLDERS AND BETWEEN OR AMONG THE AGENT, THE ADMINISTRATIVE AGENT AND ANY BANKS AND ANY CP HOLDERS AND EACH BORROWER HEREBY WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION). SECTION 6.7. Jurisdiction; Service of Process. Each Borrower hereby irrevocably consents to the jurisdiction of the courts of the State of New York, County of New York and of any Federal Court located in the Southern District of New York, and agrees that venue in each of such Courts is proper in connection with any action or proceeding arising out of or relating to this Agreement, the Other -33- Agreements, or any document or instrument delivered pursuant to this Agreement or the Other Agreements. Nothing herein shall affect the right of any Bank or the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against either Borrower in any other jurisdiction. SECTION 6.8. Survival of Representations and Warranties. All representations and warranties of each Borrower and all terms, provisions, conditions and agreements to be performed by each Borrower contained in this Agreement and in the other Loan Documents shall be true and correct, and satisfied, where applicable, at the time of the execution of this Agreement, and shall survive the execution and delivery of this Agreement and all Other Agreements. SECTION 6.9. Obligations Secured by Property Other Than Collateral. To the extent that the Obligations are now or hereafter secured by property other than the Collateral, or by a guarantee, endorsement or property of any other Person, then the Agent shall have the right to, and upon the direction of the Required Banks shall, proceed against such other property, guarantee or endorsement upon the occurrence and during the continuance of an Event of Default, and the Agent shall have the right, with the consent of the Required Banks, to determine which rights, security, liens, security interests or remedies the Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Agent's rights or any of the Banks' rights under the Obligations, this Agreement or any Other Agreements. SECTION 6.10. Resignation of Agent; Successor Agent. (a) The Agent may at any time resign by giving ten (10) days prior written notice thereof to each Bank, the Paying Agent and the Borrowers, provided that no resignation shall be effective until a successor for the Agent is appointed. Upon such resignation, the Required Banks (or, if the Obligations have been paid in full and the Revolving Credit Commitments have terminated, the Paying Agent) shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Required Banks or the Paying Agent, as applicable, appoint a successor Agent, which shall be a bank or trust company incorporated -34- and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. (b) In the event a successor agent is appointed pursuant to the provisions of Section 11.4 of the Loan Agreement, such successor agent shall succeed to the rights, powers and duties of the Agent hereunder, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to the Loan Agreement or any holders of the Revolving Credit Notes or Term Notes. Such former Agent agrees to take such actions as are reasonably necessary to effectuate the transfer of its rights, powers and duties to such successor agent. SECTION 6.11. Amendment and Waiver. No modification or amendment of this Agreement shall be effective unless the same shall be in writing and signed by the Agent (acting with the requisite consent of the Banks as required by the Loan Agreement) and the Borrowers; provided, however, (i) no amendment or waiver shall adversely affect any of the Agent's rights, immunities or rights to indemnification hereunder or under any of the Loan Documents or expand its duties or reduce any amount payable to the Agent hereunder without the written consent of the Agent; and (ii) any provisions of this Agreement affecting the rights and obligations of the Agent hereunder may not be amended without the written consent of the Agent. No waiver of any provision of this Agreement and no consent to any departure by any party hereto from the provisions hereof shall be effective unless such waiver or consent shall be set forth in a written instrument executed by the party against which it is sought to be enforced, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in the same, similar or other circumstances. SECTION 6.12. Termination. This Agreement and the security interest in the Collateral created hereby will terminate when the -35- Obligations and the CP Debt have been irrevocably paid and finally discharged in full in accordance with the terms of the Loan Agreement or the documents evidencing the CP Debt, as the case may be, and the Banks are no longer obligated to make Revolving Credit Loans or Term Loans under the Loan Agreement, and the dealer of the Commercial Paper is no longer required to sell Commercial Paper. No waiver by the Agent, the Administrative Agent or any Bank or any other holder of the Revolving Credit Notes or the Term Notes or any CP Holder or the Paying Agent of any default will be effective unless in writing or operate as a waiver of any other default or of the same default on a future occasion. In the event of a sale or assignment by any Bank (including the Administrative Agent in its capacity as a Bank but not as Administrative Agent) of a Revolving Credit Note(s) or a Term Note(s) or any portion thereof, such Bank may assign or transfer its rights and interest under this Agreement in whole or in part to the purchaser or purchasers of the Revolving Credit Note(s) or Term Note(s), whereupon such purchaser or purchasers will become vested with all of the powers, rights and responsibilities of such Bank hereunder, and such Bank will thereafter be forever released and fully discharged from any liability or responsibility hereunder with respect to the rights, interest and responsibilities so assigned, other than liabilities arising out of actions taken prior to the date of assignment. Neither Borrower may assign this Agreement without the express written consent of the Administrative Agent and the Banks. SECTION 6.13. Notices. All notices, requests, consents, demands or other communications provided for herein shall be given in accordance with the terms of Section 10.4 of the Loan Agreement. SECTION 6.14. Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. SECTION 6.15. Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be an original and both of which shall together constitute one and the same agreement. -36- SECTION 6.16. 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"). 6.16.1. Attachment. In applying the law of any jurisdiction in which Revised Article 9 is in effect, the Collateral is all assets of the Borrowers, 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 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 and hereafter acquired. If either 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, such Borrower shall immediately notify the Agent in a writing signed by such Borrower of the brief details thereof and grant to the Agent for the benefit of itself, the Administrative Agent, 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. 6.16.2. 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 each 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 -37- amendment, including whether either Borrower is an organization, the type of organization and any organization identification number issued to the such Borrower. Each Borrower agrees to furnish any such information to the Agent promptly upon request. Any such financing statements, continuation statements or amendments may be signed by the Agent on behalf of each 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. 6.16.3. Other Perfection, etc. Each 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 the Adminstrative Agent, 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. ss.ss. 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 Administrative Agent, 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. 6.16.4 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 ss. 9-105(1)(b) Rev.ss.9-102(a)(11) --------------------------- ----------------------- -------------------- 1.1 ss. 9-105(1)(i) Rev.ss.9-102(a)(47) --------------------------- ----------------------- -------------------- 1.1 ss. 9-106 Rev. ss.9-102(a)(2) (for the definition of "accounts") or Rev. ss. -38- --------------------------- ----------------------- -------------------- 9-102(a)(46) (for the definition of general intangibles) --------------------------- ----------------------- -------------------- 1.1 ss. 9-109(2) Rev.ss.9-102(a)(33) --------------------------- ----------------------- -------------------- 1.1 ss. 9-109(4) Rev.ss.9-102(a)(48) --------------------------- ----------------------- -------------------- 1.1 ss. 9-115 Rev.ss.9-102(a)(49) --------------------------- ----------------------- -------------------- 1.1 ss. 9-306(1) Rev.ss.9-102(a)(64) --------------------------- ----------------------- -------------------- 6.16.5 Savings Clause. Nothing contained in this Section 6.16 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, the Administrative 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 6.17. Transitional Arrangements. This Agreement shall supersede the MFC Security Agreement and the MBC Security Agreement in their entirety, provided that each Borrower hereby (a) confirms its prior grant to the Administrative Agent in favor of the Banks of a security interest in the "Collateral" (as defined in the MFC Security Agreement and the MBC Security Agreement, respectively), and (b) grants a continuing lien on such "Collateral" (as defined in the MFC Security Agreement and the MBC Security Agreement, respectively). -39- IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written by the duly authorized officers of the parties hereto. MEDALLION FINANCIAL CORP. By:______________________________________ Name: Title: By:______________________________________ Name: Title: MEDALLION BUSINESS CREDIT, LLC By:______________________________________ Name: Title: By:______________________________________ Name: Title: FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association) as Agent By:______________________________________ Name: Title: -40- EXHIBIT G BORROWING BASE CERTIFICATE 200__ To: Fleet National Bank (f/k/a Fleet Bank, National Association), as Agent (as defined below ) under a Second Amended and Restated Loan Agreement (the "Loan Agreement"), dated as of September 22, 2000, among Medallion Financial Corporation, a Delaware corporation ("MFC"), Medallion Business Credit, LLC, a Delaware limited liability company ("MFC"), the banks that from time to time are signatories thereto (including Assignees (as hereinafter defined), collectively, the "Banks" and individually, a "Bank"), and Fleet National Bank (f/k/a Fleet Bank, National Association), as a Bank ("Fleet"), as Swing Line Lender (the "Swing Line Lender"), and as Arranger and as Agent for the Banks (including any successor, the "Agent"). Terms used in this certificate shall have the same meaning as ascribed thereto in the Loan Agreement. The undersigned officers of the Borrowers certify that the information furnished herein as of ___________, 200__ as to the MFC Borrowing Base and the MBC Borrowing Base and Eligible Loans of MFC and MBC is true and correct and that as of the date hereof no Event of Default, or event which after notice or lapse of time or both would be an Event of Default exists under the Loan Agreement. I. MFC Borrowing Base A. MFC's Eligible Medallion Loans*/ $____________ - B. Loans in Line A not collectible or 60+ days past due $____________ C. Line A minus Line B $____________ D. 83.3% of Line C $____________ E. MFC's Eligible Commercial Loans*/ $____________ - (excluding Section 7a Loans) F. Loans in Line F not collectible or 60+ days past due $____________ G. Line E minus Line F $____________ H. 75% of Line G $____________ I. MFC's Eligible Section 7a Loans*/ $____________ - J. Loans in Line I not collectible or 60+ days past due $____________ K. Line I minus Line J $____________ L. 75% of Line K $____________ - ------------------------- */ without excluding Loans not collectible or 60+ days - past due M. Line D plus Line H plus Line L $____________ N. MFC's Cash and Short-Term Investments $____________ O. MFC BORROWING BASE - Line M plus Line N $____________ P. Amount outstanding to MFC $____________ Q. Line O minus Line P $____________ (if positive, amount available to MFC; if negative amount due) II. MBC Borrowing Base A. MBC's Eligible Medallion Loans*/ $____________ - B. Loans in Line A not collectible or 60+ days past due $____________ C. Line A minus Line B $____________ D. 83.3% of Line C $____________ E. MBC's Eligible Commercial Loans*/ $____________ - F. Loans in Line F not collectible or 60+ days past due $____________ G. Line E minus Line F $____________ H. 80% of Line G $____________ I. Line D plus Line H $____________ J. MBC's Cash and Short-Term Investments $____________ K. MBC BORROWING BASE - Line I plus Line J $____________ L. Amount outstanding to MBC $____________ M. Line K minus Line L $____________ (if positive, amount available to MBC; if negative amount due) III. Total Borrowing Base A. Line I.O. plus Line II.K. $____________ B. Total amount of outstanding Revolving Credit Loans, $____________ Term Loans and Swing Line Loans C. Line A minus Line B $____________ (if positive, amount available (subject to I and II); if negative, amount due) IV. Senior Debt Coverage A. Indebtedness of MFC and MBC with respect to Commercial paper $____________ B. Line I.P. plus Line II.L. $____________ C. Line A plus Line B $____________ D. Line III.A. minus Line C $____________ (if positive, amount available (subject to I, II and III); if negative, amount due) - ------------------------- */ (if positive, amount available to NEC; if negative - amount due) -2- Very truly yours, MEDALLION FINANCIAL CORP. By: /s/ ALVIN MURSTEIN ------------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ DANIEL F. BAKER ------------------------------------- Name: Daniel F. Baker Title: Treasurer and Chief Financial Officer MEDALLION BUSINESS CREDIT, LLC By: /s/ ALVIN MURSTEIN ------------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ DANIEL F. BAKER ------------------------------------- Name: Daniel F. Baker Title: Chief Financial Officer EXHIBIT I ASSIGNMENT AND ACCEPTANCE ------------------------- Dated______________ Reference is hereby made to the Second Amended and Restated Loan Agreement dated as of September 22, 2000 (the "Loan Agreement") by and among MEDALLION FINANCIAL CORP., a Delaware corporation ("MFC"), MEDALLION BUSINESS CREDIT, LLC, a Delaware limited liability company ("MBC"), the banks that from time to time are signatories thereto (including Assignees (as hereinafter defined), collectively, the "Banks" and individually, a "Bank"), and FLEET NATIONAL BANK, as swing line lender (the "Swing Line Lender"), as Arranger and as Agent for the Banks (including any successor, the "Agent"). Capitalized terms used herein that are defined in the Loan Agreement that are not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement. __________________________ a ______________ (the "Assignor") and ______________________________, a ______________, (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, a __% interest in and to all of the Assignor's rights and obligations under the Loan Agreement as of the Effective Date (as defined below) (including, without limitation, such percentage interest in the Assignor's Revolving Credit Commitment and Term Loan Commitment as in effect on the Effective Date, and the Revolving Credit Loans and/or Term Loans owing to the Assignor on the Effective Date, and the Note(s) held by the Assignor). 2. The Assignor: (i) represents and warrants that as of the date hereof its Revolving Credit and Term Loan Commitment (without giving effect to assignments thereof that have not yet become effective) is $___________ and the aggregate outstanding principal amount of Revolving Credit Loans and Term Loans owing to it (without giving effect to assignments thereof that have not yet become effective) is $_____________ (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder, and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any other instrument or document furnished pursuant thereto; and (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Person or the performance or observance by the Borrower or any other Person of any of its obligations under the Loan Agreement or any other instrument or document furnished pursuant thereto; and (v) attaches the Notes referred to in paragraph 1 above and requests that the Agent exchange such Notes for new Notes as follows: [a Revolving Credit Note dated the Effective Date (as such term is defined below) in the principal amount of $_______________ payable to the order of the Assignee, a Revolving Credit Note dated the Effective Date in the principal amount of $________________ payable to the order of the Assignor, a Term Note dated the Effective Date in the principal amount of $_________________ payable to the order of the Assignee and a Term Note dated the Effective Date in the principal amount of $________________ payable to the order of the Assignor.] 3. The Assignee: (i) confirms that it has received a copy of the Loan Agreement, together with copies of such financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement; (iii) confirms that it is an Assignee permitted by the Loan Agreement; (iv) appoints and authorizes the Agent to take such action as its agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Bank; and (vi) specifies as its addresses for Prime Rate Loans and LIBOR Rate Loans (and address for notices) the offices set forth beneath its name on the signature pages hereof. 4. The effective date for this Assignment shall be ________________ (the "Effective Date"). Following the execution of this Assignment, it will be delivered to the Agent for acceptance by the Agent. 5. Upon such acceptance, as of the Effective Date: (i) the Assignee shall be a party to the Loan Agreement and, to the extent -1- provided in this Assignment, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Loan Agreement. 6. Upon such acceptance, from and after the Effective Date, the Agent shall make all payments under the Loan Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Loan Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment shall be governed by, and construed in accordance with, the laws of the State of New York. [NAME OF ASSIGNOR] By_______________________________________ Name: Title: [NAME OF ASSIGNEE] By_______________________________________ Name: Title: Lending Office for Prime Rate Loans: Lending Office for LIBOR Rate Loans: Attention: Address for Notices: Attention: Telephone No.: Telex No.: Accepted this _____ day of ___________________, 199_ FLEET NATIONAL BANK, as Agent By__________________________________________ Title EX-10.35 7 dex1035.txt AMENDMENT NO.3 TO 2ND AMND & RESTATED LOAN AGMT Exhibit 10.35 AMENDMENT NO. 3 TO SECOND AMENDED AND ------------------------------------- RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT --------------------------------------------------- AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT dated as of December 31, 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; WHEREAS, certain Events of Default occurred as of September 30, 2001, and as a result of such Events of Default, no Term Loans were made on the Term Out Date (November 5, 2001) and all outstanding Revolving Credit Loans and Swing Line Loans matured and became immediately due and payable; WHEREAS, the Borrowers did not repay the outstanding Revolving Credit Loans and Swing Line Loans on or before the Term Out Date, and have not repaid such Bank Loans as of the date hereof; 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 and certain other Loan Documents, inter alia, to reinstate the Aggregate Revolving Credit ----- ---- Commitment for a limited period, delete the Term Out option and the Renewal Period, and waive certain Events of Default; 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 and the Security Agreement as follows: 1. Omnibus Amendment to the Loan Documents. --------------------------------------- (a) It is the intention of each of the parties that the Revolving Credit Commitment of each Bank to advance any amounts to the Borrowers, as well as the Aggregate Revolving Credit Commitment, be reinstated until the earliest to occur of -2- (i) March 15, 2002, (ii) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, and (iii) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to Section 35 hereof, and that all Bank Loans shall once again be due and payable upon the expiration of such reinstatement. Each of the Loan Documents is hereby further amended mutatis ------- mutandis as appropriate to reflect the reinstatement described above. -------- (b) It is the further intention of each of the parties that, in the event the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof is obtained by March 15, 2002, the Revolving Credit Commitment of each Bank to advance any amounts to the Borrowers, as well as the Aggregate Revolving Credit Commitment, be reinstated until the Termination Date (as such defined term is being amended pursuant to the terms of Sections 2(h) and 45(b) hereof), that no Renewal Term be permitted, and that no Term Loans be or be able to be extended, under the Loan Agreement, that, in the event that the definition of Termination Date is amended in accordance with Sections 2(h) and 45(b) hereof, all Revolving Credit Loans be repaid on or before May 15, 2002 and that, in the event that the definition of Termination Date is amended in accordance with Sections 2(h) and 45(b) hereof, all Swing Line Loans be repaid on or before May 10, 2002. Therefore, for each of the Loan Documents, any and all references to "Term-Out Date" shall, upon the waiver and the consents of the Senior Note Holders pursuant to Section 45(b)(x) hereof, be deemed to be references to "Termination Date", as such definition is being amended by this Amendment, and any and all references to "Term Loans" and the "Renewal Period" shall be deemed to be deleted. Each of the Loan Documents is hereby further amended mutatis mutandis as appropriate to reflect the changed ------- -------- references to "Termination Date" and the deletion of the Term Loans and Renewal Period. 2. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by: (a) deleting the period (".") at the end of the definition of "Adjusted Net Investment Income" and substituting in lieu thereof the following text: "; provided further, that with respect to the covenants contained in -------- Section 7.4(a) and 7.4(b) hereof, earnings attributable to MFC's equity interest in the Guarantor shall be excluded." (b) inserting the words "first priority" immediately prior to the words "perfected security interest" in the definitions of "Eligible Equipment" and "Medallion Rights"; (c) inserting the words "a first priority perfected security interest in" immediately prior to the words "Medallion Rights" in subsection (a) of the definition of "Eligible Medallion Loan"; (d) inserting the words "first priority" immediately prior to the words "mortgage interest" in the definition of "Eligible Real Estate"; -3- (e) deleting the definition "Eligible Yellow Cab Loan" in its entirety; (f) deleting the definition "Yellow Cab Loan" in its entirety; (g) deleting the following definitions in their entirety, and substituting in lieu thereof the following new definitions: "Additional Commitment Amount" shall have the meaning set forth in ---------------------------- Section 12.3 hereof. "Aggregate Revolving Credit Commitment" shall mean $76,288,730, as the ------------------------------------- same may (or, in the case of Section 2.4 hereof, shall) be reduced, terminated or increased from time to time pursuant to Section 2.1(d), 2.4, 2.10, 9.1 or 12.2 hereof. "Allocated Investments" shall have the meaning set forth in Section --------------------- 8.3(e) hereof. "Applicable Facility Percentage" shall mean 0.20% per annum. ------------------------------ "Applicable LIBOR Margin" shall mean, (a) for the period commencing ----------------------- with the Amendment No. 3 Effective Date and ending February 28, 2002, for any Payment Period during such period, the respective rates indicated below for Revolving Credit Loans which are LIBOR Rate Loans opposite the applicable Pricing Level indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): Pricing Level Applicable LIBOR Margin ------------- ----------------------- (percent per annum) 1 2.50% 2 2.75% 3 3.00% and (b) for the period commencing with March 1, 2002 and thereafter, for any Payment Period during such period, the respective rates indicated below for Revolving Credit Loans which are LIBOR Rate Loans opposite the applicable Pricing Level indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): Pricing Level Applicable LIBOR Margin ------------- ----------------------- (percent per annum) -4- 1 3.00% 2 3.25% 3 3.50% Subject to and in accordance with the final sentence of this definition, the Applicable LIBOR Margin shall be effective as of the first date of each Payment Period (or in the circumstances described in the final sentence of this definition, such portion of a Payment Period). Anything in this Agreement to the contrary notwithstanding, in the event that the certificate of the Borrowers required by Section 6.1(f) hereof shall not be delivered when required by such Section 6.1(f), the Applicable LIBOR Rate Margin for a Payment Period shall be the highest rate provided for in the table above until such time as such certificate is actually delivered. "Applicable Prime Rate Margin" shall mean, (a) for the period ---------------------------- commencing with the Amendment No. 3 Effective Date and ending February 28, 2002, for any Payment Period during such period, the respective rates indicated below for Revolving Credit Loans which are Prime Rate Loans opposite the applicable Pricing Level indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): Pricing Level Applicable Prime Rate Margin ------------- ---------------------------- (percent per annum) 1 0.00% 2 0.25% 3 0.50% and (b) for the period commencing with March 1, 2002 and thereafter, for any Payment Period during such period, the respective rates indicated below for Revolving Credit Loans which are Prime Rate Loans opposite the applicable Pricing Level indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): Pricing Level Applicable Prime Rate Margin ------------- ---------------------------- (percent per annum) -5- 1 0.25% 2 0.50% 3 0.75% Subject to and in accordance with the final sentence of this definition, the Applicable Prime Rate Margin shall be effective as of the first date of each Payment Period (or in the circumstances described in the final sentence of this definition, such portion of a Payment Period). Anything in this Agreement to the contrary notwithstanding, in the event that the certificate of the Borrowers required by Section 6.1(f) hereof shall not be delivered when required by such Section 6.1(f), the Applicable Prime Rate Margin for a Payment Period shall be the highest rate provided for in the table above until such time as such certificate is actually delivered. "Borrower Obligations" shall mean, (a) with respect to MFC, (i) all of -------------------- the indebtedness, obligations and liabilities of MFC under any of the Loan Documents, and (ii) all Indebtedness of MFC to a Bank permitted to be incurred pursuant to Section 8.2(i)(ii) of this Agreement, (b) with respect to MBC, (i) all of the indebtedness, obligations and liabilities of MBC under any of the Loan Documents, and (ii) all indebtedness of MBC to a Bank permitted to be incurred pursuant to Section 8.2(i)(i)(A) of this Agreement and Section 8.2(i)(ii) of this Agreement, (c) Cash Management Items, and (d) if the context so requires, all Indebtedness, obligations and liabilities described in clauses (a) - (c) hereof; in each case described in clauses (a), (b), (c) and (d), whether direct or indirect, joint or several, fixed, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, now existing or hereafter arising, created, assumed, incurred or acquired including (i) any obligation or liability in respect of any breach of any representation or warranty, and (ii) all post-petition interest and funding losses. "Combined MFC/MBC Tangible Net Worth" shall mean the sum of ----------------------------------- Unconsolidated Tangible Net Worth of MFC plus Unconsolidated Tangible Net ---- Worth of MBC. "Dividends" shall mean for both the most recently completed fiscal --------- quarter of the applicable Borrower and the most recently completed four fiscal quarters of the applicable Borrower, the sum of all (a) paid cash dividends on Capital Stock of such Borrower plus (b) accrued and unpaid ---- cash dividends on Capital Stock of such Borrower. "EBIT" shall mean, with respect to either Borrower for any period, and ---- calculated on a Consolidated or Unconsolidated basis, as otherwise specified herein, the sum of (i) Adjusted Net Investment Income, plus (ii) ---- Interest Expense, plus (iii) Federal, state and local income taxes, if any, ---- in each case of such Borrower for such period, computed in accordance with GAAP, plus (iv) (A) for the purposes of calculating Unconsolidated EBIT of ---- -6- each of the Borrowers in Section 7.4(b) hereof for the fiscal quarter ending March 31, 2002, extraordinary non-recurring charges related to professional fees as further described on Schedule V hereto, provided that -------- - -------- the aggregate of such charges shall not exceed $525,000, and (B) for the purposes of calculating Consolidated EBIT of MFC in Section 7.4(a) hereof for the fiscal quarter ending March 31, 2002, extraordinary non-recurring charges related to professional fees as further described on Schedule V -------- - hereto, provided that the aggregate of such charges shall not exceed -------- $1,063,000. "Fee Letter" shall mean that certain letter agreement among the ---------- Borrowers and the Agent dated as of the Amendment No. 3 Effective Date. "Indebtedness" shall mean as to any Person and whether recourse is ------------ secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication, all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date Indebtedness of such Person is to be determined (other than dividends on Capital Stock declared but not paid to the extent such dividends are not Restricted Payments), and including: (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (c) every reimbursement obligation (contingent or otherwise) of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account, or upon the application, of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), (e) every obligation of such Person under any Capitalized Lease, (f) every obligation of such Person under any Synthetic Lease, (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively "receivables"), whether ----------- pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, -7- indemnities, penalties, recourse, expenses or other amounts in connection therewith, (h) every obligation of such Person (an "equity related purchase ------ ------- -------- obligation") to purchase, redeem, retire or otherwise acquire for ---------- value any shares of Capital Stock issued by such Person or any rights measured by the value of such Capital Stock, (i) every obligation of such Person under any Derivative contract, (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law, (k) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clauses (a) through (j) (the "primary obligation") of another ------- ---------- Person (the "primary obligor"), in any manner, whether directly or ------- ------- indirectly, and including, without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation, and (l) all indebtedness for borrowed money secured by any Lien upon property owned by such Person (whether or not the holder of such indebtedness has any recourse against such Person). The "amount" or "principal amount" of any Indebtedness at any time of ------ --------- ------ determination represented by (s) any letter of credit shall mean its face amount (excluding any reimbursement obligations with respect to any drawing under such a letter of credit which have been paid), (t) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (u) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (v) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than any Borrower or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (w) any -8- Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (x) any Derivative contract shall be determined by the Agent in a manner consistent with its ordinary practices for valuing derivative contracts, (y) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (z) any guaranty or other contingent liability referred to in clause (k) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Interest Expense" shall mean, for any period with respect to either ---------------- Borrower, and calculated on a Consolidated or Unconsolidated basis, as otherwise specified herein, all interest paid or scheduled to be paid (including amortization of original issue discount and non-cash interest payments or accruals and the interest component of Synthetic Leases or Capitalized Leases) by such Borrower during such period on Indebtedness of such Borrower. "Investment" in any Person shall mean any loan, advance, or extension ---------- of credit to or for the account of; any guaranty, endorsement or other direct or indirect contingent liability in connection with the obligations, Capital Stock or dividends of; any ownership, purchase or acquisition of any assets, business, Capital Stock, obligations or securities of; or any other interest in or capital contribution to; such Person, but shall not include (a) any Loan, (b) any Investment permitted by Section 8.14 hereof and (c) any Portfolio Purchase. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (d) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (b) may be deducted when paid; and (e) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. "Loan Documents" shall mean and include this Agreement, the Revolving -------------- Credit Notes, the Swing Line Notes, the Security Agreement, any Mortgage Assignment, the Borrower Financing Statements, the Borrowing Base Certificates, the Fee Letter, the Guaranty, the Collateral Agency Agreement and the Lockbox Agreements and each other document, instrument or agreement executed pursuant to, or in connection with, any Loan Document. -9- "Restricted Payment" shall mean, with respect to either Borrower, any ------------------ of the following: (i) the payment of any dividend on or any distribution in respect of any Capital Stock of such Borrower (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), (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 ---------- or the Swing Line Notes or of any Indebtedness having a maturity date subsequent to the maturity of the Revolving Credit Notes or the Swing Line Notes (other than Permitted Debt and Indebtedness permitted by Sections 8.2(c), (e) and (g) 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(c), (e) and (g) hereof, (iv) the redemption, repurchase, retirement or other acquisition of any Capital Stock of such Borrower or of any warrants, rights or options to purchase or acquire any Capital Stock of such Borrower (other than pursuant to and in accordance with stock option plans and other benefit plans for management or employees of either 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 such Borrower or of any warrants, rights or options to purchase or acquire any Capital Stock of such 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 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, any interest on, or any amounts due in respect of, any Indebtedness not permitted by Section 8.2 hereof, (viii) the payment of any principal of 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), and (ix) the setting aside of any amount or other property for the payment of Indebtedness described above, including by means of a sinking fund, defeasance or other such payment. "Tangible Net Worth" shall mean, as to any Person and calculated on a ------------------ Consolidated or Unconsolidated Basis, as otherwise specified herein, the sum of capital surplus, earned surplus, capital stock minus deferred charges, intangibles (including good will) and treasury stock, all determined in accordance with GAAP and, to the extent applicable thereto, the regulations of the SEC applicable to investment companies, provided -------- that the Unconsolidated Tangible Net Worth of any Person shall not include any GAAP Investments of such Person. -10- "Total Liabilities" shall mean and include, without duplication and ----------------- with respect to any Person as of any date of calculation, and calculated on a Consolidated or Unconsolidated basis as otherwise specified herein, (i) all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date Indebtedness of such Person is to be determined, other than dividends on Capital Stock declared but not paid to the extent such dividends are not Restricted Payments, (ii) any liability secured by any Lien on property owned or acquired by such Person, whether or not such liability shall have been assumed by such Person, (iii) guaranties, endorsements (other than for collection in the ordinary course of business), reimbursement obligations in respect of undrawn letters of credit and other contingent obligations of such Person in respect of the obligations of others, and (iv) all obligations of such Person in respect of Derivative contracts. "Unconsolidated" or "unconsolidated" shall mean, with reference to any -------------- -------------- term defined herein, that term as applied to the accounts of MFC or MBC, as applicable, without taking into account the Subsidiaries of such Person, provided that when the unconsolidated accounts of MFC are added to the -------- unconsolidated accounts of MBC, such accounts shall be added without taking into account the intercompany transactions and intercompany accounts between MFC and MBC. "Voting Interests" shall mean securities, as defined in Section ---------------- 2(a)(1) of the Securities Act of 1933, as amended, of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of the directors (or Persons performing similar functions) of the corporation, association, trust, partnership, joint venture or other business entity involved, whether or not the right to so vote exists by reason of the happening of a contingency. References in this Agreement to percentages of Voting Interests, unless otherwise noted, refer to percentages of votes to which such Voting Interests are entitled in the election of directors (or Persons performing similar functions) rather than to the number of shares. (h) deleting the following definitions in their entirety, and substituting in lieu thereof the following new definitions: "Initial Term" shall mean the period from and including the Amendment ------------ No. 3 Effective Date to and including May 14, 2002. "MBC Borrowing Base" shall mean, as determined pursuant to the most ------------------ recently required Borrowing Base Certificate: (i) cash of up to $5,000,000 maintained by MBC in one or more deposit accounts in which the Agent for the benefit of the Agent, the CP Holders and the Banks has a first priority, perfected security interest and Short Term Investments in which the Agent for the benefit of the Agent, the CP Holders and the Banks has a first priority, perfected security interest shown on MBC's balance sheet as of such date, plus ---- -11- (ii) 83.3% of the aggregate outstanding principal balances of, plus accrued interest on, all of MBC's Eligible Medallion Loans from time to time outstanding that are Retained Loans, plus ---- (iii) 80% of the aggregate outstanding principal balances of, plus ---- accrued interest on, all of MBC's Eligible Commercial Loans from time to time outstanding that are Retained Loans; provided, that, if all or any part of any Loan would be excluded as an -------- ---- Eligible Commercial Loan or Eligible Medallion 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. "MFC Borrowing Base" shall mean, as determined pursuant to the most ------------------ recently required Borrowing Base Certificate: (i) cash of up to $5,000,000 maintained by MFC in one or more deposit accounts in which the Agent for the benefit of the Agent, the CP Holders and the Banks has a first priority, perfected security interest and Short Term Investments in which the Agent for the benefit of the Agent, the CP Holders and the Banks has a first priority, perfected security interest 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; minus ----- (v) 100% of the Borrowing Base Holdback; provided, that, if all or any part of any Loan would be excluded, -------- ---- whether as an Eligible Commercial Loan, Eligible Medallion 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. "Revolving Credit Commitment Period" at any date shall mean with ---------------------------------- respect to any Bank, the period from and including the Second Restatement Effective Date to May 15, 2002, with respect to such Bank's Revolving Credit Commitment. -12- "Scheduled Swing Line Commitment Termination Date" shall mean the ------------------------------------------------ earlier to occur of the fifth Business Day preceding the Termination Date and May 10, 2002. "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), including, without limitation, the face amount of all letters of credit issued pursuant thereto (excluding any reimbursement obligations with respect to any drawing under such a letter of credit which have been paid). "Termination Date" shall mean the earlier of (i) May 15, 2002, or (ii) ---------------- the Business Day, if any, on which all of the Revolving Credit Commitments are terminated in accordance with Section 2.4 or 9.1 hereof.; (i) inserting, in the places required by alphabetical order, the following new definitions: "Agent's Fee" shall mean all fees due to the Agent pursuant to Section ----------- 3.1(b) hereof. "Amendment No. 3" shall mean Amendment No. 3 to Second Amended and --------------- Restated Loan Agreement, Limited Waiver and Consent dated as of December 31, 2001 among the Borrowers, the Agent, the Swing Line Lender and the Banks. "Amendment No. 3 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 3. "Capitalized Lease" shall mean any lease under which the Borrowers or ----------------- any of their Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP. "Cash Equivalents" shall mean, as to the Borrowers and their ---------------- Subsidiaries, (a) securities issued or directly and fully guaranteed or insured by the United States of America and having a maturity of not more than six (6) months from the date of acquisition; (b) certificates of deposit, time deposits and eurodollar time deposits with maturities of six (6) months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six (6) months and overnight bank deposits, in each case, (i) with any Bank or (ii) with any domestic commercial bank organized under the laws of the United States of America or any state thereof, in each case having a rating of not less than A or its equivalent by Standard & Poor's Ratings Group or any successor and having capital and surplus in excess of $1,000,000,000; (c) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clauses (a) and (b) above; and (d) any commercial paper or finance company paper issued by (i) any Bank or any holding company controlling any Bank or (ii) any other Person that is rated not less -13- than "P-1" or "A-1" or their equivalents by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group or their successors. "Cash Management Items" shall mean all fees and other amounts owing to --------------------- the Agent by the Borrowers related to cash management and similar services, returned checks or other items, or the reversal or withdrawal of any provisional or other credits granted by the Agent, or by any other financial institution which has entered into a Lockbox Agreement with the Agent (including without limitation actual amounts returned by the Agent as the result of any such return, reversal or withdrawal). "Combined Leverage Ratio" shall mean the ratio of (a) the sum of ----------------------- Unconsolidated Total Liabilities of MFC plus Unconsolidated Total ---- Liabilities of MBC to (b) Combined MFC/MBC Tangible Net Worth. "Combined Intercompany Receivables" shall mean, with respect to the --------------------------------- Borrowers, the sum of (a) the amount listed as "Intercompany Receivables" (or the like) on each of the Borrowers' Unconsolidated balance sheets delivered to the Agent pursuant to Section 6.1(d) hereof, plus (b) to the ---- extent not otherwise included, all amounts owed to the Borrowers by their respective Affiliates, plus (c) to the extent not otherwise included, ---- Investments by each of the Borrowers in its Affiliates (other than Investments by MFC in MBC and Investments by MBC in MFC). "DeMinimis Accounts" shall have the meaning set forth in Section ------------------ 6.23.1 hereof. "Fleet Concentration Account" shall have the meaning set forth in --------------------------- Section 6.23.1 hereof. "GAAP Investments" shall mean investments of such Person in its ---------------- Subsidiaries, calculated in accordance with GAAP, as reported on such Person's balance sheet as of the date of reference. "Lockbox Agreements" shall have the meaning set forth in Section ------------------ 6.23.1 hereof. "Note Purchase Agreement" shall mean, collectively, those certain ----------------------- identical Note Purchase Agreements dated as of June 1, 1999 by and between the Borrower and each of the Purchasers listed on Schedule A thereto, as -------- - the same may hereafter be amended, modified, or supplemented from time to time in accordance with Section 8.10 hereof. "Payment Period" shall mean (a) initially, the period commencing on -------------- the Amendment No. 3 Effective Date and ending on the later of February 14, 2002 or the date of the actual receipt by the Agent of the certificate required to be delivered by the Borrowers on or before such date pursuant to Section 6.1(f) hereof, and (b) thereafter, the period commencing on the date immediately succeeding the last day of the prior Payment Period to, but not including, the fifth Business Day after the earlier of the due date of the -14- next certificate required to be delivered by the Borrowers to the Agent pursuant to Section 6.1(f) hereof or the date of the actual receipt by the Agent of such certificate. "Pricing Level" shall mean, for any Payment Period, the respective ------------- Pricing Level indicated below opposite the applicable Combined Leverage Ratio indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): --------------------------------------------------------- Combined Leverage Ratio Pricing Level --------------------------------------------------------- Less than 1:1 1 --------------------------------------------------------- Greater than or equal to 1:1 2 and less than 2:1 --------------------------------------------------------- Greater than or equal to 2:1 3 --------------------------------------------------------- The Combined Leverage Ratio for any Payment Period shall be determined in connection with the certificate required to be delivered to the Agent pursuant to Section 6.1(f) hereof setting forth, among other things, a calculation of the Combined Leverage Ratio as at the last day of the fiscal quarter immediately preceding such Payment Period, each of which certificates shall be delivered together with the financial statements for the fiscal quarter on which such calculation is based; provided that in the -------- case of the initial Payment Period described in clause (a) of the definition of Payment Period, the calculation shall be based on the Combined Leverage Ratio calculation set forth in the certificate delivered by the Borrowers to the Banks on or prior to the Amendment No. 3 Effective Date. "Senior Note Debt" shall mean the principal amount of all ---------------- Indebtedness, together with accrued interest thereon, evidenced by, and all other amounts owing in respect of, the Note Purchase Agreement. "Senior Notes" shall mean (i) the 7.20% Senior Secured Notes, Series ------------ A, Due June 1, 2004, in a maximum principal amount of $22,500,000 and (ii) the 7.20% Senior Secured Notes, Series B, Due September 1, 2004, in a maximum principal amount of $22,500,000, issued by Medallion Funding pursuant to the Note Purchase Agreement. "Synthetic Lease" shall mean any lease of goods or other property, --------------- whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes. "Total Intercompany Receivables" shall mean, with respect to the ------------------------------ Borrowers, the sum of (a) the amounts listed as "Intercompany Receivables" on each of the Borrowers' Unconsolidated balance sheets delivered to the Agent pursuant to Section 6.1(d) hereof, plus (b) to the extent not ---- otherwise included, all amounts owed to the Borrowers by their respective Affiliates, plus (c) to the extent not otherwise ---- -15- included, Investments by each of the Borrowers in its Affiliates (other than Investments by MFC in MBC and Investments by MBC in MFC). and (j) inserting, in the places required by alphabetical order, the following new definitions: "Borrowing Base Holdback" shall mean (a) for the Borrowing Base ----------------------- Certificates for the period ending January 31, 2002 and required to be delivered within fifteen (15) Business Days following such date, (i) the Overinvestment Amount minus (ii) two-thirds multiplied by the Original ----- ---------- Overinvestment Amount, provided that if the result of such calculation is -------- $0 or less, the Borrowing Base Holdback for such period shall be $0, (b) for the Borrowing Base Certificates for the period ending February 28, 2002 and required to be delivered within fifteen (15) Business Days following such date, (i) the Overinvestment Amount minus (ii) one-third multiplied by ----- ---------- the Original Overinvestment Amount, provided that if the result of such -------- calculation is $0 or less, the Borrowing Base Holdback for such period shall be $0, and (c) for the Borrowing Base Certificates for the period ending March 29, 2002 and required to be delivered within fifteen (15) Business Days following such date and each Borrowing Base Certificate thereafter, the Overinvestment Amount. "Original Overinvestment Amount" shall mean the sum of the amounts ------------------------------ listed as "Overinvestment Amounts" on Schedule III hereto with respect to -------- --- the Guarantor, BL and Medallion Funding. "Overinvestment Amount" shall mean (a) the Original Overinvestment --------------------- Amount, minus (b) the sum of amounts repaid to MFC by the Guarantor, BL and ----- Medallion Funding with respect to such "Overinvestment Amounts" on Schedule -------- III hereto, as demonstrated on a certificate of the Borrowers delivered to --- the Agent and the Banks together with the next Borrowing Base Certificate required to be delivered pursuant to Section 6.1(c) hereof. 3. Amendment of Section 2.1(b) of the Loan Agreement. Section 2.1 of the ------------------------------------------------- Loan Agreement is hereby amended by deleting Section 2.1(b) in its entirety and substituting the following new Section 2.1(b) in lieu thereof. "(b) [Intentionally Omitted]." ----------------------- 4. Amendment of Section 2.1(c) of the Loan Agreement. Section 2.1(c) of --------------------------------------------------- the Loan Agreement is hereby amended by (a) inserting the following new sentence at the end of Section 2.1(c)(i) thereof: "Notwithstanding the requirements of the foregoing paragraph, in the event that any Cash Management Item is returned, a Swing Line Loan shall be deemed to automatically be made in an amount equal to such returned Cash Management Item, regardless of whether the conditions for making a Swing Line Loan described in the foregoing paragraph are met."; -16- and (b) deleting the first sentence of Section 2.1(c)(ii) in its entirety and replacing it with the following new first sentence: "Other than Swing Line Loans made with respect to returned Cash Management Items, the Swing Line Lender shall not be obligated to make any Swing Line Loan at a time when any Bank shall be in default of its obligations under this Agreement unless arrangements to eliminate the Swing Line Lender's risk with respect to such defaulting Bank's participation in such Swing Line Loan shall have been made for the benefit of the Swing Line Lender and such arrangements are in all respects satisfactory to the Swing Line Lender." 5. Amendment of Section 2.1(d) of the Loan Agreement. Section 2.1 of the ------------------------------------------------- Loan Agreement is hereby amended by deleting Section 2.1(d) in its entirety and substituting the following new Section 2.1(d) in lieu thereof. "(d) Reallocations upon Assignment to New Banks. Any new Revolving ------------------------------------------ Credit Commitment, increase in Revolving Credit Commitment, new Bank Loans or increase in Bank Loans provided by any new Bank or Bank which is a Bank as of the Amendment No. 3 Effective Date in accordance with Section 12.2 hereof, shall be used to reduce the Revolving Credit Commitments and outstanding Bank Loans of each other Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans reduced, pro rata in --- ---- accordance with such other Bank's Percentage or, in the event that one or more Banks opt not to have their Revolving Credit Commitments and outstanding Bank Loans reduced, by an amount equal, in the case of each Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans reduced, to (i)(A) such Bank's Revolving Credit Commitment (or outstanding Bank Loans) divided by (B) the sum of the Revolving Credit Commitments (or outstanding Bank Loans) of all Banks desiring to have their Revolving Credit Commitments and outstanding Bank Loans reduced, multiplied by (ii) the amount of the Revolving Credit Commitment (or outstanding Bank Loans) of such new Bank or, as the case may be, any increase in an existing Bank's Revolving Credit Commitment (or outstanding Bank Loans); provided -------- that the Banks' Percentages shall be correspondingly adjusted, each new Bank or existing Bank increasing its Revolving Credit Commitment (or outstanding Bank Loans) shall make all (if any) such payments to the other Banks as may be necessary to result in the Bank Loans made by such Bank being equal to such Bank's new Percentage (as then in effect) of the aggregate principal amount of all Bank Loans outstanding to the Borrowers as of such date), and Notes shall be issued or amended and such other changes shall be made to the Loan Documents, as necessary, to reflect any such changes to the Banks' Revolving Credit Commitments and outstanding Bank Loans." 6. Amendment of Section 2.2 of the Loan Agreement. Section 2.2 of the Loan ---------------------------------------------- Agreement is hereby amended by (a) deleting the words "minus the Applicable Prime Rate Margin" in clause (c)(i)(a) of Section 2.2 and substituting the words "plus the Applicable Prime Rate Margin" in lieu thereof, and (b) by deleting Sections 2.2(a)(ii), 2.2(c)(iii) and 2.2(d)(B) in their entirety and substituting the following new Sections 2.2(a)(ii), 2.2(c)(iii) and 2.2(d)(B) in lieu thereof: -17- "(ii) [Intentionally Omitted]. (iii) [Intentionally Omitted]. (B) [Intentionally Omitted]." 7. Amendment of Section 2.3 of the Loan Agreement. Section 2.3 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting Section 2.3(a)(ii) in its entirety and substituting the following new Section 2.3(a)(ii) in lieu thereof: "(ii) [Intentionally Omitted]." ---------------------- 8. Amendment of Section 2.4 of the Loan Agreement. Section 2.4 of the ---------------------------------------------- Loan Agreement is hereby amended by adding the following new Section 2.4(b) in proper alphabetical order therein: "(b) (i) On March 1, 2002 (the "First Revolver Reduction Date"), the Aggregate Revolving Credit Commitment as in effect on such date shall be irrevocably reduced by $5,000,000, (ii) on April 1, 2002 (the "Second Revolver Reduction Date"), the Aggregate Revolving Credit Commitment as in effect on such date shall be irrevocably reduced by $5,000,000, and (iii) on May 1, 2002 (the "Third Revolver Reduction Date", and together with the First Revolver Reduction Date and the Second Revolver Reduction Date, the "Revolver Reduction Dates"), the Aggregate Revolving Credit Commitment as in effect on such date shall be irrevocably reduced by $10,000,000. The reductions in the Aggregate Revolving Credit Commitment required by this subsection (b) shall be in addition to any reductions in the Aggregate Revolving Credit Commitment resulting from mandatory prepayments required to be paid in accordance with Article 2B hereof or from any other prepayments (whether voluntary or otherwise) made by the Borrowers (other than those set forth in Section 2.5(b)(i) and (ii) hereof). Each such reduction shall be accompanied by repayment of Bank Loans, together with accrued interest thereon, 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. All such repayments shall be applied to the Bank Loans in accordance with the terms of Section 2.5(e)(v) hereof. Each reduction of the Aggregate Revolving Credit Commitment pursuant to this Section 2.4(b) shall be applied pro rata among the Banks desiring to have their Revolving --- ---- Credit Commitments reduced in proportion to their respective Percentages (or, in the event that one or more Banks opt not to have their Revolving Credit Commitments reduced, by an amount equal, in the case of each Bank desiring to have its Revolving Credit Commitment reduced, to (x)(i) such Bank's Revolving Credit Commitment divided by (ii) the sum of the Revolving Credit Commitments of all Banks desiring to have their Revolving Credit Commitments reduced, multiplied by (y) the amount of such reduction and with the Percentages of the Banks being correspondingly adjusted)." -18- 9. Amendment of Section 2.5 of the Loan Agreement. Section 2.5 of the ---------------------------------------------- Loan Agreement is hereby amended by (a) deleting Section 2.5(b) in its entirety and substituting the following new Section 2.5(b) in lieu thereof: "(b) [Intentionally Omitted]." ----------------------- and (b) deleting the first sentence of Section 2.5(c)(ii) and Section 2.5(d) in their entirety and substituting the following new first sentence of Section 2.5(c)(ii), new Section 2.5(d) and new Section 2.5(e) in lieu thereof: "(c)(ii) If, at any time, (A) the aggregate outstanding principal balance of the Revolving Credit Loans, plus the aggregate outstanding principal balance of all Swing Line Loans, exceeds the Aggregate Revolving Credit Commitment, or (B) the aggregate outstanding principal balance of the Swing Line Loans exceeds the Swing Line Commitment, or (C) the aggregate unpaid balance of all Senior Debt shall exceed the MFC Borrowing Base plus the MBC Borrowing Base, within five days of the first day there ---- exists any such deficiency the relevant Borrower shall (1) make payment to the Agent (to be applied against such Borrower's Swing Line Loans first and then Revolving Credit Loans in such order or preference as the Agent shall determine) 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) hereof, and (2) deliver a Borrowing Base Certificate showing compliance with Section 7.3 hereof, as well as a borrowing base certificate under the Funding Agreement showing Medallion Funding's compliance with Section 7.3 of the Funding Agreement, as of the date such excess is repaid. (d) Application of Payments. With respect to all payments pursuant to ----------------------- subsections (a), (b) and (c) above and subsection (e) below, upon receipt of any notice of payment and/or any such payment, the Agent shall promptly notify each Bank thereof and, with respect to Bank Loans of a Borrower, each such prepayment shall be effected pro rata amongst all the Banks in proportion to each Bank's then outstanding Bank Loans to such Borrower, as the case may be. (e) Mandatory Payment of Loans. In addition to amounts otherwise -------------------------- required to be paid hereunder, each of the Borrowers promises to pay (i) on the First Revolver Reduction Date, and there shall become absolutely due and payable on the First Revolver Reduction Date, $5,000,000 of the Bank Loans, and (ii) on the Termination Date, and there shall become absolutely due and payable on the Termination Date, all of the Revolving Credit Loans and all of the Swing Line Loans outstanding on such date, together with any and all accrued and unpaid interest thereon." 10. Amendment of Section 2.6 of the Loan Agreement. Section 2.6 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting said Section 2.6 in its entirety and substituting the following new Section 2.6 in lieu thereof: "Section 2.6. Interest after Default. ---------------------- -19- 2.6.1. Overdue Amounts. Overdue principal and (to the extent permitted --------------- by applicable law) interest on the Bank Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to two percent (2%) plus the rate of interest then applicable thereto (or, ---- if no rate of interest is then applicable thereto, the Prime Rate) until such amount shall be paid in full (after as well as before judgment). 2.6.2. Amounts Not Overdue. During the continuance of a Default or an ------------------- Event of Default under Section 9.1(a), (b), or (c) hereof, the principal of the Bank Loans not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived pursuant to Section 10.2 hereof, bear interest at a rate per annum equal to two percent (2%) plus the rate of interest otherwise applicable to ---- such Bank Loans pursuant to Section 2.2(c) hereof. 2.6.3. Calculation of Default Interest. The rate of interest to be ------------------------------- charged under Section 2.6.1 or Section 2.6.2 hereof (in either case, a "Default Rate") shall be computed on the basis of a 360-day year for the actual number of days elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate to be charged shall change when and as the Prime Rate is changed, and any such change in the Prime Rate shall become effective at the opening of business on the day on which such change is adopted. At the end of the applicable Interest Period for a LIBOR Rate Loan on which the Default Rate is being charged, such LIBOR Rate Loan shall be automatically converted to a Prime Rate Loan, and the Default Rate to be charged in respect of such Bank Loan shall be computed based on the Prime Rate. 2.6.4. Special Provisions. Notwithstanding the foregoing, the Default ------------------ Rate shall not be charged for the period commencing with February 20, 2002 through March 15, 2002, provided that no Default or Event of Default shall -------- occur and be continuing other than those described in Section 35 of Amendment No. 3." 11. Amendment of Section 2.10 of the Loan Agreement. Section 2.10 of the ----------------------------------------------- Loan Agreement is hereby amended by deleting Sections 2.10(a)-(c) in their entirety and substituting the following new Sections 2.10(a)-(c) in lieu thereof: "(a) Subject to the other provisions of this Section 2.10, the Revolving Credit Commitment and other obligations of each Bank under this Agreement with respect to Revolving Credit Loans shall terminate on the last day of the Initial Term. (b) Each Bank's Revolving Credit Commitment and other obligations under this Agreement with respect to Revolving Credit Loans (collectively, "Revolving Credit Obligations") shall be terminated on the last day of the ---------------------------- Initial Term. (c) Subject to the other provisions of this Section 2.10, the Swing Line Commitment and other obligations of the Agent and each Bank under this Agreement -20- with respect to Swing Line Loans shall terminate on May 10, 2002. The Swing Line Commitment and other obligations under this Agreement with respect to Swing Line Loans shall be terminated on May 10, 2002." 12. Amendment of Article 2A of the Loan Agreement. Article 2A of the Loan --------------------------------------------- Agreement is hereby deleted in its entirety and the following new Article 2A is substituted in lieu thereof: "ARTICLE 2A. COLLATERAL SECURITY; GUARANTY. The Borrower Obligations 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 (1) 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 (but excluding the capital stock of Medallion Funding Chicago Corp.), 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 pledge of (and subsequent enforcement of the security interest in) the stock of the Guarantor requires no such consent, and (2) the Lockbox Agreements upon the Borrowers' compliance with Section 6.23.1 hereof. The Borrower Obligations 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." 13. Amendment of Article 2B of the Loan Agreement. Article 2B of the Loan Agreement is hereby deleted in its entirety and the following new Article 2B is hereby substituted in lieu thereof: "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), the Borrowers -21- shall repay (or cause any of their applicable Subsidiaries to repay) (i) outstanding Bank Loans and (ii) outstanding Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof 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 Swing Line Lender, the Agent, the CP Holders and the holders of the Indebtedness described in clause (ii) of this paragraph (a) on a pro rata basis in accordance with the percentage -------- interest that each Person holds of the sum of the Aggregate Revolving Credit Commitment plus the outstanding principal amount of the CP Debt plus ---- ---- the outstanding principal amount of Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof (with the Revolving Credit Commitment of each Bank being irrevocably reduced by an amount equal to the amount of the repayment to be made to it pursuant to this Article 2B(a)(ii) and in accordance with the terms of Article 2B(e) hereof, 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 required to be made by this parenthetical). (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), MFC shall repay (i) outstanding Bank Loans (with the Revolving Credit Commitment of each Bank being irrevocably reduced by an amount equal to the amount of the repayment to be made to it pursuant to this Article 2B(b) and in accordance with the terms of Article 2B(e) hereof, 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 required to be made by this parenthetical), (ii) outstanding loans under the Funding Agreement, (iii) the amounts outstanding under the Senior Notes, (iv) the principal amounts outstanding with respect to the CP Debt, and (v) outstanding Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof, 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 Swing Line Lender, the Agent, the Funding Banks, the holders of the Senior Notes, the CP Holders and the holders of the Indebtedness described in clause (v) of this paragraph (b) 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 its 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), such Borrower shall repay (i) outstanding Bank Loans (and, except with respect to transfers permitted by Sections 8.3(g)(i) and (v) hereof, with the Revolving Credit Commitment of each Bank being irrevocably reduced by an amount equal to the amount of the repayment to be made to it pursuant to this -22- Article 2B(c) and in accordance with the terms of Article 2B(e) hereof, 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 required to be made by this parenthetical), and (ii) outstanding Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof, 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 Swing Line Lender, the Agent, the CP Holders and the holders of the Indebtedness described in clause (ii) of this paragraph (c) on a pro rata --- ---- basis in accordance with the percentage interest that each Person holds of the sum of the Aggregate Revolving Credit Commitment plus the outstanding ---- principal amount of the CP Debt plus the outstanding principal amount of ---- Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof. (d) In the event that, with respect to any fiscal quarter ending on or after December 31, 2001, MFC seeks to pay Dividends in excess of ninety percent (90%) of the Consolidated Adjusted Net Investment Income of MFC for such fiscal quarter (the amount of such excess Dividends is hereafter referred to as the "Excess Dividends"), MFC shall give 14 days prior written notice to the Agent of such intention, and concurrently with the payment of such Excess Dividends, MFC shall repay (A) outstanding Bank Loans (with the Revolving Credit Commitment of each Bank being irrevocably reduced by an amount equal to the amount of any repayment to be made to it pursuant to this Article 2B(d) and in accordance with the terms of Article 2B(e) hereof, 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 required to be made by this parenthetical), and (B) outstanding Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof, 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 Swing Line Lender, 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 Aggregate Revolving Credit Commitment, plus the ---- outstanding principal amount of Indebtedness of the Borrowers permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof. Together with the payment of any Dividend Prepayment, MFC shall deliver to the Agent and the Banks a certificate in substantially the form of Exhibit X hereto --------- demonstrating compliance with the calculations set forth above. (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 Prime Rate Loans and third, to outstanding LIBOR Rate Loans, with any prepayment of LIBOR Rate Loans being subject to Section 2.11 hereof; provided, however, that the Borrowers may -------- ------- request to avoid such breakage costs (with the determination as to whether to agree with such request being made by the Agent in its sole discretion) that one or more such payments be made by providing to the Agent cash in an amount sufficient to cash collateralize such LIBOR -23- Rate Loans (with the Borrowers not to be deemed to have paid such LIBOR Rate Loans until such cash has been applied to such LIBOR Rate Loans) and otherwise in accordance with Section 2.C.1.3(b) hereof. 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 Article 2B(a), Article 2B(b), Article 2B(c), and Article 2B(d) hereof, with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced by 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 being made in accordance with the requirements of this Article 2B. 14. Addition of Article 2C of the Loan Agreement. The Loan Agreement is -------------------------------------------- hereby amended by adding the following new Article 2C: "Article 2C.1. Allocation of Funds in the Fleet Concentration Account ------------------------------------------------------ and Repayments of Revolving Credit Loans Prior to Event of Default or --------------------------------------------------------------------- Request of the Agent. -------------------- 2C.1.1. Credit for Funds Received in Concentration Account. (a) -------------------------------------------------- All funds and cash proceeds in the form of money, checks and like items received in the Fleet Concentration Account as contemplated by Section 6.23 hereof shall be credited, on the same Business Day on which the Agent determines that good collected funds have been received, and, prior to the receipt of good collected funds, on a provisional basis until final receipt of good collected funds, and applied as contemplated by Section 2C.1.2 or 2C.1.3 hereof, as the case may be, (b) all funds and cash proceeds in the form of a wire transfer received in the Fleet Concentration Account as contemplated by Section 6.23 hereof shall be credited on the same Business Day as the Agent's receipt of such amounts (or on such later date as the Agent determines that good collected funds have been received), and transferred as contemplated by Section 2C.1.2 hereof or, as the case may be, applied as contemplated by Section 2C.1.3 hereof, and (c) all funds and cash proceeds in the form of an automated clearing house transfer received in the Fleet Concentration Account as contemplated by Section 6.23 hereof shall be credited, on the next Business Day following the Agent's receipt of such amounts (or on such later date as the Agent determines that good collected funds have been received), and transferred as contemplated by Section 2C.1.2 hereof or, as the case may be, applied as contemplated by Section 2C.1.3 hereof. For purposes of the foregoing provisions of this Section 2C.1.1, the Agent shall not be deemed to have received any such funds or cash proceeds on any day unless received by the Agent before 2:30 p.m. (Boston time) on such day. The Borrowers further acknowledge and agree that any such provisional credits or credits in respect of wire or automatic clearing house funds transfers shall be subject to reversal if final collection in good funds of the related item is not received by, or final settlement of the funds transfer is not made in favor of, the Agent in -24- accordance with the Agent's customary procedures and practices for collecting provisional items or receiving settlement of funds transfers. 2C.1.2. Transfer to Operating Account Prior to Event of Default ------------------------------------------------------- and Request of the Agent that Such Transfers Cease. Amounts received -------------------------------------------------- in the Fleet Concentration Account which are determined by the Agent in its sole discretion to be good collected funds shall be transferred to the Operating Account on a daily basis, so long as neither (a) an Event of Default has occurred of which the account officers of the Agent active on the Borrowers' accounts have knowledge, nor (b) has a determination been made by the Agent that the funds contained in the Fleet Concentration Account shall be applied to the Borrower Obligations as contemplated by Section 2C.1.3 hereof or Section 2C.2 hereof. The Borrowers shall be permitted to invest funds transferred to the Operating Account pursuant to this Section 2C.1.2 in Cash Equivalents. 2C.1.3. Application of Payments Prior to Event of Default, but ------------------------------------------------------ Following The Agent's Determination That Funds Contained In the Fleet --------------------------------------------------------------------- Concentration Account Are To Be Applied To The Borrower Obligations. ------------------------------------------------------------------- (a) Prior to the occurrence of an Event of Default of which the account officers of the Agent active on the Borrowers' accounts have knowledge, but following the Agent's determination (which may be made by the Agent in its sole discretion) that funds contained in the Fleet Concentration Account be applied to the Borrower Obligations, all funds transferred to the Fleet Concentration Account and for which the Borrowers have received credits shall be allocated among the Banks, the Swing Line Lender, the Agent, the CP Holders and the holders of any outstanding Indebtedness permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof, with the portion of such funds allocated to the Banks, the Swing Line Lender and the Agent being applied to the Borrower Obligations as follows: (i) first, to pay amounts then due and payable under this Agreement, the Notes and the other Loan Documents; (ii) second, to reduce Swing Line Loans made by the Swing Line Lender; (iii) third, to reduce Bank Loans (other than Swing Line Loans) which are Prime Rate Loans; (iv) fourth, to reduce Bank Loans (other than Swing Line Loans) which are LIBOR Rate Loans; and (v) fifth, to the Operating Account. -25- (b) All prepayments of LIBOR Rate Loans prior to the end of an Interest Period shall obligate the Borrower to pay any breakage costs associated with such LIBOR Rate Loans in accordance with Section 2.11 hereof. Prior to the occurrence of an Event of Default, the Borrowers may request that they be permitted (with the Agent determining whether to agree to such request in its sole discretion) to avoid such breakage costs by providing to the Agent cash in an amount sufficient to cash collateralize such LIBOR Rate Loans, but in no event shall the Borrowers be deemed to have paid such LIBOR Rate Loans until such cash has been applied to such LIBOR Rate Loans. In the event that the Agent agrees to such request, the Agent may elect to cause such cash collateral to be deposited into either (i) a cash collateral account pursuant to the terms of a cash collateral agreement executed by the Borrowers and the Agent and in form and substance satisfactory to the Agent or (ii) the Borrowers' Operating Account with appropriate instructions prohibiting the Borrowers' withdrawal of such funds so long as they remain cash collateral. In each such case, each Borrower agrees to execute and deliver to the Agent such instruments and documents, including Uniform Commercial Code financing statements and agreements with any third party depository banks, as the Agent may request. (c) All prepayments of the Revolving Credit Loans pursuant to this Section 2C.1.3 shall be allocated among the Banks making such Revolving Credit Loans, in proportion, as nearly as practicable, to the respective unpaid principal amount of such Revolving Credit Loans outstanding, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. All prepayments of the Revolving Credit Loans shall be applied in accordance with this Section 2C.1.3. No prepayment made in accordance with this Section 2C.1.3 shall reduce the Aggregate Revolving Credit Commitment. 2C.2. Repayments of Revolving Credit Loans After Event of Default. ----------------------------------------------------------- Following (a) the occurrence and during the continuance of an Event of Default of which the account officers of the Agent active on the Borrowers' accounts have knowledge, and (b) the determination of either the Agent or the Required Banks (which determination may be made in the sole discretion of the Person or Persons making such determination) that funds contained in the Fleet Concentration Account shall be applied to the Borrower Obligations, all funds transferred to the Fleet Concentration Account and for which either Borrower has received credits shall be allocated among the Banks, the Swing Line Lender, the Agent, the CP Holders and the holders of the outstanding Indebtedness permitted pursuant to Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof, with the portion of such funds allocated to the Banks, the Swing Line Lender and the Agent being applied to the obligations of the Borrowers under the Loan Documents in accordance with Section 9.5 hereof." 15. Amendment of Section 3.1 of the Loan Agreement. Section 3.1 of the ---------------------------------------------- Loan Agreement is hereby amended by adding the following new Sections 3.1(d), (e) and (f) in proper alphabetical order therein: -26- "(d) Delinquency Fee. Without limiting the provisions of Section 9.1 --------------- hereof, the Borrowers agree to pay to the Agent, for the pro rata account --- ---- of each Bank (based on each Bank's Percentage), on the last Business Day of each calendar month for any Delinquency Fee accrued during such calendar month, a delinquency fee of $12,000 for each and every five (5) consecutive Business Days that the Borrowers fail to deliver any statement, certificate, report or other information required to be delivered to the Agent or the Banks in accordance with the requirements of Section 6.1 hereof (the "Delinquency Fee"). For purposes hereof, consecutive Business --------------- Days shall mean one Business Day following another Business Day, with intervening Saturdays, Sundays and holidays excluded. The Borrowers authorize the Agent to deduct the Delinquency Fee from the Operating Account on the last Business Day of each calendar month for any Delinquency Fee accrued during such calendar month. (e) Amendment Fee. The Borrowers agree to pay to the Agent, for the ------------- pro rata account of each Bank (based on each Bank's Percentage), on March --- ---- 1, 2002, an amendment fee equal in the aggregate to 0.20% of the Aggregate Revolving Credit Commitment in effect on March 1, 2002; provided, however, -------- ------- that in the event that prior to March 1, 2002, the Aggregate Revolving Credit Commitment has been terminated and the Borrower Obligations have been paid in full, the Borrowers shall not be obligated to pay the amendment fee described in this Section 3.1(e). (f) Nature of Fees. All fees hereunder shall, except for the -------------- amendment fee described in Section 3.1(e) hereof, be fully earned as of the Amendment No. 3 Effective Date, and shall in any case be non-refundable when paid." 16. Amendment of Section 4.22 of the Loan Agreement. Section 4.22 of the ----------------------------------------------- Loan Agreement is hereby amended by inserting immediately following the text "the Security Agreement" in the second sentence thereof the following new text: "and the Lockbox Agreements". 17. Amendment of Section 4.25 of the Loan Agreement. Section 4.25 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 4.25 is hereby substituted in lieu thereof: "4.25. Bank Accounts. Schedule IV sets forth the account numbers, ------------- ----------- locations and descriptions of purpose of all bank accounts of the Borrowers." 18. Amendment of Section 5.2 of the Loan Agreement. Section 5.2 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting the initial paragraph of Section 5.2 in its entirety and replacing it with the following new initial paragraph: "The obligation of the Banks to make any Revolving Credit Loans (including the Initial Revolving Credit Loan) and any Term Loans and the obligation of the Swing Line Lender to make any Swing Line Loan (including any initial Swing Line Loan, but excluding any Swing Line Loan made with respect to a returned Cash -27- Management Item) is further subject to the satisfaction of the following conditions precedent:" 19. Amendment of Article 6 of the Loan Agreement. Article 6 of the Loan -------------------------------------------- Agreement is hereby amended by: (a) deleting Sections 6.1(c), (k), (l) and (m), Section 6.6 and Section 6.20 in their entirety and substituting the following new Sections 6.1(c), (k), (l), (m), (n) (o), and (p), Section 6.6 and Section 6.20 in proper alphabetical and numerical order in lieu thereof: "(c) within fifteen (15) Business Days after each of January 31, 2002, February 28, 2002, March 29, 2002, and April 30, 2002, and at any other time upon the Agent's request, (i) a Borrowing Base Certificate indicating a separate computation of the MFC Borrowing Base and the MBC Borrowing Base, signed by each of the chief financial officer of each Borrower and M.R. Weiser, Inc., or another consultant satisfactory to the Borrowers and the Agent, covering the period commencing with the first day following the last day of the period covered by the preceding Borrowing Base Certificate, and (ii) a certificate of the Borrowers showing all repaid Overinvestment Amounts for such period; (k) within forty-five (45) days after the last day of each fiscal quarter of the Borrowers, (i) a listing of the Loans over $3,000,000, (ii) a detailed listing of accounts charged off for such quarter, (iii) a report detailing all accounts that have been restructured or modified, including delinquent rewrites and troubled debt restructuring Loans, as well as non-distressed Loans, and listing the number and amount of such Loans and whether such Loans are Medallion Loans or Commercial Loans, (iv) a loss reserve analysis in the form used by the Borrowers as of the Second Restatement Effective Date, (v) a listing of accounts delinquent by more than twelve (12) months, and (vi) a delinquency analysis report in the form currently prepared by the Borrowers, with the addition of (A) an over one hundred twenty (120) days category and (B) a separate analysis for Section 7a Loans similarly aged, in each case in form and content satisfactory to the Agent; (l) not later than fifteen (15) Business Days after the last day of each calendar month, a delinquency report from each Borrower listing the Loans of such Borrower delinquent over 60 days and detailing the top ten delinquent Loans of such Borrower, in each case in form acceptable to the Agent; (m) not later than fifteen (15) Business Days after the last day of each 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 scope acceptable to the Agent; (n) not later than sixty (60) days after the last day of each fiscal quarter of the Borrowers, quarterly reports detailing Total Intercompany Receivables; -28- (o) upon the making of any payment required by Section 2.5(c)(ii) hereof, the Borrowing Base Certificates required by Section 2.5(c)(ii) hereof, evidencing the Borrowers' compliance with Section 7.3 hereof and Funding's compliance with Section 7.3 of the Funding Agreement as of the date such payment is made; and (p) with reasonable promptness, such other information respecting the business, operations and financial condition of either Borrower (including, without limitation periodic commercial finance examinations) as the Agent or any of the Banks from time to time reasonably may request. Section 6.6. Inspection by the Banks. Each of the Borrowers agrees to ----------------------- allow any representative of the Agent or any of the Banks to visit and inspect any of the properties of such Borrower, to examine and audit the books of account and other records and files of such Borrower, to make copies thereof and to discuss the affairs, business, finances and accounts of such Borrower with its officers and employees, all at such reasonable times and as often as the Agent or any of the Banks may request. Reasonable expenses incurred in connection with all such audits and inspections shall be paid by the Borrowers. Section 6.20. M.R. Weiser, etc. The Borrowers agree 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 each certificate of a Financial Officer of the Borrowers required by Section 6.1(f) hereof, and to provide reporting requested by the Agent with respect thereto, and 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."; (b) deleting Section 6.1(f) in its entirety and substituting the following new Section 6.1(f) in lieu thereof: "(f) concurrently with the delivery of the schedules or financial statements required to be furnished under Section 6.1(a) or 6.1(d) hereof, a certificate signed by the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of each Borrower and by M.R. Weiser, Inc., or another consultant satisfactory to the Borrowers and the Agent, and concurrently with the delivery of the financial statements required to be furnished under Section 6.1(e) hereof, a certificate signed by the Independent Public Accountants, and promptly upon the occurrence of any Default or Event of Default, a certificate signed by the chief executive officer, chief operating officer, chief financial officer, or chief accounting officer of each Borrower or such Independent Public Accountants, if a Default or Event of Default shall have occurred during the period of their review, in each case with such certificate (i) stating (A) that a review of the activities of each Borrower during such period has been made under his or their, as the case may be, immediate supervision with a view to determining whether each Borrower has observed, performed and fulfilled all of its obligations under this Agreement, and (B) that there existed during such period no Default or Event of Default (provided that, as to a certificate prepared by the Independent Public Accountants, such period, as it relates -29- to the compliance by each Borrower with covenants contained in Articles 2B(d), VII and VIII hereof shall apply to the fiscal period covered by their review) or if any such Default or Event of Default exists, specifying the nature thereof, the period of existence thereof and what action the Borrowers propose to take, or have taken, with respect thereto, and (ii) being accompanied by a schedule setting forth the computations as of the end of such period of each of the financial ratios, tests or covenants specified in Article 2B(d) (with such computations being made substantially in the form attached hereto as Exhibit X), Article VII and Sections 6.15, 8.2, 8.3, and 8.14 hereof;" (c) adding in proper numerical order therein the following new Sections 6.23, 6.24, 6.25 and 6.26: "6.23. Bank Accounts. ------------- 6.23.1. General. Each Borrower agrees to establish a depository account ------- (the "Fleet Concentration Account") under the control of the Agent for the benefit of the Banks, the CP Holders and the Agent, in the name of the Borrowers. Each Borrower further agrees that it shall cause all account debtors and other obligors of the Borrowers to remit all cash proceeds of Accounts Receivable, the Net Cash Proceeds of any Debt Offering, Equity Offering or sale, disposition or transfer of assets described in clause (iii) of the definition of Net Cash Proceeds, Excess Dividend Payments and all other amounts paid or to be paid to such Borrower to be transferred to the Agent and the Banks hereunder to (i) concentration, depository or other accounts with financial institutions which have entered into lock box or agency account agreements with the Agent (collectively, the "Lockbox Agreements") with respect to such accounts, with each such agreement to be in form and substance satisfactory to the Agent, or (ii) the Fleet Concentration Account for transfer to the Operating Account or for application to the Bank Loans in accordance with Section 2C.1.2, Section 2C.1.3 or, as the case may be, Section 2C.2 hereof. The Borrowers (a) on or prior to February 19, 2002, will deliver to the Agent fully executed Lockbox Agreements pursuant to which the Borrowers shall direct all depository institutions to cause all funds of the Borrowers to be transferred daily to, and only to, the Fleet Concentration Account, and (b) will at all times ensure that immediately upon either Borrower's receipt of any funds constituting cash proceeds of any Collateral, including Accounts Receivable, the Net Cash Proceeds of any Debt Offering, Equity Offering or sale, disposition or transfer of assets described in (iii) of the definition Net Cash Proceeds, all such amounts shall have been deposited in the Fleet Concentration Account. In the event that the arrangements described in the foregoing sentence are not established by February 19, 2002, and without limiting any Event of Default arising from any such failure or the provisions of Section 2.3(c) hereof, the Borrowers shall not be permitted to request LIBOR Rate Loans until such time as the arrangements described in this paragraph have been established in form and substance satisfactory to the Agent. Notwithstanding the foregoing, neither Borrower shall be required by this Section 6.23.1 to enter into any Lockbox Agreement with those financial institutions with which they maintain a depository account the daily balance in which account is at all -30- times less than $25,000, provided that the aggregate balance of all such -------- accounts is at all times less than $150,000 (the "DeMinimis Accounts"). ------------------ 6.23.2. Acknowledgment of Application. Each Borrower hereby agrees ----------------------------- that all amounts received by the Agent in the Fleet Concentration Account and the Operating Account will be the sole and exclusive property of the Agent, for the accounts of the Banks and the Agent, to be applied, in accordance with Section 2C.1.2 hereof, Section 2C.1.3 hereof or, as the case may be, Section 2C.2 hereof. Section 6.24. Independent Firm, etc. The Borrowers agree (a) not later --------------------- than the dates set forth in subsections (b)(i) and (ii) below for the delivery and presentation of the CMG Report (as defined below), to likewise deliver and present to the Agent and the Banks a six-month cash flow projection prepared by the Borrowers and the Carl Marks Group ("CMG"), (b)(i) to deliver to the Agent a draft comprehensive business plan (to include, among other things, plans for refinancing the Indebtedness under both this Agreement and the Funding Agreement by May 15, 2002 (including anticipated lending institutions)) prepared by the Borrowers with the assistance of CMG (the "CMG Report") on or prior to February 21, 2002, and (ii) to deliver to the Agent and the Banks the final CMG Report on or prior to February 25, 2002, which shall also be presented by the Borrowers' management and CMG to the Banks and the Agent on or prior to March 1, 2002, as well as to the Board of Directors at the Board of Directors meeting on March 12, 2002 and March 13, 2002, and (c) not later than January 1, 2002, to deliver to the Agent and the Banks a written report detailing the scope of the work and level of the tasks to be performed by CMG. The Required Banks and the Agent shall be reasonably satisfied with the scope and level of the work performed by CMG in connection with each of the items required by subsections (a), (b), and (c) of this Section 6.24. The Borrowers further agree to deliver to the Agent and the Banks, on or prior to February 25, 2002, a report detailing the actions the Borrowers are taking in response to the CMG Report. If the Borrowers do not intend to implement any of CMG's recommendations, such report by the Borrowers shall include the Borrowers' reasons for not implementing such recommendations. The Banks and the Agent shall have access to CMG at all times for, among other things, updates on the status of CMG's work and questions about the scope and substance thereof and shall have the right at any time to hire their own consulting firm at the request of the Agent (with the expenses of such other consulting firm to be for the account of the Borrowers following the occurrence of a Default or Event of Default). Section 6.25. Investment Amounts, Etc. The Borrowers agree to deliver ----------------------- to the Agent and the Banks no later than March 1, 2002 written certification from M.R. Weiser, Inc. that each of the Investments amounts set forth in Schedule III hereto were accurate as of December 31, 2001, and ------------ remain accurate (or have not increased) as of January 31, 2002. Section 6.26. Compliance with Section 6.15, Etc. The Borrowers agree --------------------------------- that (a) no later than January 31, 2002, the Borrowers shall be in compliance with Section 6.15 hereof, and not more than 80% of the aggregate principal amount of all Loans -31- made by the Borrowers and then outstanding shall be Commercial Loans and not fewer than 20% of the aggregate principal amount of all Loans made by the Borrowers and then outstanding shall be Medallion Loans, (b) no later than fifteen (15) Business Days following February 15, 2002, the Borrowers shall deliver a certificate to the Agent and the Banks evidencing compliance with Section 6.15 hereof, certified by M.R. Weiser, Inc. as being true, correct and complete, and (c) no later than March 15, 2002, the Borrowers shall deliver to the Agent evidence, satisfactory in form and substance to the Agent, (i) of the consent of the Senior Note Holders (A) under the Collateral Agency Agreement and the Note Purchase Agreement to the provisions of Amendment No. 3 requiring such consent and the transactions contemplated thereby, and (B) under the Collateral Agency Agreement, the Intercreditor Agreement and the Note Purchase Agreement to the provisions of Amendment No. 6 (as such term is defined in the Funding Agreement) requiring such consent and the transactions contemplated thereby, and (ii) of the waiver of any and all defaults (including defaults occurring under Sections 9.5, 10.7, 10.8(e), 10.10, 10.13 and 10.14 of the Note Purchase Agreement) under the Note Purchase Agreement existing immediately prior to the date such waiver and consents are given."; and (d) Section 6.19 of the Loan Agreement is hereby amended by: (i) deleting the text "and" at the end of subsection (f) thereof; (ii) deleting the period (".") at the end of subsection (g) thereof and substituting in lieu thereof the text "; and"; and (iii) adding, in proper alphabetical order, the following new subsection (h): "(h) on or prior to February 19, 2002, execute and deliver to the Agent the Lockbox Agreements pursuant to which the Borrower shall direct all depository institutions to cause all funds of the Borrower to be transferred daily to, and only to, the Fleet Concentration Account, together with such other items, or take such other actions, as the Agent may require in order to effectuate arrangements contemplated by Section 6.23.1 hereof." 20. Amendment of Article 7 of the Loan Agreement. Article 7 of the -------------------------------------------- Loan Agreement is hereby amended by: (a) deleting the ratio "4:1" in Section 7.1 and substituting the ratio "3:1" in lieu thereof; (b) deleting Section 7.4 in its entirety and substituting the following new Section 7.4 in lieu thereof: "Section 7.4. Minimum EBIT to Interest Expense Ratio. -------------------------------------- (a) Suffer or permit the ratio, at the end of each fiscal quarter of MFC ending on or after December 31, 2001, of (i) Consolidated EBIT of -32- MFC for such fiscal quarter to (ii) Consolidated Interest Expense of MFC for such fiscal quarter to be less than 1.3:1.0. (b) Suffer or permit the ratio at the end of each fiscal quarter of MFC, ending in the table below, of (i) Unconsolidated EBIT of MFC for such fiscal quarter plus ---- Unconsolidated EBIT of MBC for such fiscal quarter, to (ii) the sum of Unconsolidated Interest Expense of MFC for such fiscal quarter plus the sum of Unconsolidated Interest Expense ---- of MBC for such fiscal quarter to be less than the ratio set forth opposite such fiscal quarter in the table below: Fiscal Quarter Ending Ratio --------------------- ----- 12/31/01 1.15:1 3/31/02 and thereafter 1.30:1 (c) adding the following new Section 7.6 in proper numerical order therein: "Section 7.6. Minimum Tangible Net Worth. Suffer or permit (a) -------------------------- Consolidated Tangible Net Worth of the Borrowers minus GAAP Investments ----- in the Guarantor to be less than $159,000,000 at any time, and (b) the sum of Unconsolidated Tangible Net Worth of MFC plus Unconsolidated ---- Tangible Net Worth of MBC to be less than $63,000,000 at any time."; and (d) adding the following new Section 7.7 in proper numerical order therein: "Section 7.7. Losses of the Guarantor. Suffer or permit the ----------------------- portion of Adjusted Net Investment Income of MFC attributable to MFC's equity interest in the Guarantor (computed without regard to the portion of losses attributable to the impairment of good will of the Guarantor) for any fiscal quarter of the Borrower ending in the table set forth below to be less than the amount set forth the opposite such quarter in the table below: -------------------------------------------------------------- Quarter Maximum Loss ------- ------------ -------------------------------------------------------------- October 1, 2001 - December 31, 2001 ($1,600,000) -------------------------------------------------------------- January 1, 2002 - March 31, 2002 ($2,000,000) -------------------------------------------------------------- -33- -------------------------------------------------------------- April 1, 2002 - June 30, 2002 ($1,800,000) -------------------------------------------------------------- 21. Amendment of Section 8.1 of the Loan Agreement. Section 8.1 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting subsection (a) thereof in its entirety and substituting in lieu thereof the following new subsection (a): "(a) (i) Liens created under the Security Agreement and other Liens in favor of the Agent or any of the Banks, and (ii) Liens with respect to Indebtedness permitted by Sections 8.2(i)(i)(A) and 8.2(i)(ii) hereof, subject to the terms of the Collateral Agency Agreement and only to the extent that the Indebtedness secured thereby is permitted to be incurred by the Borrowers;". 22. Amendment of Section 8.2 of the Loan Agreement. Section 8.2 of ---------------------------------------------- the Loan Agreement is hereby amended by: (a) deleting Section 8.2(a) in its entirety and substituting the following new Section 8.2(a) in lieu thereof: "(a) Indebtedness of the Borrowers and the Guarantor to the Agent, the Swing Line Lender and the Banks arising hereunder or under any of the other Loan Documents;" (b) deleting Section 8.2(i) in its entirety and substituting the following new Section 8.2(i) in lieu thereof: "(i) (i) Indebtedness of up to but not in excess of $500,000 in standby or documentary letter of credit facilities (A) between MBC and any Bank, which facilities may be secured by the Collateral or cash collateralized on terms and conditions satisfactory to the Agent, or (B) established on an unsecured basis with any lending institution which is not also a Bank, and (ii) other pari passu Indebtedness of the Borrowers (including derivative contracts, but excluding letter of credit facilities not permitted by Section 8.2(i)(i) hereof), secured ratably by the Collateral, on terms and conditions acceptable to the Agent; provided that in each case (x) the Borrowers shall notify the -------- Agent in writing three (3) weeks (or such lesser period to which the Agent in its sole discretion shall agree) prior to the incurrence of any such Indebtedness, (y) 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 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 hereof, including the MFC Borrowing Base or the MBC Borrowing Base, as applicable, after giving effect to the incurrence of any such Indebtedness, and (z) the Person extending such Indebtedness shall, if such Indebtedness is to be secured, become a party to the Collateral Agency Agreement as an "Additional Senior Creditor" (as defined in the Collateral Agency Agreement)."; and (b) adding the following new final paragraph at the end of Section 8.2: -34- "Notwithstanding the foregoing, no additional Indebtedness not incurred prior to Amendment No. 3 Effective Date other than Indebtedness permitted by Sections 8.2(a), 8.2(e) and 8.2(i)(i) hereof shall be incurred by the Borrowers following the Amendment No. 3 Effective Date without the prior written consent of the Agent, which consent may be given or withheld by the Agent in its sole discretion." 23. Amendment of Section 8.3 of the Loan Agreement. Section 8.3 ---------------------------------------------- of the Loan Agreement is hereby amended by: (a) deleting subsection (e) thereof in its entirety and substituting in lieu thereof the following new subsection (e): "(e) Make any Investment in any Subsidiary or Affiliate (including by way of the acquisition of 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, and (ii) Investments existing on the Amendment No. 3 Effective Date in the particular Subsidiaries, and in the amounts with respect to each such Subsidiary, listed on Schedule III hereto. In addition to the amounts ------------ on Schedule III hereto, MFC may make additional Investments in ------------ Freshstart Venture Capital Corp. and Medallion Capital, Inc., which shall not exceed $15,348,434 in an aggregate amount for Investments in both such Subsidiaries, but neither Borrower may make, nor shall it permit any of its Subsidiaries to make, any Investments in the Guarantor, BL or any other Subsidiary (other than Freshstart Venture Capital Corp. and Medallion Capital, Inc.) following the Amendment No. 3 Effective Date, except as provided in the remainder of this paragraph. Investments consisting of intercompany receivables listed on Schedule III hereto (the "Repaid Receivables") may be repaid and the ------------ ------------------ Borrowers may subsequently reinvest the proceeds of the Repaid Receivables in the Subsidiary which repaid the Repaid Receivables; provided that at no time shall the aggregate amount of the Borrowers' -------- Investments in any particular Subsidiary (other than MBC) exceed the amount with respect to such Subsidiary listed on Schedule III hereto; ------------ and provided further that until such time as (i) the Guarantor shall ---------------- have repaid to MFC an aggregate amount equal to at least $3,646,158 with respect to MFC's Investments made on or prior to December 31, 2001 in the Guarantor, the Borrowers may not reinvest the proceeds of Repaid Receivables in the Guarantor, (ii) BL shall have repaid to MFC an aggregate amount equal to at least $2,345,111 with respect to MFC's Investments made on or prior to December 31, 2001 in BL, the Borrowers may not reinvest the proceeds of Repaid Receivables in BL, and (iii) Medallion Funding shall have repaid to MFC an aggregate amount equal to at least $5,090,378 with respect to MFC's Investments made on or prior to December 31, 2001 in Medallion Funding, the Borrowers may not reinvest the proceeds of Repaid Receivables in Medallion Funding. For purposes of complying with the limitations contained in this Section 8.3(e), Investments by either Borrower or the Guarantor in Subsidiaries of either Borrower on any day of any calendar month other than the last Business Day of such calendar month shall be determined without regard to allocable corporate overhead and salaries of MFC (to the extent that the same is allocated in reasonable amounts consistent with past practices), and without regard to the interest component of Investments consisting of loans or -35- advances from either Borrower to a Subsidiary of MFC or intercompany receivables owed by Subsidiaries of either Borrower or the Guarantor to either Borrower or the Guarantor (so long as such interest has accrued at commercially reasonable "market" rates, consistent with past practices) (such allocable corporate overhead and salaries and interest amounts hereinafter referred to as "Allocated Investments"); provided --------- ----------- -------- further that, as of the last Business Day of each month, Investments by ------- either Borrower or the Guarantor in Subsidiaries of either Borrower (other than MBC), including Allocated Investment amounts, shall meet the limitations set forth on Schedule III hereto; and provided further -------- --- -------- ------- that if as of the last Business Day of any month, Investments by either Borrower or the Guarantor in Subsidiaries of either Borrower do exceed the limitations set forth on Schedule III hereto, the Borrowers shall -------- --- repay, or cause to be repaid, Allocated Investment amounts in order to comply with the limitations set forth on Schedule III hereto within -------- --- fifteen (15) Business Days following the last Business Day of such month and shall deliver to the Agent and the Banks within fifteen (15) Business Days following the last Business Day of such month a certificate demonstrating such compliance."; (b) deleting subsection (g) thereof in its entirety and substituting in lieu thereof the following new subsection (g): "(g) Sell, discount or otherwise dispose of Loans or any Collateral or sell, discount or otherwise dispose of other Receivables or obligations owing to a Borrower or any of its Subsidiaries, with or without recourse, other than (i) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 hereof, and consistent in any event with past practices, (ii) for collection in the ordinary course of business consistent with any past practices (with the parties hereby agreeing that no securitization or like transaction described in Section 8.4 hereof shall be deemed to be 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, (iv) Loans disposed of to Affiliates in compliance with Section 8.6 hereof and for cash for a price at least equal to the outstanding principal amount thereof (without discount thereon)(with the parties agreeing that no securitization or like transaction described in Section 8.4 hereof shall be deemed permitted by this subsection (vi)), and (v) with respect to the sales of Loans by Borrowers to their Affiliates made prior to the Amendment No. 3 Effective Date and described on Schedule 8.3(g) hereto."; and -------- ------ (c) inserting, after subsection (i) thereof, the following new subsection 8.3(j): "(j) Acquire or commit to acquire any Loan from any Affiliate other than Loans acquired for a purchase price no greater than the outstanding principal amount thereof; provided that the Borrowers may -------- ---- only repurchase and acquire the Loans described on Schedule 8.3(g) -------- ------ hereto, and sold to such Affiliate prior to the Amendment No. 3 Effective Date, so long as at least seven (7) Business Days prior to any such repurchase, the Borrowers provide to the Agent a certificate of a -36- Financial Officer of the Borrowers demonstrating pro forma compliance with --- ----- the covenants set forth in Article VII hereof, satisfactory in form and substance to the Agent and the Required Banks. 24. Amendment of Section 8.4 of the Loan Agreement. Section 8.4 of the ---------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.4 is hereby substituted in lieu thereof: "Section 8.4. Securitizations. Enter into any securitization or ----------- --------------- similar transaction (i.e., any transfer of any of its assets in connection with any sale, assignment or other transfer of any receivables, including accounts receivable, loan receivables, lease receivables or other payment obligations or any interest in any of the foregoing, which may in each case include any collections and other proceeds thereof, any collection or deposit accounts related thereto, or any collateral, guarantees or other property or claims supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables) without the prior written consent of the Agent and the requisite Banks (as determined by reference to Section 10.2 hereof) or as otherwise permitted by Section 8.3(g) hereof." 25. Amendment of Section 8.6 of the Loan Agreement. Section 8.6 of the ---------------------------------------------- Loan Agreement is hereby amended by: (a) deleting subsection (b) thereof in its entirety and substituting in lieu thereof the following new subsection (b): "(b) Sell or otherwise dispose of an amount of Loans which, in aggregate principal amount, exceeds 10% of the aggregate principal amount of all Loans of the applicable Borrower then outstanding unless, immediately upon such sale or disposition, the Borrowers make, in accordance with the provisions of Article 2B(c) hereof, a mandatory prepayment of the outstanding Revolving Credit Loans (with the Revolving Credit Commitments being irrevocably reduced by an aggregate amount equal to the amount of such repayment) in an amount equal to the aggregate principal amount, plus accrued interest, of the Loans so sold or disposed of."; and (b) deleting subsection (c) thereof in its entirety and substituting in lieu thereof the following new subsection (c): "(c) Enter into any transaction of merger or consolidation or transfer, sell, assign, lease or otherwise dispose of all or substantially all of its properties or assets to any one or more Persons, without, in each case, the prior written consent of the Agent and the requisite Banks (as determined by reference to Section 10.2 hereof).". 26. Amendment of Section 8.10 of the Loan Agreement. Section 8.10 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.10 is hereby substituted in lieu thereof: -37- "Section 8.10. Amendment of Agreements. Consent to any amendment, ------------ ----------------------- supplement, waiver or other modification of any of the terms (including acceleration, covenant, default, subordination, sinking fund, repayment, interest rate or redemption provisions) contained in, or applicable to, or any security for, any Permitted Debt, any instrument evidencing or applicable to Permitted Debt, or the Note Purchase Agreement, 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." 27. Amendment of Section 8.15 of the Loan Agreement. Section 8.15 of the ----------------------------------------------- Loan Agreement is hereby deleted it in its entirety, and the following new Section 8.15 is hereby substituted in lieu thereof: "8.15. Bank Accounts. (i) Establish any bank accounts other than those ------------- listed on Schedule IV hereto, without the Agent's prior written consent, -------- -- with any such new bank account being subject, at the Agent's request, to Lockbox Agreements, and with Schedule IV hereto being deemed to be revised -------- -- to include any such additional accounts which are approved by the Agent and subject (if requested by the Agent) to the Lockbox Agreements, (ii) violate directly or indirectly any Lockbox Agreement or any similar agreement in favor of the Agent for the benefit of the Banks, the CP Holders and the Agent with respect to any such account, (iii) deposit into any of the payroll accounts listed on Schedule IV hereto any amounts in excess of -------- -- amounts necessary to pay current payroll obligations from such accounts, (iv) maintain a daily balance in any DeMinimis Account greater than $25,000, or an aggregate daily balance in all DeMinimis Accounts greater than $150,000, or (v) transfer any amounts which would be required by Section 6.23 hereof to be transferred to the Fleet Concentration Account into any other account, including any account established by a Subsidiary of the Borrowers." 28. 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: "Section 8.16. Portfolio Purchases and Acquisitions. Make or effect, ------------ ------------------------------------ or obligate itself to make or effect, any Portfolio Purchase or other asset acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) or stock (or other equity interest) acquisition.". 29. Amendment of Section 8.17 of the Loan Agreement. Section 8.17 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.17 is hereby substituted in lieu thereof: "Section 8.17. [Intentionally Omitted]." ------------ ----------------------- 30. Amendment of Section 9.1 of the Loan Agreement. Section 9.1 of the ---------------------------------------------- Loan Agreement is hereby amended by deleting subsection (b) thereof in its entirety and substituting in lieu thereof the following new subsection (b): -38- "(b) if default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in Article VII or Section 6.9(d), 6.13, 6.14, 6.19, 6.22, 6.23, 6.24, 6.25 or 6.26 or Article 8 hereof, provided that (i) if the excess repayment -------- required by Section 2.5(c)(ii) of this Agreement is made in accordance with the time period and other requirements set forth in such Section 2.5(c)(ii), no default shall occur as a result of the violation of Section 7.3(D) hereof resulting from the occurrence of the underlying violations with respect to which such excess repayment is made, and (ii) if the Borrowers repay, or cause to be repaid, Allocated Investment amounts required by Section 8.3(e) of this Agreement in accordance with the time period and other requirements set forth in such Section 8.3(e), no default shall occur as a result of the violation of Section 8.3(e) hereof resulting from the Borrowers having Allocated Investment amounts in excess of the limitations set forth in Section 8.3(e) hereof on the last Business Day of each calendar month;". 31. Amendment of Section 10.2 of the Loan Agreement. Section 10.2 of the ----------------------------------------------- Loan Agreement is hereby amended by deleting Section 10.2(a)(iv) in its entirety and substituting the following new Section 10.2(a)(iv) in lieu thereof: "(iv) release all or substantially all of the Collateral (it being understood that release of the Guarantor from its guaranty obligations under the Guaranty, other than in accordance with the terms of this Agreement or any other Loan Document, shall require only the approval of the Agent and the Required Banks) (excluding, if a 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);". 32. Amendment of Section 10.6 of the Loan Agreement. Section 10.6 of the ----------------------------------------------- Loan Agreement is hereby amended by: (a) deleting subsection (b) thereof in its entirety and substituting in lieu thereof the following new subsection (b): "(b) The Borrowers further agree to indemnify and save harmless each Bank, the Swing Line Lender and the Agent and each of their respective officers, directors, employees, agents and Affiliates (each an "Indemnified Party" and collectively the "Indemnified Parties") ----------------- ------------------- from and against any and all actions, causes of action, suits, losses, liabilities and damages and expenses (including, without limitation, reasonable attorneys' fees actually incurred) in connection therewith (herein called the "Indemnified Liabilities") incurred by any ----------------------- Indemnified Party as a result of, or arising out of or relating to: (i) any of the transactions contemplated hereby or by the other Loan Documents, (ii) any Indemnified Party's providing payroll and other cash management services to the Borrowers or their Subsidiaries, or (iii) the use of any proceeds of the Bank Loans made hereunder or any of the other Loan Documents, except for any Indemnified Liabilities arising on account of the gross negligence or willful misconduct of the Indemnified Party seeking -39- indemnity under this Section 10.6(b); provided, however, that, if and -------- ------- to the extent such agreement to indemnify may be unenforceable for any reason, the Borrowers shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which shall be permissible under applicable law. The parties hereto further hereby agree that such indemnification obligations provided in this Section 10.6(b) shall be Borrower Obligations under the Loan Documents. The agreements in this Section 10.6(b) shall survive the payment of the Revolving Credit Notes and the Swing Line Notes and related obligations and the termination of the Revolving Credit Commitments and Swing Line Commitment."; and (b) adding in proper alphabetical order therein the following new subsection (c): "(c) Each Borrower agrees to pay any Cash Management Item, fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Agent in establishing, maintaining or handling lock box accounts and other accounts for the collection of any of the Collateral." 33. Amendment of Article 12 of the Loan Agreement. Section 12 of the Loan --------------------------------------------- Agreement is hereby amended by: (a) deleting Section 12.1(b)(iii) thereof in its entirety and substituting in lieu thereof the following new Section 12.1(b)(iii): "(iii) [intentionally omitted]." (b) deleting Section 12.2 thereof in its entirety and substituting in lieu thereof the following new Section 12.2: "Section 12.2. New Banks; Additional Commitments From Existing Banks. ------------ ----------------------------------------------------- Without limiting the Banks' respective rights to assign their interests pursuant to Section 12.1 hereof, any financial institution approved by the Borrowers, the Agent and the Required Banks may join this Agreement as an additional Bank (such Person being herein referred to as the "New Bank") -------- and be entitled to all the rights and interests and obligated to perform all of the obligations and duties of a Bank with respect to a specified additional amount of Revolving Credit Commitment and outstanding Bank Loans hereunder, with the Revolving Credit Commitment and outstanding Bank Loans of each other Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans proportionately reduced being reallocated in accordance with Section 2.1(d) hereof, provided, that (a) the Borrowers -------- shall, in their sole discretion, have given their prior written consent to the addition of the New Bank as a party to this Agreement, and (b) the Agent, the Swing Line Lender and the Required Banks shall have given their prior written consent (which consent shall not be unreasonably withheld). At the request of the Borrowers, any Bank may elect to increase its Revolving Credit Commitment and outstanding Bank Loans, with the Revolving Credit Commitment and outstanding Bank Loans of each other Bank desiring to have its Revolving Credit Commitment and outstanding Bank Loans -40- proportionately reduced being reallocated in accordance with Section 2.1(d) hereof; provided that (x) the Borrowers shall, in their sole discretion, have given their prior written consent to the increase of such Bank's Revolving Credit Commitment and outstanding Bank Loans, and (y) the Agent, the Swing Line Lender and the Required Banks shall have given their prior written consent (which consent shall not be unreasonably withheld); and provided further that the Aggregate Revolving Credit Commitment and -------- ------- aggregate outstanding Bank Loans may not be increased pursuant to this Section 12.2."; (c) deleting Section 12.3 thereof in its entirety and substituting in lieu thereof the following new Section 12.3: "Section 12.3. Requirements for New Banks. Whether a new Bank as a ------------ -------------------------- result of Section 12.1 or Section 12.2 hereof, the joinder of any New Bank or assignee under Section 12.1 hereof may not result in an increase to the Aggregate Revolving Credit Commitment and aggregate outstanding Bank Loans (with the maximum amount of Bank Loans that such New Bank or assignee under Section 12.1 hereof agrees to provide hereunder (the "Additional Commitment ---------- ---------- Amount") being allocated to reduce the Revolving Credit Commitment and ------ outstanding Bank Loans of the other Banks in accordance with Section 2.1(d) hereof). Such New Bank or assignee under Section 12.1 hereof and the Borrowers shall execute and deliver an instrument of adherence (the "Instrument of Adherence") in form and substance satisfactory to the ----------------------- Borrowers and the Agent pursuant to which such New Bank or assignee under Section 12.1 hereof shall agree to be bound as a Bank by the terms and conditions hereof and the other Loan Documents, and to make Bank Loans to the Borrowers in accordance with this Agreement. Such Instrument of Adherence shall specify the Additional Commitment and outstanding Bank Loans and such New Bank's or assignee's address for notices. In addition, the Additional Commitment Amount provided by any New Bank or assignee under Section 12.1 hereof must be at least $5,000,000, and (a) such New Bank or assignee under Section 12.1 hereof shall have received such opinions of counsel to the Borrowers, such evidence of proper corporate organization, existence, authority and appropriate corporate proceedings with respect to the Borrowers, and such other certificates, instruments, and documents, as it shall have requested in connection with such Instrument of Adherence, (b) such New Bank or assignee under Section 12.1 hereof shall have paid to the Agent an administrative fee in the sum of $3,500 for the account of the Agent, and (c) such New Bank or assignee under Section 12.1 hereof shall have confirmed to and agreed with the Agent, the Swing Line Lender, the Banks and the Borrowers as follows: (i) the Agent, the Swing Line Lender and the Banks have made no representation or warranty and shall have no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency, collectability or value of this Agreement, the other Loan Documents, and Collateral, or any other instrument or document furnished pursuant hereto; -41- (ii) the Agent, the Swing Line Lender and the Banks have made no representation or warranty and shall have no responsibility with respect to the financial condition of either Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of their obligations under this Agreement or any of the other Loan Documents, or the performance or observance by either Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such New Bank or assignee under Section 12.1 hereof confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the most recent financial statements referred to in or delivered pursuant to Sections 4.18 and 6.1 hereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Instrument of Adherence; (iv) such New Bank or assignee under Section 12.1 hereof will, independently and without reliance upon the other Banks, the Swing Line Lender, or the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such New Bank or assignee under Section 12.1 hereof appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (vi) such New Bank or assignee under Section 12.1 hereof agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank; and (vii) such New Bank or assignee under Section 12.1 hereof represents and warrants that it is legally authorized to enter into such Instrument of Adherence. Upon any New Bank's or assignee's execution of an Instrument of Adherence and the Borrowers', the Agent's, the Swing Line Lender's and the Required Banks' consent thereto (to the extent that any of the same may be required hereunder), the Percentage of each Bank shall be adjusted appropriately. Promptly thereafter, the Borrowers shall notify each of the Banks and the Agent of the joinder hereunder of such New Bank or assignee under Section 12.1 hereof, and each Bank's new Percentage and provide each of the Banks and the Agent with a copy of the executed Instrument of Adherence and a copy of Exhibit A hereto reflecting the necessary ------- - adjustments. -42- Upon the effective date of any Instrument of Adherence, the New Bank or assignee under Section 12.1 hereof shall make all (if any) such payments to the other Banks as may be necessary to result in the Bank Loans made by such New Bank or assignee under Section 12.1 hereof being equal to such New Bank's or assignee's Percentage (as then in effect) of the aggregate principal amount of all Bank Loans outstanding to the Borrowers as of such date. The Borrowers hereby agree that any New Bank or assignee so paying any such amount to the other Banks pursuant to this Section 12.3 shall be entitled to all the rights of a Bank hereunder and such payments to the other Banks shall constitute Bank Loans held by such New Bank or assignee hereunder and that such New Bank or assignee may, to the fullest extent permitted by law, exercise all of its right of payment (including the right of set-off) with respect to such amounts as fully as if such New Bank or assignee had initially advanced to the Borrowers the amount of such payments."; and (d) adding, in proper numerical order, the following new Section 12.4: "Section 12.4 Joint and Several Liability. Except to the extent ------------ --------------------------- otherwise expressly provided, the liability of the Borrowers under this Agreement and each other Loan Document shall be joint and several without regard to which party receives the proceeds of the Bank Loans. Each Borrower hereby acknowledges that it expects to derive substantial economic benefit from the Bank Loans." 34. Amendment to Exhibits and Schedules to the Loan Agreement. The --------------------------------------------------------- Exhibits and Schedules to the Loan Agreement are hereby amended by (a) deleting Schedule III thereto in its entirety and substituting in lieu thereof Schedule - -------- --- -------- III attached hereto, (b) deleting Exhibit G thereto in its entirety and - --- ------- - substituting in lieu thereof Exhibit G attached hereto, (c) adding Exhibit X ------- - ------- - attached hereto, and (d) adding the attached new Schedules IV, V and 8.3(g) in --------- -- - ------ proper numerical order. 35. Forbearance and Waivers. ----------------------- (a) Pursuant to Section 2.2(b) of the Loan Agreement, all outstanding Revolving Credit Loans and Swing Line Loans matured on or before the Term-Out Date (November 5, 2001). As of the date hereof, such outstanding Revolving Credit Loans and Swing Line Loans, and interest thereon, have not been repaid (the "Non-Payment"). Subject to the terms and conditions hereof, each of the Agent and the Banks: (i) until the earliest to occur of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 35, hereby agrees (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 Default or Event of Default which occurred under Section 9.1(a) of the Loan Agreement as a result of the Non-Payment, (x) that the Agent and the Banks will not demand accelerated payment of the Borrower Obligations arising under the Loan Agreement and the other Loan Documents under Section 9.1 of the Loan Agreement or -43- otherwise cause any of such Borrower Obligations to become immediately due and payable, except that the Borrowers shall in any event continue to be required to make any and all payments 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of any Default or Event of Default which occurred under Section 9.1(a) of the Loan Agreement as a result of the Non-Payment) shall be determined without regard to any Default or Event of Default which occurred under Section 9.1(a) of the Loan Agreement as a result of the Non-Payment, 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 earliest to occur of (A), (B) and (C) set forth above; provided that the Borrowers shall pay -------- interest on such outstanding Revolving Credit Loans and Swing Line Loans at the Default Rate to the Banks for the period from November 5, 2001 through February 20, 2002; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, hereby waives any Default or Event of Default which occurred under Section 9.1(a) of the Loan Agreement as a result of the Non-Payment, provided that (A) the Borrowers -------- shall have paid interest on such outstanding Revolving Credit Loans and Swing Line Loans at the Default Rate to the Banks for the period from November 5, 2001 through February 20, 2002, and (B) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(x) hereof no later than March 15, 2002. (b) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the covenant set forth in Section 7.4(a) of the Loan Agreement (as in effect prior to the Effective Date) for the fiscal quarter of the Borrowers ended September 30, 2001; provided, however, that 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 0.5:1. (c) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the covenant set forth in Section 7.4(b) of the Loan Agreement (as in effect prior to the Effective Date) for the fiscal quarter of the Borrowers ended September 30, 2001; provided, however, that 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 0.6:1. (d) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the covenant set forth in Section 8.3(c)(ii) of the Loan Agreement (as in effect prior to the Effective Date); provided however, that the Loan or Loans made - -------- ------- -44- pursuant to such Section 8.3(c)(ii) shall not exceed $3,527,338 in aggregate outstanding principal amount. (e) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the covenant set forth in Section 8.3(e)(ii) of the Loan Agreement solely with respect to Investments made by the Borrowers in their Subsidiaries and Affiliates as set forth on Schedule III to -------- --- the Loan Agreement (as in effect prior to the Effective Date); provided, -------- however, that (x) Investments by the Borrowers in their Subsidiaries and - ------- Affiliates are in the particular Subsidiaries, and in the amounts with respect to each such Subsidiary, as are listed on Schedule III of the Loan Agreement (as -------- --- in effect on and after the Effective Date), and (y) no later than March 1, 2002 the Borrowers shall deliver to the Agent and the Banks written certification from M.R. Weiser, Inc. that each of the Investments amounts set forth in Schedule III of the Loan Agreement were accurate as of December 31, 2001, and - -------- --- remain accurate (or have not increased) as of January 31, 2002. (f) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the covenants set forth in Section 8.3(e)(iii)(B), Section 8.3(e)(v) and Section 8.3(e)(vi) of the Loan Agreement (each as in effect prior to the Effective Date); provided, however, that -------- ------- Investments by MFC (x) in the Guarantor made from September 22, 2000 through December 31, 2001 shall not have exceeded an aggregate amount of $8,647,158, (y) in BL made from September 22, 2000 through December 31, 2001 shall not have exceeded an aggregate amount of $33,167,205, and (z) in other Subsidiaries and Affiliates (excluding the Guarantor, BL and MBC) made from September 22, 2000 through December 31, 2001 shall not have exceeded an aggregate amount of $68,224,639. The Borrowers acknowledge and agree that the calculation method used to obtain the Investment amounts set forth in this subsection (f) (whereby the accumulated undistributed income of each Subsidiary as of December 31, 2000 was deducted from the amount of GAAP Investments reported as of December 31, 2000), while waived for purposes of determining compliance as of December 31, 2001 with clauses (x), (y) and (z) above, shall not be used after the Effective Date. (g) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the notice period set forth in Article 2B(d) of the Loan Agreement (as in effect prior to the Effective Date) for the Dividend to be paid by MFC on January 14, 2002; provided, however, that such -------- ------- Dividend shall not be paid earlier than January 14, 2002; and provided, further, -------- ------- that MFC shall make any Dividend Prepayment required by Article 2B(d) of the Loan Agreement. (h) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the covenant set forth in Section 6.15 of the Loan Agreement (as in effect prior to the Effective Date) for the fiscal quarter of the Borrowers ended December 31, 2001; provided, however, that (i) -------- ------- not more than 82% of the aggregate principal amount of all Loans made by the Borrowers and outstanding for such fiscal quarter shall be Commercial Loans and not fewer than 18% of the aggregate principal amount of all Loans made by the Borrowers and outstanding for such fiscal quarter shall be Medallion Loans, (ii) no later than January 31, 2002, the Borrowers shall be in compliance with Section 6.15 of the Loan Agreement and not more than 80% of the aggregate principal amount of all Loans made by the Borrowers and then outstanding shall be Commercial -45- Loans and not fewer than 20% of the aggregate principal amount of all Loans made by the Borrowers and then outstanding shall be Medallion Loans, and (iii) the Borrowers shall have delivered to the Agent and the Banks no later than no later than fifteen (15) Business Days following February 15, 2002 a certificate evidencing compliance with Section 6.15 of the Loan Agreement, which certificate shall also be certified by M.R. Weiser, Inc. as being true, correct and complete. (i) The Funding Agreement requires Medallion Funding to ensure that (i) the aggregate unpaid balance of all Senior Debt does not exceed the Borrowing Base (each as defined in the Funding Agreement), and (ii) for the fiscal quarter ended September 30, 2001, the ratio of (A) the sum of EBIT for the Second FQ01 plus EBIT for Third FQ01 (each as defined in the Funding Agreement) to (B) the - ---- sum of Interest Expense (as defined in the Funding Agreement) for such fiscal quarters not be less than 1.20:1. Medallion Funding has reported that (i) as of September 30, 2001 (A) Senior Debt exceeded the Borrowing Base (each as defined in the Funding Agreement) by $486,684, and (B) the ratio of (1) the sum of EBIT for the Second FQ01 plus EBIT for Third FQ01 (each as defined in the Funding ---- Agreement) to (2) the sum of Interest Expense (as defined in the Funding Agreement) for such fiscal quarters was 0.76:1, and (ii) as of November 30, 2001, Senior Debt may have exceeded the Borrowing Base (each as defined in the Funding Agreement) by no more than $600,000. Subject to the terms and conditions hereof, each of the Agent and the Banks hereby waives 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 Sections 7.3 and 7.5 of the Funding Agreement, provided that, (i) as of September 30, 2001, -------- (A) Senior Debt exceeded the Borrowing Base (each as defined in the Funding Agreement and in accordance with the Funding Agreement prior to the effectiveness of the amendment contemplated by Section 45(a)(xii) hereof) by no more than $486,684, and (B) the ratio of (1) the sum of EBIT for the Second FQ01 plus EBIT for Third FQ01 (each as defined in the Funding Agreement) to (2) the - ---- sum of Interest Expense (as defined in the Funding Agreement) for such fiscal quarters was no less than 0.76:1, and (ii) as of November 30, 2001, Senior Debt exceeded the Borrowing Base (each as defined in the Funding Agreement) by no more than $600,000. (j) The Funding Agreement requires that Medallion Funding not have any subsidiaries, and that it not transfer or sell any of its Loans (as defined in the Funding Agreement) in violation of the provisions of the Funding Agreement. On or before December 31, 2001, Medallion Funding formed a wholly-owned subsidiary, Medallion Funding Chicago Corp. ("MFCC") and transferred Yellow Cab ---- Loans (as defined in the Funding Agreement) to MFCC in an aggregate outstanding principal amount not exceeding $9,000,000. Subject to the terms and conditions hereof, each of the Agent and the Banks hereby waives any Default or Event of Default which may have occurred under Section 9.1(e) of the Loan Agreement as a result of Medallion Funding's non-compliance with Sections 4.2, 8.3(e)(ii), 8.11 and 8.16 through 8.18 of the Funding Agreement solely with respect to the formation of MFCC and the implementation of the Yellow Cab Transfer (as defined in the Funding Agreement), provided that the Yellow Cab Loans (as defined in the -------- Funding Agreement) transferred pursuant to the Yellow Cab Transfer (as defined in the Funding Agreement) shall remain subject to the lien and security interest of the agent for the banks party to the Funding Agreement, for the benefit of such agent and such banks, and that -46- Medallion Funding and MFCC comply with the requirements of Section 6.16 of the Funding Agreement. (k) The Funding Agreement does not permit Medallion Funding to make any Investments in Affiliates (each as defined in the Funding Agreement) other than those permitted by Section 8.3(e) of the Funding Agreement. Subject to the terms and conditions hereof, each of the Agent and the Banks hereby waives 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 8.3(e) of the Funding Agreement with respect to Investments made in MBC and Freshstart Venture Capital Corp. prior to December 31, 2001; provided, -------- however, that by January 31, 2002, MBC and Freshstart Venture Capital Corp. - ------- shall have repaid to Medallion Funding an amount equal to the Investments made by Medallion Funding in each such entity in the amounts and otherwise as set forth on Schedule III to the Funding Agreement and in compliance with Section -------- --- 6.16 of the Funding Agreement. (l) The Funding Agreement requires that Medallion Funding not breach certain covenants under the Note Purchase Agreement, including Section 10.13 of the Note Purchase Agreement, which requires that Medallion Funding ensure that the aggregate unpaid balance of all Senior Debt does not exceed Net Finance Assets (each as defined in the Note Purchase Agreement). Medallion Funding has reported that (i) as of September 30, 2001, Senior Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by $486,684, and (ii) as of November 30, 2001, Senior Debt may have exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $600,000 (the defaults in clauses (i) and (ii) collectively referred to as the "Specified Noteholder -------------------- Defaults"). Subject to the terms and conditions hereof, each of the Agent and - -------- the Banks: (i) until the earliest to occur of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 35, hereby agrees (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 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 the Specified Noteholder Defaults, (x) that the Agent and the Banks will not demand accelerated payment of the Borrower Obligations arising under the Loan Agreement and the other Loan Documents under Section 9.1 of the Loan Agreement or otherwise cause any of such Borrower Obligations to become immediately due and payable, except that the Borrowers shall in any event continue to be required to make any and all payments 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of 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 the Specified Noteholder Defaults) shall be determined without regard to -47- 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 the Specified Noteholder Defaults, 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 earliest to occur of (A), (B) and (C) set forth above; provided that (1) as of September 30, 2001, Senior -------- Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $486,684, and (2) as of November 30, 2001, Senior Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $600,000; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, hereby waives 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 the Specified Noteholder Defaults; provided that (A) as of September 30, 2001, Senior Debt exceeded -------- Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $486,684, (B) as of November 30, 2001, Senior Debt exceeded Net Finance Assets (each as defined in the Note Purchase Agreement) by no more than $600,000, and (C) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(x) hereof no later than March 15, 2002. (m) The Funding Agreement requires that Medallion Funding not breach certain covenants under the Note Purchase Agreement, including Section 10.7 of the Note Purchase Agreement, which requires that Medallion Funding ensure that the ratio of (i) Net Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) is not less than 1.20:1. Medallion Funding has reported that as of September 30, 2001, the ratio of (i) Net Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) was 0.76:1 (such default referred to as the "Financial --------- Noteholder Default"). Subject to the terms and conditions hereof, each of the - ------------------ Agent and the Banks: (i) until the earliest to occur of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 35, hereby agrees (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 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 the Financial Noteholder Default, (x) that the Agent and the Banks will not demand accelerated payment of the Borrower Obligations arising under the Loan Agreement and the other Loan Documents under Section 9.1 of the Loan Agreement or otherwise cause any of such Borrower Obligations to become immediately due and payable, except that the Borrowers shall in any event continue to be required to make any and all payments 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) and (b) of the Loan Agreement (solely with respect -48- to Section 4.20 of the Loan Agreement as a result of 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 the Financial Noteholder Default) shall be determined without regard to 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 the Financial Noteholder Default, 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 earliest to occur of (A), (B) and (C) set forth above; provided that as of September 30, -------- 2001, the ratio of (i) Net Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) was no less than 0.76:1; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, hereby waives 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 the Financial Noteholder Default; provided that (A) as of September 30, 2001, the ratio of (i) Net -------- Income plus Interest Expense to (ii) Interest Expense (each as defined in the Note Purchase Agreement) was no less than 0.76:1, and (B) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(x) hereof no later than March 15, 2002. (n) The Funding Agreement requires that Medallion Funding not make any Portfolio Purchases (as defined in the Funding Agreement). Medallion Funding has reported that as of January 31, 2002, Medallion Funding purchased $8,085,294.10 of Loans from MFC (such default referred to as the "Funding Portfolio Default" ------------------------- and such purchase referred to as the "Funding Portfolio Purchase"). Subject to -------------------------- the terms and conditions hereof, each of the Agent and the Banks: (i) until the earliest to occur of (A) March 15, 2002, (B) the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, and (C) the occurrence of a Default or Event of Default other than those expressly waived or forborne pursuant to this Section 35, hereby agrees (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 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 the Funding Portfolio Default, (x) that the Agent and the Banks will not demand accelerated payment of the Borrower Obligations arising under the Loan Agreement and the other Loan Documents under Section 9.1 of the Loan Agreement or otherwise cause any of such Borrower Obligations to become immediately due and payable, except that the Borrowers shall in any event continue to be required to make any and all payments 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) and (b) of the Loan Agreement (solely with respect to Section 4.20 of the Loan Agreement as a result of 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 the Funding Portfolio Default) shall be determined without regard to any Default or Event of Default which may have occurred or may occur under Section 9.1(e) of the Loan -49- Agreement as a result of the Funding Portfolio Default, 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 earliest to occur of (A), (B) and (C) set forth above; provided that as -------- of January 31, 2002, Medallion Funding shall not have made any Portfolio Purchase (as defined in the Funding Agreement) other than the Funding Portfolio Purchase; and (ii) following the effectiveness of the Senior Note Holders' waiver and consents required by Section 45(b)(x) hereof, hereby waives 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 the Funding Portfolio Default; provided that (A) as of January 31, 2002, Medallion Funding shall not have -------- made any Portfolio Purchase (as defined in the Funding Agreement) other than the Funding Portfolio Purchase, and (B) the Senior Note Holders shall have given the waiver and consents required by Section 45(b)(x) hereof no later than March 15, 2002. 36. Amendment to Section 1.1 of the Security Agreement. Section 1.1 of the -------------------------------------------------- Security Agreement is hereby amended by (a) deleting the first paragraph of the definition of "Collateral" in its entirety and substituting in lieu thereof the following new first paragraph: "Collateral" shall mean all assets (excluding the Capital Stock of ---------- Medallion Funding Chicago Corp.), including all of the following property and to the extent otherwise not included, all other personal and fixture property of every kind and nature, now owned or at any time hereafter acquired by either Borrower or in which either Borrower now has or at any time in the future may acquire any right, title or interest:"; (b) deleting the word "and" at the end of subsection (u) of the definition of "Collateral"; (c) adding the following new subsection (v) of the definition of "Collateral" in proper alphabetical order therein and relettering the current subsection (v) as subsection (w): "(v) commercial tort claims (the Agent acknowledges that the attachment of its security interest in any commercial tort claim as original collateral is subject to the Borrowers' compliance with Section 2.3(d) hereof); and"; (d) deleting the first sentence of the definition of "Obligations" in its entirety and substituting in lieu thereof the following new sentence: "Obligations" shall mean "Borrower Obligations" as set forth in ----------- -------------------- Section 1.1 of the Loan Agreement. and (e) deleting the definition of "Stock" in its entirety and substituting in lieu thereof the following new definition of "Stock: "Stock" shall mean the shares of Capital Stock owned by the Borrowers ----- as more fully described on Schedule A attached hereto and any additional -------- - shares of -50- Capital Stock of any Person or any securities exchangeable for or convertible into shares of such capital stock or other equity interests of any class acquired by either Borrower, by purchase, stock dividend, distribution of capital or otherwise, but shall not include (a) any shares of Capital Stock or any other securities, the pledge of which is subject to the receipt of consents (including lender consents) as may be required under the Loan Documents for any particular Subsidiary of either Borrower unless and until such consents are obtained; provided that the Borrowers shall have used their best efforts to obtain such consents, and (b) any shares of Capital Stock of Medallion Funding Chicago Corp." 37. Amendment to Section 2.3 of the Security Agreement. Section 2.3 of the -------------------------------------------------- Security Agreement is hereby amended by (a) deleting the word "and" at the end of Section 2.3(c) of the Security Agreement, and (b) adding the following new Section 2.3(d) of the Security Agreement in proper alphabetical order therein and relettering the current Section 2.3(d) of the Security Agreement as Section 2.3(e): "(d) If either Borrower shall, now or at any time hereafter, hold or acquire a commercial tort claim, such Borrower shall immediately notify the Agent in a writing signed by such Borrower of the particulars thereof and grant to the Agent, for the benefit of the CP Holders, the Banks and the Agent, 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; and". 38. Amendment to Section 4.1 of the Security Agreement. Section 4.1 of the -------------------------------------------------- Security Agreement is hereby amended by (a) deleting the word "and" at the end of Section 4.1(j) of the Security Agreement, and (b) adding the following new Section 4.1(k) of the Security Agreement in proper alphabetical order therein and relettering the current Section 4.1(k) of the Security Agreement as Section 4.1(l): "(k) The Borrowers hold no commercial tort claim except as indicated in writing to the Agent and the Banks; and". 39. Amendment to Section 5.2 of the Security Agreement. Section 5.2 of the -------------------------------------------------- Security Agreement is hereby amended by deleting the first paragraph of Section 5.2(d) of the Security Agreement and substituting in lieu thereof the following new first paragraph of Section 5.2(d) of the Security Agreement: "(d) Without limiting the provisions of Article 2C and Sections 6.23 and 8.15 of the Loan Agreement, upon the occurrence of an Event of Default, the Agent shall have the right to, and upon the direction of the Required Banks shall, require each Borrower to establish and maintain a lockbox service (which may be the Collateral Account) with such bank or banks as may be acceptable to the Agent. In the event either Borrower (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or agents) shall receive any monies, checks, notes, drafts or any other items of payment relating to, or proceeds of, the Loans, such Borrower agrees with the Agent as follows:". -51- 40. Amendment to Section 5.3 of the Security Agreement. Section 5.3 of the -------------------------------------------------- Security Agreement is hereby amended by deleting the first paragraph of Section 5.3(a) thereof and substituting in lieu thereof the following new first paragraph of Section 5.3(a) thereof: "(a) Upon receipt thereof in accordance with the terms of Section 5.3 of the Collateral Agency Agreement (if and to the extent applicable), any proceeds of any lockbox collection or sale of, or other realization upon, all or any part of the Collateral shall be applied by the Agent in the following order of priority:". 41. Amendment to Section 5.4 of the Security Agreement. Section 5.4 of the -------------------------------------------------- Security Agreement is hereby amended by deleting the first sentence of Section 5.4 of the Security Agreement and substituting in lieu thereof the following new first sentence of Section 5.4 of the Security Agreement: "To the extent permitted by the Loan Agreement and, if applicable, the Collateral Agency Agreement, the Agent, for the benefit of itself, the Banks and the CP Holders is hereby authorized, upon receipt of a request from the Company, to release any Collateral and to provide such releases and termination statements with respect to any Collateral in connection with any sale, exchange or other disposition thereof permitted under the Loan Agreement so long as (i) the Agent, for the benefit of itself, the Banks and the CP Holders, obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder." 42. Amendment to Section 10 of the Guaranty. Section 10 of the Guaranty is --------------------------------------- hereby amended by deleting Section 10 in its entirety and substituting in lieu thereof the following new Section 10: "10. Termination; Reinstatement. This Guaranty shall remain in full -------------------------- force and effect until the Agent and the Required Banks release the Guarantor from the Guaranty or until all Borrower Obligations have been paid in full and all commitments to lend under the Loan Agreement have been terminated. Notwithstanding the foregoing, this Guaranty shall continue to be effective or be reinstated, notwithstanding any such repayment in full of the Obligations, and termination of all commitments to lend under the Loan Agreement, 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." 43. Consent to Funding Amendment, etc. (a) Each of the Agent and the Banks --------------------------------- hereby consents to the amendment of the Funding Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement and Section 8.17 of the Loan Agreement, and (b) the Agent, in its capacity as Collateral Agent under the Collateral Agency Agreement, hereby consents to the amendment of the Funding Agreement dated as -52- of the date hereof for purposes of Section 2 of the Collateral Agency Agreement and Section 8.17 of the Loan Agreement. 44. Representations and Warranties, Etc. ----------------------------------- (a) Each of the Borrowers and the Guarantor 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 45 below are met, as follows: (i) The execution and delivery by each of the Borrowers and the Guarantor of this Amendment and all other instruments and agreements required to be executed and delivered by each of the Borrowers and the Guarantor in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by each of the Borrowers --------- --------- and the Guarantor 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 and the Guarantor, as the case may be, have been duly authorized by all necessary proceedings on behalf of each of the Borrowers and the Guarantor, as the case may be, and do not and will not contravene any provision of law or of any judgment, order or decree applicable to or binding on the Borrowers (or any of them) or the Guarantor, or of the Borrowers' or the Guarantor'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 Borrowers (or either of them) or the Guarantor. (ii) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which any of the Borrowers or the Guarantor 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. (iii) 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 and the Guarantor of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by each of the Borrowers and the Guarantor of the transactions among the parties contemplated hereby and thereby or referred to herein or therein. (iv) 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, -53- 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. (v) Each of the Borrowers and the Guarantor 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. (b) Each of the Borrowers and the Guarantor 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. 45. Effectiveness. ------------- (a) Section 1(a), Section 2 (a), Section 2(g), Section 2(i), Sections 4 - 6(a), Section 8, Sections 9(b) - 10, Section 12, Sections 14 - 19(a), Sections 19(c) - 24, Sections 26 - 34(a), Sections 34(d) - 43(a), and Sections 44 - 47 of 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: (i) This Amendment shall have been duly executed and delivered by each of the Borrowers, the Guarantor, the Agent and the Banks and shall be in full force and effect. (ii) The Agent shall have received from the Secretary of each Borrower and of the Guarantor a copy, certified by such Secretary to be true and complete as of such date, of each of (A) its charter or other organizational documents as in effect on such date of certification, (B) 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 ------- (A) and (B) of this subsection (ii), 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. (iii) The Agent shall have received from each Borrower and 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 -54- signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, the Amendment Documents. (iv) The Agent shall have received from each Borrower and from the Guarantor a good standing certificate for such Borrower and for the Guarantor, issued by the Secretary of State of Delaware, and evidence that such Borrower and such Guarantor 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. (v) The Agent shall have received favorable legal opinions addressed to the Agent and the Banks, dated as of such date, in form and substance satisfactory to the Agent, from counsel to the Borrowers and the Guarantor and Delaware counsel to the Borrowers, concerning corporate or other applicable entity authority matters and the enforceability of each of the Amendment Documents, and the Loan Agreement and the other Loan Documents as amended thereby, and concerning such other matters as the Agent may request. (vi) The Agent shall have received, for the pro rata account of --- ---- each Bank which executes and delivers its signature pages to the Agent, by February 20, 2002 in facsimile (to be followed by originals) or original form, amendment fees equal, in the case of each Bank, to 0.30% multiplied by such Bank's Revolving Credit Commitment in effect on the date hereof, provided that amounts previously received by the -------- Banks as negotiation fees pursuant to the Fee Letter dated as of January 31, 2002, among the Borrowers and the Agent shall be credited against such amendment fees. (vii) 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 connection with the preparation of this Amendment and ancillary documentation. (viii) The Fee Letter (as defined in the Loan Agreement, as amended hereby) shall have been duly executed and delivered by each of the Borrowers and the Agent and shall be in full force and effect, provided that amounts previously received by the Agent as an agent's -------- fee pursuant to the Fee Letter dated as of January 31, 2002, among the Borrowers and the Agent shall be credited against such agent's fee. (ix) All reports, statements, schedules, certificates and other documents required to be delivered to the Agent and each Bank pursuant to Section 6.1 of the Loan Agreement, as amended by this Amendment, shall have been so delivered. (x) The Agent shall have received evidence of the consent of the Funding Agreement banks under the Collateral Agency Agreement to this Amendment and the transactions contemplated hereby, and of the waiver of -55- any defaults existing immediately prior to the Effective Date under the Funding Agreement. (xi) The Agent shall have received (A) projections for Borrowers showing quarterly profits and loss, balance sheets and covenant calculations, and (B) accrual and cash earnings reconcilement to dividends for the past five years. (xii) The Agent shall have received evidence of the effectiveness of an amendment to the Funding Agreement. (xiii) The Agent shall have received a copy of the fully executed engagement letter dated as of December 14, 2001, evidencing the hiring of the Carl Marks Group. (xiv) The Agent shall have received a certificate from the Borrowers setting forth the Borrowers' Investments pursuant to Section 8.3(e) of the Loan Agreement as of the Effective Date and demonstrating compliance with the restrictions set forth in Section 8.3(e) of the Loan Agreement, as amended hereby, as of the Effective Date. (xv) The Agent shall have received, for the pro rata account of --- ---- each Bank, Default Rate interest, for the period from November 5, 2001 through February 20, 2002, on all outstanding Revolving Credit Loans and Swing Line Loans which matured on or before the Term-Out Date (November 5, 2001). (xvi) 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. (b)(i) Section 1(b), Sections 2(b) - (f), Section 2(h), Section 2(j), Section 3, Section 6(b), Section 7, Section 9(a), Section 11, Section 13 (other than the revisions to Article 2B(d) described therein), Section 19(b), Section 25, Section 34(b), Section 34(c) and Section 45(b) of this Amendment shall become effective as of the Effective Date, and (ii) the revisions to Article 2B(d) described in Section 13 of this Amendment shall become effective as of January 15, 2002; in each case described in clauses (i) and (ii) of this subsection (b), upon the satisfaction of each of the following conditions, in a manner satisfactory to, and in form and substance satisfactory to, the Agent: (w) The satisfaction of all conditions precedent set forth in Section 45(a) of this Amendment. (x) The Agent shall have received evidence of (A) the consent of the Senior Note Holders (1) under the Collateral Agency Agreement and the Note Purchase Agreement to the provisions of this Amendment requiring such consent and the transactions contemplated hereby, and (2) under the Collateral Agency Agreement, the Intercreditor Agreement and the Note -56- Purchase Agreement to the provisions of Amendment No. 6 (as such term is defined in the Funding Agreement) requiring such consent and the transactions contemplated thereby, and (B) the waiver of any defaults (including defaults occurring under Sections 9.5, 10.7, 10.8(e), 10.10, 10.13 and 10.14 of the Note Purchase Agreement) existing under the Note Purchase Agreement immediately prior to the date such consents and waiver are given; provided -------- that such waiver and consents are given no later than March 15, 2002. (y) The Agent (in its capacity as Agent under the Loan Agreement and in its capacity as Collateral Agent under the Collateral Agency Agreement) and the Banks shall have consented to the amendment of the Note Purchase Agreement for purposes of Section 2 of the Collateral Agency Agreement and Section 8.10 of the Loan Agreement. (z) Bingham Dana LLP shall have received payment of all fees and expenses outstanding as of the date the conditions in this Section 45(b) are satisfied, including, but not limited to, fees and expenses in connection with the preparation of necessary documentation. (c) Each of the parties signatory hereto agrees that the failure to obtain the waiver and consents of the Senior Note Holders required by Section 45(b)(x) hereof by March 15, 2002 shall cause all amounts owing under the Loan Agreement and the other Loan Documents to become immediately due and payable and shall constitute a payment Event of Default under Section 9.1(a) of the Loan Agreement, as well as a covenant Event of Default under Section 9.1(b) of the Loan Agreement. (d) For the avoidance of doubt, each of the parties signatory hereto acknowledges that any acceleration by the Senior Note Holders of the Senior Note Debt will constitute a new Event of Default (as defined in the Funding Agreement) under Section 9.1(f)(ii) of the Funding Agreement, which shall constitute a new Event of Default under Section 9.1(e) of the Loan Agreement. (e) Until such time as the Senior Note Holders provide the waiver and consents required by Section 45(b)(x) hereof, the Borrowers hereby agree that if Medallion Funding makes any prepayment of Senior Note Debt (other than the prepayment of the Senior Note Debt made as of February 11, 2002 in an aggregate amount not in excess of $1,000,000), the Borrowers shall simultaneously make a prepayment of the Borrower Obligations owing to the Agent and the Banks under the Loan Agreement and the other Loan Documents in an amount equal to (i)(x) the amount of the prepayment of Senior Note Debt divided by (y) the principal ------- -- amount outstanding of the Senior Note Debt multiplied by (ii) the ---------- -- Aggregate Revolving Credit Commitment, which prepayment shall be shared pro rata by the Banks in accordance with their respective --- ---- Percentages. Simultaneously with any such prepayment, the Borrowers hereby agree to voluntarily reduce the Aggregate Revolving Credit Commitment in accordance with Section 2.4 of the Loan Agreement, with the Aggregate Revolving Credit Commitment being irrevocably reduced by an amount -57- equal to the amount of the prepayment to be made to the Agent and the Banks pursuant to this clause (e), and each Bank's Revolving Credit Commitment being irrevocably reduced by an amount equal to its pro rata share of such --- ---- prepayment. In the event that no Bank Loans or other Borrower Obligations are outstanding at the time of such a prepayment of Senior Note Debt, no prepayment shall be made to the Banks, provided that the Borrowers -------- voluntarily reduce the Aggregate Revolving Credit Commitment as set forth above in this subsection (e). 46. 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, the Arranger, the Collateral Agent, the Swing Line Bank 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, the Arranger, the Collateral Agent, the Swing Line Bank or any Bank; and (c) each of the Agent, the Arranger, the Collateral Agent, the Swing Line Bank 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, the Arranger's, the Collateral Agent's, the Swing Line Bank'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, the Arranger, the Collateral Agent, the Swing Line Bank or any Bank to such Person, except the obligations to be performed by the Agent, the Arranger, the Collateral Agent, the Swing Line Bank 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, the Arranger, the Collateral Agent, the Swing Line Bank, 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. 47. 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 and the other Loan Documents, in each case as amended hereby, including, without limitation, the Bank 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 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 -58- 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 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 FINANCIAL CORP. By: /s/ Alvin Murstein -------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: /s/ James E. 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 E. 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: Senior Vice President 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: Vice President THE BANK OF NEW YORK By: /s/ Edward J. DeSalvio -------------------------- Name: Edward J. DeSalvio Title: Vice President JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank) By: /s/ Carol A. Kernblath -------------------------- Name: Carol A. Kernblath Title: Vice President ISRAEL DISCOUNT BANK OF NEW YORK By: /s/ Howard Weinberg ----------------------------------------- Name: Howard Weinberg Title: Senior Vice President By: /s/ Matilde Reyes ----------------------------------------- Name: Matilde Reyes Title: Vice President CITIBANK, N.A. (f/k/a European American Bank) By: /s/ George L. Stirling ----------------------------------------- Name: George L. Stirling Title: Vice President BANK LEUMI By: /s/ Paul Tine ----------------------------------------- Name: Paul Tine Title: Vice President By: /s/ Glen D. Kreutzer ----------------------------------------- Name: Glen D. Kreutzer Title: Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Jeff Millar ----------------------------------------- Name: Jeff Millar Title: Vice President ACKNOWLEDGED AND AGREED, - ------------------------ including for purposes of amendments - ------------------------------------ to the Guaranty: - ---------------- MEDALLION TAXI MEDIA, INC. By: /s/ Alvin Murstein --------------------------------- Name: Alvin Murstein Title:President By: /s/ James E. Jack --------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer EXHIBIT G BORROWING BASE CERTIFICATE 200__ To: Fleet National Bank (f/k/a Fleet Bank, National Association), as Agent (as defined below ) under a Second Amended and Restated Loan Agreement (the "Loan Agreement"), dated as of September 22, 2000, among Medallion Financial Corporation, a Delaware corporation ("MFC"), Medallion Business Credit, LLC, a Delaware limited liability company ("MBC"), the banks that from time to time are signatories thereto (including Assignees (as hereinafter defined), collectively, the "Banks" and individually, a "Bank"), and Fleet National Bank (f/k/a Fleet Bank, National Association), as a Bank ("Fleet"), as Swing Line Lender (the "Swing Line Lender"), and as Arranger and as Agent for the Banks (including any successor, the "Agent"). Terms used in this certificate shall have the same meaning as ascribed thereto in the Loan Agreement. The undersigned officers of the Borrowers certify that the information furnished herein as of ___________, 200__ as to the MFC Borrowing Base and the MBC Borrowing Base and Eligible Loans of MFC and MBC is true and correct and that as of the date hereof no Event of Default, or event which after notice or lapse of time or both would be an Event of Default exists under the Loan Agreement. I. MFC Borrowing Base A. MFC's Eligible Medallion Loans*/ $________ - B. Loans in Line A not collectible or 60+ days past due $________ C. Line A minus Line B $________ D. 83.3% of Line C $________ E. MFC's Eligible Commercial Loans*/ $________ -- (excluding Section 7a Loans) F. Loans in Line F not collectible or 60+ days past due $________ G. Line E minus Line F $________ H. 75% of Line G $________ I. MFC's Eligible Section 7a Loans*/ $________ -- J. Loans in Line I not collectible or 60+ days past due $________ K. Line I minus Line J $________ - ---------- */ without excluding Loans not collectible or 60+ days past due - L. 75% of Line K $________ M. Line D plus Line H plus Line L $________ N. MFC's Cash (up to $5,000,000) and Short-Term Investments $________ O. Borrowing Base Holdback $________ P. MFC BORROWING BASE - Line M plus Line N minus Line O $________ Q. Amount outstanding to MFC $________ R. Line P minus Line Q $________ (if positive, amount available to MFC; if negative amount due) II. MBC Borrowing Base A. MBC's Eligible Medallion Loans* $________ - B. Loans in Line A not collectible or 60+ days past due $________ C. Line A minus Line B $________ D. 83.3% of Line C $________ E. MBC's Eligible Commercial Loans*/ $________ -- F. Loans in Line F not collectible or 60+ days past due $________ G. Line E minus Line F $________ H. 80% of Line G $________ I. Line D plus Line H $________ J. MBC's Cash (up to $5,000,000) and Short-Term Investments $________ K. MBC BORROWING BASE - Line I plus Line J $________ L. Amount outstanding to MBC $________ M. Line K minus Line L $________ (if positive, amount available to MBC; if negative amount due) III. Total Borrowing Base A. Line I.O. plus Line II.K. $________ B. Total amount of outstanding Revolving Credit Loans, Term Loans and Swing Line Loans $________ C. Line A minus Line B $________ (if positive, amount available (subject to I and II); if negative, amount due) IV. Senior Debt Coverage A. Indebtedness of MFC and MBC with respect to Commercial Paper $________ - ---------- */ (if positive, amount available to NEC; if negative amount due) - B. Indebtedness of MFC and MBC incurred in accordance with (S)8.2(i) C. Line I.P. plus Line II.L. $__________ D. Line A plus Line B plus Line C $__________ E. Line III.A. minus Line D $__________ (if positive, amount available (subject to I, II and III); if negative, amount due) Very truly yours, MEDALLION FINANCIAL CORPORATION By:_________________________________ Name: Alvin Murstein Title: Chief Executive Officer By:_________________________________ Name: James E. Jack Title: Executive Vice President and Chief Financial Officer MEDALLION BUSINESS CREDIT, LLC By:_________________________________ Name: Alvin Murstein Title: Chief Executive Officer By:_________________________________ Name: James E. Jack Title: Executive Vice President and Chief Financial Officer EXHIBIT X --------- Excess Dividend Calculations ---------------------------- For the Fiscal Quarter Ended: ______________ - ---------------------------- A. Excess Dividends ---------------- 1. Adjusted Net Investment Income of MFC $___________ Multiplied by ------------- 2. Ninety Percent (90%) (Line A(1) multiplied by 90%) $___________ ---------- -- 3. Amount of Dividends Paid During the Prior Fiscal Quarter by MFC $___________ 4. Excess Dividends (Line A(3) minus Line A(2)) $___________ ----- If Line 4 is positive, proceed to Part B; if $0 or a negative number, no Dividend Prepayment is Required. B. Dividend Prepayment ------------------- 1. Payment Amount One a. $2,000,000 $2,000,000 b. (i) .018 (ii) Amount of Sections 8.2(i)(i)(A) and 8.2(i)(ii) Indebtedness $___________ (iii) Line (B)(1)(b)(i) multiplied by ---------- -- Line B(1)(b)(ii) $___________ c. Total of Payment Amount One (Line B(1)(a) plus Line (B)(1)(b)(iii)) $___________ ---- 2. Payment Amount Two a. (i) 4 (ii) Line A(4)(a) (iii) Total (Line B(2)(a)(i) multiplied by Line ---------- -- B(2)(a)(ii)) $___________ b. (i) Sections 8.2(i)(i)(A) and 8.2(i)(ii) Indebtedness $___________ (ii) $110,000,000 $110,000,000 (iii) Line B(2)(b)(i) divided by ------- -- Line B(2)(b)(ii) $___________ (iv) Line B(2)(b)(iii) multiplied by 4 multiplied by ---------- -- ---------- -- Line A(4)(a) $___________ c. Payment Amount Two (Line B(2)(a)(iii) plus Line B(2)(b)(iv)) $___________ ---- 3. Dividend Prepayment - The greater of Line (B)(1)(c) and Line B(2)(c) $___________ 1011205.1 Medallion Financial Corp Schedule III Investment in Subsidiaries (a) Medallion Funding Corp. $ 68,224,639 Medallion Capital Corp. 19,060,448 Freshstart Venture Capital 7,448,988 Business Lenders 7,840,000 Medallion Business Credit 2,500,000 ---------------------------- Total Investment in Subsidiaries 105,074,075 ---------------------------- ---------------------------- Investment in Unconsolidated Subsidiary (Media) (a) 8,647,158 ---------------------------- Intercompany Receivables Medallion Capital Corp 236,414 Freshstart Venture Corp 838,301 Business Lenders 25,327,205 Medallion Business Credit 50,685,197 ---------------------------- Total Intercompany Receivables 77,087,117 ---------------------------- ---------------------------- Total Investments in Subsidiaries $ 190,808,350 ============================ Balances subject to year-end audit
(a) The investments at December 31, 2001 exclude Accumulated Undistributed Income Overinvestment Amounts Medallion Taxi Media $ 3,646,158 ------------------ Business Lenders $ 2,345,111 ------------------ Medallion Funding Corp $ 5,090,378 ------------------ COMBINED MEDALLION FINANCIAL CORP & MEDALLION BUSINESS CREDIT
Schedule IV Bank Accounts - ----------- ------------- Company/Bank Account Number Purpose Location -------------------------------------------------------------------------------- MEDALLION FINANCIAL CORP. - -------------------------- Fleet Bank 2173-008210 Operating 100 Federal Street, Boston, MA 02110 Fleet Bank 2598-022914 Zero balance Golden Bridge, NY 10526 Fleet Bank 9403-543588 Payroll 100 Federal Street, Boston, MA 02110 Chase Manhattan Bank 134-737652 Depository 270 Park Avenue NY, NY 10017/ 401 Madison MEDALLION BUSINESS CREDIT - -------------------------- Chase Bank - Regular 134-673867 Depository 270 Park Avenue NY, NY 10017/ 401 Madison Chase Bank - Austin 134-696239 Depository 270 Park Avenue NY, NY 10017/ 401 Madison Fleet Bank 9415-855079 Operating 100 Federal Street, Boston, MA 02110
SCHEDULE 5 ADDBACK TO EBIT CALCULATION FOR EXTRAORDINARY PROFESSIONAL FEES RECORDED DURING THE QUARTER ENDING MARCH 31, 2002 Combined Medallion Medallion Financial & Company Total Funding Business Credit - -------------------------------------------------------------------------------- Kaye Scholer 125,000 125,000 0 Bingham Dana 188,000 38,000 150,000 Willkie Farr & Gallagher 156,000 31,000 125,000 Carl Marks Group 250,000 0 250,000 Nightingale 344,000 344,000 0 --------------------------------------------------- 1,063,000 538,000 525,000 =================================================== Schedule 8.3(g) SALES OF LOANS MADE BY THE BORROWER TO AN AFFILIATE PRIOR TO THE AMENDMENT -------------------------------------------------------------------------- NO. 3 EFFECTIVE DATE --------------------
Transaction ----------- Month Sale # Seller Purchaser Amount ----- ------ ------ --------- ------ January February March 1 Medallion Capitol Medallion Funding $ 625,000.00 2 Business Lenders Medallion Financial $29,747,702.49 3 Business Lenders Medallion Financial $10,726,850.30 April 4 Medallion Capitol Medallion Funding $ 950,000.00 5 Business Lenders Medallion Financial $ 1,578,800.00 May 6 Business Lenders Medallion Financial $ 1,371,566.12 June 7 Medallion Capitol Medallion Funding $ 7,000,000.00 8 Business Lenders Medallion Financial $ 3,690,616.39 July 9 Business Credit Medallion Funding $ 2,500,000.00 August 10 Medallion Capitol Medallion Funding $ 1,500,000.00 11 Business Lenders Medallion Financial $ 1,145,788.83 September 12 Business Lenders Medallion Financial $ 3,225,125.21 13 Medallion Financial Medallion Funding $ 5,984,455.25 14 Medallion Financial Medallion Funding $ 668,070.96 15 Medallion Financial Medallion Funding $ 5,325,710.82 October 16 Freshstart Medallion Funding $ 6,071,858.27 17 Business Lenders Medallion Financial $ 2,336,056.16 November 18 Business Lenders Medallion Financial $ 1,250,675.00 19 Medallion Financial Medallion Funding $ 4,412,778.02 December 20 Business Lenders Medallion Financial $ 5,180,175.45 21 Medallion Funding Freshstart $ 4,172,682.00 22 Medallion Funding Medallion Capitol $ 3,525,054.00 23 Medallion Financial Medallion Funding $ 387,828.80 24 Medallion Financial Medallion Funding $ 624,021.42 January 25 Business Lenders Medallion Financial $ 1,674,031.65 26 Medallion Funding Freshstart 571,849.66 February 27 Business Lenders Medallion Financial 79,500.00 28 Medallion Funding Freshstart 1,074,489.37 March 29 Business Lenders Medallion Financial 313,532.15 May 30 Medallion Funding Medallion Capital 950,000.00 June 31 Medallion Funding Medallion Capital 450,000.00 32 Medallion Funding Medallion Capital $ 6,691,423.44
-2- EX-10.40 8 dex1040.txt SECURITY AGREEMENT, DATED AS OF FEBRUARY 20, 2002 Exhibit 10.40 SECURITY AGREEMENT among MEDALLION FUNDING CHICAGO CORP., as debtor, and FLEET NATIONAL BANK (f/k/a, Fleet Bank, National Association) as Agent and secured party, for the benefit of THE BANKS AND SWING LINE LENDER SIGNATORY TO THE AMENDED AND RESTATED LOAN AGREEMENT, DATED AS OF DECEMBER 24, 1997 AMONG MEDALLION FUNDING CORP., THE BANKS SIGNATORY THERETO, THE SWING LINE LENDER AND FLEET NATIONAL BANK, AS ARRANGER AND ADMINISTRATIVE AGENT, and THE HOLDERS OF COMMERCIAL PAPER ISSUED BY MEDALLION FUNDING CORP. _______________________________ dated as of February 20, 2002 _______________________________ SECURITY AGREEMENT This SECURITY AGREEMENT, dated as of February 20, 2002, is among MEDALLION FUNDING CHICAGO CORP., a Delaware corporation (the "Company"), and FLEET NATIONAL BANK (f/k/a FLEET BANK, National Association), a national banking association, as collateral agent for the banks that from time to time are signatories to the Loan Agreement (hereinafter defined) (collectively, the "Banks" and individually, a "Bank;" which term as used in this Security ----- ---- Agreement shall be deemed to include the Swing Line Lender set forth in such Loan Agreement, unless the context clearly indicates otherwise) and as collateral agent for the CP Holders (as defined in the Loan Agreement) (in such capacity, the "Agent"). ----- RECITALS WHEREAS, Fleet National Bank, as Agent (in such capacity, the "Administrative Agent") and the Banks have entered into an Amended and Restated Loan Agreement, dated as of December 24, 1997 (as the same may have been amended, modified, supplemented or restated prior to the effectiveness hereof, the "Loan Agreement"), with the Medallion Funding Corp., a New York Corporation -------------- (the "Borrower") providing for revolving credit loans (including the Initial Revolving Credit Loan) (the "Revolving Credit Loans," which term as used in this ---------------------- Security Agreement shall be deemed to include the Swing Line Loans (as defined in the Loan Agreement) unless the context clearly indicates otherwise) and term loans (the "Term Loans") not to exceed the amounts provided in the Loan ---------- Agreement. WHEREAS, the Loan Agreement is an amendment and restatement of the Original Agreement dated as of the Original Effective Date; WHEREAS, in connection with the Original Agreement, the Borrower entered into a Security Agreement; WHEREAS, the is a wholly-owned subsidiary of the Borrower; WHEREAS, it is a condition to the effectiveness of Amendment No. 6 (as defined in the Loan Agreement) that the Company guaranty the Borrower Obligations and, in order to secure such obligations pursuant to the Guaranty of even date herewith (the "Guaranty") issued by the Company in favor of the Agent, execute and deliver to the Agent, for the benefit of the Banks, the Agent and the CP Holders, a security agreement in substantially the form hereof; WHEREAS, the Banks are willing to consent to the grant of the security interest in the Collateral to the Agent for the benefit of the CP Holders (in addition to the Banks and the Administrative Agent), provided that in the case of each of the CP Holders such security interest granted to the Agent for such CP Holder's benefit shall only be effective to the extent that such CP Holder has (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on terms and conditions satisfactory to the Agent and with duties consistent with those necessary to enable the Agent (in its opinion) to perform its duties as collateral agent under this Agreement, (b) consented to and agreed to be bound by the terms of this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in its capacity as collateral agent, in a manner satisfactory to the Agent, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. WHEREAS, by accepting the security granted by, and the other benefits of, this Agreement, each CP Holder shall be deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to the terms of this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in its capacity as collateral agent, pursuant to the terms of this Agreement, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. NOW, THEREFORE, in consideration of the willingness of the Administrative Agent and the Banks to enter into the Loan Agreement and to agree, subject to the terms and conditions thereof, to make the Revolving Credit Loans and/or Term Loans to the Borrower pursuant thereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Agent hereby covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Defined Terms. Capitalized terms defined in the foregoing caption and recitals shall have the respective meanings ascribed thereto. Capitalized terms defined in the Loan Agreement and not otherwise defined in this Agreement shall have the meanings ascribed to those terms in the Loan Agreement. In addition, as used herein, the following terms shall have the following meanings: "Accounts" shall have the meaning assigned to it in Section 9-102(2) of the -------- UCC. "Books and Records" shall mean all books, records, computer files and other ----------------- Information relating to any of the Collateral. "Chattel Paper" shall have the meaning assigned to it in Section 9-102(11) ------------- of the UCC. "Collateral" shall mean all assets, including all of the following property ---------- and to the extent otherwise not included, all other personal and fixture property of every kind and nature, now owned or at any time hereafter acquired by the Company or in which the Company now has or at any time in the future may acquire any right, title or interest: (a) all Loans; 3 (b) all property and rights, including, but not limited to, Underlying Collateral, which now or hereafter secure any of the Loans; (c) all Books and Records; (d) all amounts deposited in any Collateral Account; (e) all Contracts; (f) all rights and remedies of the Company with respect to, or in connection with, any contract, security interest, guaranty or other document, instrument or agreement relating to or affecting any Loans or any Underlying Collateral; (g) all General Intangibles; (h) all Instruments; (i) all Chattel Paper; (j) all Equipment; (k) all Inventory; (l) all Investments; (m) all Investment Property; (n) all Accounts; (o) all Receivables; (p) all Documents; (q) all property and rights, including, but not limited to, items described in clauses (b) through (o) hereof, repossessed, or otherwise acquired in connection with any Loans or the exercise by the Company of any rights of a secured party under or with respect to any of the Loans or this Agreement or arising out of the sale or disposition of any Loans, any other Collateral, or in connection with the sale of any repossessed property; (r) all parts, accessions, accessories, goods, appurtenant or related to any of the foregoing, replacement parts, trade names, closes in action, now or hereafter affixed thereto, arising therefrom, used in connection therewith, or related to the use, possession or operation thereof; 4 (s) all cash and Short-Term Investments; (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; (v) commercial tort claims (the Agent acknowledges that the attachment of its security interest in any commercial tort claim as original collateral is subject to the Company's compliance with Section 2.4(d) hereof); and (w) to the extent not otherwise included, all Proceeds, products, substitutions and replacements of any and all of the foregoing. "Collateral Account" shall mean the one or more accounts of the Company ------------------ maintained with the Agent and containing such reasonable terms as shall be agreed to by the Agent. "Contracts" shall mean all contracts and agreements, including, but not --------- limited to, loan agreements, security agreements, guaranties, intercreditor agreements, office leases, lease agreements for mobile goods (as defined in the UCC) (whether or not covered by a certificate of title), indemnity agreements, license agreements, rental agreements and all other contracts and agreements of every kind and nature whatsoever. "Depository Accounts" shall mean accounts of the Company containing any ------------------- deposits or other sums credited to such Borrower, whether in regular or special depository accounts or otherwise. "Documents" shall have the meaning assigned to it in Section 9-102(30) of --------- the UCC. "Equipment" shall mean all machinery, equipment, fixtures, vehicles, office --------- equipment, furniture, furnishings, inventories, supplies, computer equipment and all other equipment whatsoever, wherever located, together with all attachments, components, parts, equipment and accessories installed therein or affixed thereto, including, but not limited to, all equipment as defined in Section 9-102(33) of the UCC and all products, profits, rents and proceeds of any of the foregoing; all whether now owned or hereafter created or acquired. "General Intangibles" shall have the meaning assigned to it in Section ------------------- 9-102(42) of the UCC and shall include, but not be limited to, all interests in and to Permits and Licenses, Medallion Rights, tax refund claims, patents, patent applications, rights to sue and recover for past infringement of patents, trademarks, tradenames, trademark applications, copyrights, copyright applications, trade secrets, licenses and know-how. 5 "Information" shall mean books, records, delivery receipts, copies of ----------- checks and stubs, security documents, division of interest files, bank reconciliation statements, remittances, revenue accounting records, invoices, leases, licenses, authorizations for expenditures, contracts and such other documents, and all other recorded information and data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics. "Instruments" shall have the meaning assigned to it in Section 9-102(47) of ----------- the UCC. "Inventory" shall mean all inventory, goods, raw materials, components and --------- other personal property, wherever located, including, but not limited to, all inventory as defined in Section 9-102(48) of the UCC. "Investment" in any Person shall mean any loan, advance, or extension of ---------- credit to or for the account of; any guaranty, endorsement or other direct or indirect contingent liability in connection with the obligations, Capital Stock or dividends of; any ownership, purchase or acquisition of any assets, business, Capital Stock, obligations or securities of; or any other interest in or capital contribution to; such Person. "Investment Property" shall have the meaning assigned to it in Section ------------------- 9-102(49) of the UCC, including, without limitation, securities as defined in the UCC. "Law" shall mean any law, regulation, guideline, treaty or directive or --- condition or interpretation thereof, including without limitation, any request, guideline or policy, whether or not having the force of law. "Loan" shall mean any loan, advance or extension of credit made in the ---- ordinary course of business by the Company to or for the account of any client or customer of the Company. Any loan, advance or extension of credit made at a different point in time shall be deemed to be a separate and distinct Loan. "Loan Documents" shall mean and collectively refer to the Loan Documents -------------- (as defined in the Loan Agreement) and all other agreements, instruments and documents, including, without limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust account agreements and all other written matters whether heretofore, now or hereafter executed by or on behalf of either the Borrower or the Company and/or delivered to the Agent, the Administrative Agent or the Banks, with respect to this Agreement, or the transactions contemplated by this Agreement. "Medallion" shall mean the plate which displays the license number of a --------- licensed Taxicab on the outside of the vehicle and which is issued by the New York City Taxi and Limousine Commission or by any other Governmental Authority for a jurisdiction other than New York City with the authority to issue licenses for the operation of Taxicabs. 6 "Medallion Rights" shall mean (a) all license, operating and/or ---------------- subscription rights to Taxicab Medallion(s), and all license, operating and/or subscription rights evidenced by such Medallion(s) and (b) all renewals thereof. "Obligations" shall mean all indebtedness, obligations, and liabilities of ----------- the Company under the Loan Documents, including, without limitation, under or in respect of the Company's guaranty of the Borrower Obligations pursuant to the Guaranty. Without limiting the generality of the foregoing, the Obligations shall include the liability of the Borrower or the Company to any Bank for all balances owing to any Bank in any account maintained on such Bank's books under the Loan Agreement or under any other agreement or arrangement now or hereafter entered into between Borrower or the Company and the Agent, the Administrative Agent or any Bank in connection therewith, and, in connection with this Agreement or the Loan Agreement, (i) indebtedness owing by the Borrower or the Company to the Agent, the Administrative Agent or any Bank, (ii) the liability of the Borrower or the Company to the Agent, the Administrative Agent or any Bank as maker or endorser of any promissory note or other instrument for the payment of money, and (iii) the liability of the Borrower or the Company to the Agent, the Administrative Agent or any Bank under any instrument of guaranty or indemnity, or arising under any guarantee, endorsement, or undertaking which the Agent, the Administrative Agent or any Bank may make or issue to others for the account of the Borrower or the Company, including without limitation, any accommodation extended to the Borrower or the Company with respect to letters of credit, acceptance of drafts, or endorsement of notes or other instruments by the Agent, the Administrative Agent or such Bank for the account and benefit of the Borrower or the Company. The Obligations shall also include interest, premium (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 Agent and the Administrative Agent and the costs and expenses of filing, perfecting, preserving, retaking, holding, and preparing any of the Collateral for sale chargeable to the Borrower or the Company and due from the Borrower or the Company under this Agreement, the Loan Agreement or under any other agreement or arrangement which may be now or hereafter entered into between the Borrower or the Company and the Agent, the Administrative Agent or the Banks and shall also include (i) any obligation or liability in respect of any breach of any representation or warranty, and (ii) all post-petition interest and funding losses. "Other Agreements" shall mean collectively any of the Loan Documents other ---------------- than this Agreement. "Percentage of the Obligations" shall mean with respect to the ----------------------------- Administrative Agent or any Bank the percentage which is equal to the product of (x) 100 times (y) a fraction, the numerator of which is the total amount of Obligations owing to the Administrative Agent or such Bank, as the case may be, at the time of computation and the denominator of which is the total amount of the Obligations as of such time. 7 "Permits and Licenses" shall mean (a) all applicable authorizations, -------------------- consents, certificates, licenses, rights-of-way permits, approvals, waivers, exemptions, encroachment agreements, variances, franchises, permissions, and permits of any Governmental Authority or any other Person and all documents and applications filed in connection therewith, and (b) all renewals thereof. "Permitted Liens" shall mean the Liens permitted pursuant to Section 8.1 of --------------- the Loan Agreement. "Proceeds" shall have the meaning assigned to it in Section 9-102(64) of -------- the UCC and shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty existing from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Real Property" shall mean real property of a Person or an ultimate ------------- beneficial owner of such Person or machinery or Equipment of such Person or beneficial owner forming a part of, or affixed to, such real property. "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. "Stock" shall mean the shares of Capital Stock owned by the and any ----- additional shares of Capital Stock of any Person or any securities exchangeable for or convertible into shares of such capital stock or other equity interests of any class acquired by the Company, by purchase, stock dividend, distribution of capital or otherwise, but shall not include any shares of Capital Stock or any other securities, the pledge of which is subject to the receipt of consents (including lender consents) as may be required under the Loan Documents unless and until such consents are obtained; provided that the Company shall have used its best efforts to obtain such consents. "Taxicab" shall mean a motor vehicle carrying passengers for hire, duly ------- licensed as a taxicab by the New York City Taxi and Limousine Commission, or any other Governmental Authority for a jurisdiction other than New York City, and permitted to accept hails from passengers in the street. "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial --- Code as then in effect in that jurisdiction. Unless the context otherwise requires, references to the UCC contained herein shall mean the Uniform Commercial Code as then in effect in the State of New York. 8 "Underlying Collateral" shall mean all of the Company's rights with respect --------------------- to, or interest in, any and all present and future Medallion Rights, Equipment, Real Property, machinery, Inventory, Receivables, Accounts, future accounts, accounts receivable, contracts, contract rights, General Intangibles, books, desks, notes, bills, drafts, acceptances, choses in action, Chattel Paper, Instruments, Documents and other forms of obligations, and property, real, personal or mixed, tangible or intangible, at any time owing to or owned by any Person to whom the Company has made a Loan, or any guarantor of such Person. SECTION 1.2. Accounting Terms. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP. SECTION 1.3. Rules of Construction. (a) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders, and words importing the singular number shall mean and include the plural number and vice versa. (b) The terms "hereby," "hereto," "hereof," "herein," and "hereunder" and any similar words refer to this Agreement as a whole and not to any particular provisions of this Agreement. The term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of this Agreement, and "Article," "Section," "Schedule," "Exhibit" and like references are to this Agreement unless otherwise specified. (c) Any defined term that relates to a document shall include within its definition any amendments, modifications, renewals, restatements, extensions, supplements, or substitutions which may have been heretofore or may be hereafter executed in accordance with the terms thereof. (d) References in this Agreement to particular sections of the UCC or to any other legislation shall be deemed to refer also to any successor sections thereof or other redesignations for codification purposes. Unless otherwise indicated, references in this Agreement to the UCC shall mean the UCC as in effect in the State of New York. (e) All terms used in this Agreement that are not capitalized shall have the meanings provided by the UCC as in effect in the State of New York to the extent the same are used or defined therein. ARTICLE II CREATION OF SECURITY INTEREST SECTION 2.1. Grant of Security Interest to Agent. To induce the Banks to make the Revolving Credit Loans and/or Term Loans to the Borrower and, as security for any and all Obligations of the Borrower, and as security for the Borrower's Permitted 9 Debt owing to the CP Holders, the Company hereby grants, pledges and assigns to the Agent for the ratable benefit of the Agent, the Administrative Agent, the Banks and the CP Holders a continuing lien on and security interest in the Collateral, which shall be a first priority lien (except for the Permitted Liens entitled to priority under applicable law) and, in furtherance of such grant, the Company hereby assigns for security all of the Collateral to the Agent for the ratable benefit of the Agent, the Administrative Agent, the Banks and the CP Holders. SECTION 2.2. Intercreditor Agreement. The Agent, on behalf of itself, the CP Holders and the Banks, acknowledges and agrees that the Collateral granted to the Agent for the benefit of itself, the CP Holders and the Banks pursuant to this Agreement, shall constitute "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. SECTION 2.3. Perfection. At any time or times the Company shall execute and deliver to the Agent, at the Agent's request, all assignments, certificates of title, conveyances, assignment statements, financing statements, renewal financing statements, security agreements, affidavits, mortgages, mortgage assignments, trust deeds, notices and all other agreements, instruments and documents that the Agent reasonably may request, in form satisfactory to the Agent, and shall take any and all other steps reasonably requested by the Agent, in order to perfect and maintain the security interests and liens granted herein, and to consummate fully all of the transactions contemplated under this Agreement and any Other Agreements. SECTION 2.4. Recording, Registering, Filing, Etc. At any time or times when the Agent reasonably deems it necessary, the Company will perform, or will cause to be performed, each of the following: (a) Record, register and file such notices, certificates of title, financing statements, mortgage assignments, trust deeds and other documents or instruments as may, from time to time, be requested by the Agent to carry out fully the intent of this Agreement, with such administrations or governmental agencies as may be necessary or advisable in order to perfect, establish, confirm, and maintain the security interests and liens created hereunder, as legal, valid, and binding security interests and liens upon the Collateral; (b) Furnish to the Agent evidence of every such recording, registration and filing; (c) Execute and deliver or perform, or cause to be executed and delivered or performed, such further and other instruments or acts as the Agent reasonably determines are necessary or desirable to carry out fully the intent and purpose of this Agreement or to subject the Collateral to the security interest and lien created hereunder, including, without limitation, defending the title of the Company to the Collateral by means of 10 negotiation with and, if necessary, appropriate legal proceedings against, each party claiming an interest therein contrary or adverse to the Company's title to same; (d) If the Company shall, now or at any time hereafter, hold or acquire a commercial tort claim, the Company shall immediately notify the Agent in a writing signed by the Company of the particulars thereof and grant to the Agent, for the benefit of the CP Holders, the Banks and the Agent, 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; and (e) In case of certain revisions to Article 9 of the UCC described in Section 6.16 hereof, comply with all of the requirements of and its agreements contained within such Section 6.16. SECTION 2.5. Delivery of Documents. (a) As promptly as practicable after the date hereof (but in no event later than 10 Business Days after the date hereof), the Company shall deliver to the Agent all instruments evidencing all Loans (collectively, the "Collateral Notes") of the Company then outstanding and ---------------- if any such Loan is secured by Real Property, a Mortgage Assignment with respect to each such Loan. In addition, each time the Company shall make a new Loan, the Company shall immediately deliver to the Agent the Collateral Note evidencing such Loan and if such Loan is secured by Real Property, a Mortgage Assignment with respect to each Loan. The Agent shall keep all Collateral Notes and Mortgage Assignments at its office in Farmington, Connecticut in a vault or other place of similar security. The Company and its authorized agents and representatives, which shall include its Independent Public Accountants, shall at all times, during normal business hours, have full access to examine, but not to remove, without the prior consent of the Agent, the Collateral Notes and Mortgage Assignments; provided, however, that (i) the Company and/or its authorized agent shall have given the Agent at least one (1) Business Day's prior notice, or such other notice as may be required by applicable provisions of the Investment Company Act of 1940, as amended, before seeking access to the Collateral Notes and Mortgage Assignments and (ii) the Agent shall, in its sole discretion, be entitled to have one of its employees, agents or representatives present at all times or from time to time during any such period of access. (b) Upon the Agent's request, the Company shall immediately deliver to the Agent or its designee, at the Borrowers' joint and several expense, copies of all Documents, Chattel Paper, security agreements, guarantees and other writings evidencing any Loan or its related Underlying Collateral. (c) Upon the Agent's request, the Company shall immediately endorse and deliver to the Agent or its designee all Documents, Instruments, Chattel Paper, security agreements, guarantees and other writings so requested by the Agent evidencing any Collateral of the Company, such Documents, Instruments, Chattel Paper, security agreements, guarantees and other writings to be held as Collateral under the terms of this Agreement. 11 (d) The Agent shall have no obligation to inspect or examine any of the Collateral Notes, Mortgage Assignments or other documents delivered to it by the Company hereunder, and shall be entitled to assume, and shall be fully protected in assuming, without inspection or examination, that the Company has complied in full with its delivery obligations hereunder. (e) Pursuant to the terms hereof, the Company has assigned and delivered to the Agent all certificates representing the certificated securities pledged by the Company hereunder, together with instruments of transfer or assignment duly executed in blank as the Agent may have specified. In the event that the Company shall, after the date of this Agreement, acquire any other certificated securities to be pledged by it hereunder, the Company shall forthwith assign and deliver certificates representing such certificated securities to the Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time specify. To the extent that any securities are uncertificated (or in the case of uncertificated securities hereafter acquired by the Company), at the request of the Agent, the Company shall (i) make appropriate book-entry transfers reflecting the pledge of such securities created hereby for the account of the Agent or one or more nominees of the Agent with the issuer of such securities or other appropriate book-entry facility or financial intermediary, with the Agent having at all times the right to obtain definitive certificates (in the Agent's name or in the name of one or more nominees of the Agent) where the issuer customarily or otherwise issues certificates, all to be held as Collateral hereunder or (ii) take such other action to establish "control" (as such term is defined in the UCC) by the Agent over such uncertificated securities. The Company agrees that the Agent from time to time may attach hereto an updated Schedule A. The Company hereby acknowledges that the Agent may, in its discretion, appoint one or more financial institutions to act as the Agent's agent in holding in custodial account instruments or other financial assets in which the Agent is granted a security interest hereunder, including, without limitation, certificates of deposit and other instruments evidencing short term obligations. SECTION 2.6. Further Assurances. (a) At any time or times, upon request by the Agent, in addition to the acts specifically required to be performed by the Company elsewhere under this Agreement, the Company shall do all other things and sign and deliver all other documents and instruments reasonably requested by the Agent to perfect, protect, maintain and enforce the security interests and liens of the Agent in the Collateral, and the first priority of such security interests and liens, and other rights granted hereunder or under any other present or future agreement between or among the Company and the Agent, including, without limitation, the Loan Documents. Such acts shall include but not be limited to the marking of the Company's Books and Records, Chattel Paper and Instruments to show the Agent's security interests and liens and the recording of Mortgage Assignments and/or the filing of financing, renewal and/or continuation statements under the UCC or other documents evidencing the Agent's liens under applicable law and the delivery of any Collateral the physical possession of which is necessary or desirable in order for the Agent to perfect its liens. The Company authorizes the Agent to execute, file and/or record, any financing, renewal and/or continuation statement, any Mortgage Assignment or any other document or instrument 12 which the Agent may require to perfect, protect, continue or enforce in accordance herewith any security interest, lien or other right hereunder or under any of the other Loan Documents and authorizes the Agent to sign the Company's name on the same. Upon payment in full by the Company of all the Obligations in accordance with the terms thereof, the security interests and liens granted by the Company hereunder shall terminate, except that if, at any time, all or part of the payment of the monetary Obligations theretofore made by the Company or any other Person is rescinded or otherwise must be returned by the Agent or any Bank for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Company or such other Person), the security interests and liens granted hereunder or under any other present or future agreement between or among the Company and the Agent, and all rights of the Agent and all Obligations shall be reinstated as to monetary Obligations which were satisfied by the payment to be rescinded or returned, all as though such payment had not been made, and the Company shall sign and deliver to the Agent all documents and things necessary to perfect all terminated liens subject to the intervening liens, if any, granted by the Company to any Person. (b) A carbon, photographic, or other reproduction of this Agreement shall be sufficient as a UCC financing statement and may be filed at any time in any appropriate office in lieu thereof. (c) To the extent requested by the Agent, the Company will use its best efforts to cause each mortgagee of any and all real estate under any lease included in any Underlying Collateral and each landlord under any lease included in any Underlying Collateral to execute and deliver to the Agent assignments, in form and substance satisfactory to the Agent, by which such mortgagee or landlord waives its rights, if any, to the Collateral. (d) The Company further agrees at the request of the Agent to do or cause to be done all such other acts and things as may be necessary or advisable to make any sales of any portion or all of the Stock pursuant to Section 5.2(g) valid and binding and in compliance with any and all applicable laws (including the Securities Act, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Company's expense. SECTION 2.7. Appointment of Agent as Attorney-in-Fact. The Company does hereby irrevocably make, constitute and appoint the Agent and any of its officers, employees or agents as the true and lawful attorneys of the Company with power to: (a) sign the name of the Company on any financing statement, renewal financing statement, notice or other similar document that in the Agent's opinion must be filed in order to perfect or continue perfected the security interests granted in this Agreement or any Other Agreements and to effect such filing; 13 (b) receive, endorse, assign and deliver, in the Company's name or in the name of the Agent, all checks, notes, drafts and other instruments relating to any Collateral, including receiving, opening and properly disposing of all mail addressed to the Company concerning the Collateral and, during the existence of an Event of Default (as hereinafter defined), to notify postal authorities to change the address for delivery of mail to such address as the Agent may designate; (c) sign the Company's name on any notices to any of the Company's clients or customers; and (d) upon the occurrence and during the continuance of an Event of Default, take or bring at the Company's cost, in the Company's name or in the name of the Agent, all steps, actions and suits deemed by the Agent necessary or desirable to effect collections in connection with any Loans, to enforce payment in connection with any Loans, to settle, compromise or release in whole or in part, any amounts owing in connection with any Loans, to prosecute any action or proceeding with respect to any Loans, to extend the time of payment in connection with any Loans, to make allowances and adjustments with respect thereto, to secure credit in the name of the Agent, and to do all other things necessary or desirable to realize upon the Collateral, including but not limited to the Underlying Collateral, and to carry out this Agreement and all Other Agreements. Neither the Agent nor its agents or attorneys will be liable for any act or omission nor for any error of judgment or mistake of fact unless such act, omission, error or mistake shall occur as a result of their gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable so long as the Obligations remain unpaid. SECTION 2.8. Indemnity. In addition to all of the Agent's, the Administrative Agent's and Banks' other rights and remedies under the Loan Documents, the Company will hold the Banks, the Administrative Agent and the Agent harmless from and indemnify the Banks, the Administrative Agent and the Agent or other designee of the Agent against all losses, damages, costs and expenses (including, without limitation, attorneys' fees, costs and expenses) incurred by any of them, whether prior to or from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or relating to any suit, investigation, action or proceeding by any Person, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any Person under any statute or regulation, including without limitation, any Federal or state antitrust laws, or under any common law or equitable cause or otherwise, all to the extent arising from or in connection with this Agreement or the other Loan Documents or the enforcement of the rights of the Agent hereunder, other than losses, damages, costs and expenses resulting from, but only to the extent resulting from, the willful misconduct or gross negligence of the Person seeking indemnification. 14 Each of the Banks and the CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) severally agree (i) to reimburse the Agent, on demand, in the amount of its pro rata share, for any expenses referred to in this --- ---- Section 2.8 which shall not have been reimbursed or paid by the Company or paid from the proceeds of Collateral as provided herein and (ii) to indemnify and hold harmless the Agent and its directors, officers, employees and agents, on demand, in the amount of such pro rata share, from and against any and all --- ---- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this Section 2.8, to the extent the same shall not have been reimbursed by the Company or paid from the proceeds of Collateral as provided herein; provided that no Bank or CP Holder shall be -------- liable to the Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or any of its directors, officers, employees or agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this Section 2.8, pro rata shares at any time shall be determined based upon the --- ---- aggregate Exposures (in the case of the Banks), or the Commercial Paper (in the case of the CP Holders) at the time such expenses were incurred. SECTION 2.9. Company Remains Liable. Anything herein to the contrary notwithstanding, (i) the Company shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Agent, the Administrative Agent or the Banks of any rights under this Agreement or any of the other Loan Documents shall not release the Company from any of its duties or obligations under the contracts and agreements included in the Collateral, and (iii) neither the Agent, the Administrative Agent nor the Banks shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any of the other Loan Documents nor shall the Agent, the Administrative Agent or any Bank be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 2.10. Banks' Freedom of Dealing. Each CP Holder agrees, with respect to the Obligations, any and all guaranties thereof and any and all Collateral, that the Company and the Banks may agree to increase the amount of the Obligations or otherwise modify or waive the terms of any of the Loan Agreement, the Obligations or the other Loan Documents, and the Banks may grant extensions of the time of payment or performance to and make compromises, including releases of guaranties, collateral which is not Collateral, and settlements with the Company and all other Persons, in each case without the consent of any CP Holder or the Paying Agent for which it acts and without affecting the agreements of the CP Holders or the Company contained in this Agreement. SECTION 2.11. Agent May Perform; Actions of Agent. If the Company fails to perform any agreement contained herein, the Agent may (but shall not be required to) 15 itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be jointly and severally payable by the Company, together with interest thereon at the rate specified in Section 2.6 of the Loan Agreement, and until so paid shall be deemed part of the Obligations. The Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Agent shall take any action under or with respect to this Agreement which is requested by the Required Banks and which is not inconsistent with or contrary to the provisions of this Agreement or the Loan Documents. The Agent shall have the right to decline to follow any such direction if the Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Loan Documents, may not lawfully be taken or would involve it in personal liability, and the Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement, the Agent may rely on any such direction given to it by the Required Banks and shall be fully protected, and shall under no circumstances (absent the gross negligence and willful misconduct of the Agent) be liable to the Company, any Bank, any CP Holder, the Paying Agent or any other Person for taking or refraining from taking action in accordance therewith. The Agent may consult with counsel and shall be fully protected in taking any action hereunder in accordance with any advice of such counsel. The Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Collateral from any court of competent jurisdiction. At such time as all Obligations have been repaid in full and there are no commitments to incur further Obligations, the Agent shall take instructions from the holders of a majority of CP Debt or their representative. SECTION 2.12. Agent's Duties. The powers conferred on the Agent hereunder are solely to protect its interest and the interests of the Banks and the CP Holders in the Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Agent makes no representation as to the value or condition of the Collateral or any part thereof, as to the title of the Company to the Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Agent shall incur no liability or responsibility in respect of any such matters. The Agent shall not be responsible for insuring the Collateral, for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise as to the maintenance of the Collateral. 16 The Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such Person may be liable due to its willful misconduct or gross negligence. Neither the Agent nor any officer, agent or representative thereof shall be personally liable for any action taken by any such Person in accordance with any notice given by the Required Banks pursuant to the terms of this Agreement even if, at the time such action is taken by any such Person, the Required Banks are not entitled to give such notice, except where the account officer of the Agent active upon the Company accounts has actual knowledge that such Required Banks are not entitled to give such notice. SECTION 2.13. Perfection of Security Interest. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Agent's security interest in the Collateral for the benefit of itself, the Administrative Agent, the Banks and the CP Holders. The Collateral and the Agent's rights with respect to the Collateral (to the extent such Collateral is included in the Borrowing Base) are not subject to any setoff, claims, withholdings or other defenses. The Company is the owner of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. SECTION 2.14. Concerning the Stock. (a) Any sums paid upon or in respect of any of the Stock upon the liquidation or dissolution of the issuer thereof (other than in connection with transactions permitted by the Loan Agreement and pursuant to which the Agent obtains a first priority perfected security interest in any non-cash proceeds thereof and any net-cash proceeds thereof are paid in accordance with the terms thereof) shall be paid over to the Agent to be held by it as security for the Obligations; and, in case any distribution of capital shall be made on or in respect of any of the Stock, or any property shall be distributed upon or with respect to any of the Stock pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Agent to be held by it as security for the Obligations. All sums of money and property paid or distributed in respect of the Stock as required by the immediately preceding sentence upon such a liquidation, dissolution, recapitalization or reclassification which are received by the Company shall, until paid or delivered to the Agent, be held in trust for the Agent as security for the Obligations. (b) The Agent may, at any time after the occurrence and during the continuance of an Event of Default, at its option, transfer to itself or any nominee for security purposes the Stock or any other security constituting Collateral, and, any time after the occurrence and during the continuance of an Event of Default, receive any income thereon and apply it to the Obligations. In addition and whether or not 17 Obligations are due, upon the occurrence and during the continuance of an Event of Default, the Agent may demand, sue for, collect, or make any settlement or compromise it deems desirable with respect to the Collateral. Regardless of the adequacy of the Collateral or any other security for the Obligations, any deposits or other sums at any time credited by or due from the Agent to the Company may, upon the occurrence and during the continuance of an Event of Default, at any time be applied to or set off against any of the Obligations to the extent permitted by applicable law. (c) So long as no Event of Default is continuing, the Company shall (except as otherwise required by Section 2.14(a) hereof) be entitled to receive all cash dividends paid in respect of the Stock owned by it, to vote such Stock, and to give consents, waivers, and ratifications in respect of such Stock, provided that no vote shall be cast, and no consent, waiver, or ratification given or action taken which would be inconsistent with or violate any provisions of this Agreement, the Loan Agreement, or the other Loan Documents. All such rights of the Company to receive cash dividends shall cease in case an Event of Default shall have occurred and be continuing. All such rights of the Company to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Agent's option, as evidenced by the Agent's notifying the Company of such election, cease in case an Event of Default shall have occurred and be continuing." ARTICLE III PRIORITY OF SECURITY INTERESTS SECTION 3.1. Priority of Security Interests. The Company warrants and represents to the Agent, the Administrative Agent and the Banks that, as to those assets for which perfection may be accomplished by filing or by possession under the UCC, the security interests granted to the Agent hereunder constitute and will constitute at all times a valid and perfected security interest vested in the Agent in and upon the Collateral. The Company further warrants and represents that the Agent's security interests in the Collateral for the benefit of itself, the Administrative Agent, the Banks and the CP Holders are not and hereinafter shall not become subordinate or junior to the security interests, liens or claims of any other Person, firm or corporation, including the United States or any department, agency or instrumentality thereof, or any state, county or local governmental agency, except for the Permitted Liens. The Company shall grant (without the prior written approval of the Required Banks) a security interest in or permit a lien or encumbrance upon any of the Collateral to anyone except the Agent for the benefit of itself, the Administrative Agent, the Banks and the CP Holders as long as any of the Obligations remain unpaid or any commitments to lend have not been terminated, except for the Permitted Liens. ARTICLE IV COLLATERAL 18 SECTION 4.1. Representations, Covenants and Warranties. The Company hereby makes the following representations, warranties and covenants to the Agent, the Administrative Agent and the Banks, which shall survive the execution and delivery of the Loan Documents and (except to the extent that any of such representations, and warranties and covenants expressly relate to earlier dates) shall be deemed repeated and confirmed as of each date on which any Revolving Credit Loans or Term Loans are requested by the Company or made by any Bank: (a) The Company is now and at all times hereafter shall be the absolute owner, free and clear of all Liens (other than Permitted Liens) except security interests and rights of the Agent, the Administrative Agent, the Banks and the CP Holders granted herein, of indefeasible title to all of the Collateral belonging to it except for that portion of the Company's rights and/or obligations under any Loan in which the Company has granted a participation to any Person in accordance with Section 2.14 of the Loan Agreement; (b) To the best of the Company's knowledge, each outstanding Loan does, and each future Loan will, represent a bona fide, valid and legally enforceable indebtedness according to its terms, and each Loan, at the time of creation thereof, except with the consent of the Agent, the Administrative Agent and the Banks, will be subject to no offsets, discounts, counterclaims, contra-accounts or any other defense of any kind or character that materially adversely affects the value of the Loan; (c) With respect to each outstanding and future Loan, the Agent, the Administrative Agent and the Banks may rely on all statements or representations made by the Company on or with respect to such Loans delivered hereunder or under the Loan Agreement, and, unless otherwise indicated in writing by the Company, each outstanding Loan is, and each future Loan will be, genuine and in all respects what it purports to be, and, to the Company's knowledge, there are no, and, at the time of creation of each Loan there will not be any, to the Company's knowledge, facts, events or occurrences that would in any way materially impair the validity or enforcement thereof; (d) All of the outstanding Loans have been, and all future Loans will be, created, and are (or in the case of future Loans, will be) in compliance in all material respects with, and the form and content of each document related to all outstanding and future Loans, the security related thereto, and the transactions from which they arose comply (or, in the case of future Loans, will comply) in all material respects with, any and all applicable laws, ordinances, rules and regulations, Federal, state and/or local, with respect to the extension of credit and charging of interest, including, without limitation, as applicable, the Federal Consumer Credit Protection Act, the Federal Fair Credit Reporting Act, the Federal Trade Commission Act, the Federal Equal Credit Opportunity Act and all Federal, state and local laws related to licensing, usury, truth in lending, real estate settlement procedures, consumer protection, equal credit opportunity, fair debt collection, unfair and deceptive trade practices, rescission rights and disclosures, and with all rules and regulations thereunder, all as amended, and any disclosures required with 19 respect to any Loan the failure to make which would have a Material Adverse Effect on the Company were and will continue to be made properly and in a timely manner; (e) The original amount and unpaid balance of each Loan shown on the Company's books and records and on any statement or schedule delivered to the Agent are and will be true and correct, and the unpaid balance is and will be the amount actually owing to the Company; (f) If requested by the Required Banks at any time or from time to time, the Company shall cause a Lien search against each Person to whom a Loan has been made, satisfactory to the Agent, to be performed and delivered directly to the Agent, which Lien search shall indicate the absence of any Liens against such Person or the property of the Person on which the Company has a Lien, other than Liens in favor of the Company which have been assigned to the Agent, the Administrative Agent or the Banks or Liens in favor of the Agent, the Administrative Agent or the Banks and other than Permitted Liens; (g) The Company neither has extended nor will extend any credit of any kind or in any manner to any Person in connection with the transactions from which the Loans arose or will arise other than as the Company has indicated on and has had evidenced by, or will indicate or have evidenced by, in the case of future Loans, the Company's files related to the Loans; (h) Each security agreement, UCC filing, mortgage, title retention instrument, and other document and instrument, if any, which is security for the Loans contains, or will contain, in the case of future Loans, a correct and sufficient description of the Underlying Collateral covered thereby and each lien, mortgage or security interest which secures any outstanding Loan is, or any future Loan will be, valid; (i) To the best knowledge of the Company, except as disclosed to the Agent, any and all policies of insurance related to the property securing any obligation of a Person to whom the Company has made a Loan, or any guarantor of such Loan, in connection with any Loan and any credit life insurance, credit disability insurance, or credit unemployment insurance are in full force and effect in accordance with the terms of all agreements between the Company and such Person or guarantor; (j) The Company has no knowledge of any fact which would impair in any material respect the value or validity of any Loan except as disclosed to the Agent; (k) The Company holds no commercial tort claim except as indicated in writing to the Agent and the Banks; and (l) The transactions contemplated herein, including the granting of security interests herein and the enforcement by the Agent of its rights hereunder if a Default or Event of Default occurs, do not and will not affect the validity of the pledges of the 20 Underlying Collateral and the Loans secured by the Underlying Collateral are and will still be valid against the Obligors of such Loans. SECTION 4.2. Collections. (a) Subject to the provisions of this Agreement and the other Loan Documents, the Company shall service, manage, enforce, and make Collections in connection with the Loans. "Collections," as used herein, means the collection of payment of principal and interest on the Loans, other payments made with respect to Loans, the cash proceeds realized from the enforcement of Loans and any security therefor, or the collateral, proceeds of credit or group life insurance, and all proceeds of insurance of any real or personal property which secures any of the Loans. (b) With respect to each of the Collections, the Company shall collect all Collections, receive all payments thereon and immediately deposit the proceeds thereof into a Depository Account. The Company in whose name such account is kept may withdraw funds from such account to use in the ordinary course of its business. SECTION 4.3. Rights of Agent Regarding Collateral. Upon the occurrence and during the continuance of an Event of Default, the Agent shall have the right to, and upon the direction of the Required Banks shall, at any time and from time to time thereafter, without notice to the Company, (a) notify, and upon the direction of the Agent to the Company, the Company will notify, (i) all Persons to whom the Company has made Loans that the Agent has a security interest in such Collateral and direct all such Persons to make payments to the Agent or its designee, and to such banks and accounts (which may be the Collateral Account) as designated by the Agent or such designee, of all sums owing by them to the Company, and (ii) all banks in which the Company has any Depository Accounts of the occurrence of an Event of Default and direct all such Banks to transfer into the Collateral Account, or to such other account at such bank as shall be designated by the Agent or its designee, all amounts on deposit from time to time in the related Depository Accounts; (b) to settle, compromise, sell, assign, extend or renew any debt owing by any Persons to whom the Company has made a Loan; (c) to sell or assign such Collateral upon such terms as the Agent may deem advisable; and (d) to discharge and release in the name of the Company and the Agent any such debt. Any and all disbursements for costs and expenses incurred or paid by the Agent with respect to the enforcement, collection or protection of its interest in the Collateral, or against the Company, whether by suit or otherwise, notification of Persons to whom the Company has made Loans, including reasonable attorneys' fees actually incurred, court costs and similar expenses, if any, shall become a part of the Obligations secured by the Collateral, payable on demand. ARTICLE V DEFAULT SECTION 5.1. Events of Default. Any one of the following events will constitute an "Event of Default": 21 (a) failure of the Company to observe, perform or comply with any of the terms, provisions, conditions or covenants, or, in any material respect, any warranties or representations, contained in this Agreement other than in Section 4.1 hereof; (b) failure of the Company to observe, perform or comply with any of the terms, provisions, conditions, covenants, warranties or representations contained in Section 4.1 of this Agreement, which failure shall not have been remedied within 30 days after such failure shall first have become known to any officer of the Company (c) the occurrence of an "Event of Default" as defined in the Loan Agreement; or (d) any of the Loan Documents shall cease to be in full force and effect. SECTION 5.2. Remedies. (a) Upon the occurrence of any Event of Default, the Agent shall have, in addition to any other rights and remedies contained in this Agreement or in any of the Other Agreements, all the rights and remedies of a secured party under the UCC, and all other rights and remedies provided by law, all of which shall be cumulative to the extent permitted by law. Upon the occurrence of any Event of Default and at any time thereafter if such or any other default shall then be continuing, the Agent shall have the right without further notice to the Company to, and upon the direction of the Required Banks shall, appropriate, take possession and control of, set off and apply to the payment of any or all of the Obligations, any or all Collateral, subject to and in the manner set forth in Section 5.3 hereof to enforce payment in connection with the Loans or any other Collateral to settle, compromise or release, in whole or in part, any amounts owing on the Collateral, to prosecute any action, suit or proceeding with respect to the Collateral, to extend the time of payment of any and all Collateral, to make allowances and adjustment with respect thereto, to issue credits in the name of the Company or the Agent, to sell, assign and deliver the Collateral (or any part thereof), at public or private sale, at broker's board, for cash, upon credit or otherwise, at the Agent's sole option and discretion and the Agent, the Administrative Agent and any Bank or other Person interested in the Obligations may bid or become purchaser at any such sale, if public, free from any right of redemption, which is hereby expressly waived. The Company agrees that the giving of ten days notice by the Agent, sent by certified mail, return receipt requested postage prepaid, to the address set forth below, designating the place and time of any public sale or of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be deemed to be reasonable notice thereof and the Company waives any other notice with respect thereto. The net cash proceeds resulting from the exercise of any of the foregoing rights or remedies shall be applied by the Agent in accordance with Section 5.3 hereof, and the Company shall remain liable to the Agent, the Administrative Agent, the Banks and the CP Holders for any deficiency, together with interest thereon at the rate provided in the Loan Agreement with respect to the Obligations and in the Commercial Paper with respect to the CP Debt and the cost and expenses of collection of such deficiency, including (to the extent permitted by law), without limitation, reasonable attorneys' fees actually incurred, expenses and disbursements. 22 (b) If at any time or times hereafter the Agent employs counsel for advice with respect to this Agreement or any Other Agreements, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any Other Agreements (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or any Other Agreements), or relating to any Collateral; or to protect, take possession of, or liquidate any Collateral, or to attempt to enforce any security interest or lien in any Collateral, or to represent the Agent in any pending or threatened litigation with respect to the affairs of the Company in any way relating to any of the Collateral or to the Obligations or to enforce any rights of the Agent, the Administrative Agent, any Bank, the Paying Agent or the CP Holders or liabilities of the Company, any Person to whom the Company has made a Loan, or any Person which may be obligated to the Agent or such Bank by virtue of this Agreement or any Other Agreement, instrument or document now or hereafter delivered to the Agent, the Administrative Agent, any Bank, the Paying Agent or any CP Holder by or for the benefit of the Company, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations secured by the Collateral. (c) Upon the occurrence of an Event of Default, the Agent shall have the right to require the Company to assemble all Collateral not already in the Agent's possession and make it reasonably available to the Agent at one or more places to be designated by the Agent which are reasonably convenient to both parties, and to take possession of such Collateral and to enter and remain upon the various premises of the Company without cost or charge to the Agent, and to use the same, together with materials, supplies, books and records of the Company for the purpose of collecting such Collateral or liquidating such Collateral (plus any Collateral already in the Agent's possession), whether by foreclosure, auction or otherwise. In addition, the Agent may remove from such premises such Collateral, and any records with respect thereto, to the premises of the Agent or any Custodian for such time as the Agent may desire, in order to effectively collect or liquidate such Collateral. (d) Without limiting the provisions of Article 2B and Sections 6.21 and 8.15 of the Loan Agreement, upon the occurrence of an Event of Default, the Agent shall have the right to, and upon the direction of the Required Banks shall, require the Company to establish and maintain a lockbox service (which may be the Collateral Account) with such bank or banks as may be acceptable to the Agent. In the event the Company (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or agents) shall receive any monies, checks, notes, drafts or any other items of payment relating to, or proceeds of, the Loans, the Company agrees with the Agent as follows: (i) the Company shall hold all such items of payment in trust for the Agent, the Administrative Agent, the Banks and the CP Holders and as the property of Agent, the Administrative Agent, the Banks and the CP Holders, separate from the funds of the Company, and the Company shall immediately 23 forward, or cause to be forwarded, the same to the lockbox service for application to the Swing Line Loans, the Revolving Credit Loans or Term Loans; (ii) the Company shall forward to the Agent, on a daily basis, deposit slips related to all such items of payment received by the Company and, if requested by the Agent, copies of such checks and other items, together with a statement showing the application of that portion of such items of payment relating to payment in connection with the Loans and a collection report with regard thereto in form and substance satisfactory to the Agent; (iii) All such items of payment shall be the sole and exclusive property of the Agent for the benefit of the Banks, the Administrative Agent and the CP Holders immediately upon the earlier of receipt of such items by the Agent or the receipt of such items by the Company; (iv) The lockbox service shall be subject to the sole control of the Agent and the Agent shall have the right at all times in its sole discretion to apply all or part of such items of payment to the payment in accordance with Section 5.3 hereof. The Agent may, and upon the direction of the Required Banks shall, release to the Company all or any part of such items of payment; and (v) The Agent assumes no responsibility for such lockbox arrangement, including, without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any bank thereunder. (e) Each of the Banks and CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acknowledges and agrees that (i) it shall only have recourse to the Collateral through the Agent and that it shall have no independent recourse to the Collateral and (ii) the Agent shall have no obligation to take any action, or refrain from taking any action, except upon instructions from the Required Banks in accordance with the provisions hereunder. To the extent that the Agent, acting as Agent hereunder, exercises any rights or omits to exercise any rights under this Agreement at any time for the benefit of the Administrative Agent or the Banks (whether requested by the Required Banks thereunder or otherwise) with respect to any of the Collateral, such exercise or omission shall likewise be deemed to be authorized by the CP Holders and the Paying Agent for performance (or omission) by the Agent hereunder for the benefit of the CP Holders. In furtherance of the foregoing, the Agent may exercise (or omit to exercise) all rights requested by the Required Banks under this Agreement without first giving notice or consulting with any CP Holder or the Paying Agent. (f) Upon the occurrence and during the continuance of an Event of Default, the Agent may: (i) if the Agent so elects and gives notice of such election to the Company, vote any or all of the Stock possessing voting rights (whether or not the same 24 shall have been transferred into its name or the name of its nominee or nominees) and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner thereof (the Company hereby irrevocably constituting and appointing the Agent the proxy and attorney-in-fact of the Company, with full power of substitution, to do so); and (ii) cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees, if it has not already done so. (g) the Company recognizes that the Agent may be unable to effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act of 1933, as amended, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Company recognizes that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Agent shall be under no obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933, as amended, even if the issuer would agree to do so. SECTION 5.3. Application of Proceeds. (a) Upon receipt thereof in accordance with the terms of Section 5 of the Intercreditor Agreement, any proceeds of any lockbox collection or sale of, or other realization upon, all or any part of the Collateral shall be applied by the Agent in the following order of priority: first, to payment of the expenses of such lockbox or sale or other realization, including reasonable compensation to the Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations and the CP Debt (to the extent it constitutes Permitted Debt), pro rata in accordance with the respective outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations and all CP Debt, to payment to the Company or its successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Agent may make distributions hereunder in cash or in kind, but such distributions to the Banks shall in all events be made pro rata on the basis of the respective Exposure Percentages of the Obligations. Distributions made under clause 25 "second" above may also be made in a combination of cash or property, but distributions to the Banks shall be made pro rata on the basis of the respective Exposure Percentages of the Obligations. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations, shall continue to be Obligations for which the Company remains liable. (b) In making the determinations and allocations required by this Section 5.3 or otherwise by this Agreement, the Agent may rely upon information supplied by the Banks as to the amounts of the Obligations held by them and supplied by the CP Holders or the Paying Agent as to the amounts owed on the CP Debt, or as to other matters (with each such matter being conclusively deemed to be proved or established by a certificate executed by an officer of such Person), and the Agent shall have no liability to any of the Banks, the Paying Agent or any of the CP Holders for actions taken in reliance upon such information. All distributions made by the Agent pursuant to this Section 5.3 shall be final, and the Agent shall have no duty to inquire as to the application by the Banks, the Paying Agent or the CP Holders of any amount distributed to them. However, if at any time the Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Agent may in its discretion, but shall not, subject to Section 5.3(d), be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Banks and the CP Holders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Agent hereunder or under any Security Document, the Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. (c) If any Bank, the Paying Agent or any CP Holder (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acquires custody, control or possession of any Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Bank, the Paying Agent or such CP Holder shall promptly cause such Collateral or proceeds to be delivered to or put in the custody, possession or control of the Agent or, if the Agent shall so designate, an agent of the Agent (which agent may be a branch or affiliate of the Agent, the Administrative Agent or any Bank) in the same form of payment received, with appropriate endorsements, in the country in which such Collateral is held for distribution in accordance with the provisions of this Section 5.3. Until such time as the provisions of the immediately preceding sentence have been complied with, such Bank, the Paying Agent or such CP Holder shall be deemed to hold such Collateral and proceeds in trust for the Agent. (d) If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations and the CP Debt, the Agent shall nonetheless apply 26 the proceeds for the benefit of the Banks and the CP Holders in the proportion and subject to the priorities of Section 5.3(a) hereof. To the extent that the Agent distributes proceeds collected with respect to one Obligation to or on behalf of the holder of another Obligation or a Bank or the Administrative Agent obtains the equivalent of proceeds through the exercise of any right of setoff, counterclaim, cross action, voluntary payment by the Company, enforcement of claim, proceedings in bankruptcy, reorganization, liquidation or otherwise, the holder of the former Obligation shall be deemed to have purchased a participation in the latter Obligation or shall be subrogated to the rights of the holder thereof to receive any subsequent payments and distributions made with respect to the portion thereof paid or to be paid by the application of such proceeds; provided that if all or any part of such excess payment is thereafter recovered, such distribution and arrangements shall be rescinded and the amount restored to the extent of such recovery, without interest. If any Bank or CP Holder exercises any right of setoff, banker's lien or similar right with respect to any Collateral for payment of any Obligations or any Commercial Paper, each of the Banks and CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) agrees with each other Bank and CP Holder that if an amount to be set off is to be applied to Indebtedness of the Company to such Bank or CP Holder, other than Indebtedness evidenced by the Notes or Commercial Paper held by such Bank or CP Holder, as applicable, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes or Commercial Paper held by such Bank or CP Holder. SECTION 5.4. Release of Collateral; Subordination of Lien. To the extend permitted by the Loan Agreement and the Intercreditor Agreement, the Agent, for the benefit of itself, the Banks and the CP Holders is hereby authorized, upon receipt of a request from the Company, to release any Collateral and to provide such releases and termination statements with respect to any Collateral in connection with any sale, exchange or other disposition thereof permitted under the Loan Agreement so long as (i) the Agent obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Banks, the Agent may release any Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Loan Agreement, the Agent shall, on the written instructions of the Required Banks, subordinate by written instrument the Lien on all or any portion of the Collateral to any other lender extending to the Company indebtedness permitted by the terms of the Loan Agreement, and (iii) the Agent is so instructed by the Required Banks in accordance with the terms of the Loan Agreement. SECTION 5.5. Waiver by Agent or Banks. The Agent's or any Bank's failure at any time or times hereafter to require strict performance by the Company of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Other Agreements shall not waive, affect or diminish any right of the Agent, the Administrative Agent or any Bank at any time or times hereafter to demand strict 27 performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement or any of the Other Agreements, and any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any Other Agreement shall be deemed to have been waived by any act or knowledge of the Agent, the Administrative Agent or any Bank, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Agent, the Administrative Agent or such Bank and directed to the Company specifying such waiver. ARTICLE VI MISCELLANEOUS SECTION 6.1. Continuing Lien. The Collateral described in this Agreement secures all present and future Obligations of the Company. There is included within the term "Collateral;" as used herein, all other property and all interests therein of any kind hereafter acquired by the Company, meeting or falling within the general description of the Collateral set forth herein and also the proceeds and products thereof. SECTION 6.2. Waivers by Company. (a) The Company irrevocably waives the right to direct the application of any and all payments which may be received by the Agent during the continuance of an Event of Default, and the Company does hereby irrevocably agree that, during the continuance of an Event of Default, the Agent shall have the continuing exclusive right to apply and reapply any and all such payments received in such manner as the Agent may deem advisable, notwithstanding any entry upon any of its books and records. (b) The Company also waives any and all notices of demand, notice or protest that the Company might be entitled to receive with respect to this Agreement by virtue of any applicable statute or law, and waives demand, protest, notice of protest, notice of default, release, compromise, settlement, extension or renewal of all commercial paper, accounts, contract rights, instruments, guaranties, and otherwise, at any time held by the Agent, the Administrative Agent or the Banks on which the Company may in any way be liable, notice of nonpayment at maturity of any and all Loans, and notice of any action taken by the Agent, the Administrative Agent or the Banks unless expressly required by this Agreement. SECTION 6.3. Parties. This Agreement and any of the Other Agreements, instruments and documents executed and delivered pursuant hereto or to consummate the transactions contemplated hereunder shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. SECTION 6.4. CP Holders. By accepting the security granted by, and the other benefits of, this Agreement, each CP Holder is hereby deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to and agreed to be bound by the terms of 28 this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, (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 (d) agreed to indemnify the Agent, in its capacity as collateral agent, pursuant to the terms of this Agreement, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. SECTION 6.5. GOVERNING LAW. THIS AGREEMENT AND ANY OTHER AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE TO THE EXERCISE OF REMEDIES OR THE PERFECTION OF SECURITY INTERESTS UNDER THE UCC. SECTION 6.6. WAIVER OF JURY TRIAL AND SETOFF. EACH OF THE AGENT AND THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER AGREEMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER AGREEMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE, HOWSOEVER ARISING, BETWEEN OR AMONG THE COMPANY AND ANY OF THE BANKS, THE ADMINISTRATIVE AGENT, THE CP HOLDERS, THE PAYING AGENT OR THE AGENT, BETWEEN OR AMONG ANY BANKS, THE ADMINISTRATIVE AGENT, THE PAYING AGENT AND ANY CP HOLDERS AND BETWEEN OR AMONG THE AGENT, THE ADMINISTRATIVE AGENT AND ANY BANKS AND ANY CP HOLDERS AND THE COMPANY HEREBY WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION). SECTION 6.7. Jurisdiction; Service of Process. The Company hereby irrevocably consents to the jurisdiction of the courts of the State of New York, County of New York and of any Federal Court located in the Southern District of New York, and agrees that venue in each of such Courts is proper in connection with any action or proceeding arising out of or relating to this Agreement, the Other Agreements, or any document or instrument delivered pursuant to this Agreement or the Other Agreements. Nothing herein shall affect the right of any Bank or the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. 29 SECTION 6.8. Survival of Representations and Warranties. All representations and warranties of the Company and all terms, provisions, conditions and agreements to be performed by the Company contained in this Agreement and in the other Loan Documents shall be true and correct, and satisfied, where applicable, at the time of the execution of this Agreement, and shall survive the execution and delivery of this Agreement and all Other Agreements. SECTION 6.9. Obligations Secured by Property Other Than Collateral. To the extent that the Obligations are now or hereafter secured by property other than the Collateral, or by a guarantee, endorsement or property of any other Person, then the Agent shall have the right to, and upon the direction of the Required Banks shall, proceed against such other property, guarantee or endorsement upon the occurrence and during the continuance of an Event of Default, and the Agent shall have the right, with the consent of the Required Banks, to determine which rights, security, liens, security interests or remedies the Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Agent's rights or any of the Banks' rights under the Obligations, this Agreement or any Other Agreements. SECTION 6.10. Resignation of Agent; Successor Agent. (a) The Agent may at any time resign by giving ten (10) days prior written notice thereof to each Bank, the Paying Agent and the Company, provided -------- that no resignation shall be effective until a successor for the Agent is appointed. Upon such resignation, the Required Banks (or, if the Obligations have been paid in full and the Revolving Credit Commitments have terminated, the Paying Agent) shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Required Banks or the Paying Agent, as applicable, appoint a successor Agent, which shall be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. (b) In the event a successor agent is appointed pursuant to the provisions of Section 11.4 of the Loan Agreement, such successor agent shall succeed to the rights, powers and duties of the Agent hereunder, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to the Loan Agreement or any holders of the Revolving Credit Notes or Term Notes. Such former Agent agrees to take such actions as 30 are reasonably necessary to effectuate the transfer of its rights, powers and duties to such successor agent. SECTION 6.11. Amendment and Waiver. No modification or amendment of this Agreement shall be effective unless the same shall be in writing and signed by the Agent (acting with the requisite consent of the Banks as required by the Loan Agreement) and the Company; provided, however, (i) no amendment or waiver -------- ------- shall adversely affect any of the Agent's rights, immunities or rights to indemnification hereunder or under any of the Loan Documents or expand its duties or reduce any amount payable to the Agent hereunder without the written consent of the Agent; and (ii) any provisions of this Agreement affecting the rights and obligations of the Agent hereunder may not be amended without the written consent of the Agent. No waiver of any provision of this Agreement and no consent to any departure by any party hereto from the provisions hereof shall be effective unless such waiver or consent shall be set forth in a written instrument executed by the party against which it is sought to be enforced, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in the same, similar or other circumstances. SECTION 6.12. Termination. This Agreement and the security interest in the Collateral created hereby will terminate when the Obligations and the CP Debt have been irrevocably paid and finally discharged in full in accordance with the terms of the Loan Agreement or the documents evidencing the CP Debt, as the case may be, and the Banks are no longer obligated to make Revolving Credit Loans or Term Loans under the Loan Agreement, and the dealer of the Commercial Paper is no longer required to sell Commercial Paper. No waiver by the Agent, the Administrative Agent or any Bank or any other holder of the Revolving Credit Notes or the Term Notes or any CP Holder or the Paying Agent of any default will be effective unless in writing or operate as a waiver of any other default or of the same default on a future occasion. In the event of a sale or assignment by any Bank (including the Administrative Agent in its capacity as a Bank but not as Administrative Agent) of a Revolving Credit Note(s) or a Term Note(s) or any portion thereof, such Bank may assign or transfer its rights and interest under this Agreement in whole or in part to the purchaser or purchasers of the Revolving Credit Note(s) or Term Note(s), whereupon such purchaser or purchasers will become vested with all of the powers, rights and responsibilities of such Bank hereunder, and such Bank will thereafter be forever released and fully discharged from any liability or responsibility hereunder with respect to the rights, interest and responsibilities so assigned, other than liabilities arising out of actions taken prior to the date of assignment. The Company may not assign this Agreement without the express written consent of the Administrative Agent and the Banks. SECTION 6.13. Notices. All notices, requests, consents, demands or other communications provided for herein shall be given in accordance with the terms of Section 10.4 of the Loan Agreement. 31 SECTION 6.14. Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. SECTION 6.15. Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be an original and both of which shall together constitute one and the same agreement. IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written by the duly authorized officers of the parties hereto. MEDALLION FUNDING CHICAGO CORP. By: /s/ Alvin Murstein ------------------------------------ Alvin Murstein Chairman & Chief Executive Officer: By: /s/ James E. Jack ------------------------------------ James E. Jack Chief Financial Officer FLEET NATIONAL BANK, as Agent By: /s/ Kevin J. Foley ------------------------------------ Name: Kevin J. Foley Title: Senior Vice President 32 CERTIFICATE OF ACKNOWLEDGMENT STATE OF NEW YORK ) ) ss. COUNTY OF ) Before me, the undersigned, a Notary Public in and for the county aforesaid, on this 20/th/ day of February, 2002, personally appeared Alvin Murstein to me known personally, and who, being by me duly sworn, deposes and says that [s]he is the Chairman of Medallion Funding Chicago Corp., and that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors, and said _______________________ acknowledged said instrument to be the free act and deed of said corporation. /s/ Adrian Rodriguez, Jr. --------------------------------------- Notary Public My commission expires: CERTIFICATE OF ACKNOWLEDGMENT STATE OF NEW YORK ) ) ss. COUNTY OF ) Before me, the undersigned, a Notary Public in and for the county aforesaid, on this 20/th/ day of February, 2002, personally appeared James Jack to me known personally, and who, being by me duly sworn, deposes and says that [s]he is the Chief Financial Officer of Medallion Funding Chicago Corp., and that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors, and said _______________________ acknowledged said instrument to be the free act and deed of said corporation. /s/ Adrian Rodriguez, Jr. --------------------------------------- Notary Public My commission expires: 33 EX-10.42 9 dex1042.txt AMENDMENT NO.1 TO THE INTERCREDITOR AGREEMENT Exhibit 10.42 AMENDMENT NO. 1 TO INTERCREDITOR -------------------------------- AGREEMENT --------- AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT dated as of June 29, 2001 (this "Amendment"), by and among (i) Fleet National Bank (f/k/a Fleet Bank, National --------- Association) ("Fleet"), acting in its capacity as agent (in such capacity, the "Bank Agent") for and on behalf of the various financial institutions (collectively, the "Banks") which are, or may from time to time hereafter become, parties to the Loan Agreement (as defined in the Intercreditor Agreement), (ii) the Banks, (iii) the Senior Noteholders (as defined in the Intercreditor Agreement), (iv) Fleet, acting as collateral agent for the Senior Noteholders (the "Senior Note Collateral Agent") and (v) Fleet, acting in its individual capacity and in its capacity as intercreditor collateral agent for the Senior Creditors (together with its successors and assigns, the "Collateral Agent"). WHEREAS, the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral Agent and the Collateral Agent are parties to an Intercreditor Agreement dated as of June 1, 1999 (as amended and in effect from time to time, the "Intercreditor Agreement", capitalized terms defined therein having the same ----------------------- meanings herein as therein), pursuant to which the Banks and the Senior Noteholders have made certain arrangements with respect to the collateral granted to the Banks and the Senior Noteholders by Medallion Funding Corp. (the "Borrower"); and -------- WHEREAS, the Banks are amending the Loan Agreement to delete the Minimum Asset Coverage test therein, and the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral Agent and the Collateral Agent have agreed to amend the Intercreditor Agreement to delete the Minimum Asset Coverage test and as further 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 Intercreditor Agreement as follows: 1. Amendment to Section 2 of the Intercreditor Agreement. Section 2 of the ----------------------------------------------------- Intercreditor Agreement is hereby amended by deleting the third paragraph of Section 2 in its entirety and substituting in lieu thereof the following new text: "The Banks agree that they shall not, without prior notice to the Senior Noteholders and without the prior written consent of the Required Noteholders, amend or revise the Loan Agreement in any manner that would (i) permit the Borrowing Base (as defined in the Loan Agreement as in effect on June 29, 2001) to exceed the aggregate unpaid balance of all Senior Debt (as defined in the Loan Agreement as in effect on June 29, 2001) at such time, (ii) modify any required payment dates so as to cause the maturity date of the Loan Agreement to occur earlier, or (iii) modify Section 2.5(e) of the Loan Agreement. The Noteholders agree -2- that they shall not, without prior written notice to the Senior Creditors and without the prior written consent of the Required Banks, amend or revise any Note Purchase Agreements in any manner that would increase the principal amount of or the rate of interest on, the Senior Notes, increase the Make-Whole Amount, increase the dollar limitation set forth in Section 10.2 of the Note Purchase Agreements, decrease the ratio set forth in Section 10.3 or 10.14 of the Note Purchase Agreements, increase the ratio set forth in Sections 10.4, 10.5 or 10.15 of the Note Purchase Agreements, modify the definition of "Bank Debt Prepayment" in, or Section 8.8 or 10.13 of, the Note Purchase Agreements or modify any required payment dates so as to reduce the average life of the Senior Notes." 2. Amendment to Section 5 of the Intercreditor Agreement. Section 5(a) ----------------------------------------------------- of the Intercreditor Agreement is hereby amended by deleting the first sentence of Section 5(a) in its entirety and substituting in lieu thereof the following new text: "Upon (w) the receipt of any proceeds or awards arising from any condemnation or eminent domain proceedings concerning the Collateral, (x) the receipt of any insurance proceeds arising from damage to the Collateral by fire or any other casualty which are not used for restoration of the Collateral in accordance with the terms of the Security Document governing same, (y) the receipt of any proceeds arising from any asset sale, disposition or transfer, the sale or issuance of any indebtedness, or the sale or issuance of any capital stock or other equity interests, or (z) the exercise of any rights and remedies by the Collateral Agent under the Security Documents, any and all proceeds from the sale, foreclosure or other disposition of Collateral pursuant thereto shall, promptly following their receipt by the Collateral Agent, be applied and distributed by the Collateral Agent as follows:" 3. Representations and Warranties. ------------------------------ (a) Neither the Collateral Agent, the Bank Agent, the Senior Note Collateral Agent nor any Senior Creditor makes any representation or warranty to any other party hereto with respect to the effectiveness, enforceability, validity or due execution of the Security Documents or as to any of the Collateral. (b) Each Senior Creditor represents, warrants and covenants that it has not and will not have or accept any security, collateral or other credit enhancement from the Borrower or any subsidiary or affiliate thereof with respect to any of the Senior Obligations without making adequate provision to cause such security, collateral or credit enhancement to be subject to the terms and provisions of the Intercreditor Agreement. 4. Effectiveness. This Amendment shall become effective as of the date ------------- first written above (the "Effective Date"), upon the satisfaction of each of the -3- following conditions, in each case in a manner satisfactory in form and substance to the Collateral Agent: (a) This Amendment shall have been duly executed and delivered by each of the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral Agent and the Collateral Agent and shall be in full force and effect. (b) The Collateral Agent shall have received evidence of the effectiveness of an amendment of the Funding Agreement, in the form attached hereto as Exhibit A. (c) 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. (d) The Collateral Agent shall have received such other items, documents, agreements or actions as the Collateral Agent may reasonably request in order to effectuate the transactions contemplated hereby. 5. Miscellaneous Provisions. ------------------------ (a) Each of the Senior Creditors hereby ratifies and confirms all of its obligations under the Intercreditor Agreement, as amended hereby. Except as expressly amended hereby, the Intercreditor Agreement shall continue in full force and effect. This Amendment and the Intercreditor Agreement shall hereafter be read and construed together as a single document, and all references to the Intercreditor Agreement in the Intercreditor Agreement or any agreement or instrument related to the Intercreditor Agreement shall hereafter refer to the Intercreditor Agreement as amended by this Amendment. (b) 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 Collateral Agent incurred in connection with this Amendment. (c) 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). (d) 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. FLEET NATIONAL BANK, (f/k/a Fleet Bank, N.A.), as Collateral Agent, Bank Agent and a Bank 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 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: V.P. BANK LEUMI By: /s/ Paul Tine /s/ John Koenigsberg ------------- -------------------- Name: Paul Tine John Koenigsberg Title: VP First Vice President THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Jeffrey Millar ------------------ Name: J. Millar Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Michael S. Cameli --------------------- Name: Michael S. Cameli Title: V. P. 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 COMPANION LIFE INSURANCE COMPANY By: /s/ Edwin H. Garrison, Jr. -------------------------- Name: Edwin H. Garrison, Jr. Title: Assistant Treasurer ACKNOWLEDGED AND AGREED: - ------------------------ MEDALLION FUNDING CORP. By: /s/ Alvin Murstein ------------------ Name: Alvin Murstein Title: President By: /s/ James Jack -------------- Name: James J. Jack Title: Executive Vice President & Chief Financial Officer EX-10.43 10 dex1043.txt STOCK PLEDGE AGREEMENT, DATED AS OF APRIL 30, 2001 Exhibit 10.43 ================================================================================ Stock Pledge Agreement DATED as of April 30, 2001 between Medallion Financial Corp. and Fleet National Bank, as Collateral Agent and secured party, for the benefit 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. Pledge of Stock, Etc .......................................... 1 Section 1.1. Pledge of Stock ............................................... 1 Section 1.2. Additional Stock .............................................. 1 Section 1.3. Pledge of Cash Collateral Account ............................. 2 Section 2. Definitions ................................................... 2 Section 3. Security for Obligations ...................................... 3 Section 4. Liquidation, Recapitalization, Etc ............................ 3 Section 4.1. Distributions Paid to Collateral Agent ........................ 3 Section 4.2. Cash Collateral Account........................................ 3 Section 4.3. Company's Rights to Cash Collateral, etc ...................... 4 Section 5. Warranty of Title; Authority .................................. 4 Section 6. Dividends, Voting, etc., Prior to Maturity .................... 4 Section 7. Remedies ...................................................... 5 Section 7.1. In General .................................................... 5 Section 7.2. Sale of Stock Collateral ...................................... 6 Section 7.3. Registration of Stock ......................................... 7 Section 7.4. Private Sales ................................................. 8 Section 7.5. Company's Agreements, etc ..................................... 8 Section 7.6 Waiver by Collateral Agent or Noteholders ..................... 9 Section 8. Release of Collateral; Subordination of Lien .................. 9 Section 9. Marshalling; Obligations Secured by Property Other Than Stock Collateral ......................................... 10 Section 10. Company's Obligations Not Affected ............................ 10 Section 11. Transfer, etc., by Company .................................... 10 Section 12. Further Assurances ............................................ 11 Section 13. Collateral Agent's Exoneration ................................ 11 Section 14. Indemnity ..................................................... 12
-i- Section 15. Compensation of the Collateral Agent ...................................... 12 Section 16. Collateral Agent May Perform; Actions of Collateral Agent ................. 12 Section 17. Collateral Agent's Duties ................................................. 13 Section 18. Resignation of Collateral Agent; Successor Collateral Agent ............... 14 Section 19. No Waiver, etc ............................................................ 14 Section 20. Notice, etc ............................................................... 14 Section 21. Termination ............................................................... 15 Section 22. Overdue Amounts ........................................................... 15 Section 24. Waiver of Jury Trial ...................................................... 15 Section 25. Miscellaneous ............................................................. 15 Signatures..........................................................Error! Bookmark not defined.
-ii- Stock Pledge Agreement This Stock Pledge Agreement ("Agreement") is made as of April 30, 2001, by and between Medallion Financial Corp., a Delaware corporation (the "Company"), and Fleet National Bank, a national banking association, as collateral agent (hereinafter in such capacity, the "Collateral Agent") for the holders of the Notes from time to time (herein, the "Noteholders") 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 Agreement") and in effect from time to time, the "Note Agreements"), among Medallion Funding Corp. ("Funding") and the purchasers of Notes thereunder. Whereas, the Company is the direct legal and beneficial owner of all of the issued and outstanding shares of each class of the capital stock of the corporation described on Annex A (the "Subsidiary"); and Whereas, it is a condition to the effectiveness of the First Amendment that the Company execute and deliver to the Collateral Agent, for the benefit of the Noteholders, a pledge agreement in substantially the form hereof; and Whereas, the Company wishes to grant pledges and security interests in favor of the Collateral Agent, for the benefit of the Noteholders, as herein provided; Now, Therefore, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Pledge of Stock, Etc. Section 1.1. Pledge of Stock. The Company hereby pledges, assigns, grants a security interest in, and delivers to the Collateral Agent, for the benefit of the Noteholders, all of the shares of capital stock of the Subsidiary of every class, as more fully described on Annex A hereto, to be held by the Collateral Agent, for the ratable benefit of the Noteholders, subject to the terms and conditions hereinafter set forth. The certificates for such shares, accompanied by undated stock powers or other appropriate instruments of assignment thereof duly executed in blank by the Company, have been delivered to the Collateral Agent. Section 1.2. Additional Stock. In case the Company shall acquire any additional shares of the capital stock of the Subsidiary or corporation which is the successor of the Subsidiary, or any securities exchangeable for or convertible into shares of such capital stock of any class of the Subsidiary, by purchase, stock dividend, stock split or otherwise, then the Company shall forthwith deliver to and pledge such shares or other securities to the Collateral Agent, for the benefit of the Noteholders, under this Agreement and shall deliver to the Collateral Agent forthwith any certificates therefor, accompanied by undated stock powers or other appropriate instruments of assignment duly executed by the Company in blank. The Company agrees that the Collateral Agent may from time to time attach as Annex A hereto an updated list of the shares of capital stock or securities at the time pledged with the Collateral Agent hereunder. Section 1.3. Pledge of Cash Collateral Account. The Company also hereby pledges, assigns, grants a security interest in, and delivers to the Collateral Agent, for the benefit of the Noteholders, the Cash Collateral Account and all of the Cash Collateral as such terms are hereinafter defined. Section 2. Definitions. Terms used herein and not defined herein that are defined in the Note Agreements shall have the respective meanings provided in the Note Agreements, unless the context otherwise indicated or requires, and the following terms shall have the following meanings: "Cash Collateral." See (S)4. "Cash Collateral Account." See (S)4. "Notes" shall have the meaning set forth for such term in the Note Agreements. "Obligations" shall mean any and all present and future indebtedness and all performance obligations which may at any time be owing by the Company to the Collateral Agent or any Noteholder, however arising, under the Note Agreements, this Agreement or any other Note Document between the Collateral Agent and/or any Noteholder and the Company 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 Company, whether secured by mortgage, pledge, or lien upon or security interest in any property of the Company, 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 Company 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 Company 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 Company and the Collateral Agent or any Noteholder in connection therewith, and, solely in connection with this Agreement or the Note Agreements, the following: (i) indebtedness owing by the Company to the Collateral Agent or any Noteholder, (ii) the liability of the Company 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 Company to the Collateral Agent or any Noteholder under any instrument of guaranty or 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 Company. 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, -2- perfecting, preserving, retaking, holding, and preparing any of the Collateral for sale chargeable to the Company and due from the Company under this Agreement, the Note Agreements or under any other agreement or arrangement which may be now or hereafter entered into between the Company and the Collateral Agent or the Noteholders. "Stock" The shares of stock described in Annex A attached hereto and any additional shares of stock at the time pledged with the Collateral Agent hereunder. "Stock Collateral." The property at any time pledged to the Collateral Agent hereunder (whether described herein or not) and all income therefrom, increases therein and proceeds thereof, including without limitation that included in Cash Collateral, but excluding from the definition of "Stock Collateral" any income, increases or proceeds received by the Company to the extent expressly permitted by (S)6. "Time Deposits." See (S)4. Section 3. Security for Obligations. This Agreement and the security interest in and pledge of the Stock Collateral hereunder are made with and granted to the Collateral Agent, for the benefit of the Noteholders, as security for the payment and performance in full of all the Obligations. Section 4. Liquidation, Recapitalization, Etc. Section 4.1. Distributions Paid to Collateral Agent. Any sums or other property paid or distributed upon or with respect to any of the Stock, whether by dividend or redemption or upon the liquidation or dissolution of the issuer thereof or otherwise, shall, except to the limited extent provided in (S)6, be paid over and delivered to the Collateral Agent to be held by the Collateral Agent, for the benefit of the Noteholders, as security for the payment and performance in full of all of the Obligations. In case, pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, any distribution of capital shall be made on or in respect of any of the Stock or any property shall be distributed upon or with respect to any of the Stock, the property so distributed shall be delivered to the Collateral Agent, for the benefit of the Noteholders, to be held by it as security for the Obligations. Except to the limited extent provided in (S)6, all sums of money and property paid or distributed in respect of the Stock, whether as a dividend or upon such a liquidation, dissolution, recapitalization or reclassification or otherwise, that are received by the Company shall, until paid or delivered to the Collateral Agent, be held in trust for the Collateral Agent, for the benefit of the Noteholders, as security for the payment and performance in full of all of the Obligations. Section 4.2. Cash Collateral Account. All sums of money that are delivered to the Collateral Agent pursuant to this (S)4 shall be deposited into an interest bearing account with the Collateral Agent (the "Cash Collateral Account"). Some or all of the funds from time to time in the Cash Collateral Account may be invested in time deposits, including, without limitation, certificates of deposit issued by the Collateral Agent (such certificates of deposit or other time deposits being hereinafter referred to, collectively, as "Time Deposits"), that are satisfactory to -3- the Collateral Agent after consultation with the Company, provided, that, in each such case, arrangements satisfactory to the Collateral Agent are made and are in place to perfect and to insure the first priority of the Collateral Agent's security interest therein. Interest earned on the Cash Collateral Account and on the Time Deposits, and the principal of the Time Deposits at maturity that is not invested in new Time Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral Account, all sums from time to time standing to the credit of the Cash Collateral Account, any and all Time Deposits, any and all instruments or other writings evidencing Time Deposits and any and all proceeds or any thereof are hereinafter referred to as the "Cash Collateral." Section 4.3. Company's Rights to Cash Collateral, etc. Except as otherwise expressly provided in (S)16, the Company shall have no right to withdraw sums from the Cash Collateral Account, to receive any of the Cash Collateral or to require the Collateral Agent to part with the Collateral Agent's possession of any instruments or other writings evidencing any Time Deposits. Section 5. Warranty of Title; Authority. The Company hereby represents and warrants that: (i) the Company has good and marketable title to, and is the sole record and beneficial owner of, the Stock described in (S)1, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances except the pledge and security interest created by this Agreement and Permitted Liens, (ii) all of the Stock described in (S)1 is validly issued, fully paid and non-assessable, (iii) the Company has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to pledge and grant a security interest in all of the Stock Collateral pursuant to this Agreement, and the execution, delivery and performance hereof and the pledge of and granting of a security interest in the Stock Collateral hereunder have been duly authorized by all necessary corporate or other action and do not contravene any law, rule or regulation or any provision of the Company's charter documents or by-laws or of any judgment, decree or order of any tribunal or of any agreement or instrument to which the Company is a party or by which it or any of its property is bound or affected or constitute a default thereunder, and (iv) the information set forth in Annex A hereto relating to the Stock is true, correct and complete in all respects. The Company covenants that it will defend the rights of the Noteholders and security interest of the Collateral Agent, for the benefit of the Noteholders, in such Stock against the claims and demands of all other persons whomsoever. The Company further covenants that it will have the like title to and right to pledge and grant a security interest in the Stock Collateral hereafter pledged or in which a security interest is granted to the Collateral Agent hereunder and will likewise defend the rights, pledge and security interest thereof and therein of the Noteholders and the Collateral Agent. Section 6. Dividends, Voting, Etc., Prior to Maturity. So long as no Default or Event of Default shall have occurred and be continuing, the Company shall be entitled to receive all cash dividends paid in respect of the Stock, to vote the Stock and to give consents, waivers and ratifications in respect of the Stock; provided, however, that no vote shall be cast or consent, waiver or ratification given by the Company if the effect -4- thereof would in the reasonable judgment of the Required Holders impair any of the Stock Collateral or be inconsistent with or result in any violation of any of the provisions of the Note Agreements, or any of the other Note Documents. All such rights of the Company to receive cash dividends shall cease in case a Default or an Event of Default shall have occurred and be continuing. All such rights of the Company to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Collateral Agent's option, as evidenced by the Collateral Agent's notifying the Company of such election, cease in case a Default or an Event of Default shall have occurred and be continuing. Section 7. Remedies. Section 7.1. In General. If a Default or an Event of Default shall have occurred and be continuing, the Collateral Agent shall thereafter have the following rights and remedies (to the extent permitted by applicable law) in addition to the rights and remedies of a secured party under the Uniform Commercial Code of the State of New York (the "New York UCC"), all such rights and remedies being cumulative, not exclusive, and enforceable alternatively, successively or concurrently, at such time or times as the Collateral Agent deems expedient: (a) if the Collateral Agent so elects and gives notice of such election to the Company, the Collateral Agent may vote any or all shares of the Stock (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) for any lawful purpose, including, without limitation, if the Collateral Agent so elects, for the liquidation of the assets of the issuer thereof, and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner thereof (the Company hereby irrevocably constituting and appointing the Collateral Agent the proxy and attorney-in-fact of the Company, with full power of substitution, to do so); (b) the Collateral Agent may demand, sue for, collect or make any compromise or settlement the Collateral Agent deems suitable in respect of any Stock Collateral; (c) the Collateral Agent may sell, resell, assign and deliver, or otherwise dispose of any or all of the Stock Collateral, for cash or credit or both and upon such terms at such place or places, at such time or times and to such entities or other persons as the Collateral Agent thinks expedient, all without demand for performance by the Company or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by law; (d) the Collateral Agent may cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees; and (e) the Collateral Agent may set off against the Obligations any and all sums deposited with it or held by it, including without limitation, any sums standing to the credit of the Cash Collateral Account and any Time Deposits issued by the Collateral Agent. -5- (f) Each of the Noteholders acknowledges and agrees that (i) it shall only have recourse to the Collateral through the Collateral Agent and that it shall have no independent recourse to the Collateral and (ii) the Collateral Agent shall have no obligation to take any action, or refrain from taking any action, except upon instructions from the Required Holders in accordance with the provisions hereunder. Section 7.2. Sale of Stock Collateral. In the event of any disposition of the Stock Collateral as provided in clause (c) of (S)7.1, the Collateral Agent shall give to the Company at least five Business Days prior written notice of the time and place of any public sale of the Stock Collateral or of the time after which any private sale or any other intended disposition is to be made. The Company hereby acknowledges that five Business Days prior written notice of such sale or sales shall be reasonable notice. The Collateral Agent may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereunder imposed by statute, rule of law or otherwise (all of which are hereby expressly waived by the Company, to the fullest extent permitted by law). The Collateral Agent may buy any part or all of the Stock Collateral at any public sale and if any part or all of the Stock Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely-distributed standard price quotations, the Collateral Agent may buy at private sale and may make payments thereof by any means. The Collateral Agent may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling and the like, to reasonable attorneys' fees, travel and all other expenses which may be incurred by the Collateral Agent in attempting to collect the Obligations or to enforce this Agreement or in the prosecution or defense of any action or proceeding related to the subject matter of this Agreement, and then to the Obligations in accordance with this (S)7.2. The proceeds of any collection or sale of, or other realization upon, all or any part of the Stock Collateral shall be applied by the Collateral Agent in the following order of priority: first, to payment of the expenses of sale or other realization, including reasonable compensation to the Collateral Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Collateral Agent in connection therewith, and any other unreimbursed expenses for which the Collateral Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations (after taking into account amounts not then due and payable), pro rata in accordance with the respective outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations, to payment to the Company or Funding or their successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Collateral Agent may make distributions hereunder in cash or in kind, but such distributions to the Noteholders shall in all events be made pro rata on the basis of the outstanding principal amount of the Obligations. Distributions made under clause "second" above may also be made in a combination of cash or property, but distributions to the Noteholders shall be made pro rata on the basis of the outstanding principal amount of the -6- Obligations. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations, shall continue to be Obligations for which Funding remains liable. In making the determinations and allocations required by this (S)7.2 or otherwise by this Agreement, the Collateral Agent may rely upon information supplied by the Noteholders as to the amounts of the Obligations, or as to other matters (with each such matter being conclusively deemed to be proved or established by a certificate executed by an officer of such person), and the Collateral Agent shall have no liability to any of the Noteholders for actions taken in reliance upon such information. All distributions made by the Collateral Agent pursuant to this (S)7.2 shall be final, and the Collateral Agent shall have no duty to inquire as to the application by the Noteholders of any amount distributed to them. However, if at any time the Collateral Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Collateral Agent may in its discretion, but shall not, subject to this (S)7.2, be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Noteholders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Collateral Agent hereunder or under any Security Document, the Collateral Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations, the Collateral Agent shall nonetheless apply the proceeds for the benefit of the Noteholders in the proportion and subject to the priorities of (S)7.2 hereof. Only after such applications, and after payment by the Collateral Agent of any amount required by (S)9-504(1)(c) of the New York UCC, need the Collateral Agent account to the Company for any surplus. To the extent that any of the Obligations are to be paid or performed by a person other than the Company, the Company waives and agrees not to assert any rights or privileges which it may have under (S)9-112 of the New York UCC. If any Noteholder acquires custody, control or possession of any Stock Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Noteholder shall promptly cause such Stock Collateral or proceeds to be delivered to or put in the custody, possession or control of the Collateral Agent or, if the Collateral Agent shall so designate, an agent of the Collateral Agent (which Collateral Agent may be a branch or affiliate of the agent, the Administrative Collateral Agent or any Bank) in the same form of payment received, with appropriate endorsements, in the country in which such Stock Collateral is held for distribution in accordance with the provisions of this Section. Until such time as the provisions of the immediately preceding sentence have been complied with, such Noteholder shall be deemed to hold such Stock Collateral and proceeds in trust for the Collateral Agent. Section 7.3. Registration of Stock. If the Collateral Agent shall determine to exercise its right to sell any or all of the Stock pursuant to this (S)7, and if in the opinion of counsel for the -7- Collateral Agent it is necessary, or if in the reasonable opinion of the Collateral Agent it is advisable, to have the Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Collateral Agent, advisable to register such Stock under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for a period of 9 months from the date such registration statement became effective, and to make all amendments thereto or to the related prospectus or both that, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Collateral Agent shall designate and to cause such issuer to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of (S)11(a) of the Securities Act. Section 7.4. Private Sales. The Company recognizes that the Collateral Agent may be unable to effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act, federal banking laws, and other applicable laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Company agrees that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act, or such other federal banking or other applicable laws, even if the issuer would agree to do so. Subject to the foregoing, the Collateral Agent agrees that any sale of the Stock shall be made in a commercially reasonable manner, and the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Collateral Agent, advisable to exempt such Stock from registration under the provisions of the Securities Act, and to make all amendments to such instruments and documents which, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company further agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Collateral Agent shall designate and, if required, to cause such issuer or issuers to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of (S)11(a) of the Securities Act. Section 7.5. Company's Agreements, etc. The Company further agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make any sales of any -8- portion or all of the Stock pursuant to this (S)7 valid and binding and in compliance with any and all applicable laws (including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Company's expense. The Company further agrees that a breach of any of the covenants contained in this (S)7 will cause irreparable injury to the Collateral Agent and the Noteholders, that the Collateral Agent and the Noteholders have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this (S)7 shall be specifically enforceable against the Company by the Collateral Agent and the Company hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. Section 7.6 Waiver by Collateral Agent or Noteholders. The Collateral Agent's or any Noteholder's failure at any time or times hereafter to require strict performance by either the Company or Funding of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Note Documents shall not waive, affect or diminish any right of the Collateral Agent or any Noteholder at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement or any of the Note Documents, and any waiver of any Default or Event of Default shall not waive or affect any other Default or Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any other Note Documents shall be deemed to have been waived by any act or knowledge of the Collateral Agent or any Noteholder, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Collateral Agent or such Noteholder and directed to the Company or Funding specifying such waiver. Section 8. Release of Collateral; Subordination of Lien. The Collateral Agent, for the benefit of itself and the Noteholders is hereby authorized, upon receipt of a request from either the Company or Funding, to release any Stock Collateral and to provide such releases with respect to any Stock Collateral in connection with any sale, exchange or other disposition thereof permitted under the Note Agreements so long as (i) the Collateral Agent obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Holders, the Collateral Agent may release any Stock Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Note Agreements, the Collateral Agent shall, on the written instructions of the Required Holders, subordinate by written instrument the lien on all or any portion of the Stock Collateral to any other lender extending to the Company or Funding indebtedness permitted by the terms of the Note Agreements. -9- Section 9. Marshalling; Obligations Secured by Property Other Than Stock Collateral. None of the Collateral Agent or any Noteholder shall be required to marshal any present or future collateral security for (including but not limited to this Agreement and the Stock Collateral), or other assurances of payment of, the Obligations, or to resort to such collateral security or other assurances of payment in any particular order. All of the Collateral Agent's rights hereunder and of the Noteholders in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, the Company hereby agrees that it will not invoke any law relating to the marshalling of collateral that might cause delay in or impede the enforcement of the Collateral Agent's rights under this Agreement or under any other instrument evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and to the extent that it lawfully may the Company hereby irrevocably waives the benefits of all such laws. To the extent that the Obligations are now or hereafter secured by property other than the Stock Collateral, or by a guarantee, endorsement or property of any other person, then the Collateral Agent shall have the right to, and upon the direction of the Required Holders shall, proceed against such other property, guarantee or endorsement upon the occurrence of a Default and during the continuance of an Event of Default, and the Collateral Agent shall have the right, with the consent of the Required Holders, to determine which rights, security, liens, security interests or remedies the Collateral Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Collateral Agent's rights or any of the Noteholders' rights under the Obligations, this Agreement or any other Note Document. Section 10. Company's Obligations Not Affected. The obligations of the Company hereunder shall remain in full force and effect without regard to, and shall not be impaired by (i) any exercise or nonexercise, or any waiver, by the Collateral Agent or any Noteholder of any right, remedy, power or privilege under or in respect of any of the Obligations or any security therefor (including this Agreement); (ii) any amendment to or modification of the Note Agreements, the other Note Documents or any of the Obligations; (iii) any amendment to or modification of any instrument (other than this Agreement) securing any of the Obligations, including, without limitation, any of the Security Documents; or (iv) the taking of additional security for, or any other assurances of payment of, any of the Obligations or the release or discharge or termination of any security or other assurances of payment or performance for any of the Obligations; whether or not the Company shall have notice or knowledge of any of the foregoing. Section 11. Transfer, etc., by Company. Without the prior written consent of the Collateral Agent, the Company will not sell, assign, transfer or otherwise dispose of, grant any option with respect to, or pledge or grant any security interest in or otherwise encumber or restrict any of the Stock Collateral or any interest therein, except for the pledge thereof and security interest therein provided for (i) in this -10- Agreement in that certain Stock Pledge dated as of April 30, 2001 between the Company and Fleet National Bank, as agent, pursuant to that certain Amended and Restated Loan Agreement dated as of December 24, 1997, as amended from time to time and (ii) in that certain Security Agreement dated as of September 22, 2000, as amended as of October 27, 2000, among Medallion Financial Corp., Medallion Business Credit, LLC and the banks parties thereto. Section 12. Further Assurances. The Company will do all such acts, and will furnish to the Collateral Agent all such financing statements, certificates, legal opinions and other documents and will obtain all such governmental consents and corporate approvals and will do or cause to be done all such other things as the Collateral Agent or any Noteholder may reasonably request from time to time in order to give full effect to this Agreement and to secure the rights of the Noteholders, all without any cost or expense to the Collateral Agent or any if the Noteholders. If the Collateral Agent so elects, a photocopy of this Agreement may at any time and from time to time be filed by the Collateral Agent as a financing statement in any recording office in any jurisdiction. Section 13. Collateral Agent's Exoneration. (a) Under no circumstances shall the Collateral Agent be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Stock Collateral of any nature or kind or any matter or proceedings arising out of or relating thereto, other than (i) to exercise reasonable care in the physical custody of the Stock Collateral and (ii) after a Default or an Event of Default shall have occurred and be continuing to act in a commercially reasonable manner. Neither the Collateral Agent nor any Noteholder shall be required to take any action of any kind to collect, preserve or protect its or the Company's rights in the Stock Collateral or against other parties thereto. The Collateral Agent's prior recourse to any part or all of the Stock Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of any of the Obligations. (b) If at any time or times hereafter the Collateral Agent employs counsel for advice with respect to this Agreement, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement), or relating to any Stock Collateral; or to protect, take possession of, or liquidate any Stock Collateral, or to attempt to enforce any security interest or lien in any Stock Collateral, or to represent the Collateral Agent in any pending or threatened litigation with respect to the affairs of Funding in any way relating to any of the Stock Collateral or to the Obligations or to enforce any rights of the Collateral Agent or any Noteholder or liabilities of Funding, any person to whom Funding has made a Loan, or any person which may be obligated to the Collateral Agent or such Noteholder by virtue of this Agreement or any other agreement, instrument or document now or hereafter delivered to the Collateral Agent or any Noteholder by or for the benefit of Funding, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations. -11- Section 14. Indemnity. Each of the Noteholders severally agree (i) to reimburse the Collateral Agent, on demand, in the amount of its pro rata share, for any expenses referred to in this ss.14 which shall not have been reimbursed or paid by Funding or paid from the proceeds of Stock Collateral as provided herein and (ii) to indemnify and hold harmless the Collateral Agent and its directors, officers, employees and agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this ss.14, to the extent the same shall not have been reimbursed by Funding or paid from the proceeds of Stock Collateral as provided herein; provided that no Noteholder shall be liable to the Collateral Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Collateral Agent or any of its directors, officers, employees or agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this ss.14, pro rata shares at any time shall be determined based upon the outstanding principal amount of the Notes at the time such expenses were incurred. Section 15. Compensation of the Collateral Agent. The Collateral Agent shall be entitled to reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered, and to reimbursement for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent, in and about the administration of the trusts herein provided for and in and about foreclosure, enforcement or other protection of this Agreement or the lien and security interest hereof or thereof (including reasonable compensation and expenses and disbursements of its counsel and of all persons not regularly in their employ). The Company and Funding, jointly and severally, agree to pay such compensation for services of the Collateral Agent and to reimburse the Collateral Agent for such expenses, disbursements and advances. The Company and Funding, jointly and severally, agree to indemnify and save harmless the Collateral Agent from and against all loss, liability and expense incurred in good faith and without negligence on its part in the exercise or performance of any rights, remedies or duties under this Agreement. Section 16. Collateral Agent May Perform; Actions of Collateral Agent. If the Company or Funding fails to perform any agreement contained herein, the Collateral Agent may (but shall not be required to) itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by Funding, together with interest thereon at the rate of 9.20% per annum, determined on a basis of a 360-day year of twelve 30-day months, and until so paid shall be deemed part of the Obligations. The Collateral Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Note Agreement and the other Note Documents, the Collateral Agent shall take any action under or with respect to this Agreement which is requested by the Required Holders and which is not inconsistent with or contrary to the -12- provisions of this Agreement or the Note Documents. The Collateral Agent shall have the right to decline to follow any such direction if the Collateral Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Note Documents, may not lawfully be taken or would involve it in personal liability, and the Collateral Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement, the Collateral Agent may rely on any such direction given to it by the Required Holders and shall be fully protected, and shall under no circumstances (absent the gross negligence or willful misconduct of the Collateral Agent) be liable to the Company, Funding, any Noteholder or any other person for taking or refraining from taking action in accordance therewith. The Collateral Agent may consult with counsel and shall be fully protected in taking any action hereunder in accordance with any advice of such counsel. The Collateral Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Stock Collateral from any court of competent jurisdiction. Section 17. Collateral Agent's Duties. The powers conferred on the Collateral Agent hereunder are solely to protect its interest and the interests of the Noteholders in the Stock Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Stock Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Collateral Agent shall have no duty as to any Stock Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Stock Collateral. The Collateral Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Collateral Agent makes no representation as to the value or condition of the Stock Collateral or any part thereof, as to the title of the Company to the Stock Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Collateral Agent shall incur no liability or responsibility in respect of any such matters. The Collateral Agent shall not be responsible for insuring the Stock Collateral, for the payment of taxes, charges, assessments or liens upon the Stock Collateral or otherwise as to the maintenance of the Stock Collateral. The Collateral Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through Agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Collateral Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such person may be liable due to its willful misconduct or gross negligence. Neither the Collateral Agent nor any officer, agent or representative thereof shall be personally liable for any action taken by any such person in accordance with any notice given by the Required Holders pursuant to the terms of this Agreement even if, at the time such action is taken by any such person, the Required Holders are not entitled to give such notice, except where the account -13- officer of the Collateral Agent active upon Funding's accounts has actual knowledge that such Required Holders are not entitled to give such notice. Section 18. Resignation of Collateral Agent; Successor Collateral Agent. The Collateral Agent may at any time (i) be removed upon at least 30 days' prior written notice to the Collateral Agent provided by the Required Holders or (ii) resign by giving thirty (30) days prior written notice thereof to each Noteholder, the Company and Funding, provided that no resignation shall be effective until a successor for the Collateral Agent is appointed. Upon such resignation or removal, the Required Holders shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Collateral Agent's giving of notice of resignation, then the retiring Collateral Agent may, on behalf of the Required Holders, as applicable, appoint a successor Collateral Agent, which shall be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring Collateral Agent's resignation or removal, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent. Section 19. No Waiver, etc. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so modified or limited, and executed by the Collateral Agent, with the consent of the Required Holders (or, if required by the Note Agreements, with the consent of all of the Noteholders), and the Company. No act, failure or delay by the Collateral Agent shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by the Collateral Agent of any default or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. The Company hereby waives presentment, notice of dishonor and protest of all instruments, included in or evidencing any of the Obligations, and any and all other notices and demands whatsoever (except as expressly provided herein or in the Note Agreements). Section 20. Notice, etc. All notices, requests and other communications hereunder shall be made in the manner set forth in ss.18 of the Note Agreements. -14- Section 21. Termination. Upon final payment and performance in full of the Obligations, this Agreement shall terminate and the Collateral Agent shall, at the Company's request and expense, return such Stock Collateral in the possession or control of the Collateral Agent as has not theretofore been disposed of pursuant to the provisions hereof, together with any moneys and other property at the time held by the Collateral Agent hereunder. Section 22. Overdue Amounts. Until paid, all amounts due and payable by the Company hereunder shall be a debt secured by the Stock Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Note Agreements. Section 23. Governing Law; Consent to Jurisdiction. This Agreement 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 Company agrees that any suit for the enforcement of this Agreement may be brought in the courts of the State of New York or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Company by mail at the address specified in ss.18 of the Note Agreements. The Company 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 is brought in an inconvenient court. Section 24. Waiver of Jury Trial. The Company waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of any such rights or obligations. Except as prohibited by law, the Company 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 Company (i) certifies that neither the Collateral Agent or any Noteholder nor any representative, agent or attorney of the Collateral Agent or any Noteholder has represented, expressly or otherwise, that the Collateral Agent or 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 to which the Collateral Agent is a party and the Noteholders are relying upon, among other things, the waivers and certifications contained in this (S)25. Section 25. Miscellaneous. The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations hereunder -15- shall be binding upon the Company and its respective successors and assigns, and shall inure to the benefit of the Collateral Agent and the Noteholders and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall be in no way affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Company 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). The Company acknowledges receipt of a copy of this Agreement. -16- In Witness Whereof, intending to be legally bound, the Company and the Collateral Agent have caused this Agreement to be executed as of the date first above written. Medallion Financial Corp. By /s/ Andrew M. Murstein ---------------------- Andrew M. Murstein President By /s/ Larry D. Hall ----------------- Larry D. Hall Corporate Controller Fleet National Bank, as Collateral Agent By /s/ Kevin J. Foley ------------------ Name: Kevin J. Foley Title: Sr. VP The undersigned Subsidiary hereby joins in the above Agreement for the sole purpose of consenting to and being bound by the provisions of ss.ss.4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate fully and in good faith with the Collateral Agent and the Company in carrying out such provisions. Medallion Taxi Media, Inc. By /s/ Andrew M. Murstein ---------------------- Andrew M. Murstein President By /s/ Larry D. Hall ----------------- Larry D. Hall Corporate Controller -17- Annex A to Pledge Agreement The issuer has no authorized, issued or outstanding shares of its capital stock of any class or any commitments to issue any shares of its capital stock of any class or any securities convertible into or exchangeable for any shares of its capital stock of any class except as otherwise stated in this Annex A.
Number of Number of Number of Par or Record Class of Authorized Issued Outstanding Liquidation Issuer Owner Shares Shares Shares Shares Value Medallion Taxi Medallion Common 100 100 100 .001 Media, Inc. Financial Corp.
EX-10.44 11 dex1044.txt STOCK PLEDGE AGREEMENT, DATED AS OF APRIL 30, 2001 Exhibit 10.44 - -------------------------------------------------------------------------------- STOCK PLEDGE AGREEMENT ---------------------- DATED as of April 30, 2001 between MEDALLION FINANCIAL CORP. and FLEET NATIONAL BANK, as Agent and secured party, for the benefit of THE BANKS AND THE HOLDERS OF COMMERCIAL PAPER ISSUED BY MEDALLION FUNDING CORP. - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- 1. Pledge of Stock, etc. ................................................... 2 --------------------- 1.1. Pledge of Stock ....................................................... 2 --------------- 1.2. Additional Stock ...................................................... 2 ---------------- 1.3. Pledge of Cash Collateral Account ..................................... 3 --------------------------------- 2. Definitions ............................................................. 3 ----------- 3. Security for Obligations ................................................ 3 ------------------------ 4. Liquidation, Recapitalization, etc. ..................................... 4 ----------------------------------- 4.1. Distributions Paid to Agent ........................................... 4 --------------------------- 4.2. Cash Collateral Account ............................................... 4 ----------------------- 4.3. Company's Rights to Cash Collateral, etc. ............................. 5 ----------------------------------------- 5. Warranty of Title; Authority ............................................ 5 ---------------------------- 6. Dividends, Voting, etc., Prior to Maturity .............................. 6 ------------------------------------------ 7. Remedies ................................................................ 6 -------- 7.1. In General ............................................................ 6 ---------- 7.2. Sale of Stock Collateral .............................................. 8 ------------------------ 7.3. Registration of Stock ................................................. 11 --------------------- 7.4. Private Sales ......................................................... 12 ------------- 7.5. Company's Agreements, etc. ............................................ 12 ------------------------- 7.6. Waiver by Agent or Banks .............................................. 13 ------------------------ 8. Release of Collateral; Subordination of Lien ............................ 13 -------------------------------------------- 9. Marshalling ............................................................. 14 ----------- 10. Company's Obligations Not Affected .................................... 15 ---------------------------------- 11. Transfer, etc., by Company .............................................. 15 -------------------------- 12. Further Assurances ...................................................... 16 ------------------ 13. Agent's Exoneration ..................................................... 16 ------------------- 14. Indemnity ............................................................... 17 --------- 15. Banks' Freedom of Dealing ............................................... 18 ------------------------- 16. Agent May Perform; Actions of Agent ..................................... 18 ----------------------------------- 17. Agent's Duties .......................................................... 19 -------------- 18. Resignation of Agent; Successor Agent ................................... 20 ------------------------------------- 19. No Waiver, etc. ......................................................... 21 --------------- 20. Notice, etc. ............................................................ 21 ------------ 21. Termination ............................................................. 21 ----------- 22. Overdue Amounts ......................................................... 21 --------------- 23. CP Holders .............................................................. 21 ---------- 24. Governing Law; Consent to Jurisdiction .................................. 22 -------------------------------------- 25. Waiver of Jury Trial .................................................... 22 -------------------- 26. Miscellaneous ........................................................... 22 -------------
STOCK PLEDGE AGREEMENT ---------------------- This STOCK PLEDGE AGREEMENT is made as of April 30, 2001, by and between MEDALLION FINANCIAL CORP., a Delaware corporation (the "Company"), and FLEET NATIONAL BANK, a national banking association, as agent (hereinafter in such capacity, the "Administrative 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. ("Funding"), the Banks and the Administrative Agent and as collateral agent for the Administrative Agent, the Banks and the CP Holders (as defined in the Loan Agreement) (in such capacity, the "Agent"). WHEREAS, the Company is the direct legal and beneficial owner of all of the issued and outstanding shares of each class of the capital stock of the corporation described on Annex A (the "Subsidiary"); and ----- - WHEREAS, it is a condition to the effectiveness of Amendment No. 1 that the Company execute and deliver to the Agent, for the benefit of the Banks and the Agent, a pledge agreement in substantially the form hereof; and WHEREAS, the Banks are willing to consent to the grant of the security interest in the Collateral to the Agent for the benefit of the CP Holders (in addition to the Banks and the Agent), provided that in the case of each of the CP Holders such security interest granted to the Agent for such CP Holder's benefit shall only be effective to the extent that such CP Holder has (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on terms and conditions satisfactory to the Agent and with duties consistent with those necessary to enable the Agent (in its opinion) to perform its duties as collateral agent under this Agreement, (b) consented to and agreed to be bound by the terms of this Agreement and to the Agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in a manner satisfactory to the Agent, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf; and WHEREAS, by accepting the security granted by, and the other benefits of, this Agreement, each CP Holder shall be deemed to have -2- (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to the terms of this Agreement and to the Agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, pursuant to the terms of this Agreement, as collateral agent under this Agreement on such CP Holder's behalf; and WHEREAS, the Company wishes to grant pledges and security interests in favor of the Agent, for the benefit of the Banks, the CP Holders and the Agent, as herein provided; NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Pledge of Stock, etc. 1.1. Pledge of Stock. The Company hereby pledges, assigns, grants a --------------- security interest in, and delivers to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, all of the shares of capital stock of the Subsidiary of every class, as more fully described on Annex A hereto, to be held by the Agent, for the ratable ----- - benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, subject to the terms and conditions hereinafter set forth. The certificates for such shares, accompanied by undated stock powers or other appropriate instruments of assignment thereof duly executed in blank by the Company, have been delivered to the Agent. 1.2. Additional Stock. In case the Company shall acquire any ---------------- additional shares of the capital stock of the Subsidiary or corporation which is the successor of the Subsidiary, or any securities exchangeable for or convertible into shares of such capital stock of any class of the Subsidiary, by purchase, stock dividend, stock split or otherwise, then the Company shall forthwith deliver to and pledge such shares or other securities to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, under this Agreement and shall deliver to the Agent forthwith any certificates therefor, accompanied by undated stock powers or other appropriate instruments of assignment duly executed by the Company in blank. The Company agrees that the Agent may from time to -3- time attach as Annex A hereto an updated list of the shares of capital ----- - stock or securities at the time pledged with the Agent hereunder. 1.3. Pledge of Cash Collateral Account. The Company also hereby --------------------------------- pledges, assigns, grants a security interest in, and delivers to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, the Cash Collateral Account and all of the Cash Collateral as such terms are hereinafter defined. 2. 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. Terms used herein and not defined in the Loan Agreement or otherwise defined herein that are defined in the Loan Agreement have such defined meanings herein, unless the context otherwise indicated or requires, and the following terms shall have the following meanings: Cash Collateral. See (S).4. --------------- Cash Collateral Account. See (S).4. ----------------------- Stock. The shares of stock described in Annex A attached hereto and any ----- ----- - additional shares of stock at the time pledged with the Agent hereunder. Stock Collateral. The property at any time pledged to the Agent hereunder ---------------- (whether described herein or not) and all income therefrom, increases therein and proceeds thereof, including without limitation that included in Cash Collateral, but excluding from the definition of "Stock Collateral" any income, increases or proceeds received by the Company to the extent expressly permitted by (S).6. Time Deposits. See (S).4. ------------- 3. Security for Obligations. This Agreement and the security interest in ------------------------ and pledge of the Stock Collateral hereunder are made with and granted to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, as security for the payment and performance in full of all the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. -4- 4. Liquidation, Recapitalization, etc. ---------------------------------- 4.1. Distributions Paid to Agent. Any sums or other property paid or --------------------------- distributed upon or with respect to any of the Stock, whether by dividend or redemption or upon the liquidation or dissolution of the issuer thereof or otherwise, shall, except to the limited extent provided in (S).6, be paid over and delivered to the Agent to be held by the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, as security for the payment and performance in full of all of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. In case, pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, any distribution of capital shall be made on or in respect of any of the Stock or any property shall be distributed upon or with respect to any of the Stock, the property so distributed shall be delivered to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, to be held by it as security for the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. Except to the limited extent provided in (S).6, all sums of money and property paid or distributed in respect of the Stock, whether as a dividend or upon such a liquidation, dissolution, recapitalization or reclassification or otherwise, that are received by the Company shall, until paid or delivered to the Agent, be held in trust for the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, as security for the payment and performance in full of all of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. 4.2. Cash Collateral Account. All sums of money that are delivered to ----------------------- the Agent pursuant to this (S).4 shall be deposited into an interest bearing account with the Agent (the "Cash Collateral Account"). Some or all of the funds from time to time in the Cash Collateral Account may be invested in time deposits, including, without limitation, certificates of deposit issued by the Agent (such certificates of deposit or other time deposits being hereinafter referred to, collectively, as "Time Deposits"), that are satisfactory to the Agent after consultation with the Company, provided, that, in each such case, -------- arrangements satisfactory to the Agent are made and are in place to perfect and to insure the first priority of the Agent's security interest -5- therein. Interest earned on the Cash Collateral Account and on the Time Deposits, and the principal of the Time Deposits at maturity that is not invested in new Time Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral Account, all sums from time to time standing to the credit of the Cash Collateral Account, any and all Time Deposits, any and all instruments or other writings evidencing Time Deposits and any and all proceeds or any thereof are hereinafter referred to as the "Cash Collateral." 4.3. Company's Rights to Cash Collateral, etc. Except as otherwise ---------------------------------------- expressly provided in (S).16, the Company shall have no right to withdraw sums from the Cash Collateral Account, to receive any of the Cash Collateral or to require the Agent to part with the Agent's possession of any instruments or other writings evidencing any Time Deposits. 5. Warranty of Title; Authority. The Company hereby represents and warrants ---------------------------- that: (i) the Company has good and marketable title to, and is the sole record and beneficial owner of, the Stock described in (S).1, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances except the pledge and security interest created by this Agreement and Permitted Liens, (ii) all of the Stock described in (S).1 is validly issued, fully paid and non-assessable, (iii) the Company has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to pledge and grant a security interest in all of the Stock Collateral pursuant to this Agreement, and the execution, delivery and performance hereof and the pledge of and granting of a security interest in the Stock Collateral hereunder have been duly authorized by all necessary corporate or other action and do not contravene any law, rule or regulation or any provision of the Company's charter documents or by-laws or of any judgment, decree or order of any tribunal or of any agreement or instrument to which the Company is a party or by which it or any of its property is bound or affected or constitute a default thereunder, and (iv) the information set forth in Annex A hereto relating to the Stock is true, ----- - correct and complete in all respects. The Company covenants that it will defend the rights of the Banks, the CP Holders, the Administrative Agent and the Agent and security interest of the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, in such Stock against the claims and demands of all other persons whomsoever. The Company further covenants that it will have the like title to and right to pledge and grant a security interest in the Stock Collateral -6- hereafter pledged or in which a security interest is granted to the Agent hereunder and will likewise defend the rights, pledge and security interest thereof and therein of the Banks, the CP Holders, the Administrative Agent and the Agent. 6. Dividends, Voting, etc., Prior to Maturity. So long as no Default or ------------------------------------------ Event of Default shall have occurred and be continuing, the Company shall be entitled to receive all cash dividends paid in respect of the Stock, to vote the Stock and to give consents, waivers and ratifications in respect of the Stock; provided, however, that no vote shall be cast or consent, waiver or ratification - -------- ------- given by the Company if the effect thereof would in the reasonable judgment of the Required Banks impair any of the Stock Collateral or be inconsistent with or result in any violation of any of the provisions of the Loan Agreement or any of the other Loan Documents. All such rights of the Company to receive cash dividends shall cease in case a Default or an Event of Default shall have occurred and be continuing. All such rights of the Company to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Agent's option, as evidenced by the Agent's notifying the Company of such election, cease in case a Default or an Event of Default shall have occurred and be continuing. 7. Remedies. -------- 7.1. In General. If a Default or an Event of Default shall have ---------- occurred and be continuing, the Agent shall thereafter have the following rights and remedies (to the extent permitted by applicable law) in addition to the rights and remedies of a secured party under the Uniform Commercial Code of the State of New York (the "New York UCC"), all such rights and remedies being cumulative, not exclusive, and enforceable alternatively, successively or concurrently, at such time or times as the Agent deems expedient: (a) if the Agent so elects and gives notice of such election to the Company, the Agent may vote any or all shares of the Stock (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) for any lawful purpose, including, without limitation, if the Agent so elects, for the liquidation of the assets of the issuer thereof, and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner -7- thereof (the Company hereby irrevocably constituting and appointing the Agent the proxy and attorney-in-fact of the Company, with full power of substitution, to do so); (b) the Agent may demand, sue for, collect or make any compromise or settlement the Agent deems suitable in respect of any Stock Collateral; (c) the Agent may sell, resell, assign and deliver, or otherwise dispose of any or all of the Stock Collateral, for cash or credit or both and upon such terms at such place or places, at such time or times and to such entities or other persons as the Agent thinks expedient, all without demand for performance by the Company or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by law; (d) the Agent may cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees; and (e) the Agent may set off against the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders any and all sums deposited with it or held by it, including without limitation, any sums standing to the credit of the Cash Collateral Account and any Time Deposits issued by the Agent. (f) Each of the Banks and CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acknowledges and agrees that (i) it shall only have recourse to the Collateral through the Agent and that it shall have no independent recourse to the Collateral and (ii) the Agent shall have no obligation to take any action, or refrain from taking any action, except upon instructions from the Required Banks in accordance with the provisions hereunder. To the extent that the Agent, acting as Agent hereunder, exercises any rights or omits to exercise any rights under this Agreement at any time for the benefit of the Administrative Agent or the Banks (whether requested by the Required Banks thereunder or otherwise) with respect to any of the Collateral, such exercise or omission shall likewise be deemed to be authorized by the CP Holders -8- and the Paying Agent for performance (or omission) by the Agent hereunder for the benefit of the CP Holders. In furtherance of the foregoing, the Agent may exercise (or omit to exercise) all rights requested by the Required Banks under this Agreement without first giving notice or consulting with any CP Holder or the Paying Agent. 7.2. Sale of Stock Collateral. In the event of any disposition of the Stock ------------------------ Collateral as provided in clause (c) of (S).7.1, the Agent shall give to the Company at least five Business Days prior written notice of the time and place of any public sale of the Stock Collateral or of the time after which any private sale or any other intended disposition is to be made. The Company hereby acknowledges that five Business Days prior written notice of such sale or sales shall be reasonable notice. The Agent may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereunder imposed by statute, rule of law or otherwise (all of which are hereby expressly waived by the Company, to the fullest extent permitted by law). The Agent may buy any part or all of the Stock Collateral at any public sale and if any part or all of the Stock Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely-distributed standard price quotations, the Agent may buy at private sale and may make payments thereof by any means. The Agent may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling and the like, to reasonable attorneys' fees, travel and all other expenses which may be incurred by the Agent in attempting to collect the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or to enforce this Agreement or in the prosecution or defense of any action or proceeding related to the subject matter of this Agreement, and then to the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders in accordance with this (S).7.2. The proceeds of any collection or sale of, or other realization upon, all or any part of the Stock Collateral shall be applied by the Agent in the following order of priority: first, to payment of the expenses of sale or other realization, including reasonable compensation to the Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Agent in connection -9- therewith, and any other unreimbursed expenses for which the Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations (after taking into account amounts not then due and payable) and of the obligations in respect of the Permitted Debt owing to the CP Holders and the CP Debt (to the extent it constitutes Permitted Debt), pro rata in accordance with the respective --- ---- outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders and all CP Debt, to payment to the Company or Funding or its successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Agent may make distributions hereunder in cash or in kind, but such distributions to the Banks shall in all events be made pro rata on the basis of the respective Exposure Percentages of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. Distributions made under clause "second" above may also be made in a combination of cash or property, but distributions to the Banks shall be made pro rata on the basis of the respective Exposure Percentages of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders, shall continue to be Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders for which the Company or Funding remains liable. In making the determinations and allocations required by this (S).7.2 or otherwise by this Agreement, the Agent may rely upon information supplied by the Banks as to the amounts of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders held by them and supplied by the CP Holders or the Paying Agent as to the -10- amounts owed on the CP Debt, or as to other matters (with each such matter being conclusively deemed to be proved or established by a certificate executed by an officer of such Person), and the Agent shall have no liability to any of the Banks, the Paying Agent or any of the CP Holders for actions taken in reliance upon such information. All distributions made by the Agent pursuant to this (S).7.2 shall be final, and the Agent shall have no duty to inquire as to the application by the Banks, the Paying Agent or the CP Holders of any amount distributed to them. However, if at any time the Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Agent may in its discretion, but shall not, subject to this (S).7.2, be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Banks and the CP Holders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Agent hereunder or under any Security Document, the Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders and the CP Debt, the Agent shall nonetheless apply the proceeds for the benefit of the Banks and the CP Holders in the proportion and subject to the priorities of (S).7.2 hereof. Only after such applications, and after payment by the Agent of any amount required by (S).9-504(1)(c) of the New York UCC, need the Agent account to the Company for any surplus. To the extent that any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders are to be paid or performed by a person other than the Company, the Company waives and agrees not to assert any rights or privileges which it may have under (S).9-112 of the New York UCC. If any Bank, the Paying Agent or any CP Holder (with the CP Holders being deemed to so agree by accepting the security -11- interests granted hereunder and the other benefits provided hereby) acquires custody, control or possession of any Stock Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Bank, the Paying Agent or such CP Holder shall promptly cause such Stock Collateral or proceeds to be delivered to or put in the custody, possession or control of the Agent or, if the Agent shall so designate, an agent of the Agent (which agent may be a branch or affiliate of the Agent, the Administrative Agent or any Bank) in the same form of payment received, with appropriate endorsements, in the country in which such Stock Collateral is held for distribution in accordance with the provisions of this Section. Until such time as the provisions of the immediately preceding sentence have been complied with, such Bank, the Paying Agent or such CP Holder shall be deemed to hold such Stock Collateral and proceeds in trust for the Agent. 7.3. Registration of Stock. If the Agent shall determine to exercise its --------------------- right to sell any or all of the Stock pursuant to this (S).7, and if in the opinion of counsel for the Agent it is necessary, or if in the reasonable opinion of the Agent it is advisable, to have the Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Agent, advisable to register such Stock under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for a period of 9 months from the date such registration statement became effective, and to make all amendments thereto or to the related prospectus or both that, in the reasonable opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Agent shall designate and to cause such issuer to make available to its security holders, as soon as practicable, an -12- earnings statement (which need not be audited) which will satisfy the provisions of (S).11(a) of the Securities Act. 7.4. Private Sales. The Company recognizes that the Agent may be unable to ------------- effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act, federal banking laws, and other applicable laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Company agrees that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Agent shall be under no obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act, or such other federal banking or other applicable laws, even if the issuer would agree to do so. Subject to the foregoing, the Agent agrees that any sale of the Stock shall be made in a commercially reasonable manner, and the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Agent, advisable to exempt such Stock from registration under the provisions of the Securities Act, and to make all amendments to such instruments and documents which, in the opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company further agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Agent shall designate and, if required, to cause such issuer to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of (S).11(a) of the Securities Act. 7.5. Company's Agreements, etc. The Company further agrees to do or cause ------------------------- to be done all such other acts and things as may be reasonably necessary to make any sales of any portion or all of the Stock pursuant to this (S)7 valid and binding and in -13- compliance with any and all applicable laws (including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Company's expense. The Company further agrees that a breach of any of the covenants contained in this (S)7 will cause irreparable injury to the Agent, the CP Holders, the Administrative Agent and the Banks, that the Agent, the CP Holders, the Administrative Agent and the Banks have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this (S)7 shall be specifically enforceable against the Company by the Agent and the Company hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. 7.6 Waiver by Agent or Banks. The Agent's or any Bank's failure at any ------------------------ time or times hereafter to require strict performance by either the Company or Funding of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Loan Documents shall not waive, affect or diminish any right of the Agent, the Administrative Agent or any Bank at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement or any of the Loan Documents, and any waiver of any Default or Event of Default shall not waive or affect any other Default or Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any other Loan Documents shall be deemed to have been waived by any act or knowledge of the Agent, the Administrative Agent or any Bank, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Agent, the Administrative Agent or such Bank and directed to the Company or Funding specifying such waiver. 8. Release of Collateral; Subordination of Lien. The Agent, for the benefit -------------------------------------------- of itself, the Banks, the Administrative Agent and the CP Holders is hereby authorized, upon receipt of a request from either the -14- Company or Funding, to release any Stock Collateral and to provide such releases with respect to any Stock Collateral in connection with any sale, exchange or other disposition thereof permitted under the Loan Agreement so long as (i) the Agent obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Banks, the Agent may release any Stock Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Loan Agreement, the Agent shall, on the written instructions of the Required Banks, subordinate by written instrument the lien on all or any portion of the Stock Collateral to any other lender extending to the Company or Funding indebtedness permitted by the terms of the Loan Agreement. 9. Marshalling; Obligations Secured by Property Other Than Stock ------------------------------------------------------------- Collateral. None of the Agent, the Administrative Agent, any Bank, or any CP - ---------- Holder shall be required to marshal any present or future collateral security for (including but not limited to this Agreement and the Stock Collateral), or other assurances of payment of, the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or any of them, or to resort to such collateral security or other assurances of payment in any particular order. All of the Agent's rights hereunder and of the Banks, the CP Holders, the Administrative Agent and the Agent in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, the Company hereby agrees that it will not invoke any law relating to the marshalling of collateral that might cause delay in or impede the enforcement of the Agent's rights under this Agreement or under any other instrument evidencing any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or under which any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders is outstanding or by which any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders is secured or payment thereof is otherwise assured, and to the extent that it lawfully may the Company hereby irrevocably waives the benefits of all such laws. To the extent that the Obligations are now or hereafter secured by property other than the Stock Collateral, or by a guarantee, endorsement or property of any other Person, then the -15- Agent shall have the right to, and upon the direction of the Required Banks shall, proceed against such other property, guarantee or endorsement upon the occurrence of a Default and during the continuance of an Event of Default, and the Agent shall have the right, with the consent of the Required Banks, to determine which rights, security, liens, security interests or remedies the Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Agent's rights or any of the Banks' rights under the Obligations, this Agreement or any other Loan Document. 10. Company's Obligations Not Affected. The obligations of the Company ---------------------------------- hereunder shall remain in full force and effect without regard to, and shall not be impaired by (i) any exercise or nonexercise, or any waiver, by the Agent, any CP Holder, the Administrative Agent or any Bank of any right, remedy, power or privilege under or in respect of any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or any security therefor (including this Agreement); (ii) any amendment to or modification of the Loan Agreement, the other Loan Documents or any of the Obligations or of the obligations in respect of the Permitted Debt owing to the CP Holders; (iii) any amendment to or modification of any instrument (other than this Agreement) securing any of the Obligations or of the obligations in respect of the Permitted Debt owing to the CP Holders, including, without limitation, any of the Security Documents; or (iv) the taking of additional security for, or any other assurances of payment of, any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or the release or discharge or termination of any security or other assurances of payment or performance for any of the Obligations or of the obligations in respect of the Permitted Debt owing to the CP Holders; whether or not the Company shall have notice or knowledge of any of the foregoing. 11. Transfer, etc., by Company. Without the prior written consent of the -------------------------- Agent, the Company will not sell, assign, transfer or otherwise dispose of, grant any option with respect to, or pledge or grant any security interest in or otherwise encumber or restrict any of the Stock Collateral or any interest therein, except for the pledge thereof and security interest therein provided for in this Agreement, the Security Agreement dated as of September 22, 2000, as amended as of October 27, 2000, among the Company, Medallion Business Credit, LLC and Fleet National Bank, as agent, for the benefit of itself, certain other financial institutions and certain commercial paper -16- holders named therein, and the Stock Pledge Agreement dated as of April 30, 2001, by and between the Company and Fleet National Bank as collateral agent for the holders of certain notes pursuant to those certain Note Purchase Agreements each dated as of June 1, 1999. 12. Further Assurances. The Company will do all such acts, and will furnish ------------------ to the Agent all such financing statements, certificates, legal opinions and other documents and will obtain all such governmental consents and corporate approvals and will do or cause to be done all such other things as the Agent may reasonably request from time to time in order to give full effect to this Agreement and to secure the rights of the CP Holders, the Banks, the Administrative Agent and the Agent hereunder, all without any cost or expense to the Agent, any CP Holder, the Administrative Agent or any Bank. If the Agent so elects, a photocopy of this Agreement may at any time and from time to time be filed by the Agent as a financing statement in any recording office in any jurisdiction. 13. Agent's Exoneration. ------------------- (a) Under no circumstances shall the Agent be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Stock Collateral of any nature or kind or any matter or proceedings arising out of or relating thereto, other than (i) to exercise reasonable care in the physical custody of the Stock Collateral and (ii) after a Default or an Event of Default shall have occurred and be continuing to act in a commercially reasonable manner. Neither the Agent, any CP Holder, the Administrative Agent nor any Bank shall be required to take any action of any kind to collect, preserve or protect its or the Company's rights in the Stock Collateral or against other parties thereto. The Agent's prior recourse to any part or all of the Stock Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders (b) If at any time or times hereafter the Agent employs counsel for advice with respect to this Agreement or any Other Agreements, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any Other Agreements (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or any Other Agreements), or relating to any Stock Collateral; or to protect, take possession of, or liquidate -17- any Stock Collateral, or to attempt to enforce any security interest or lien in any Stock Collateral, or to represent the Agent in any pending or threatened litigation with respect to the affairs of Funding in any way relating to any of the Stock Collateral or to the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or to enforce any rights of the Agent, the Administrative Agent, any Bank, the Paying Agent or the CP Holders or liabilities of Funding, any Person to whom Funding has made a Loan, or any Person which may be obligated to the Agent, the Administrative Agent, the CP Holders or such Bank by virtue of this Agreement or any Other Agreement, instrument or document now or hereafter delivered to the Agent, any Bank, the Paying Agent, the Administrative Agent, the CP Holders or any CP Holder by or for the benefit of Funding, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders secured by the Stock Collateral. 14. Indemnity. Each of the Banks and the CP Holders (with the CP Holders --------- being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) severally agree (i) to reimburse the Agent, on demand, in the amount of its pro rata share, for any expenses referred --- ---- to in this (S)14 which shall not have been reimbursed or paid by Funding or paid from the proceeds of Stock Collateral as provided herein and (ii) to indemnify and hold harmless the Agent and its directors, officers, employees and agents, on demand, in the amount of such pro rata share, from and against any and all --- ---- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this (S)14, to the extent the same shall not have been reimbursed by Funding or paid from the proceeds of Stock Collateral as provided herein; provided that no Bank or CP Holder shall be -------- liable to the Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or any of its directors, officers, employees or agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this (S)14, pro rata shares at any time shall be determined based upon the --- ---- aggregate exposures (in the case of the Banks), or the Commercial Paper (in the case of the CP Holders) at the time such expenses were incurred. -18- 15. Banks' Freedom of Dealing. Each CP Holder agrees, with respect to the ------------------------- Obligations and the obligations in respect of the Permitted Debt owing to the CP Holders, any and all guaranties thereof and any and all Stock Collateral, that Funding and the Banks may agree to increase the amount of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or otherwise modify or waive the terms of any of the Loan Agreement, the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or the other Loan Documents, and the Banks may grant extensions of the time of payment or performance to and make compromises, including releases of guaranties, collateral which is not Stock Collateral, and settlements with Funding and all other Persons, in each case without the consent of any CP Holder or the Paying Agent for which it acts and without affecting the agreements of the CP Holders or Funding contained in this Agreement. 16. Agent May Perform; Actions of Agent. If Funding fails to perform any ----------------------------------- agreement contained herein, the Agent may (but shall not be required to) itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by Funding, together with interest thereon at the rate specified in (S)2.6 of the Loan Agreement, and until so paid shall be deemed part of the Obligations. The Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Loan Agreement and the other Loan Documents, the Agent shall take any action under or with respect to this Agreement which is requested by the Required Banks and which is not inconsistent with or contrary to the provisions of this Agreement or the Loan Documents. The Agent shall have the right to decline to follow any such direction if the Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Loan Documents, may not lawfully be taken or would involve it in personal liability, and the Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement the Agent may rely on any such direction given to it by the Required Banks and shall be fully protected, and shall under no circumstances (absent the gross negligence or willful misconduct of the Agent) be liable to Funding, any Bank, the Administrative Agent, any CP Holder, the Paying Agent or any other Person for taking or refraining from taking action in accordance therewith. The Agent may consult with counsel and shall be fully protected in taking any -19- action hereunder in accordance with any advice of such counsel. The Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Stock Collateral from any court of competent jurisdiction. At such time as all Obligations have been repaid in full and there are no commitments to incur further Obligations, the Agent shall take instructions from the holders of a majority of the CP Debt or their representative. 17. Agent's Duties. The powers conferred on the Agent hereunder are solely -------------- to protect its interest and the interests of the Banks and the CP Holders in the Stock Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Stock Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Agent shall have no duty as to any Stock Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Stock Collateral. The Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Agent makes no representation as to the value or condition of the Stock Collateral or any part thereof, as to the title of the Company to the Stock Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Agent shall incur no liability or responsibility in respect of any such matters. The Agent shall not be responsible for insuring the Stock Collateral, for the payment of taxes, charges, assessments or liens upon the Stock Collateral or otherwise as to the maintenance of the Stock Collateral. The Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such Person may be liable due to its willful misconduct or gross negligence. Neither the Agent nor any officer, -20- agent or representative thereof shall be personally liable for any action taken by any such Person in accordance with any notice given by the Required Banks pursuant to the terms of this Agreement even if, at the time such action is taken by any such Person, the Required Banks are not entitled to give such notice, except where the account officer of the Agent active upon Funding's accounts has actual knowledge that such Required Banks are not entitled to give such notice. 18. Resignation of Agent; Successor Agent. ------------------------------------- (a) The Agent may at any time resign by giving ten (10) days prior written notice thereof to each Bank, the Administrative Agent, the Paying Agent, the Company and Funding, provided that no resignation shall be effective until a successor for the Agent is appointed. Upon such resignation, the Required Banks (or, if the Obligations have been paid in full and the Revolving Credit Commitments have terminated, the Paying Agent) shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Required Banks or the Paying Agent, as applicable, appoint a successor Agent, which shall be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. (b) In the event a successor agent is appointed pursuant to the provisions of (S)11.4 of the Loan Agreement, such successor agent shall succeed to the rights, powers and duties of the Agent hereunder, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to the Loan Agreement or any holders of the Revolving Credit Notes or Term Notes. Such former Agent agrees to take such actions as are -21- reasonably necessary to effectuate the transfer of its rights, powers and duties to such successor agent. 19. No Waiver, etc. Neither this Agreement nor any term hereof may be -------------- changed, waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so modified or limited, and executed by the Agent, with the consent of the Required Banks (or, if required by the Loan Agreement, with the consent of all of the Banks), and the Company. No act, failure or delay by the Agent shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by the Agent of any default or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. The Company hereby waives presentment, notice of dishonor and protest of all instruments, included in or evidencing any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or the Stock Collateral, and any and all other notices and demands whatsoever (except as expressly provided herein or in the Loan Agreement). 20. Notice, etc. All notices, requests and other communications hereunder ----------- shall be made in the manner set forth in (S)10.4 of the Loan Agreement. 21. Termination. Upon final payment and performance in full of the ----------- Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders, this Agreement shall terminate and the Agent shall, at the Company's request and expense, return such Stock Collateral in the possession or control of the Agent as has not theretofore been disposed of pursuant to the provisions hereof, together with any moneys and other property at the time held by the Agent hereunder. 22. Overdue Amounts. Until paid, all amounts due and payable by the Company --------------- hereunder shall be a debt secured by the Stock Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Loan Agreement. 23. CP Holders. By accepting the security granted by, and the other ---------- benefits of, this Agreement, each CP Holder is hereby deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to and agreed to be bound by the terms of this -22 Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in its capacity as collateral agent, pursuant to the terms of this Agreement, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. 24. Governing Law; Consent to Jurisdiction. THIS AGREEMENT 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 Company agrees that any suit for the enforcement of this Agreement may be brought in the courts of the State of New York or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Company by mail at the address specified in (S)10.4 of the Loan Agreement. The Company 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 is brought in an inconvenient court. 25. Waiver of Jury Trial. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH -------------------- RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company 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 Company (i) certifies that neither the Agent, the Administrative Agent, any CP Holder or any Bank nor any representative, agent or attorney of the Agent, the Administrative Agent, any CP Holder or any Bank has represented, expressly or otherwise, that the Agent, the Administrative Agent, any CP Holder 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 is a party, the Agent, the Administrative Agent, the CP Holders and the Banks are relying upon, among other things, the waivers and certifications contained in this (S)25. 26. Miscellaneous. The headings of each section of this Agreement are for ------------- convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations -23- hereunder shall be binding upon the Company and its respective successors and assigns, and shall inure to the benefit of the Agent, the Administrative Agent, the CP Holders and the Banks and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall be in no way affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Company 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). The Company acknowledges receipt of a copy of this Agreement. -24- IN WITNESS WHEREOF, intending to be legally bound, the Company and the Agent have caused this Agreement to be executed as of the date first above written. MEDALLION FINANCIAL CORP. By: /s/ Andrew M. Murstein --------------------------------- Andrew M. Murstein President By: /s/ Larry D. Hall --------------------------------- Larry D. Hall Corporate Controller FLEET NATIONAL BANK, as Agent By: /s/ Kevin J. Foley --------------------------------- Name: Kevin J. Foley Title: Senior Vice President The undersigned Subsidiary hereby joins in the above Agreement for the sole purpose of consenting to and being bound by the provisions of (S)(S)4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate fully and in good faith with the Agent and the Company in carrying out such provisions. MEDALLION TAXI MEDIA, INC. By: /s/ Andrew M. Murstein --------------------------------- Andrew M. Murstein President -25- By: /s/ Larry D. Hall ---------------------------------- Larry D. Hall Corporate Controller ANNEX A TO PLEDGE AGREEMENT --------------------------- The issuer has no authorized, issued or outstanding shares of its capital stock of any class or any commitments to issue any shares of its capital stock of any class or any securities convertible into or exchangeable for any shares of its capital stock of any class except as otherwise stated in this Annex A. ----- -
Number of Number of Number of Par or Record Class of Authorized Issued Outstanding Liquidation Issuer Owner Shares Shares Shares Shares Value ------ ------ -------- ---------- ---------- ----------- -------- Medallion Taxi Medallion Common 100 100 100 $0.001 Media, Inc. Financial Corp.
EX-10.45 12 dex1045.txt STOCK PLEDGE AGREEMENT, DATED AS OF 2/20/02 Exhibit 10.45 STOCK PLEDGE AGREEMENT ---------------------- DATED as of February 20, 2002 between MEDALLION FUNDING CORP. and FLEET NATIONAL BANK, as Agent and secured party, for the benefit of THE BANKS AND THE HOLDERS OF COMMERCIAL PAPER ISSUED BY MEDALLION FUNDING CORP. TABLE OF CONTENTS ----------------- 1 Pledge of Stock, etc ......................................... 2 1.1 Pledge of Stock .............................................. 2 1.2 Intercreditor Agreement ...................................... 2 1.3 Additional Stock ............................................. 2 1.4 Pledge of Cash Collateral Account ............................ 2 2 Definitions .................................................. 2 3 Security for Obligations ..................................... 3 4 Liquidation, Recapitalization, etc ........................... 3 4.1 Distributions Paid to Agent .................................. 3 4.2 Cash Collateral Account ...................................... 4 4.3 Company's Rights to Cash Collateral, etc ..................... 4 5 Warranty of Title; Authority ................................. 5 6 Dividends, Voting, etc., Prior to Maturity ................... 5 7 Remedies ..................................................... 5 7.1 In General ................................................... 5 7.2 Sale of Stock Collateral ..................................... 6 7.3 Registration of Stock ........................................ 10 7.4 Private Sales ................................................ 11 7.5 Company's Agreements, etc .................................... 10 7.6 Waiver by Agent or Banks ..................................... 10 8 Release of Collateral; Subordination of Lien ................. 12 9 Marshalling .................................................. 13 10 Company's Obligations Not Affected ........................... 12 11 Transfer, etc., by Company ................................... 14 12 Further Assurances ........................................... 14 13 Agent's Exoneration .......................................... 15 14 Indemnity .................................................... 16 15 Banks' Freedom of Dealing .................................... 16 16 Agent May Perform; Actions of Agent .......................... 16 17 Agent's Duties ............................................... 17 18 Resignation of Agent; Successor Agent ........................ 18 19 No Waiver, etc ............................................... 19 20 Notice, etc .................................................. 19 21 Termination .................................................. 19 22 Overdue Amounts .............................................. 19 23 CP Holders ................................................... 19 24 Governing Law; Consent to Jurisdiction ....................... 20 25 Waiver of Jury Trial ......................................... 20 26 Miscellaneous ................................................ 20 STOCK PLEDGE AGREEMENT ---------------------- This STOCK PLEDGE AGREEMENT is made as of February 20, 2002, by and between MEDALLION FUNDING CORP., a New York corporation (the "Company"), and FLEET NATIONAL BANK, a national banking association, as agent (hereinafter in such capacity, the "Administrative 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. ("Funding"), the Banks and the Administrative Agent and as collateral agent for the Administrative Agent, the Banks and the CP Holders (as defined in the Loan Agreement) (in such capacity, the "Agent"). WHEREAS, the Company is the direct legal and beneficial owner of all of the issued and outstanding shares of each class of the capital stock of the corporation described on Annex A (the "Subsidiary"); ------- WHEREAS, it is a post-closing condition to Amendment No. 6 (as defined in the Loan Agreement) that the Company execute and deliver to the Agent, for the benefit of the Banks and the Agent, a pledge agreement in substantially the form hereof; WHEREAS, the Banks are willing to consent to the grant of the security interest in the Collateral to the Agent for the benefit of the CP Holders (in addition to the Banks and the Agent), provided that in the case of each of the CP Holders such security interest granted to the Agent for such CP Holder's benefit shall only be effective to the extent that such CP Holder has (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on terms and conditions satisfactory to the Agent and with duties consistent with those necessary to enable the Agent (in its opinion) to perform its duties as collateral agent under this Agreement, (b) consented to and agreed to be bound by the terms of this Agreement and to the Agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in a manner satisfactory to the Agent, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf; WHEREAS, by accepting the security granted by, and the other benefits of, this Agreement, each CP Holder shall be deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to the terms of this Agreement and to the Agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, pursuant to the terms of this Agreement, as collateral agent under this Agreement on such CP Holder's behalf; and WHEREAS, the Company wishes to grant pledges and security interests in favor of the Agent, for the benefit of the Banks, the CP Holders and the Agent, as herein provided; -2- NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Pledge of Stock, etc. --------------------- 1.1. Pledge of Stock. The Company hereby pledges, assigns, --------------- grants a security interest in, and delivers to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, all of the shares of capital stock of the Subsidiary of every class, as more fully described on Annex A hereto, to be held by the ------- Agent, for the ratable benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, subject to the terms and conditions hereinafter set forth. The certificates for such shares, accompanied by undated stock powers or other appropriate instruments of assignment thereof duly executed in blank by the Company, have been delivered to the Agent. 1.2. Intercreditor Agreement. The Agent, on behalf of itself, ----------------------- the CP Holders and the Banks, acknowledges and agrees that the Stock Collateral granted to the Agent for the benefit of itself, the CP Holders and the Banks pursuant to this Agreement, shall constitute the "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. 1.3. Additional Stock. In case the Company shall acquire any ---------------- additional shares of the capital stock of the Subsidiary or corporation which is the successor of the Subsidiary, or any securities exchangeable for or convertible into shares of such capital stock of any class of the Subsidiary, by purchase, stock dividend, stock split or otherwise, then the Company shall forthwith deliver to and pledge such shares or other securities to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, under this Agreement and shall deliver to the Agent forthwith any certificates therefor, accompanied by undated stock powers or other appropriate instruments of assignment duly executed by the Company in blank. The Company agrees that the Agent may from time to time attach as Annex A hereto an updated list of the shares of capital stock or securities at the time pledged with the Agent hereunder. 1.4. Pledge of Cash Collateral Account. The Company also --------------------------------- hereby pledges, assigns, grants a security interest in, and delivers to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, the Cash Collateral Account and all of the Cash Collateral as such terms are hereinafter defined. 2. 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. Terms used herein and not defined in the Loan -3- Agreement or otherwise defined herein that are defined in the Loan Agreement have such defined meanings herein, unless the context otherwise indicated or requires, and the following terms shall have the following meanings: Cash Collateral. See(S).4. --------------- Cash Collateral Account. See(S).4. ----------------------- Stock. The shares of stock described in Annex A attached hereto and any ----- ----- - additional shares of stock at the time pledged with the Agent hereunder. Stock Collateral. The property at any time pledged to the Agent ---------------- hereunder (whether described herein or not) and all income therefrom, increases therein and proceeds thereof, including without limitation that included in Cash Collateral, but excluding from the definition of "Stock Collateral" any income, increases or proceeds received by the Company to the extent expressly permitted by (S).6. Time Deposits. See(S).4. ------------- 3. Security for Obligations. This Agreement and the security interest ------------------------ in and pledge of the Stock Collateral hereunder are made with and granted to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, as security for the payment and performance in full of all the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. 4. Liquidation, Recapitalization, etc. ---------------------------------- 4.1. Distributions Paid to Agent. Any sums or other property --------------------------- paid or distributed upon or with respect to any of the Stock, whether by dividend or redemption or upon the liquidation or dissolution of the issuer thereof or otherwise, shall, except to the limited extent provided in (S).6, be paid over and delivered to the Agent to be held by the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, as security for the payment and performance in full of all of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. In case, pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, any distribution of capital shall be made on or in respect of any of the Stock or any property shall be distributed upon or with respect to any of the Stock, the property so distributed shall be delivered to the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, to be held by it as security for the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. Except to the limited extent provided in (S).6, all sums of money and property paid or distributed in respect of the Stock, whether as a dividend or upon such a liquidation, dissolution, recapitalization or reclassification or otherwise, that are received by the Company shall, until paid or delivered to the Agent, be held in trust for the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, as -4- security for the payment and performance in full of all of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. 4.2. Cash Collateral Account. All sums of money that are ----------------------- delivered to the Agent pursuant to this (S).4 shall be deposited into an interest bearing account with the Agent (the "Cash Collateral Account"). Some or all of the funds from time to time in the Cash Collateral Account may be invested in time deposits, including, without limitation, certificates of deposit issued by the Agent (such certificates of deposit or other time deposits being hereinafter referred to, collectively, as "Time Deposits"), that are satisfactory to the Agent after consultation with the Company, provided, that, in -------- each such case, arrangements satisfactory to the Agent are made and are in place to perfect and to insure the first priority of the Agent's security interest therein. Interest earned on the Cash Collateral Account and on the Time Deposits, and the principal of the Time Deposits at maturity that is not invested in new Time Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral Account, all sums from time to time standing to the credit of the Cash Collateral Account, any and all Time Deposits, any and all instruments or other writings evidencing Time Deposits and any and all proceeds or any thereof are hereinafter referred to as the "Cash Collateral." 4.3. Company's Rights to Cash Collateral, etc. Except as ---------------------------------------- otherwise expressly provided in (S).16, the Company shall have no right to withdraw sums from the Cash Collateral Account, to receive any of the Cash Collateral or to require the Agent to part with the Agent's possession of any instruments or other writings evidencing any Time Deposits. 5. Warranty of Title; Authority. The Company hereby represents and ---------------------------- warrants that: (i) the Company has good and marketable title to, and is the sole record and beneficial owner of, the Stock described in (S).1, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances except the pledge and security interest created by this Agreement and Permitted Liens, (ii) all of the Stock described in (S).1 is validly issued, fully paid and non-assessable, (iii) the Company has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to pledge and grant a security interest in all of the Stock Collateral pursuant to this Agreement, and the execution, delivery and performance hereof and the pledge of and granting of a security interest in the Stock Collateral hereunder have been duly authorized by all necessary corporate or other action and do not contravene any law, rule or regulation or any provision of the Company's charter documents or by-laws or of any judgment, decree or order of any tribunal or of any agreement or instrument to which the Company is a party or by which it or any of its property is bound or affected or constitute a default thereunder, and (iv) the information set forth in Annex A hereto ----- - relating to the Stock is true, correct and complete in all respects. The Company covenants that it will defend the rights of the Banks, the CP Holders, the Administrative Agent and the Agent and security interest of the Agent, for the benefit of the Banks, the CP Holders, the Administrative Agent and the Agent, in such Stock against the claims -5- and demands of all other persons whomsoever. The Company further covenants that it will have the like title to and right to pledge and grant a security interest in the Stock Collateral hereafter pledged or in which a security interest is granted to the Agent hereunder and will likewise defend the rights, pledge and security interest thereof and therein of the Banks, the CP Holders, the Administrative Agent and the Agent. 6. Dividends, Voting, etc., Prior to Maturity. So long as no Default ------------------------------------------ or Event of Default shall have occurred and be continuing, the Company shall be entitled to receive all cash dividends paid in respect of the Stock, to vote the Stock and to give consents, waivers and ratifications in respect of the Stock; provided, however, that no vote shall be cast or consent, waiver or ratification - -------- ------- given by the Company if the effect thereof would in the reasonable judgment of the Required Banks impair any of the Stock Collateral or be inconsistent with or result in any violation of any of the provisions of the Loan Agreement or any of the other Loan Documents. All such rights of the Company to receive cash dividends shall cease in case a Default or an Event of Default shall have occurred and be continuing. All such rights of the Company to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Agent's option, as evidenced by the Agent's notifying the Company of such election, cease in case a Default or an Event of Default shall have occurred and be continuing. 7. Remedies. --------- 7.1. In General. If a Default or an Event of Default shall ---------- have occurred and be continuing, the Agent shall thereafter have the following rights and remedies (to the extent permitted by applicable law) in addition to the rights and remedies of a secured party under the Uniform Commercial Code of the State of New York (the "New York UCC"), all such rights and remedies being cumulative, not exclusive, and enforceable alternatively, successively or concurrently, at such time or times as the Agent deems expedient: (a) if the Agent so elects and gives notice of such election to the Company, the Agent may vote any or all shares of the Stock (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) for any lawful purpose, including, without limitation, if the Agent so elects, for the liquidation of the assets of the issuer thereof, and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner thereof (the Company hereby irrevocably constituting and appointing the Agent the proxy and attorney-in-fact of the Company, with full power of substitution, to do so); (b) the Agent may demand, sue for, collect or make any compromise or settlement the Agent deems suitable in respect of any Stock Collateral; -6- (c) the Agent may sell, resell, assign and deliver, or otherwise dispose of any or all of the Stock Collateral, for cash or credit or both and upon such terms at such place or places, at such time or times and to such entities or other persons as the Agent thinks expedient, all without demand for performance by the Company or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by law; (d) the Agent may cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees; and (e) the Agent may set off against the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders any and all sums deposited with it or held by it, including without limitation, any sums standing to the credit of the Cash Collateral Account and any Time Deposits issued by the Agent. (f) Each of the Banks and CP Holders (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acknowledges and agrees that (i) it shall only have recourse to the Collateral through the Agent and that it shall have no independent recourse to the Collateral and (ii) the Agent shall have no obligation to take any action, or refrain from taking any action, except upon instructions from the Required Banks in accordance with the provisions hereunder. To the extent that the Agent, acting as Agent hereunder, exercises any rights or omits to exercise any rights under this Agreement at any time for the benefit of the Administrative Agent or the Banks (whether requested by the Required Banks thereunder or otherwise) with respect to any of the Collateral, such exercise or omission shall likewise be deemed to be authorized by the CP Holders and the Paying Agent for performance (or omission) by the Agent hereunder for the benefit of the CP Holders. In furtherance of the foregoing, the Agent may exercise (or omit to exercise) all rights requested by the Required Banks under this Agreement without first giving notice or consulting with any CP Holder or the Paying Agent. 7.2. Sale of Stock Collateral. In the event of any disposition ------------------------ of the Stock Collateral as provided in clause (c) of (S).7.1, the Agent shall give to the Company at least five Business Days prior written notice of the time and place of any public sale of the Stock Collateral or of the time after which any private sale or any other intended disposition is to be made. The Company hereby acknowledges that five Business Days prior written notice of such sale or sales shall be reasonable notice. The Agent may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereunder imposed by statute, rule of law or otherwise (all of which are hereby expressly waived by the -7- Company, to the fullest extent permitted by law). The Agent may buy any part or all of the Stock Collateral at any public sale and if any part or all of the Stock Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely-distributed standard price quotations, the Agent may buy at private sale and may make payments thereof by any means. The Agent may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling and the like, to reasonable attorneys' fees, travel and all other expenses which may be incurred by the Agent in attempting to collect the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or to enforce this Agreement or in the prosecution or defense of any action or proceeding related to the subject matter of this Agreement, and then to the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders in accordance with this (S).7.2. The proceeds of any collection or sale of, or other realization upon, all or any part of the Stock Collateral shall be applied by the Agent, following application of such proceeds in accordance with the terms of Section 5 of the Intercreditor Agreement in the following order of priority: first, to payment of the expenses of sale or other realization, including reasonable compensation to the Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations (after taking into account amounts not then due and payable) and of the obligations in respect of the Permitted Debt owing to the CP Holders and the CP Debt (to the extent it constitutes Permitted Debt), pro rata in accordance --- ---- with the respective outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders and all CP Debt, to payment to the Company or Funding or its successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Agent may make distributions hereunder in cash or in kind, but such distributions to the Banks shall in all events be made pro rata on the basis of the respective Exposure Percentages of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders. Distributions made under clause "second" above may also be made in a combination of cash or property, but distributions to the Banks shall be made pro rata on the basis of the respective Exposure Percentages of the Obligations and of the obligations in respect of the -8- Permitted Debt owing to the CP Holders. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders, shall continue to be Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders for which the Company or Funding remains liable. In making the determinations and allocations required by this (S).7.2 or otherwise by this Agreement, the Agent may rely upon information supplied by the Banks as to the amounts of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders held by them and supplied by the CP Holders or the Paying Agent as to the amounts owed on the CP Debt, or as to other matters (with each such matter being conclusively deemed to be proved or established by a certificate executed by an officer of such Person), and the Agent shall have no liability to any of the Banks, the Paying Agent or any of the CP Holders for actions taken in reliance upon such information. All distributions made by the Agent pursuant to this (S).7.2 shall be final, and the Agent shall have no duty to inquire as to the application by the Banks, the Paying Agent or the CP Holders of any amount distributed to them. However, if at any time the Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Agent may in its discretion, but shall not, subject to this (S).7.2, be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Banks and the CP Holders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Agent hereunder or under any Security Document, the Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders and the CP Debt, the Agent shall nonetheless apply the proceeds for the benefit of the Banks and the CP Holders in the proportion and subject to the priorities of (S).7.2 hereof. Only after such applications, and after payment by the Agent of any amount required by Sections 9-615(a)(3) and 9-615(b) of the New York UCC, need the Agent account to the Company for any surplus. To the extent that any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders are to be paid or performed by a person other than the Company, the Company, to the extent permitted by law, waives and agrees not to assert any rights or privileges which it may have under Sections 9-210, 9-620, 9-621, 9-623, and 9-625 of the New York UCC. -9- If any Bank, the Paying Agent or any CP Holder (with the CP Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) acquires custody, control or possession of any Stock Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Bank, the Paying Agent or such CP Holder shall promptly cause such Stock Collateral or proceeds to be delivered to or put in the custody, possession or control of the Agent or, if the Agent shall so designate, an agent of the Agent (which agent may be a branch or affiliate of the Agent, the Administrative Agent or any Bank) in the same form of payment received, with appropriate endorsements, in the country in which such Stock Collateral is held for distribution in accordance with the provisions of this Section. Until such time as the provisions of the immediately preceding sentence have been complied with, such Bank, the Paying Agent or such CP Holder shall be deemed to hold such Stock Collateral and proceeds in trust for the Agent. 7.3. Registration of Stock. If the Agent shall determine to --------------------- exercise its right to sell any or all of the Stock pursuant to this (S).7, and if in the opinion of counsel for the Agent it is necessary, or if in the reasonable opinion of the Agent it is advisable, to have the Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Agent, advisable to register such Stock under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for a period of 9 months from the date such registration statement became effective, and to make all amendments thereto or to the related prospectus or both that, in the reasonable opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Agent shall designate and to cause such issuer to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of (S).11(a) of the Securities Act. 7.4. Private Sales. The Company recognizes that the Agent may ------------- be unable to effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act, federal banking laws, and other applicable laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Company agrees that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Agent shall be under no -10- obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act, or such other federal banking or other applicable laws, even if the issuer would agree to do so. Subject to the foregoing, the Agent agrees that any sale of the Stock shall be made in a commercially reasonable manner, and the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Agent, advisable to exempt such Stock from registration under the provisions of the Securities Act, and to make all amendments to such instruments and documents which, in the opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company further agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Agent shall designate and, if required, to cause such issuer to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of (S).11(a) of the Securities Act. 7.5. Company's Agreements, etc. The Company further agrees to ------------------------- do or cause to be done all such other acts and things as may be reasonably necessary to make any sales of any portion or all of the Stock pursuant to this (S).7 valid and binding and in compliance with any and all applicable laws (including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Company's expense. The Company further agrees that a breach of any of the covenants contained in this (S).7 will cause irreparable injury to the Agent, the CP Holders, the Administrative Agent and the Banks, that the Agent, the CP Holders, the Administrative Agent and the Banks have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this (S).7 shall be specifically enforceable against the Company by the Agent and the Company hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. 7.6 Waiver by Agent or Banks. The Agent's or any Bank's ------------------------ failure at any time or times hereafter to require strict performance by either the Company or Funding of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Loan Documents shall not waive, affect or diminish any right of the Agent, the Administrative Agent or any Bank at any time or times hereafter to demand strict performance therewith and with respect to any other -11- provisions, warranties, terms and conditions contained in this Agreement or any of the Loan Documents, and any waiver of any Default or Event of Default shall not waive or affect any other Default or Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any other Loan Documents shall be deemed to have been waived by any act or knowledge of the Agent, the Administrative Agent or any Bank, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Agent, the Administrative Agent or such Bank and directed to the Company or Funding specifying such waiver. 8. Release of Collateral; Subordination of Lien. To the extent -------------------------------------------- permitted by the Loan Agreement and the Intercreditor Agreement, the Agent, for the benefit of itself, the Banks, the Administrative Agent and the CP Holders is hereby authorized, upon receipt of a request from either the Company or Funding, to release any Stock Collateral and to provide such releases with respect to any Stock Collateral in connection with any sale, exchange or other disposition thereof permitted under the Loan Agreement so long as (i) the Agent obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Banks, the Agent may release any Stock Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Loan Agreement, the Agent shall, on the written instructions of the Required Banks, subordinate by written instrument the lien on all or any portion of the Stock Collateral to any other lender extending to the Company or Funding indebtedness permitted by the terms of the Loan Agreement. 9. Marshalling; Obligations Secured by Property Other Than Stock ------------------------------------------------------------- Collateral. None of the Agent, the Administrative Agent, any Bank, or any CP - ---------- Holder shall be required to marshal any present or future collateral security for (including but not limited to this Agreement and the Stock Collateral), or other assurances of payment of, the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or any of them, or to resort to such collateral security or other assurances of payment in any particular order. All of the Agent's rights hereunder and of the Banks, the CP Holders, the Administrative Agent and the Agent in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, the Company hereby agrees that it will not invoke any law relating to the marshalling of collateral that might cause delay in or impede the enforcement of the Agent's rights under this Agreement or under any other instrument evidencing any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or under which any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders is outstanding or by which any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders is secured or payment thereof is otherwise assured, and to the extent that it lawfully may the Company hereby irrevocably -12- waives the benefits of all such laws. To the extent that the Obligations are now or hereafter secured by property other than the Stock Collateral, or by a guarantee, endorsement or property of any other Person, then the Agent shall have the right to, and upon the direction of the Required Banks shall, proceed against such other property, guarantee or endorsement upon the occurrence of a Default and during the continuance of an Event of Default, and the Agent shall have the right, with the consent of the Required Banks, to determine which rights, security, liens, security interests or remedies the Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Agent's rights or any of the Banks' rights under the Obligations, this Agreement or any other Loan Document. 10. Company's Obligations Not Affected. The obligations of the Company ---------------------------------- hereunder shall remain in full force and effect without regard to, and shall not be impaired by (i) any exercise or nonexercise, or any waiver, by the Agent, any CP Holder, the Administrative Agent or any Bank of any right, remedy, power or privilege under or in respect of any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or any security therefor (including this Agreement); (ii) any amendment to or modification of the Loan Agreement, the other Loan Documents or any of the Obligations or of the obligations in respect of the Permitted Debt owing to the CP Holders; (iii) any amendment to or modification of any instrument (other than this Agreement) securing any of the Obligations or of the obligations in respect of the Permitted Debt owing to the CP Holders, including, without limitation, any of the Security Documents; or (iv) the taking of additional security for, or any other assurances of payment of, any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or the release or discharge or termination of any security or other assurances of payment or performance for any of the Obligations or of the obligations in respect of the Permitted Debt owing to the CP Holders; whether or not the Company shall have notice or knowledge of any of the foregoing. 11. Transfer, etc., by Company. Without the prior written consent of -------------------------- the Agent, the Company will not sell, assign, transfer or otherwise dispose of, grant any option with respect to, or pledge or grant any security interest in or otherwise encumber or restrict any of the Stock Collateral or any interest therein, except for the pledge thereof and security interest therein provided for in this Agreement and the Security Agreement dated as of December 24, 1997, as amended to date among the Company and Fleet National Bank, as agent, for the benefit of itself, certain other financial institutions and certain commercial paper holders named therein. 12. Further Assurances. The Company will do all such acts, and will ------------------ furnish to the Agent all such financing statements, certificates, legal opinions and other documents and will obtain all such governmental consents and corporate approvals and will do or cause to be done all such other things as the Agent may reasonably request from time to time in order to give full effect to this Agreement and to secure the rights of the CP Holders, the Banks, the Administrative Agent and the Agent hereunder, all without any cost or expense to the Agent, any CP Holder, the Administrative Agent or -13- any Bank. If the Agent so elects, a photocopy of this Agreement may at any time and from time to time be filed by the Agent as a financing statement in any recording office in any jurisdiction. 13. Agent's Exoneration. ------------------- (a) Under no circumstances shall the Agent be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Stock Collateral of any nature or kind or any matter or proceedings arising out of or relating thereto, other than (i) to exercise reasonable care in the physical custody of the Stock Collateral and (ii) after a Default or an Event of Default shall have occurred and be continuing to act in a commercially reasonable manner. Neither the Agent, any CP Holder, the Administrative Agent nor any Bank shall be required to take any action of any kind to collect, preserve or protect its or the Company's rights in the Stock Collateral or against other parties thereto. The Agent's prior recourse to any part or all of the Stock Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders (b) If at any time or times hereafter the Agent employs counsel for advice with respect to this Agreement or any Other Agreements, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any Other Agreements (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or any Other Agreements), or relating to any Stock Collateral; or to protect, take possession of, or liquidate any Stock Collateral, or to attempt to enforce any security interest or lien in any Stock Collateral, or to represent the Agent in any pending or threatened litigation with respect to the affairs of Funding in any way relating to any of the Stock Collateral or to the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or to enforce any rights of the Agent, the Administrative Agent, any Bank, the Paying Agent or the CP Holders or liabilities of Funding, any Person to whom Funding has made a Loan, or any Person which may be obligated to the Agent, the Administrative Agent, the CP Holders or such Bank by virtue of this Agreement or any Other Agreement, instrument or document now or hereafter delivered to the Agent, any Bank, the Paying Agent, the Administrative Agent, the CP Holders or any CP Holder by or for the benefit of Funding, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders secured by the Stock Collateral. 14. Indemnity. Each of the Banks and the CP Holders (with the CP --------- Holders being deemed to so agree by accepting the security interests granted hereunder and the other benefits provided hereby) severally agree (i) to reimburse the Agent, on demand, in the amount of its pro rata share, for any --- ---- expenses referred to in this (S).14 which shall not have been reimbursed or paid by Funding or paid from the proceeds of Stock Collateral as provided herein and (ii) to indemnify and hold harmless the Agent and its directors, -14- officers, employees and agents, on demand, in the amount of such pro rata share, --- ---- from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this (S).14, to the extent the same shall not have been reimbursed by Funding or paid from the proceeds of Stock Collateral as provided herein; provided that no Bank or CP Holder shall be liable to the Agent for any portion - -------- of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or any of its directors, officers, employees or agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this (S).14, pro rata --- ---- shares at any time shall be determined based upon the aggregate exposures (in the case of the Banks), or the Commercial Paper (in the case of the CP Holders) at the time such expenses were incurred. 15. Banks' Freedom of Dealing. Each CP Holder agrees, with respect to ------------------------- the Obligations and the obligations in respect of the Permitted Debt owing to the CP Holders, any and all guaranties thereof and any and all Stock Collateral, that Funding and the Banks may agree to increase the amount of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or otherwise modify or waive the terms of any of the Loan Agreement, the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or the other Loan Documents, and the Banks may grant extensions of the time of payment or performance to and make compromises, including releases of guaranties, collateral which is not Stock Collateral, and settlements with Funding and all other Persons, in each case without the consent of any CP Holder or the Paying Agent for which it acts and without affecting the agreements of the CP Holders or Funding contained in this Agreement. 16. Agent May Perform; Actions of Agent. If Funding fails to perform ----------------------------------- any agreement contained herein, the Agent may (but shall not be required to) itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by Funding, together with interest thereon at the rate specified in (S).2.6 of the Loan Agreement, and until so paid shall be deemed part of the Obligations. The Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Loan Agreement and the other Loan Documents, the Agent shall take any action under or with respect to this Agreement which is requested by the Required Banks and which is not inconsistent with or contrary to the provisions of this Agreement or the Loan Documents. The Agent shall have the right to decline to follow any such direction if the Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Loan Documents, may not lawfully be taken or would involve it in personal liability, and the Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement the Agent may rely on any such direction given to it by the Required Banks and shall be fully protected, and shall under no circumstances (absent the gross negligence or willful misconduct of the Agent) be liable to Funding, any Bank, the Administrative Agent, any CP Holder, the Paying Agent or any other Person -15- for taking or refraining from taking action in accordance therewith. The Agent may consult with counsel and shall be fully protected in taking any action hereunder in accordance with any advice of such counsel. The Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Stock Collateral from any court of competent jurisdiction. At such time as all Obligations have been repaid in full and there are no commitments to incur further Obligations, the Agent shall take instructions from the holders of a majority of the CP Debt or their representative. 17. Agent's Duties. The powers conferred on the Agent hereunder are -------------- solely to protect its interest and the interests of the Banks and the CP Holders in the Stock Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Stock Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Agent shall have no duty as to any Stock Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Stock Collateral. The Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Agent makes no representation as to the value or condition of the Stock Collateral or any part thereof, as to the title of the Company to the Stock Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Agent shall incur no liability or responsibility in respect of any such matters. The Agent shall not be responsible for insuring the Stock Collateral, for the payment of taxes, charges, assessments or liens upon the Stock Collateral or otherwise as to the maintenance of the Stock Collateral. The Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such Person may be liable due to its willful misconduct or gross negligence. Neither the Agent nor any officer, agent or representative thereof shall be personally liable for any action taken by any such Person in accordance with any notice given by the Required Banks pursuant to the terms of this Agreement even if, at the time such action is taken by any such Person, the Required Banks are not entitled to give such notice, except where the account officer of the Agent active upon Funding's accounts has actual knowledge that such Required Banks are not entitled to give such notice. -16- 18. Resignation of Agent; Successor Agent. ------------------------------------- (a) The Agent may at any time resign by giving ten (10) days prior written notice thereof to each Bank, the Administrative Agent, the Paying Agent, the Company and Funding, provided that no resignation shall be effective until a -------- successor for the Agent is appointed. Upon such resignation, the Required Banks (or, if the Obligations have been paid in full and the Revolving Credit Commitments have terminated, the Paying Agent) shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Required Banks or the Paying Agent, as applicable, appoint a successor Agent, which shall be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. (b) In the event a successor agent is appointed pursuant to the provisions of (S).11.4 of the Loan Agreement, such successor agent shall succeed to the rights, powers and duties of the Agent hereunder, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to the Loan Agreement or any holders of the Revolving Credit Notes or Term Notes. Such former Agent agrees to take such actions as are reasonably necessary to effectuate the transfer of its rights, powers and duties to such successor agent. 19. No Waiver, etc. Neither this Agreement nor any term hereof may be -------------- changed, waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so modified or limited, and executed by the Agent, with the consent of the Required Banks (or, if required by the Loan Agreement, with the consent of all of the Banks), and the Company. No act, failure or delay by the Agent shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by the Agent of any default or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. The Company hereby waives presentment, notice of dishonor and protest of all instruments, included in or evidencing any of the Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders or the Stock Collateral, and any and all other notices and demands whatsoever (except as expressly provided herein or in the Loan Agreement). -17- 20. Notice, etc. All notices, requests and other communications ----------- hereunder shall be made in the manner set forth in (S).10.4 of the Loan Agreement. 21. Termination. Upon final payment and performance in full of the ----------- Obligations and of the obligations in respect of the Permitted Debt owing to the CP Holders, this Agreement shall terminate and the Agent shall, at the Company's request and expense, return such Stock Collateral in the possession or control of the Agent as has not theretofore been disposed of pursuant to the provisions hereof, together with any moneys and other property at the time held by the Agent hereunder. 22. Overdue Amounts. Until paid, all amounts due and payable by the --------------- Company hereunder shall be a debt secured by the Stock Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Loan Agreement. 23. CP Holders. By accepting the security granted by, and the other ---------- benefits of, this Agreement, each CP Holder is hereby deemed to have (a) designated the Agent as collateral agent for such CP Holder for purposes of this Agreement on the terms and conditions set forth herein, (b) consented to and agreed to be bound by the terms of this Agreement and to the Agent, in its capacity as collateral agent, entering into this Agreement on such CP Holder's behalf, and (c) agreed to indemnify the Agent, in its capacity as collateral agent, pursuant to the terms of this Agreement, with respect to the Agent's responsibilities as collateral agent under this Agreement on such CP Holder's behalf. 24. Governing Law; Consent to Jurisdiction. THIS AGREEMENT 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 Company agrees that any suit for the enforcement of this Agreement may be brought in the courts of the State of New York or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Company by mail at the address specified in (S).10.4 of the Loan Agreement. The Company 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 is brought in an inconvenient court. 25. Waiver of Jury Trial. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL -------------------- WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company 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 Company (i) certifies that neither the Agent, the Administrative Agent, any CP Holder or any Bank nor any representative, agent or attorney of the Agent, the Administrative Agent, any CP Holder or any Bank has -18- represented, expressly or otherwise, that the Agent, the Administrative Agent, any CP Holder 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 is a party, the Agent, the Administrative Agent, the CP Holders and the Banks are relying upon, among other things, the waivers and certifications contained in this (S).25. 26. Miscellaneous. The headings of each section of this Agreement are ------------- for convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations hereunder shall be binding upon the Company and its respective successors and assigns, and shall inure to the benefit of the Agent, the Administrative Agent, the CP Holders and the Banks and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall be in no way affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Company 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). The Company acknowledges receipt of a copy of this Agreement. -19- IN WITNESS WHEREOF, intending to be legally bound, the Company and the Agent have caused this Agreement to be executed as of the date first above written. MEDALLION FUNDING CORP. By: /s/ Alvin Murstein --------------------------------- Alvin Murstein President By: /s/ James E. Jack --------------------------------- James E. Jack Executive Vice President & Chief Financial Officer FLEET NATIONAL BANK, as Agent By: /s/ Kevin J. Foley --------------------------------- Name: Kevin J. Foley Title: Senior Vice President The undersigned Subsidiary hereby joins in the above Agreement for the sole purpose of consenting to and being bound by the provisions of (S).4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate fully and in good faith with the Agent and the Company in carrying out such provisions. MEDALLION FUNDING CHICAGO CORP. By: /s/ Alvin Murstein --------------------------------- Alvin Murstein Chairman & Chief Executive Officer By: /s/ James E. Jack --------------------------------- James E. Jack Chief Financial Officer -20- ANNEX A TO PLEDGE AGREEMENT The issuer has no authorized, issued or outstanding shares of its capital stock of any class or any commitments to issue any shares of its capital stock of any class or any securities convertible into or exchangeable for any shares of its capital stock of any class except as otherwise stated in this Annex A. - ----- -
Number of Number of Number of Par or Record Class of Authorized Issued Outstanding Liquidation Issuer Owner Shares Shares Shares Shares Value ------ ------ -------- ---------- ---------- ----------- -------- Medallion Medallion Common 1000 1000 1000 $0.01 Funding Chicago Funding Corp. Corp.
EX-10.49 13 dex1049.txt GUARANTY, DATED AS OF FEBRUARY 20, 2002 Exhibit 10.49 GUARANTY -------- DATED as of February 20, 2002 by MEDALLION FUNDING CHICAGO CORP. 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. Intercreditor Agreement ........................................................ 2 ----------------------- 4. Guarantor's Agreement to Pay Enforcement Costs, etc............................. 2 --------------------------------------------------- 5. Waivers by Guarantor; Bank's Freedom to Act..................................... 2 ------------------------------------------- 6. Unenforceability of Obligations Against Borrower................................ 3 ------------------------------------------------ 7. Subrogation; Subordination...................................................... 3 -------------------------- 7.1. Waiver of Rights Against Borrower..................................... 3 --------------------------------- 7.2. Subordination......................................................... 4 ------------- 7.3. Provisions Supplemental............................................... 4 ----------------------- 8. Setoff.......................................................................... 4 ------ 9. Further Assurances.............................................................. 4 ------------------ 10. Release......................................................................... 4 ------- 11. Termination; Reinstatement...................................................... 4 -------------------------- 12. Successors and Assigns.......................................................... 5 ---------------------- 13. Amendments and Waivers.......................................................... 5 ---------------------- 14. Notices......................................................................... 5 ------- 15. Governing Law; Consent to Jurisdiction.......................................... 5 -------------------------------------- 16. Waiver of Jury Trial............................................................ 6 -------------------- 17. Miscellaneous................................................................... 6 -------------
GUARANTY -------- GUARANTY, dated as of February 20, 2002, by MEDALLION FUNDING CHICAGO CORP., a Delaware 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 post-closing condition to Amendment No. 6 (as defined in the Loan Agreement) 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 Obligations including all such which would become due but for the operation of the automatic stay pursuant to ss.362(a) of the Federal Bankruptcy Code and the operation of ss.ss.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 -2- 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. Intercreditor Agreement. The Agent, on behalf of itself and the Banks, ----------------------- acknowledges and agrees that this Guaranty granted for the benefit of the Agent and the Banks, shall constitute "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. 4. 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 ss.4 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. 5. 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 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 -3- 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. 6. 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, 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. 7. Subrogation; Subordination. -------------------------- 7.1. 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. -4- 7.2. 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 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. 7.3. Provisions Supplemental. The provisions of this ss.7 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. 8. 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. 9. 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. 10. Release. Notwithstanding any provision of this Guaranty to the ------- contrary, this Guaranty shall not be released without the prior written consent of the Agent and the Required Banks. 11. Termination; Reinstatement. This Guaranty shall remain in full force -------------------------- and effect until the Agent and Required Banks release the Guarantor from the Guaranty or until all Borrower Obligations have been paid in full and all -- commitments to lend under -5- the Loan Agreement have been terminated. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such repayment in full of the Obligations, and termination of all commitments to lend under the Loan Agreement, 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. 12. 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 ss.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). 13. 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. 14. 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. 15. 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 ss.14. The Guarantor hereby waives any objection that it may -6- 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. 16. 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 the Banks are relying upon, among other things, the waivers and certifications contained in this ss16. 17. 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. [Remainder of page intentionally left blank; signature pages immediately follow.] -7- IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. MEDALLION FUNDING CHICAGO CORP. By: /s/ Alvin Murstein ------------------------------- Alvin Murstein Chairman & Chief Executive Officer By: /s/ James E. Jack ------------------------------- James E. Jack Chief Financial Officer Address: EX-10.77 14 dex1077.txt AMENDMENT NO.4 TO 2ND AMENDED & RESTATED LOAN AGMT Exhibit 10.77 AMENDMENT NO. 4 TO SECOND AMENDED AND ------------------------------------- RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT --------------------------------------------------- AMENDMENT NO. 4 TO SECOND AMENDED AND RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT dated as of April 1, 2002 (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; WHEREAS, the Borrower, the Banks, the Agent and the Swing Line Lender entered into Amendment No. 3 as of December 31, 2001; WHEREAS, the provisions set forth in Section 45(b) of Amendment No. 3 could not become effective until certain waivers and consents were given by the Senior Note Holders; WHEREAS, as a condition precedent to the Senior Note Holders granting such waivers and consents the Senior Note Holders have requested certain amendments to the Note Purchase Agreement and the Borrower has agreed to such amendments; 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; and WHEREAS, upon the effectiveness of the amendment to the Note Purchase Agreement concurrently with the amendment to the Loan Agreement contemplated herein, the Senior Note Holders shall provide the consents and waivers required by Amendment No. 3 and this Amendment; 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 Documents as follows: -2- 1. Amendments to Definitions. Section 1.1 of the Loan Agreement is hereby ------------------------- amended by: (a) deleting the parenthetical in clause (i) of the definition of "Restricted Payment" in its entirety; and (b) inserting, in the places required by alphabetical order, the following new definitions: "Amendment No. 4" shall mean Amendment No. 4 to Second Amended and --------------- Restated Loan Agreement dated as of April 1, 2002 among the Borrowers, 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. "Budget" shall have the meaning set forth in Section 6.1(m)(ii)(B) ------ hereof. 2. Amendment of Article 2B of the Loan Agreement. Article 2B of the Loan --------------------------------------------- Agreement is hereby amended by (a) inserting the following new sentence immediately following the last sentence of Article 2B(c) of the Loan Agreement: "Nothing in the foregoing paragraph shall apply to Net Cash Proceeds received with respect to sales or other dispositions (which are otherwise permitted to be made by this Agreement) to the extent such Net Cash Proceeds are applied to make any payment to the Banks required to be made on May 1, 2002 by Section 2.4(b) hereof."; and (b) deleting the words "fiscal quarter" and replacing them with the text "fiscal quarter or fiscal year, as applicable," in both instances in Article 2B(d). 3. Amendment of Section 6.1 of the Loan Agreement. Section 6.1 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting Section 6.1(m) in its entirety and substituting the following new Section 6.1(m) in lieu thereof: "(m) not later than (i) fifteen (15) Business Days after the last day of each calendar month, monthly underwater reports with respect to all Medallion Loans, monthly loan loss reserve reports, monthly delinquency reports, monthly portfolio aging reports, monthly charge off reports, and monthly accounts receivable reconciliation reports, in each case in form and scope acceptable to the Agent, (ii) such reports are delivered to the Senior Note Holders, (A) any reports prepared by Nightingale & Associates LLC (to the extent received by the Borrowers or any of their Subsidiaries), (B) an itemized 13-week cash flow forecast (each such forecast a "Budget") in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(i)(i) of the Note Purchase Agreement, (C) a Budget variance report for the prior week, in the form required to be delivered to the Senior Note Holders pursuant to -3- Section 7.1(i)(ii) of the Note Purchase Agreement, (D) weekly reports on the status of asset sales required pursuant to Section 9.13(a) of the Note Purchase Agreement and weekly reports on the status of refinancing the Senior Debt, (E) a listing of Loans underwritten or rewritten in the prior week in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(j)(vi) of the Note Purchase Agreement, and (F) an intercompany receivable report for the prior month and an accounts receivable reconciliation report for the prior month in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(j)(vii) of the Note Purchase Agreement, (iii) within one (1) Business Day after the Amendment No. 4 Effective Date,, a copy of the Borrowers' audit report for the fiscal year ending December 31, 2001, prepared by Arthur Andersen LLP, together with any management letters issued in connection therewith, which audit report and management letters shall not contain any exceptions or going concern qualifications, and (iv) promptly after receipt thereof, all non-confidential proposals, indication letters or commitment letters provided by potential refinancing sources for the Borrowers or Medallion Funding, provided that the applicable Person shall use reasonable best -------- efforts to obtain an exception to any confidentiality requirements in order to be able to provide copies of such proposals and letters to the Agent;" 4. Amendment of Section 7.6 of the Loan Agreement. Section 7.6(b) of the ---------------------------------------------- Loan Agreement is hereby amended by deleting the figure "$63,000,000" and replacing it with the figure "$60,000,000" in Section 7.6(b). 5. Waivers. ------- (a) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the requirement of Section 7.6(b) of the Loan Agreement (as in effect prior to the Effective Date) for the fiscal quarters ended December 31, 2001 and March 31, 2002; provided, however, that -------- ------- during the fiscal quarters ended December 31, 2001 and March 31, 2002, the sum of Unconsolidated Tangible Net Worth of MFC plus Unconsolidated Tangible Net ---- Worth of MBC was not less than $60,000,000 at any time. (b) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the requirement of Section 8.3(e)(ii) of the Loan Agreement (as in effect prior to the Effective Date) for the fiscal quarter ended March 31, 2002; provided, however, that during the fiscal quarter -------- ------- ended March 31, 2002, the aggregate amount of Investments by MFC in Medallion Funding did not exceed $70,000,000 at any time. (c) Subject to the terms and conditions hereof, each of the Banks hereby waives the Borrowers' compliance with the requirement of Section 2.4(b)(ii) of the Loan Agreement (as in effect prior to the Effective Date); provided, -------- however, that the Banks receive the $5,000,000 payment due on the Second - ------- Revolver Reduction Date no later than Amendment No. 4 Effective Date. -4- (d) The Funding Agreement requires that Medallion Funding not breach certain covenants under the Note Purchase Agreement. Medallion Funding has reported certain violations of the Note Purchase Agreement. Subject to the terms and conditions hereof, each of the Agent and the Banks following the effectiveness of the Senior Note Holders' amendment required by Section 8(h) hereof, hereby waives 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 the defaults listed on Schedule B to the Third Amendment to the Note Purchase Agreement, provided that such defaults do not exceed the thresholds set forth on Schedule B - -------- to the Third Amendment to the Note Purchase Agreement. 6. Consents. -------- (a) Subject to the terms and conditions hereof, each of the Banks hereby agrees to defer until May 15, 2002 the payment of $1,875,000 of the Dividend Prepayment due to the Banks in connection with the Excess Dividends paid on January 14, 2002. (b)(i) Each of the Agent and the Banks hereby consents to the amendment of the Funding Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement and Section 8.17 of the Loan Agreement, (ii) the Agent, in its capacity as Collateral Agent under the Collateral Agency Agreement, hereby consents to the amendment of the Funding Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement and Section 8.17 of the Loan Agreement, and (iii) each of the Agent (in its capacity as Agent under the Loan Agreement and in its capacity as Collateral Agent under the Collateral Agency Agreement) and the Banks hereby consents to the amendment of the Note Purchase Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement and Section 8.10 of the Loan Agreement. Each of the Agent and the Banks hereby further agrees that the provisions of Section 45(e) of Amendment No. 3 are no longer effective upon receipt of evidence satisfactory to the Agent of the effectiveness of the Senior Note Holders' waiver and consents contained in the amendment to the Note Purchase Agreement dated as of the date hereof. 7. Representations and Warranties, Etc. ----------------------------------- (a) Each of the Borrowers and the Guarantor 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 45 below are met, as follows: (i) The execution and delivery by each of the Borrowers and the Guarantor of this Amendment, Amendment No. 7 to the Funding Agreement and Amendment No. 3 to the Note Purchase Agreement and all other instruments and agreements required to be executed and delivered by each of the Borrowers and the Guarantor in connection with the transactions contemplated hereby or thereby or referred to herein or therein (collectively, the "Amendment Documents"), and the performance --------- --------- by each of the Borrowers and the Guarantor 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 and the Guarantor, as the -5- case may be, have been duly authorized by all necessary proceedings on behalf of each of the Borrowers and the Guarantor, as the case may be, and do not and will not contravene any provision of law or of any judgment, order or decree applicable to or binding on the Borrowers (or any of them) or the Guarantor, or of the Borrowers' or the Guarantor'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 Borrowers (or either of them) or the Guarantor. (ii) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which any of the Borrowers or the Guarantor 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. (iii) 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 and the Guarantor of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by each of the Borrowers and the Guarantor of the transactions among the parties contemplated hereby and thereby or referred to herein or therein. (iv) 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. (v) Each of the Borrowers and the Guarantor 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. (b) Each of the Borrowers and the Guarantor 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. -6- 8. 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 Borrowers, the Guarantor, the Agent and the requisite Banks and shall be in full force and effect. (b) The Agent shall have received from the Secretary of each Borrower and of the Guarantor a copy, certified by such Secretary to be true and complete as of such date, of 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 No. 3 and Amendment No. 4. (c) The Agent shall have received favorable legal opinions addressed to the Agent and the Banks, dated as of such date, in form and substance satisfactory to the Agent, from counsel to the Borrowers and the Guarantor and Delaware counsel to the Borrowers, concerning corporate or other applicable entity authority matters and the enforceability of each of the Amendment Documents, and the Loan Agreement and the other Loan Documents as amended thereby, and concerning such other matters as the Agent may request. (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 connection with the preparation of this Amendment and ancillary documentation. (e) All reports, statements, schedules, certificates and other documents required to be delivered to the Agent and each Bank pursuant to Section 6.1 of the Loan Agreement, as amended by this Amendment, shall have been so delivered. (f) The Agent shall have received evidence of the consent of the Funding Agreement banks under the Collateral Agency Agreement to this Amendment and the transactions contemplated hereby, and of the waiver of any defaults existing immediately prior to the Effective Date under the Funding Agreement. (g) The Agent shall have received copies of all proposals, indication letters or commitment letters provided by potential refinancing sources for either Borrower or Medallion Funding. (h) The Agent shall have received evidence of the effectiveness of an amendment to the Funding Agreement and evidence of the effectiveness of an amendment to the Note Purchase Agreement satisfactory to the Agent. -7- (i) The Agent shall have received evidence of (A) the consent of the Senior Note Holders (1) under the Collateral Agency Agreement and the Note Purchase Agreement to the provisions of Amendment No. 3 and this Amendment requiring such consent and the transactions contemplated hereby, and (2) under the Collateral Agency Agreement, the Intercreditor Agreement and the Note Purchase Agreement to the provisions of Amendment No. 6 (as such term is defined in the Funding Agreement) and Amendment No. 7 (as such term is defined in the Funding Agreement) requiring such consent and the transactions contemplated thereby, and (B) the waiver of any defaults (including defaults occurring under Sections 9.5, 10.7, 10.8(e), 10.10, 10.13 and 10.14 of the Note Purchase Agreement) existing under the Note Purchase Agreement immediately prior to the date such consents and waiver are given. (j) The Agent shall have received on or before the Amendment No. 4 Effective Date, for the benefit of the Banks, the $5,000,000 payment due to the Financial Banks on April 1, 2002. (k) 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. 9. 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, the Arranger, the Collateral Agent, the Swing Line Bank 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, the Arranger, the Collateral Agent, the Swing Line Bank or any Bank; and (c) each of the Agent, the Arranger, the Collateral Agent, the Swing Line Bank 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, the Arranger's, the Collateral Agent's, the Swing Line Bank'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, the Arranger, the Collateral Agent, the Swing Line Bank or any Bank to such Person, except the obligations to be performed by the Agent, the Arranger, the Collateral Agent, the Swing Line Bank 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, the Arranger, the Collateral Agent, the Swing Line Bank, 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. -8- 10. 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 and the other Loan Documents, in each case as amended hereby, including, without limitation, the Bank 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 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 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. [signature pages immediately follow] 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 E. 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 E. 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/ Jeffrey H. Robinson ------------------------------------------- Name: Jeffrey H. Robinson Title: Senior Vice President 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: Vice President THE BANK OF NEW YORK By: /s/ Edward J. DeSalvio ------------------------------------------- Name: Edward J. DeSalvio Title: Vice President JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank) By: /s/ Carol A. Kornblath ------------------------------------------- Name: Carol A. Kornblath 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 CITIBANK, N.A. (f/k/a European American Bank) By: /s/ Catherine Wilinski ------------------------------------------ Name: Catherine Wilinski Title: Vice President BANK LEUMI By: /s/ Illegible ------------------------------------------ Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Friedrich N. Wilms ------------------------------------------ Name: Friedrich N. Wilms Title: Vice President ACKNOWLEDGED AND AGREED, - ------------------------ including for purposes of amendments - ------------------------------------ to the Guaranty: - ---------------- MEDALLION TAXI MEDIA, INC. By: /s/ Alvin Murstein -------------------------------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack -------------------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer EX-10.78 15 dex1078.txt AMENDMENT NO.7 TO AMENDED & RESTATED LOAN AGMT Exhibit 10.78 AMENDMENT NO. 7 TO AMENDED AND ------------------------------ RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT --------------------------------------------------- AMENDMENT NO. 7 TO AMENDED AND RESTATED LOAN AGREEMENT, LIMITED WAIVER AND CONSENT dated as of April 1, 2002 (this "Amendment"), by and among MEDALLION --------- FUNDING CORP., a New York corporation ("Borrower"), 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 Borrower, 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 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 Borrower, the Banks, the Agent and the Swing Line Lender entered into Amendment No. 6 as of December 31, 2001; WHEREAS, the provisions set forth in Section 45(b) of Amendment No. 6 could not become effective until certain waivers and consents were given by the Senior Note Holders; WHEREAS, as a condition precedent to the Senior Note Holders granting such waivers and consents the Senior Note Holders have requested certain amendments to the Note Purchase Agreements and the Borrower has agreed to such amendments; WHEREAS, the Banks, the Agent and the Swing Line Lender have requested similar amendments to the Loan Agreement and the Borrower has agreed to such amendments; and WHEREAS, upon the effectiveness of the amendment to the Note Purchase Agreements concurrently with the amendment to the Loan Agreement contemplated herein, the Senior Note Holders shall provide the consents and waivers required by Amendment No. 6 and this Amendment; 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: -2- "Applicable LIBO Margin" shall mean, (a) for the period commencing ---------------------- with the Amendment No. 7 Effective Date and ending May 31, 2002, for any Payment Period during such period, 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 2.45% 2 2.70% 3 2.95% (b) for the period commencing with June 1, 2002 and ending August 31, 2002, for any Payment Period during such period, the Applicable LIBO Margin shall increase by an additional 50 basis points at each Pricing Level, (c) for the period commencing with September 1, 2002 and ending November 30, 2002, for any Payment Period during such period, the Applicable LIBO Margin shall increase by an additional 50 basis points at each Pricing Level, (d) for the period commencing with December 1, 2002 and ending February 28, 2003, for any Payment Period during such period, the Applicable LIBO Margin shall increase by an additional 50 basis points at each Pricing Level, (e) for the period commencing with March 1, 2003 and ending May 31, 2003, for any Payment Period during such period, the Applicable LIBO Margin shall increase by an additional 50 basis points at each Pricing Level, and (f) for the period commencing with June 1, 2003 and thereafter, for any Payment Period during such period, the Applicable LIBO Margin shall increase by an additional 50 basis points at each Pricing Level. 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). 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) hereof with respect to the portion of such Payment Period to which such certificate relates. "Applicable Prime Rate Margin" shall mean, (a) for the period ---------------------------- commencing with the Amendment No. 7 Effective Date and ending May 31, 2002, for any Payment Period during such period, the respective rates indicated below for Revolving Credit Loans and Term Loans which are Prime Rate Loans opposite the -3- applicable Pricing Level indicated below for such Payment Period (or as provided in the final sentence of this definition, for part of a Payment Period): Pricing Level Applicable Prime Rate Margin ------------- ---------------------------- (percent per annum) 1 1.00% 2 1.50% 3 2.00% (b) for the period commencing June 1, 2002 and ending August 31, 2002, for any Payment Period during such period, the Applicable Prime Rate Margin shall increase by 50 basis points at each Pricing Level, (c) for the period commencing with September 1, 2002 and ending November 30, 2002, for any Payment Period during such period, the Applicable Prime Rate Margin shall increase by an additional 50 basis points at each Pricing Level, (d) for the period commencing with December 1, 2002 and ending February 28, 2003, for any Payment Period during such period, the Applicable Prime Rate Margin shall increase by an additional 50 basis points at each Pricing Level, (e) for the period commencing with March 1, 2003 and ending May 31, 2003, for any Payment Period during such period, the Applicable Prime Rate Margin shall increase by an additional 50 basis points at each Pricing Level, and (f) for the period commencing with June 1, 2003 and thereafter, for any Payment Period during such period, the Applicable Prime Rate Margin shall increase by an additional 50 basis points at each Pricing Level. Subject to and in accordance with the final sentence of this definition, the Applicable Prime Rate Margin shall be effective as of the first date of each Payment Period (or in the circumstances described in the final sentence of this definition, such portion of a Payment Period). Anything in this Agreement to the contrary notwithstanding, in the event that the certificate of the Borrower required by Section 6.1(f) hereof shall not be delivered when required by such Section 6.1(f), the Applicable Prime Rate Margin for a Payment Period shall be the highest rate provided for in the table above until such time as such certificate is actually delivered. "Eligibility Requirements" with respect to any Loan, shall mean the ------------------------ following requirements: (a) such Loan is made to, and is a recourse obligation of, the Person to whom such Loan is made; (b) such Loan is a Medallion Loan or an Eligible Commercial Loan; -4- (c) such Loan is in compliance with the SBI Act and all SBA Regulations promulgated thereunder and, after giving effect to such Loan, the Borrower and its business and operations, taken as a whole, are in compliance with the SBI Act and all SBA Regulations promulgated thereunder; (d) such Loan is pledged in accordance with Section 2.1 of the Borrower Security Agreement; (e) the representations, warranties and covenants contained in Section 4.1 of the Borrower Security Agreement are true and correct, and have been complied with, with respect to such Loan; (f) the Agent, on behalf of the Banks, has a perfected, first priority security interest in such Loan, subject to the terms of the Intercreditor Agreement; (g) the monetary terms, payment terms, financial covenants, negative covenants and any other material terms governing such Loan have not been amended, modified or waived more than once in any 12-month period on account of the Person to whom such Loan was made being unable to comply (for whatever reason) with such terms; and (h) such Loan, if a Medallion Loan originated after March 21, 2002, is in accordance with the written and approved loan policies of the Borrower (revised as described in Section 6.17 hereof) in effect as of the Amendment No. 7 Effective Date. "Eligible Commercial Loan" shall mean the Permitted Commercial Loan ------------------------ and any other Commercial Loan that satisfies the Eligibility Requirements and (a) that is secured by Eligible Real Estate, Eligible Equipment, Eligible Inventory or Eligible Receivables, (b) that is made to a Person that is an ongoing business concern, and (c) that, as of March 3, 2002, qualified for inclusion in the Borrowing Base, provided that, in each case, -------- (x) the Commercial Loan is made to a Person that is operating as a going concern at all times and (y) the monetary terms, payment terms, financial covenants, negative covenants and any other material terms governing the Commercial Loan are not amended, modified or waived after March 3, 2002 on account of the Person to whom such Loan was made being unable to comply (for whatever reason) with the original terms. "Senior Notes" shall mean (i) the Senior Secured Notes, Series A, due ------------ June 30, 2003, in a maximum principal amount of $22,500,000 and (ii) the Senior Secured Notes, Series B, due June 30, 2003, in a maximum principal amount of $22,500,000, issued by the Borrower pursuant to the Note Purchase Agreements. (b) inserting the text "(for which payment has not at the time been made in its entirety)" immediately following the word "caps" in clause (i) of the definition of "Indebtedness"; (c) deleting the parenthetical in clause (i) of the definition of "Restricted Payment" in its entirety; -5- (d) deleting the text ", plus (iv) for the purposes of calculating EBIT of ---- the Borrower in Section 7.5 hereof for the fiscal quarter ending March 31, 2002, extraordinary non-recurring charges related to professional fees as further described on Schedule V hereto, provided that the aggregate of such charges -------- - -------- shall not exceed $538,000" in the definition of "EBIT" in its entirety; and (e) inserting the following new definitions in proper alphabetical order therein: "Amendment No. 7" shall mean Amendment No. 7 to Amended and Restated --------------- Loan Agreement dated as of April 1, 2002 among the Borrower, the Agent, the Swing Line Lender and the Banks. "Amendment No. 7 Effective Date" shall mean the "Effective Date", as ------------------------------ defined in Amendment No. 7. "Budget" shall have the meaning set forth in Section 6.1(k)(ii)(B) ------ hereof. "Monthly Permitted Asset Sales" shall have the meaning set forth in ----------------------------- Section 2.5(b)(ii) hereof. "Permitted Commercial Loan" shall mean the Commercial Loan made by the ------------------------- Company to Route 110 Service Corp. and 516 Realty Corp. with an outstanding principal amount of no greater than $450,000 as of or after the Amendment No. 7 Effective Date. 2. Amendment of Section 2.2 of the Loan Agreement. Section 2.2 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting the words "second anniversary" in Section 2.2(b)(iii)(A) thereof and substituting the words "first anniversary" in lieu thereof. 3. Amendment of Section 2.5 of the Loan Agreement. Section 2.5 of the Loan ---------------------------------------------- Agreement is hereby amended by: (a) deleting Section 2.5(b) in its entirety and substituting in lieu thereof the following new Section 2.5(b): "(b) Mandatory Prepayment of Term Loans. ---------------------------------- (i) Principal on each Term Loan shall be repaid in equal monthly installments in an amount sufficient to amortize such Term Loan over a twenty-four month period, with a final payment on Maturity in an amount equal to the unpaid balance of the Term Loan. Such payments (the "Principal Payments") shall be paid by Borrower to the Agent on ------------------ the last day of each month during which such Term Loan is outstanding. Any prepayments of principal on any Term Loan pursuant to Sections 2.5(a) and (c) hereof shall not reduce the amount of each monthly Principal Payment. Except as otherwise provided by clause (ii) hereof, any prepayments of principal on the Term Loans pursuant to Sections 2.5(a) and (c) hereof shall be applied against -6- the monthly Principal Payments in inverse order of the dates on which such Principal Payments are to be made. (ii) Up to seventy-five percent (75%) of the Net Cash Proceeds received with respect to sales of assets otherwise permitted by the terms of this Agreement for each calendar month for the period commencing with June 1, 2002 and ending with January 31, 2003, in an aggregate principal amount equal to the amount necessary to result in Net Cash Proceeds of not more than $10,667,000 for such calendar month ("Monthly Permitted Asset Sales"), may, at the option of the Borrower, be applied to scheduled amortization payments and concurrent principal payments to the Senior Note Holders in direct order of maturity, with the remainder of such Net Cash Proceeds, and all other Net Cash Proceeds received with respect to sales of assets, to be applied to scheduled amortization payments and concurrent principal payments to the Senior Note Holders in inverse order of maturity." (b) inserting the text "other than sales permitted by Section 8.3(f)(v) and" immediately after the first open parenthesis ("(") in Section 2.5(e)(iii) thereof; (c) inserting the following new sentence immediately after the last sentence of Section 2.5(e)(iii): "The foregoing paragraph shall not apply to up to seventy-five percent (75%) of the Net Cash Proceeds received with respect to Monthly Permitted Asset Sales to the extent such Net Cash Proceeds are applied to make a Principal Payment to the Banks in accordance with Section 2.5(b)(ii) hereof or a concurrent principal payment to the Senior Note Holders pursuant to Section 8.5(c) hereof during the period commencing June 1, 2002 and ending January 31, 2003." (d) deleting the words "fiscal quarter" and replacing them with the text "fiscal quarter or fiscal year, as applicable," in both instances in Section 2.5(e)(iv) thereof; and (e) deleting Section 2.5(e)(v) in its entirety and substituting in lieu thereof the following new Sections 2.5(e)(v) and (vi): "(v) With respect to all payments pursuant to subsections (i) through (iv) above and (vi) below, each such payment shall be applied first, to outstanding Swing Line Loans, second, to outstanding Prime Rate Loans of the Borrower, whether Revolving Credit Loans or Term Loans, in accordance with the provisions of Section 2.5(d) hereof, and third, to outstanding LIBO Rate Loans of the Borrower, whether Revolving Credit Loans or Term Loans, in accordance with the provisions of Section 2.5(d) hereof, with any prepayment of LIBO Rate Loans being subject to Section 2.11 hereof; provided, however, that the Borrower may request to avoid such breakage -------- ------- costs (with the determination as to whether to agree with such request being made by the Agent in its sole discretion) that one or more such payments be made by providing to the Agent cash in an amount sufficient to cash collateralize such LIBO Rate Loans (with the Borrower not to be deemed to have paid such LIBO Rate Loans until such cash has been applied to such LIBO Rate Loans) and otherwise in accordance with Section 2.B.1.3(b) hereof. Each payment pursuant to this Section -7- 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), Section 2.5(e)(ii), Section 2.5(e)(iii), Section 2.5(e)(iv) and Section 2.5(e)(vi) hereof, with the Revolving Credit Commitment of any Bank whose Revolving Credit Commitment is not $0 being irrevocably reduced by 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 (if any) being made in accordance with the requirements of this Section 2.5(e). (vi) On May 15, 2002, upon the Borrower's receipt of the cash payment necessary to reduce its intercompany account with the Parent to $0, the Borrower shall repay (1) outstanding Bank Loans (and with the Revolving Credit Commitment of each Bank being irrevocably reduced by an amount equal to the amount of the repayment to be made to it pursuant to this Section 2.5(e)(vi) and in accordance with the terms of Section 2.5(e)(v) hereof, 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 required to be made by this parenthetical), and (2) the principal amounts outstanding under the Senior Notes, in an amount equal to one hundred percent (100%) of such payment, with such payment being allocated among the Banks, the Swing Line Lender, the Agent and the Senior Noteholders on a pro rata basis in accordance with the --- ---- provisions of Section 5 of the Intercreditor Agreement." 4. Amendment of Section 3.1 of the Loan Agreement. Section 3.1 of the Loan ---------------------------------------------- Agreement is hereby amended by (a) relettering the current Section 3.1(f) as Section 3.1(g), and (b) inserting the following new Section 3.1(f) in proper alphabetical order therein: "(f) Supplemental Fee. Without limiting the provisions of Section 9.1 ---------------- hereof, the Borrower agrees to pay to the Agent, for the pro rata account --- ---- of each Bank and each Senior Note Holder (based on each Bank's and each Senior Note Holder's Pro Rata Share (as defined in the Intercreditor Agreement)), on the last Business Day of each calendar month (commencing June 30, 2002) for the Supplemental Fee accrued during such calendar month, a supplemental fee of $25,000, which fee shall increase by $25,000 from the immediately preceding amount on the first day of each calendar month, for the period commencing June 1, 2002 and ending January 31, 2003 (the "Supplemental Fee"). For purposes hereof, consecutive Business Days shall ---------------- mean one Business Day following another Business Day, with intervening Saturdays, Sundays and holidays excluded. The Borrower authorizes the Agent to deduct the Supplemental Fee from the Operating Account on the last Business Day of each calendar month for any Supplemental Fee accrued during such calendar month." 5. Amendment of Section 6.1 of the Loan Agreement. Section 6 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting Section 6.1(k) in its entirety and substituting the following new Section 6.1(k) in lieu thereof: -8- "(k) not later than (i) fifteen (15) Business Days after the last day of each 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 scope acceptable to the Agent, (ii) such reports are delivered to the Senior Note Holders, (A) any reports prepared by Nightingale & Associates LLC (to the extent received by the Borrower), (B) an itemized 13-week cash flow forecast (each such forecast a "Budget") in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(i)(i) of the Note Purchase Agreements, (C) a Budget variance report for the prior week, in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(i)(ii) of the Note Purchase Agreements, (D) weekly reports on the status of asset sales required pursuant to Section 9.13 of the Note Purchase Agreements and weekly reports on the status of refinancing the Senior Debt, (E) a listing of Loans underwritten or rewritten in the prior week in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(j)(vi) of the Note Purchase Agreements and (F) an intercompany receivable report for the prior month and an accounts receivable reconciliation report for the prior month in the form required to be delivered to the Senior Note Holders pursuant to Section 7.1(j)(vii) of the Note Purchase Agreements, (iii) within one (1) Business Day after the Amendment No. 7 Effective Date, a copy of the Borrower's audit report for the fiscal year ending December 31, 2001, prepared by Arthur Andersen LLP, together with any management letters issued in connection therewith, which audit report and management letters shall not contain any exceptions or going concern qualifications, and (iv) promptly after receipt thereof, all non-confidential proposals, indication letters or commitment letters provided by potential refinancing sources for the Borrower, the Parent or MBC, provided that the applicable Person shall -------- use reasonable best efforts to obtain an exception to any confidentiality requirements in order to be able to provide copies of such proposals and letters to the Agent;". 6. Amendment of Section 6.17 of the Loan Agreement. Section 6.17 of the ----------------------------------------------- Loan Agreement is hereby amended by inserting the following new sentence immediately after the first sentence in Section 6.17: "On the Amendment No. 7 Effective Date, the Borrower shall provide to the Agent and each Bank a copy of its revised operative credit policy manual, which revisions shall include provisions requiring that each Medallion Loan originated shall have a maximum loan to value ratio on primary Medallion collateral, excluding any third-party side collateral or cross-collateralization, of eighty percent (80%), instead of the current seventy-five percent (75%)." 7. Amendment of Article 6 of the Loan Agreement. Article 6 of the Loan -------------------------------------------- Agreement is hereby amended by inserting the following new Section 6.23 in proper numerical order therein: "Section 6.23. Excess Cash Flow Sweep. The Agent, the Required Banks, ---------------------- the requisite Senior Note Holders and the Borrower shall commence negotiations no later than September 15, 2002 concerning a periodic sweep of "excess cash flow" -9- (with the frequency of such sweep and the definition of "excess cash flow" to be acceptable to the Agent, the Required Banks, the requisite Senior Note Holders and the Borrower), which excess cash flow sweep shall be implemented no later than November 1, 2002. Any excess cash flow shall be applied pro rata to permanently reduce outstanding principal of the Senior --- ---- Notes and the Aggregate Revolving Credit Commitment in accordance with Section 5 of the Intercreditor Agreement." 8. Amendment of Section 7.5 of the Loan Agreement. Section 7.5 of the Loan ---------------------------------------------- Agreement is hereby amended by adding the following new paragraph immediately at the end of the current Section 7.5: "For purposes of calculating this covenant with respect to all fiscal quarters commencing on or after January 1, 2002, (i) to the extent expensed in the applicable period and deducted from EBIT for the applicable period, the professional fees listed on Schedule V shall be added to EBIT ---------- (otherwise determined in accordance with this Agreement), and (ii) each of the following shall be deducted from Interest Expense (otherwise determined in accordance with this Agreement) to the extent they were included in Interest Expense for the applicable period and to the extent expensed in the applicable period: (A) amendment fees payable in connection with Amendment No. 6, Amendment No. 7 and the Third Amendment to the Note Purchase Agreements, (B) make-whole premiums payable under the Note Purchase Agreements, and (C) interest payable under the Note Purchase Agreements with respect to the incremental increases of 100 basis points as of the Amendment No. 7 Effective Date, and the incremental increases of 50 basis points on each of June 1, 2002, September 1, 2002, December 1, 2002, March 1, 2003 and June 1, 2003 and interest payable under this Agreement with respect to the incremental increases of 20 basis points as of the Amendment No. 7 Effective Date, and the incremental increases of 50 basis points on each of June 1, 2002, September 1, 2002, December 1, 2002, March 1, 2003 and June 1, 2003; provided that in each case, the aggregate amount -------- of such professional fees, the aggregate amount of such amendment fees, the aggregate amount of such make-whole premiums and the aggregate amount of such excess interest shall not exceed the amounts set forth for each such category listed on Schedule V hereto." ---------- 9. Amendment of Section 7.6 of the Loan Agreement. Section 7.6 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting Section 7.6 in its entirety and substituting the following new Section 7.6 in lieu thereof: "Section 7.6. Intercompany Receivables. Suffer or permit the aggregate ------------------------ principal amount of Total Intercompany Receivables to exceed (a) through May 14, 2002, $17,548,828 (comprised of the sum of $8,598,828 plus ---- $8,950,000 of Yellow Cab Loans transferred to MFCC) at any time, and (b) on and after May 15, 2002, $8,950,000 (which shall be comprised solely of Yellow Cab Loans transferred to MFCC)." 10. Amendment of Section 8.3 of the Loan Agreement. Section 8.3 of the Loan ---------------------------------------------- Agreement is hereby amended by: -10- (a) deleting the figure "250" in subsection (d) thereof in its entirety and substituting in lieu thereof the figure "25%"; (b) deleting subsection (e) thereof in its entirety and substituting in lieu thereof the following new subsection (e): "(e)(i) 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 with respect to the intercompany account between the Borrower and the Parent in an aggregate amount not to exceed $8,598,828 through May 15, 2002, and thereafter, not to exceed $0, and (ii) Investments existing on the Amendment No. 7 Effective Date and listed on Schedule III hereto. For the avoidance of doubt, the Borrower shall not make, nor shall the Borrower permit any of its Subsidiaries to make, any Investment in Media or Business Lenders, LLC following the Amendment No. 6 Effective Date."; (c) deleting subsection (f) thereof in its entirety and substituting in lieu thereof the following new subsection (f): "(f) Sell, discount or otherwise dispose of Loans or any Collateral or sell, discount or otherwise dispose of other Receivables or obligations owing to a Borrower or any of its Subsidiaries, with or without recourse, other than (i) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 hereof, and consistent in any event with past practices, (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 Media 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, (iv) with respect to the sales of Loans by the Borrower to its Affiliates made prior to the Amendment No. 6 Effective Date and described on Schedule 8.3(f) --------------- hereto, (v) Commercial Loans in an aggregate principal amount not to exceed $3,000,000 to Freshstart Capital Corp. for cash in an amount equal to one hundred percent (100%) of the aggregate outstanding principal amount of such Commercial Loans plus all interest, fees or costs accrued and unpaid ---- with respect to such Commercial Loans, (vi) sales of Loans required pursuant to Section 9.13 of the Note Purchase Agreements (as such provision is in effect on the Amendment No. 7 Effective Date), and (vii) sales of Loans permitted pursuant to Section 8.6(b) hereof; provided that in each -------- such case, no Default or Event of Default has occurred or is continuing, or would result therefrom." and (d) deleting the text "Forbearance Net Finance Assets (as defined in Section 1 of Amendment No. 4)" in each of subsections (g) and (h) thereof in its entirety and substituting in lieu thereof the words "the Borrowing Base". 11. Amendment of Section 8.5 of the Loan Agreement. Section 8.5 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting Section 8.5 in its entirety and substituting in lieu thereof the following new Section 8.5: -11- "Section 8.5. Restricted Payments. Make, or obligate itself to make, ------------------- any Restricted Payment, provided that (a) after June 30, 2002, the Borrower -------- may make the payment of the sum of (i) 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 (ii) the ---- payment of Dividends required to be paid in order to avoid the imposition of income taxes pursuant to the Code, provided further that (x) between -------- ------- July 1, 2002 and September 12, 2002, such payment by the Borrower does not exceed $2,000,000, and (y) after September 12, 2002, five (5) days prior to any such payment, the Borrower shall deliver a certificate demonstrating pro forma compliance after making such payment with respect to any --- ----- amortization payments to be made with respect to Senior Debt for the remainder of fiscal year 2002, (b) on the Amendment No. 7 Effective Date, the Borrower may prepay principal of the Senior Note Debt in an aggregate amount not to exceed $11,086,000, and (c) on the last day of each month following the Term Out Date, the Borrower may prepay outstanding principal amounts of the Senior Note Debt in an aggregate amount not to exceed the result of 17.24% multiplied by the sum of the amount of such payment plus ---------- the aggregate amount of the Principal Payment made to the Banks on such date." 12. Amendment of Section 8.6 of the Loan Agreement. Section 8.6 of the Loan ---------------------------------------------- Agreement is hereby amended by deleting Section 8.6(b) and inserting in lieu thereof the following new Section 8.6(b): "(b)Subject to any additional requirements under Section 8.11 hereof, (i) sell, discount or otherwise dispose of Loans or any Collateral, other than (A) as permitted by Sections 8.3(f)(v) and (vi), (B) the sale of Loans to an Affiliate for cash for a price not less than the sum of the outstanding principal amount thereof, plus any accrued and unpaid interest and without discount thereon, and (C) the sale of Loans to any Person who is not an Affiliate for a cash price not less than the fair market value thereof, provided such sale is an arm's length transaction made pursuant 3 -------- to the reasonable requirements of the Company's or such Subsidiary's business; or (ii) sell, discount or otherwise dispose of other Receivables or obligations owing to the Borrower or any of its Subsidiaries, with or without recourse, other than (A) in connection with the grant of any participation in accordance with and to the extent permitted by Section 2.14 hereof and consistent in any event with past practices, (B) to a non-Affiliate for collection in the ordinary course of business, or (C) to the Agent for the benefit of the Banks (subject to the terms of the Intercreditor Agreement); provided further that, in each such case, (x) ---------------- immediately upon such sale or other disposition, the Borrower makes, in accordance with the provisions of Section 2.5(e)(iii) hereof, a mandatory prepayment of the outstanding Revolving Credit Loans (with the Revolving Credit Commitments being irrevocably reduced by an aggregate amount equal to the amount of such repayment) and Term Loans and the principal amounts outstanding under the Senior Notes in an amount equal to the aggregate principal amount, plus accrued interest, of the Loans so sold or otherwise disposed of, and (y) no Default or Event of Default has occurred or is continuing, or would result therefrom." -12- 13. Amendment of Section 8.11 of the Loan Agreement. Section 8.11 of the ----------------------------------------------- Loan Agreement is hereby deleted in its entirety and the following new Section 8.11 is hereby substituted in lieu thereof: "Section 8.11. Transactions with Affiliates. (a) Enter into, or cause, ---------------------------- suffer, or permit to exist, any transactions, including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service, with any Affiliate on fair and reasonable terms that are less favorable to the Borrower than those that would be obtainable at the time in a comparable arms-length transaction from any Person who is not an Affiliate; (b) become an Affiliated Person of any Bank or any Affiliated Person of any Bank known to the Borrower; and the Borrower shall use its best efforts to ensure that none of its Affiliated Persons is or becomes an Affiliated Person of any Bank or an Affiliated Person of any Bank known to the Borrower; (c) sell, discount or otherwise dispose of Loans or any Collateral to any Affiliate, other than any sale permitted by Section 8.3(f)(i) hereof; (d) sell, discount or otherwise dispose of other Receivables or obligations owing to the Borrower or any of its Subsidiaries to any Affiliate, with or without recourse, other than any transaction permitted by Section 8.3(f)(v) hereof; and (e) transfer any assets or cash to any Affiliate, excluding for purposes hereof (i) the payment to an Affiliate of such amounts as may be received on account of Loans serviced by the Borrower on such Affiliate's behalf, after deduction of management fees provided under the respective sale, transfer or participation agreement, and (ii) salary and other usual and customary intercompany charges. Notwithstanding the foregoing, the Borrower shall be permitted to transfer Yellow Cab Loans to MFCC in an aggregate outstanding principal amount not to exceed $9,000,000, provided that the Agent shall retain its -------- security interest for the benefit of the Agent, the CP Holders and the Banks in the Yellow Cab Loans (the "Yellow Cab Transfer")." ------------------- 14. Amendment of Section 9.1 of the Loan Agreement. Section 9.1 of the Loan ---------------------------------------------- Agreement is hereby amended by (a) inserting the text "6.1(k)(iv), 6.14, " immediately following the text "6.13, " in 9.1(b), and (b) deleting Sections 9.1(f)(iii) and (iv) in their entirety and substituting the following new Section 9.1(f)(iii) in lieu thereof: "or (iii) if Borrower shall default in the performance of or compliance with Section 10.4 (Minimum Tangible Net Worth), 10.5 (Maximum Liability Ratio), 10.6 (Minimum Net Finance Assets), 10.7 (Minimum Net Income to Interest Expense Ratio) or 10.13 (Net Finance Assets) of the Note Purchase Agreements or an "Event of Default" (as defined in the Note Purchase Agreements) shall occur and be continuing." 15. Amendments to Exhibits and Schedules to the Loan Agreement. The ---------------------------------------------------------- Exhibits and Schedules to the Loan Agreement are hereby amended by deleting the current Schedule V and adding the attached new Schedule V in proper numerical -------- - -------- - order. 16. Waivers. ------- The Borrower has reported certain violations of the Note Purchase Agreements. Subject to the terms and conditions hereof, each of the Agent and the Banks: following the -13- effectiveness of the Senior Note Holders' amendment required by Section 19(h) hereof, hereby waives any Default or Event of Default which may have occurred or may occur under Section 9.1(f) of the Loan Agreement as a result of the defaults listed on Schedule B to the Third Amendment to the Note Purchase Agreements, provided that such defaults do not exceed the thresholds set forth on Schedule B - -------- to the Third Amendment to the Note Purchase Agreements. 17. Consent to Financial Amendment, etc. (a) Each of the Agent and the ----------------------------------- Banks hereby consents to the amendment of the Financial Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement, Section 2 of the Intercreditor Agreement and Section 8.10 of the Loan Agreement, (b) the Agent, in its capacity as Collateral Agent under each of the Intercreditor Agreement and the Collateral Agency Agreement, hereby consents to the amendment of the Financial Agreement dated as of the date hereof for purposes of Section 2 of the Collateral Agency Agreement, Section 2 of the Intercreditor Agreement and Section 8.10 of the Loan Agreement, and (c) each of the Agent (in its capacity as Agent under the Loan Agreement, in its capacity as Collateral Agent under the Intercreditor Agreement, and in its capacity as Collateral Agent under the Collateral Agency Agreement) and the Banks hereby consents to the amendment of the Note Purchase Agreements dated as of the date hereof for purposes of Section 2 of the Intercreditor Agreement, Section 2 of the Collateral Agency Agreement and Section 8.10 of the Loan Agreement. Each of the Agent and the Banks hereby further agrees that the provisions of Section 45(f) of Amendment No. 6 are no longer effective upon receipt of evidence satisfactory to the Agent of the effectiveness of the Senior Note Holders' waiver and consents contained in the amendment to the Note Purchase Agreements dated as of the date hereof. 18. Representations and Warranties, Etc. ----------------------------------- (a) Each of the Borrower and the Guarantor 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 45 below are met, as follows: (i) The execution and delivery by each of the Borrower and the Guarantor of this Amendment, Amendment No. 4 to the Financial Agreement and Amendment No. 3 to the Note Purchase Agreements and all other instruments and agreements required to be executed and delivered by each of the Borrower and the Guarantor in connection with the transactions contemplated hereby and thereby or referred to herein or therein (collectively, the "Amendment Documents"), and the performance --------- --------- by each of the Borrower and the Guarantor 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 Borrower and the Guarantor, as the case may be, have been duly authorized by all necessary proceedings on behalf of each of the Borrower and the Guarantor, as the case may be, and do not and will not contravene any provision of law or of any judgment, order or decree applicable to or binding on the Borrower or the Guarantor, or of the Borrower's or the Guarantor's charter, other incorporation or organizational papers, or by-laws or -14- any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon the Borrower or the Guarantor. (ii) Each of the Amendment Documents and the Loan Agreement and other Loan Documents, as amended hereby, to which the Borrower or the Guarantor 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. (iii) 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 each of the Borrower and the Guarantor of the Amendment Documents or the Loan Agreement or other Loan Documents, as amended hereby, or the consummation by each of the Borrower and the Guarantor of the transactions among the parties contemplated hereby and thereby or referred to herein or therein. (iv) 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. (v) Each of the Borrower and the Guarantor 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. (b) Each of the Borrower and the Guarantor 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. 19. 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: -15- (a) This Amendment shall have been duly executed and delivered by each of the Borrower, the Guarantors, the Agent and the requisite Banks and shall be in full force and effect. (b) The Agent shall have received from the Secretary of the Borrower and of each Guarantor a copy, certified by such Secretary to be true and complete as of such date, of 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 No. 6 and Amendment No. 7. (c) The Agent shall have received favorable legal opinions 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 and the Guarantors and Delaware counsel to the Borrower, concerning corporate or other applicable entity authority matters and the enforceability of each of the Amendment Documents, and the Loan Agreement and the other Loan Documents as amended thereby, and concerning such other matters as the Agent may request. (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 connection with the preparation of this Amendment and ancillary documentation. (e) All reports, statements, schedules, certificates and other documents required to be delivered to the Agent and each Bank pursuant to Section 6.1 of the Loan Agreement, as amended by this Amendment, shall have been so delivered. (f) The Agent shall have received evidence of the consent of the Financial Agreement banks under the Collateral Agency Agreement to this Amendment and the transactions contemplated hereby, and of the waiver of any defaults existing immediately prior to the Effective Date under the Financial Agreement. (g) The Agent shall have received copies of all proposals, indication letters or commitment letters provided by potential refinancing sources for the Borrower, the Parent or MBC. (h) The Agent shall have received evidence of the effectiveness of an amendment to the Financial Agreement and evidence of the effectiveness of an amendment to the Note Purchase Agreements satisfactory to the Agent. (i) The Agent shall have received evidence of (A) the consent of the Senior Note Holders (1) under the Collateral Agency Agreement, the Intercreditor Agreement and the Note Purchase Agreements to the provisions of Amendment No. 6 and this Amendment requiring such consent and the transactions contemplated hereby, and (2) under the Collateral Agency Agreement and the Note Purchase Agreements to the provisions of Amendment No. 3 (as such term is defined in the Financial Agreement) and Amendment No. 4 (as such term is defined in the Financial Agreement) requiring such consent and the - 16 - transactions contemplated thereby, and (B) the waiver of any defaults (including defaults occurring under Sections 9.5, 10.7, 10.8(e), 10.10, 10.13 and 10.14 of the Note Purchase Agreements) existing under the Note Purchase Agreements immediately prior to the date such consents and waiver are given. (j) The agent under the Financial Loan Agreement shall have received on or before the Amendment No. 7 Effective Date, for the benefit of the Financial Banks, the $5,000,000 payment due to the Financial Banks on April 1, 2002. (k) 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. 20. 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, the Swing Line Bank, the Collateral 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, the Swing Line Bank, the Collateral Agent or any Bank; and (c) each of the Agent, the Swing Line Bank, the Collateral 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, the Swing Line Bank's, the Collateral 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, the Swing Line Bank, the Collateral Agent or any Bank to such Person, except the obligations to be performed by the Agent, the Swing Line Bank, the Collateral 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, the Swing Line Bank, the Collateral 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. 21. Miscellaneous Provisions. ------------------------ -17- (a) The Borrower hereby ratifies and confirms all of its obligations to the Agent and the Banks under the Loan Agreement and the other Loan Documents, in each case as amended hereby, including, without limitation, the Bank 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 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, 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. [signature pages immediately follow] 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 E. 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/ Jeffrey H. Robinson -------------------------------------------- Name: Jeffrey H. Robinson Title: Senior Vice President THE BANK OF NEW YORK, as Documentation Agent and as one of the Banks By: /s/ Edward J. DeSalvio -------------------------------------------- Name: Edward J. DeSalvio Title: Vice President -2- HARRIS TRUST AND SAVINGS BANK By: /s/ Bev Abrahams ------------------------------------------- Name: Bev Abrahams Title: Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Friedrich N. Wilms ------------------------------------------- Name: Friedrich N. Wilms Title: Vice President JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank) By: /s/ Carol A. Kornblath ------------------------------------------- Name: Carol A. Kornblath Title: 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 -3- CITIBANK, N.A. (f/k/a European American Bank) By: /s/ Catherine Wilinski -------------------------------------------- Name: Catherine Wilinski Title: Vice President BANK LEUMI USA By: /s/ Illegible -------------------------------------------- Name: Title: HSBC BANK USA By: /s/ Bruce Wicks -------------------------------------------- Name: Bruce Wicks Title: Vice President -4- ACKNOWLEDGED AND AGREED: - ------------------------ MEDALLION TAXI MEDIA, INC. By: /s/ Alvin Murstein -------------------------------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack -------------------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer MEDALLION FUNDING CHICAGO CORP. By: /s/ Alvin Murstein -------------------------------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack -------------------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer Medallion Funding Corp Schedule 5 Add Ins to EBIT and Deductions from Interest Expense ---------------------------------------------------- - ----------------------------------------------------------------------- Noteholders Banks Medallion Combined - ----------------------------------------------------------------------- Nightingale $ 850,000 $ 850,000 - ----------------------------------------------------------------------- Kaye Scholer $ 275,000 $ 275,000 - ----------------------------------------------------------------------- Bingham Dana $ 154,000 $ 154,000 - ----------------------------------------------------------------------- Willkie Farr $531,000 $ 531,000 - ----------------------------------------------------------------------- Amendment Fees $ 149,712 $ 296,000 $ 445,712 - ----------------------------------------------------------------------- Additional Interest $ 606,450 $1,786,993 $2,393,443 - ----------------------------------------------------------------------- Make Whole Amount (1) (1) - ----------------------------------------------------------------------- $1,881,162 $2,236,993 $531,000 $4,649,155 - ----------------------------------------------------------------------- (1) Plus Make Whole amount equal to the actual amount required to be accrued in accordance with the Note Purchase Agreement. EX-10.79 16 dex1079.txt AMENDMENT NO.2 TO INTERCREDITOR AGREEMENT Exhibit 10.79 AMENDMENT NO. 2 TO INTERCREDITOR -------------------------------- AGREEMENT --------- AMENDMENT NO. 2 TO INTERCREDITOR AGREEMENT dated as of April 1, 2002 (this "Amendment"), by and among (i) Fleet National Bank (f/k/a Fleet Bank, National --------- Association) ("Fleet"), acting in its capacity as agent (in such capacity, the "Bank Agent") for and on behalf of the various financial institutions (collectively, the "Banks") which are, or may from time to time hereafter become, parties to the Loan Agreement (as defined in the Intercreditor Agreement), (ii) the Banks, (iii) the Senior Noteholders (as defined in the Intercreditor Agreement), (iv) Fleet, acting as collateral agent for the Senior Noteholders (the "Senior Note Collateral Agent") and (v) Fleet, acting in its individual capacity and in its capacity as intercreditor collateral agent for the Senior Creditors (together with its successors and assigns, the "Collateral Agent"). WHEREAS, the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral Agent and the Collateral Agent are parties to an Intercreditor Agreement dated as of June 1, 1999 (as amended by that certain Amendment No. 1 to Intercreditor Agreement dated as of June 29, 2001, and as the same may be further amended and in effect from time to time, the "Intercreditor Agreement", ----------------------- capitalized terms defined therein having the same meanings herein as therein), pursuant to which the Banks and the Senior Noteholders have made certain arrangements with respect to the collateral security interests granted to the Banks and the Senior Noteholders by Medallion Funding Corp. (the "Borrower"); -------- and WHEREAS, the Banks are amending the Loan Agreement, and the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral Agent and the Collateral Agent have agreed to amend the Intercreditor 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 Intercreditor Agreement as follows: 1. Amendments to Definitions. Section 1(a) of Intercreditor Agreement is ------------------------- hereby amended by (a) deleting the following definition in its entirety, and substituting in lieu thereof the following new definition: "Security Documents" means the collective reference to all "Security Documents" as such term is defined in each of the Loan Documents, the Note Documents and the Additional Senior Agreements, which agreements secure any obligations of any obligor under any Financing Document, and any other document or agreement securing any of the obligations under any Financing Document, but excluding the Excluded Security Documents. and (b) adding the following new definitions in proper alphabetical order: -2- "Cash Management Funds" means any funds received by the Bank Agent pursuant to the provisions of Section 2B.1.3 or Section 2B.2 of the Loan Agreement. "Excluded Security Documents" means, collectively, (a) the Stock Pledge Agreement dated as of April 30, 2001, by and between the Funding Bank Agent (for the benefit of itself, the Funding Banks and the Funding CP Holders) and Financial, (b) the Stock Pledge Agreement dated as of April 30, 2001, by and between the Senior Note Collateral Agent and Financial, (c) the Guaranty dated as of April 30, 2001, executed by Media in favor of the Funding Bank Agent for the benefit of the Funding Banks, and (d) the Guaranty dated as of April 30, 2001, executed by Media in favor of the Senior Noteholders. "MFCC Guaranty" means any guaranty by Medallion Funding Chicago Corp. of the Loan Agreement Obligations, Senior Note Obligations and/or Additional Senior Obligations. 2. Amendment to Section 2 of the Intercreditor Agreement. Section 2 of the ----------------------------------------------------- Intercreditor Agreement is hereby amended by deleting the third paragraph of Section 2 in its entirety and substituting in lieu thereof the following new text: "The Banks agree that they shall not, without prior notice to the Senior Noteholders and without the prior written consent of the Required Noteholders, amend or revise the Loan Agreement in any manner that would (i) permit the Borrowing Base (as defined in the Loan Agreement as in effect on June 29, 2001) to exceed the aggregate unpaid balance of all Senior Debt (as defined in the Loan Agreement as in effect as of December 31, 2001) at such time, (ii) modify any required payment dates so as to cause the maturity date of the Loan Agreement (as set forth in the Loan Agreement as in effect on the Amendment No. 7 Effective Date (as defined in the Loan Agreement)) to occur earlier, or (iii) modify Section 2.5(e), Section 2B.1.3 or Section 2B.2 of the Loan Agreement. The Noteholders agree that they shall not, without prior written notice to the Senior Creditors and without the prior written consent of the Required Banks, amend or revise any Note Purchase Agreements in any manner that would increase the principal amount of or the rate of interest on, the Senior Notes, increase the Make-Whole Amount, increase the dollar limitation set forth in Section 10.2 of the Note Purchase Agreements, decrease the ratio set forth in Section 10.3, 10.13 or 10.14 of the Note Purchase Agreements, increase the ratio set forth in Sections 10.4, 10.5 or 10.15 of the Note Purchase Agreements, modify the definition of "Bank Debt Prepayment" in, or Section 8.8 or 10.13 of, the Note Purchase Agreements or modify any required payment dates so as to reduce the average life of the Senior Notes." 3. Amendment to Section 3 of the Intercreditor Agreement. Section 3 of the ----------------------------------------------------- Intercreditor Agreement is hereby amended by inserting the following new text in the final paragraph of Section 3 immediately following the word "guarantee" therein: "(other than guarantees which are Excluded Security Documents)". -3- 4. Amendment to Section 5 of the Intercreditor Agreement. Section 5 of the ----------------------------------------------------- Intercreditor Agreement is hereby amended by deleting Section 5 in its entirety and substituting in lieu thereof the following new Section 5: "SECTION 5. APPLICATION OF PROCEEDS. Subject to the provisions of Section 5A: (a) upon (v) the receipt by any Senior Creditor or the Collateral Agent of any Cash Management Funds, (w) the receipt by any Senior Creditor or the Collateral Agent of any proceeds or awards arising from any condemnation or eminent domain proceedings concerning the Collateral, (x) the receipt by any Senior Creditor or the Collateral Agent of any insurance proceeds arising from damage to the Collateral by fire or any other casualty which are not used for restoration of the Collateral in accordance with the terms of the Security Document governing same, (y) the receipt by any Senior Creditor or the Collateral Agent of any proceeds arising from any asset sale, disposition or transfer, the sale or issuance of any indebtedness, or the sale or issuance of any capital stock or other equity interests, or (z) the exercise of any rights and remedies by the Collateral Agent under the Security Documents, any and all Cash Management Funds or proceeds from demand being made on the MFCC Guaranty or the sale, foreclosure or other disposition of Collateral pursuant thereto shall be transferred to the Collateral Agent and, promptly following their receipt by the Collateral Agent, be applied and distributed by the Collateral Agent as follows: (i) First, to the payment of all costs, expenses, liabilities and advances made or incurred by the Collateral Agent (in its capacity as Collateral Agent and not as Bank Agent or a Bank) in connection with such proceedings, adjustments, sale, foreclosure or other disposition and in performing its duties hereunder, including compensation payable to the Collateral Agent and the costs, expenses and compensation of agents and legal counsel to the Collateral Agent; (ii) Second, to the extent Cash Management Funds or proceeds remain after payment in full of those items specified in clause (i) above, to the payment of Senior Obligations consisting of principal and interest (excluding the portion of default rate interest in excess of the non-default rate of interest), to be allocated among each Senior Creditor (according to the Pro Rata Share of each such Senior Creditor) until all such Senior Obligations are paid in full; (iii) Third, to the extent any Cash Management Funds or proceeds remain after payment in full of those items specified in clauses (i) and (ii) above, to the payment of the remaining Senior Obligations, to be allocated among each Senior Creditor (on a pro rata basis based on the unpaid amount of such remaining Senior Obligations) until all remaining Senior Obligations are paid in full; and -4- (iv) Fourth, to the extent any Cash Management Funds or proceeds remain after payment in full of those items specified in clauses (i), (ii) and (iii) above, such proceeds shall be paid to or at the direction of the Borrower or as a court of competent jurisdiction shall direct. (b) payment by the Collateral Agent to the Banks in respect of the Loan Agreement Obligations shall be made to the Bank Agent for distribution to the Banks in accordance with the Loan Agreement. Payments by the Collateral Agent to the Senior Noteholders shall be made in accordance with the terms of the Note Purchase Agreements. Payments by the Collateral Agent to the CP Holders in respect of the CP Debt shall be made to the Bank Agent for distribution to the CP Holders. Payments by the Collateral Agent to any Additional Senior Creditor shall be made in accordance with written instructions from such Additional Senior Creditor. (c) the Bank Agent (on its own behalf and on behalf of the CP Holders), the Senior Note Collateral Agent, each Bank, each Senior Noteholder signatory hereto, and each Additional Senior Creditor hereby agrees that (i) if at any time it shall receive Cash Management Funds or the proceeds of any Collateral or proceeds from the MFCC Guaranty, or shall apply any balances, credits, deposits, accounts or monies with or on deposit with such Bank Agent, Senior Note Collateral Agent, Bank, Senior Noteholder or Additional Senior Creditor, through the exercise of any right of set-off, banker's lien, counterclaim or other similar right, whether pursuant to Section 10.9 of the Loan Agreement or otherwise, (other than through application by the Collateral Agent in accordance with clauses (a) and (b) of this Section 5), it shall promptly turn the same over to the Collateral Agent for application in accordance with said clauses (a) and (b) and (ii) it will not take or cause to be taken any action, including, without limitation, the commencement of any legal or equitable proceedings, the purpose of which is to give such Bank Agent, Bank, Senior Noteholder, any CP Holder or Additional Senior Creditor any preference or priority against the other parties hereto with respect to the Collateral or the MFCC Guaranty. (d) the foregoing provisions shall not require any cash payments made by the Borrower on or prior to the Amendment No. 7 Effective Date (as defined in the Loan Agreement) and the Third Amendment Effective Date (as defined in the Note Purchase Agreement) to the Banks to reduce the Aggregate Revolving Credit Commitment or to the Senior Noteholders to reduce principal outstanding under the Senior Notes to be turned over to the Collateral Agent for application in accordance with clauses (a) and (b) hereof." 5. Addition of Section 5A of the Intercreditor Agreement. The Intercreditor ----------------------------------------------------- Agreement is hereby amended by inserting the following new Section 5A in proper numerical order therein: "SECTION 5A. TRUE UP. -5- (a) If, on the True Up Date, the Base Percentage of any Senior Creditor varies from the True Up Date Risk Percentage of such Senior Creditor, the Senior Creditor s, on the True Up Date, will make such acquisitions, dispositions and other arrangements with one another, whether by way of purchase, sale, participation, contribution, distribution, pro --- tanto assumption or assignment of claims, subrogation or otherwise, as ----- shall result in each Senior Creditor's True Up Date Risk Percentage being equal (as nearly as may be) to such Senior Creditor's Base Percentage. (b) The Collateral Agent shall establish reasonable procedures to implement such arrangements among the Senior Creditors. Such procedures may include requiring the Senior Creditors whose True Up Date Risk Percentages are less than their Base Percentages on the True Up Date to make payments to the Collateral Agent for distribution to the Senior Creditors whose True Up Date Risk Percentages are greater than their Base Percentages on the True Up Date. The Borrower agrees to cooperate with the Collateral Agent and the Senior Creditors by issuing such promissory notes and other evidences of indebtedness to confirm the amounts owed to each Senior Creditor after giving effect to such arrangements. (c) No assignment by any Senior Creditor made pursuant to the relevant provisions of the Loan Agreement or the Note Purchase Agreements of any of the Senior Obligations owed to such Senior Creditor shall release such Senior Creditor from its obligations to the other Senior Creditors under this Section 5A. (d) From and after the True Up Date, the following provisions shall apply: (1) The Collateral Agent will distribute all payments to be applied to the payment of Senior Obligations consisting of principal and interest (excluding default-rate interest), so that, after giving effect to such payments, the percentage which the Specified Obligations owed to each Senior Creditor bears to the Specified Obligations owed all of the Senior Creditors equals (as nearly as may be) such Senior Creditor's Base Percentage. (2) Any expense reimbursement or indemnification obligations of the Senior Creditors in favor of the Collateral Agent pursuant to Section 5 of the Intercreditor Agreement or any other provisions of any of the Note Documents or the Loan Documents shall be allocated among the Senior Creditors in accordance with their Base Percentages. (3) Any sharing of payments among the Senior Creditors pursuant to Section 5(a)(iii) shall be made in accordance with the Senior Creditors' Base Percentages. (4) The provisions of this Section 5A(d) shall control over other provisions of this Intercreditor Agreement that would otherwise require such payments to be made or obligations to be allocated among the Senior Creditors other than in accordance with their Base Percentages. -6- (e) Each of the Senior Creditors agrees with each other Senior Creditor that if, after the True Up Date, such Senior Creditor shall receive from the Borrower, whether by voluntary payment, counterclaim, cross action, enforcement of the claim constituting Senior Obligations owed to such Senior Creditor, by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Senior Obligations owing to such Senior Creditor, any amount in excess of its Base Percentage of the Specified Obligations, such Senior Creditor will make such disposition and arrangements with the other Senior Creditors with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation --- ----- or otherwise as shall result in each Senior Creditor receiving its Base Percentage of the Specified Obligations owing to it; provided that if all -------- or any part of such excess payment is thereafter recovered from such Senior Creditor, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. (f) To the extent that any Senior Creditor's claim in respect of Specified Obligations is subordinated to the claims of general unsecured creditors as a class under principles of equitable subordination, such Senior Creditor is not entitled to receive any payment under this Section 5A from any other Senior Creditor to the extent that the other Senior Creditor's claim in respect of Specified Obligations is not likewise subordinated. To the extent that any Senior Creditor's claim in respect of Specified Obligations is subordinated to the claim of any other Senior Creditor in respect of Specified Obligations under principles of equitable subordination, such subordinated Senior Creditor is not entitled to receive any payment under this Section 5A from such other Senior Creditor to the extent of the subordination. If any Senior Creditor does receive a payment under this Section 5A and such Senior Creditor's claim is thereafter subordinated, as contemplated by either of the foregoing sentences, to any extent, the subordinated Senior Creditor shall, to the extent that such subordinated Senior Creditor was not entitled to such payment under either of the foregoing sentences, rescind the amount of the payment and restore such payment to the paying Senior Creditor, but without interest. (g) If any Senior Creditor fails to make any payment to any other Senior Creditor required to be made by this Section 5A within five (5) days following demand by the other Senior Creditor, the amount owing by the other Senior Creditor to the demanding Senior Creditor shall bear interest at the Collateral Agent's prime rate and shall be payable on demand, whether before or after judgment. The Collateral Agent's prime rate shall be the variable annual rate of interest so designated from time to time by the Collateral Agent as its "prime rate," such rate being a reference rate and not necessarily representing the lowest or best rate being charged to any customer. In addition, if the demanding Senior Creditor institutes litigation to recover from the other Senior Creditor any amounts owing to the demanding Senior Creditor and not paid by the other Senior Creditor, and if the demanding Senior Creditor is the prevailing party in the litigation, the other Senior -7- Creditor shall reimburse the demanding Senior Creditor for the demanding Senior Creditor's reasonable attorneys' fees and other reasonable costs of collection. (h) For purposes of this Section 5A, the following terms shall have the following meanings: (i) "Base Percentage" means, with respect to any Senior Creditor, the percentage which the Specified Obligations owed to such Senior Creditor on June 29, 2001, bears to the Specified Obligations owed to all of the Senior Creditors on June 29, 2001. The Base Percentage of each Senior Creditor is set forth in the table below opposite the name of such Senior Creditor. ---------------------------------------------------------------------- Senior Creditor Base Percentage ---------------------------------------------------------------------- FLEET NATIONAL BANK 22.5705329% ---------------------------------------------------------------------- THE BANK OF NEW YORK 11.2852665% ---------------------------------------------------------------------- HARRIS TRUST AND SAVINGS BANK 9.4043887% ---------------------------------------------------------------------- THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY 7.523511% ---------------------------------------------------------------------- JPMORGAN CHASE BANK (f/k/a The Chase 7.523511% Manhattan Bank) ---------------------------------------------------------------------- CITIBANK, N.A. (f/k/a European American Bank) 7.523511% ---------------------------------------------------------------------- ISRAEL DISCOUNT BANK 5.6426332% ---------------------------------------------------------------------- HSBC BANK USA 5.6426332% ---------------------------------------------------------------------- BANK LEUMI 5.6426332% ---------------------------------------------------------------------- THE TRAVELERS INSURANCE COMPANY 7.6628352% ---------------------------------------------------------------------- FIRST CITICORP LIFE INSURANCE COMPANY 0.7662835% ---------------------------------------------------------------------- CITICORP LIFE INSURANCE COMPANY 1.1494253% ---------------------------------------------------------------------- UNITED OF OMAHA LIFE INSURANCE COMPANY 6.51341% ---------------------------------------------------------------------- COMPANION LIFE INSURANCE COMPANY 1.1494253% ---------------------------------------------------------------------- (ii) "Specified Obligations" means Senior Obligations consisting of interest on or principal of the Senior Obligations (excluding the portion of default rate interest in excess of the non-default rate of interest). (iii) "True Up Date" means the tenth Business Day following the date of the maturity of the Loan Agreement and the Note Purchase Agreements, whether such maturity occurs as scheduled or occurs at an earlier time by reason of acceleration, a bankruptcy case being commenced by or against the Borrower or otherwise. (iv) "True Up Date Risk Percentage" means, with respect to any Senior Creditor, the percentage which the Specified Obligations owed to such -8- Senior Creditor on the True Up Date bears to the Specified Obligations owed to all of the Senior Creditors on the True Up Date. 6. Addition of Section 5B of the Intercreditor Agreement. The Intercreditor ------------------------------------------------------ Agreement is hereby amended by inserting the following new Section 5B in proper numerical order therein: "SECTION 5B. SHARING OF INFORMATION. By its acknowledgement hereto, the Borrower agrees that the Senior Creditors may freely share information regarding the Borrower without the prior consent of the Borrower." 7. Representations and Warranties. ------------------------------ (a) Neither the Collateral Agent, the Bank Agent, the Senior Note Collateral Agent nor any Senior Creditor makes any representation or warranty to any other party hereto with respect to the effectiveness, enforceability, validity or due execution of the Security Documents or as to any of the Collateral. (b) Each Senior Creditor represents, warrants and covenants that it has not and will not have or accept any security, collateral or other credit enhancement from the Borrower or any subsidiary or affiliate thereof with respect to any of the Senior Obligations without making adequate provision to cause such security, collateral or credit enhancement to be subject to the terms and provisions of the Intercreditor Agreement. 8. 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 Collateral Agent: (a) This Amendment shall have been duly executed and delivered by each of the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral Agent and the Collateral Agent and shall be in full force and effect. (b) The Collateral Agent shall have received evidence that (i) Amendment No. 3 to the Note Purchase Agreements of even date herewith has been duly executed and delivered by each of the requisite parties thereto and is in full force and effect, and (ii) Amendment No. 7 to the Loan Agreement of even date herewith has been duly executed and delivered by each of the requisite parties thereto and is in full force and effect. (c) The Collateral Agent shall have received such other items, documents, agreements or actions as the Collateral Agent may reasonably request in order to effectuate the transactions contemplated hereby. 9. Miscellaneous Provisions. ------------------------ -9- (a) Each of the Senior Creditors hereby ratifies and confirms all of its obligations under the Intercreditor Agreement, as amended hereby. Except as expressly amended hereby, the Intercreditor Agreement shall continue in full force and effect. This Amendment and the Intercreditor Agreement shall hereafter be read and construed together as a single document, and all references to the Intercreditor Agreement in the Intercreditor Agreement or any agreement or instrument related to the Intercreditor Agreement shall hereafter refer to the Intercreditor Agreement as amended by this Amendment. (b) 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 Collateral Agent incurred in connection with this Amendment. (c) 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). (d) 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. FLEET NATIONAL BANK, (f/k/a Fleet Bank, N.A.), as Collateral Agent, Senior Note Collateral Agent, Bank Agent and a Bank By: /s/ Jeffrey H. Robinson ------------------------------------------------- Name: Jeffrey H. Robinson Title: Senior Vice President HSBC BANK USA By: /s/ Bruce Wicks ------------------------------------------------- Name: Bruce Wicks Title: Vice President THE BANK OF NEW YORK By: /s/ Edward DeSalvio ------------------------------------------------- Name: Edward DeSalvio Title: Vice President JPMORGAN CHASE BANK By: /s/ Carol A. Kornblath ------------------------------------------------- Name: Carol A. Kornblath 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 CITIBANK, N.A. (f/k/a European American Bank) By: /s/ Catherine Wilinski ------------------------------------------------- Name: Catherine Wilinski Title: Vice President BANK LEUMI By: /s/ Illegible ------------------------------------------------- Name: Title: THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Friedrich N. Wilms ------------------------------------------------- Name: Friedrich N. Wilms Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Bev Abrahams ------------------------------------------------- Name: Bev Abrahams Title: Vice President THE TRAVELERS INSURANCE COMPANY By: /s/ Denise T. Duffe ------------------------------------------------ Name: Denise T. Duffe Title: Investment Officer FIRST CITICORP LIFE INSURANCE COMPANY By: Travelers Asset Management International Company LLC By: /s/ Denise T. Duffe ------------------------------------------------ Name: Denise T. Duffe Title: Investment Officer CITICORP LIFE INSURANCE COMPANY BY: TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC By: /s/ Denise T. Duffe ------------------------------------------------ Name: Denise T. Duffe Title: Investment Officer UNITED OF OMAHA LIFE INSURANCE COMPANY By: /s/ Curtis R. Caldwell ------------------------------------------------ Name: Curtis R. Caldwell Title: First Vice President COMPANION LIFE INSURANCE COMPANY By: /s/ Curtis R. Caldwell ------------------------------------------------ Name: Curtis R. Caldwell Title: Authorized Signatory ACKNOWLEDGED AND AGREED: - ----------------------- MEDALLION FUNDING CORP. By: /s/ Alvin Murstein --------------------------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack --------------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer MEDALLION TAXI MEDIA CORP. By: /s/ Alvin Murstein --------------------------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack --------------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer MEDALLION CHICAGO FUNDING CORP. By: /s/ Alvin Murstein --------------------------------------- Name: Alvin Murstein Title: President By: /s/ James E. Jack --------------------------------------- Name: James E. Jack Title: Executive Vice President & Chief Financial Officer EX-10.80 17 dex1080.txt THIRD AMENDMENT AGREEMENT, DATED AS OF 4/1/01 Exhibit 10.80 ================================================================================ Third Amendment Agreement Dated as of April 1, 2002 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, as amended and Re: $22,500,000 7.20% Senior Secured Notes, Series B due September 1, 2004, as amended ================================================================================ Medallion Funding Corp. Third Amendment Agreement Re: Note Purchase Agreements dated as of June 1, 1999, as amended and $22,500,000 7.20% Senior Secured Notes, Series A due June 1, 2004, as amended and $22,500,000 7.20% Senior Notes, Series B due September 1, 2004, as amended To each of the institutional investors named on Schedule A 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, as further amended by that certain Second Amendment Agreement dated June 29, 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, as amended, 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, as hereinafter provided, and, for good and valuable consideration, hereby requests that the Holders agree to such amendments. Capitalized terms used but not otherwise defined herein shall have the meanings set forth for such terms in the Note Purchase Agreements. Upon the acceptance of the Required Holders and satisfaction of the conditions precedent set forth herein, this Amendment shall constitute a contract between the Company and the Holders, but only in the respects hereinafter set forth: Amendments to Existing Note Purchase Agreements. The Existing Note Purchase Agreements are hereby amended as of the Effective Date (as defined herein) as follows: Reletter Sections 7.1(c)-(g); add new Section 7.1(c). Section 7.1 of each of the Existing Note Purchase Agreements is hereby amended by relettering existing subsections (c), (d), (e), (f) and 2 (g) as subsections (d), (e), (f), (g) and (h), respectively, and adding in the proper alphabetical order the following: "(c) Compliance Certificates - concurrently with the delivery of the financial statements required to be furnished under Section 7.1(a) or 7.1(b) hereof, a certificate signed by a Senior Financial Officer of the Company and M.R. Weiser, Inc., or such other consultant as may be employed by the Company to provide services equivalent to those presently provided by M.R. Weiser, Inc., and promptly upon the occurrence of any Default or Event of Default, a certificate signed by a Senior Financial Officer of the Company, or the Independent Public Accountants referred to in Section 7.1(b) hereof if a Default or Event of Default shall have occurred during the period of their review, in each case stating (i) that a review of the activities of the Company during such period has been made under his or their, as the case may be, immediate supervision with a view to determining whether the Company has observed, performed and fulfilled all of its obligations under this Agreement, and (ii) that there existed during such period no Default or Event of Default (provided that, as to a certificate prepared by the Independent Public Accountants, such period, as it relates to the compliance by the Company with covenants contained in Section 8.8(d) and Section 10 hereof, shall apply to the fiscal period covered by their review) or if any such Default or Event of Default exists, specifying the nature thereof, the duration thereof and what action the Company proposes to take, or has taken, with respect thereto; each such certificate to be accompanied by a schedule setting forth the computations as of the end of such period of each of the financial ratios, tests or covenants specified in Sections 8.8(d), 10.4, 10.5, and 10.13 through 10.15. New Sections 7.1(i) and (j). Section 7 of each of the Existing Note Purchase Agreements is hereby amended by replacing the period at the end of new subsection 7.1(h) with a semi-colon and adding in the proper alphabetical order the following: "(i) Budget Reporting - (i) to be delivered on the second to last Business Day of each week, a Budget for the immediately following 13-week period, with the first such Budget to be delivered no later than April 2, 2002; and (ii) to be delivered on the second to last Business Day of each week, a Variance Report for the immediately prior week, with the first such Variance Report to be delivered no later than April 4, 2002; and (j) Other Reporting - (i) to be delivered promptly after receipt, all non-confidential proposals, indication letters, commitments or other documents provided by potential refinancing sources for the Company or the Parent, provided that the Company shall use its reasonable best efforts to have any such confidentiality 3 restrictions not prohibit the provision of such proposals, indication letters, commitments or other documents to the Holders; (ii) to be delivered contemporaneously with delivery to the Funding Banks, all reports and deliveries to be made pursuant to Sections 6.1(f), (h), (j) and (k) of the Bank Loan Agreement; (iii) to be delivered contemporaneously with delivery to the Funding Banks or the Financial Banks, (a) all borrowing base or compliance certificates prepared by or on behalf of the Company (in addition to those required by subsection 7.1(h) hereof) or the Parent and (b) any reports, analyses or other documents prepared by M.R. Weiser, Inc., or the Carl Marks Group; (iv) weekly reports on the status of the Company's efforts to achieve the asset sales required pursuant to Section 9.13 hereof; (v) weekly reports on the status of the Company's efforts to achieve the refinancing contemplated by Section 9.14 hereof; (vi) to be delivered no later than the second to last Business Day of every week, a listing of Loans underwritten or rewritten in the prior week in form acceptable to Nightingale & Associates LLC; and (vii) to be delivered no later than the 10th Business Day of every month, an intercompany receivable report for the prior month and an accounts receivable reconciliation report for the prior month. New Section 7.2. Section 7 of each of the Existing Note Purchase Agreements is hereby amended by deleting Section 7.2 in its entirety and replacing it with the following: "Section 7.2. Intentionally Omitted." New Section 7.3(c). Section 7 of each of the Existing Note Purchase Agreements is hereby amended by replacing the period at the end of subsection 7.3(b) with the word "; and" and adding in proper alphabetical order the following: "(c) On-going Review, Monitoring - At any time, at the expense of the Company, permit authorized employees of Nightingale & Associates LLC to continue reviewing and monitoring, inter alia, the assets, financial condition, operations and financial planning of the Company and its Affiliates, in connection with which, the Company shall provide such access to its books, records and personnel as may be required and otherwise cooperate with the reasonable requests of Nightingale & Associates LLC." Amendment to Section 8.1. Section 8.1 of each of the Existing Note Purchase Agreements is hereby deleted in its entirety and replaced with the following: 4 "Section 8.1. Prepayment Certificate. Each prepayment made pursuant to this Section 8 shall be accompanied by a certificate signed by a Senior Financial Officer setting forth the date and amount of such prepayment and the details of the computation thereof, including but not limited to computation of such accrued interest and Make-Whole Amount as may be due with respect to such prepayment." Amendment to Section 8.2. Section 8.2 of each of the Existing Note Purchase Agreements is hereby deleted in its entirety and replaced with the following: "Section 8.2 Optional Prepayments. The Company may, at its option, prepay at any time all, or from time to time any part of, the Notes of each series, in an amount not less than $1,000,000 in the case of a partial prepayment, provided any such prepayment is made as set forth in Section 8.8(h) hereof." Amendment to Section 8.7. Section 8.7 of each of the Existing Note Purchase Agreements is hereby amended (a) in the definition of "Called Principal," by inserting the words "or 8.8" after "Section 8.2", (b) in the definition of "Remaining Scheduled Payments," (i) inserting the words ", as calculated using the original coupon rate of 7.20%" after "interest thereon" and (ii) inserting the words ", 8.8" after "Section 8.2", and (c) .in the definition of "Settlement Date," inserting the words ", 8.8" after "Section 8.2". Amended and Restated Section 8.8. Section 8.8 of each of the Existing Note Purchase Agreements is hereby amended and restated in its entirety as follows: "Section 8.8. Mandatory Prepayments. (b) 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), the Company shall prepay or cause any of its applicable Subsidiaries to 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 thereof, in accordance with Section 5 of the Intercreditor Agreement; (c) 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) the Company shall prepay or cause any of its applicable Subsidiaries to 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 thereof, in accordance with Section 5 of the Intercreditor Agreement; (d) 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 5 under any other applicable agreements for such sale, transfer or disposition), including but not limited to any sale pursuant to Section 9.13 hereof but excluding for purposes hereof the Permitted Commercial Sale and any sale, transfer or other disposition permitted by Section 10.3(b)(ii)(x) hereof, the Company shall prepay or cause any of its applicable Subsidiaries to 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 thereof, in accordance with Section 5 of the Intercreditor Agreement, provided that the foregoing shall not apply to up to seventy-five percent (75%) of the Net Cash Proceeds from Monthly Permitted Asset Sales completed in any calendar month in the period commencing on June 1, 2002 and ending on January 31, 2003, to the extent such Net Cash Proceeds are applied to make the Principal Payment (as defined in the Bank Loan Agreement) due in the immediately following calendar month and a concurrent prepayment to the Holders in an amount equal to the Holders' Pro Rata Share (as defined in the Intercreditor Agreement) of any such Principal Payment. (e) In the event that, with respect to any fiscal quarter or fiscal year, as applicable, ending on or after December 31, 2001, the Company seeks to pay Dividends (following the obtaining of any necessary consents or approvals hereunder or under any other applicable agreements for such sale, transfer or disposition) in excess of ninety percent (90%) of the Adjusted Net Investment Income of the Company for such fiscal quarter or such fiscal year (the amount of such excess Dividends is hereafter referred to as the "Excess Dividends"), the Company shall give 14 days prior written notice to the Holders of such intention and, concurrently with the payment of such Excess Dividends, shall prepay the Notes in an amount equal to the Holders' Pro Rata Share (as defined in the Intercreditor Agreement) of the greater of Payment Amount One or Payment Amount Two, in accordance with Section 5 of the Intercreditor Agreement and deliver to the Holders a certificate signed by a Senior Financial Officer demonstrating compliance with the calculations required hereby; (f) Commencing on September 15, 2002, the Holders and the Company shall negotiate a periodic cash sweep (with the frequency of the sweep to be mutually acceptable to the Required Holders and the Company), to be implemented on or before November 1, 2002, which cash sweep shall cause "excess cash" (the definition of such term to be mutually acceptable to the Required Holders and the Company) to be paid to the Intercreditor Collateral Agent for the ratable benefit of the Holders and the Funding Banks and to be applied, in accordance with Section 5 of the Intercreditor Agreement, as a prepayment by the Holders and a permanent repayment and commitment reduction by the Funding Banks; (g) On or before May 15, 2002, the Company shall prepay the Notes in an amount equal to the Holders' Pro Rata Share (as defined in the Intercreditor Agreement) of the sum of the aggregate principal amount of Total Intercompany Receivables as of the Effective Date less Yellow Cab Loans of an aggregate 6 principal amount of not more than $8,951,000 transferred by the Company to MFCC prior to the Effective Date; (h) Without duplication of any of the payments required by Sections 8.8(a) through (f) hereof, upon (i) the making of any Bank Debt Prepayment in favor of a Person other than the Holders or (ii) the occurrence of any other event which results in a permanent reduction to availability under the Bank Loan Agreement, the Company shall concurrently prepay or cause any of its applicable Subsidiaries to prepay the Notes in an amount equal to the Holders' Pro Rata Share (as defined in the Intercreditor Agreement) of such Bank Debt Prepayment or reduction, in accordance with Section 5 of the Intercreditor Agreement; and (i) Prepayment of the Notes 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. Payment of the Make-Whole Amount due with respect to such prepayment shall be deferred until the earlier of (x) the Maturity Date and (y) the payment in full of all amounts due and payable under the Notes, provided that any amounts so deferred shall accrue interest at the same rate as the Notes during such deferral period. Any and all prepayments 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." Amendment to Section 9.5. Section 9.5 of each of the Existing Note Purchase Agreements is hereby amended by deleting the second sentence thereof. New Section 9.12. Section 9 of each of the Existing Note Purchase Agreements is hereby amended by adding the following: "Section 9.12. Audit. Within one Business Day after the Effective Date, the Company shall provide the Holders with a copy of an unconditional, unqualified audit report for fiscal year 2001, together with any management letters issued therewith, provided by Arthur Andersen LLP, subject to extension based solely upon the current circumstances of Arthur Andersen LLP." New Sections 9.13 and 9.14. Section 9 of each of the Existing Note Purchase Agreements is hereby amended by adding the following: "Section 9.13 Required Asset Sales. (j) The Company shall use best efforts to sell, on or before May 31, 2002, all Commercial Loans to dry-cleaning operations or laundromats that are less than ninety (90) days delinquent for a price not less than 100% of the aggregate outstanding principal balance of such Commercial Loans; and (k) on and after August 1, 2002, the Company shall use its best efforts to sell all participations held by the Company in Medallion Loans made to 7 YellowOne LLC or YellowTwo LLC on or before November 1, 2002, on terms mutually acceptable to the Company and the Required Holders. Section 9.14 Refinancing. The Company shall endeavor to refinance the Notes, the terms of which refinancing must be approved in advance by the Holders." Amended and Restated Section 10. Section 10 of each of the Existing Note Purchase Agreements shall be and is hereby amended and restated in its entirety to read as follows: "SECTION 10. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: Section 10.1. Transactions with Affiliates. Without the prior written consent of the Required Holders, the Company will not, and will not permit any Subsidiary to, (l) enter into, or cause, suffer, or permit to exist, any transactions with any Affiliate (including without limitation the transactions permitted by subsections (b) and (c) but excluding for purposes hereof the Permitted Commercial Sale) and any other purchase, sale, lease or exchange of any property or the rendering of any service to or with any Affiliate, except in the ordinary course, pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than those that would be obtainable at the time in a comparable arm's length transaction with any Person who is not an Affiliate; (m) (i) sell, discount or otherwise dispose of Loans or any Collateral to any Affiliate, other than as permitted by Section 10.3(b)(i) hereof; or (ii) sell, discount or otherwise dispose of other Receivables or obligations owing to the Company or any of its Subsidiaries to any Affiliate, with or without recourse, other than as permitted by Section 10.3(b)(ii)(x) hereof; and (n) transfer any assets or cash to any Affiliate, excluding for purposes hereof (i) the payment to an Affiliate of such amounts as may be received on account of Loans serviced by Funding on such Affiliate's behalf, after deduction of management fees provided under the respective sale, transfer or participation agreement, and (ii) salary and other usual and customary intercompany charges. Section 10.2. Merger, Consolidation, etc. Excluding for purposes hereof the Permitted Sales or the merger of the Company and MFCC provided that the Company is the surviving entity and there is no Default or Event of Default after giving effect to such a merger, the Company shall not, and shall not permit any of its Subsidiaries to, consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any one or more Persons, without the express written consent of the Required Holders, and no such conveyance, transfer or lease shall 8 have the effect of releasing the Company or any Successor Corporation from its liability under this Agreement, the Notes or the other Note Documents. Section 10.3. Sale of Assets. Without the prior written consent of the Required Holders, the Company will not, and will not permit any of its Subsidiaries to: (a) sell, discount or otherwise dispose of Loans or any Collateral if a Default or Event of Default has occurred and is continuing or if the effect of such sale, discount or disposal would be to put the Company in violation of any of the covenants and agreements in this Agreement; (b) (i) sell, discount or otherwise dispose of Loans or any Collateral, other than (x) the Permitted Sales, (y) the sale of Loans to an Affiliate for a cash price not less than the sum of the outstanding principal amount thereof, plus any accrued interest and without discount thereon, and (z) the sale of Loans to any Person who is not an Affiliate for a cash price not less than the fair market value thereof, provided such sale is an arm's length transaction made pursuant to the reasonable requirements of the Company's or such Subsidiary's business and provided further that, in each case, Holders receive the mandatory prepayment required by Section 8.8(c) with respect thereto; or (ii) sell, discount or otherwise dispose of other Receivables or obligations owing to the Company or any of its Subsidiaries, with or without recourse, other than (x) 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 (without regard for any amendments to Section 2.14 thereof entered into after the Effective Date) and consistent in any event with past practices, (y) to a non-Affiliate for collection in the ordinary course of business, and (z) to the Intercreditor Collateral Agent for the ratable benefit of the Holders and the Funding Banks (to be applied in accordance with the Intercreditor Agreement). Section 10.4. Minimum Tangible Net Worth. The Company will not suffer or permit Tangible Net Worth of the Company and its Subsidiaries to be less than $65,000,000 at any time. Section 10.5. Maximum Liability Ratio. The Company will not suffer or permit the ratio of Total Liabilities to Tangible Net Worth to be more than 4.00:1 at any time. Section 10.6. Intentionally Omitted. Section 10.7. Intentionally Omitted. Section 10.8. Limitation on Loans and Investments. The Company will not, and will not permit any Subsidiary to, 9 (a) make, or obligate itself to make, any Loan or advance or Investment that is not a Domestic Loan or a Domestic Investment; (b) make, or obligate itself to make, any Loan or Investment that is not in compliance with the rules and regulations promulgated by any Governmental Authority to which it is subject, including, without limitation, the SBI Act and the SBA Regulations promulgated thereunder and the 1940 Act; (c) make, or obligate 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 would exceed 20% of the Company's Tangible Net Worth plus Subordinated Debt; (d) make, or commit to make, or acquire or commit to acquire, any Commercial Loan to or from any Person if, as a result of such Loan, the Company's Commercial Loan concentration in any given industry (determined in accordance with the Standard Industrial Classification promulgated by the Office of Management and Budget) would exceed in principal amount 25% of the Company's total Loans outstanding; (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 existing as of the Effective Date in an amount not to exceed $8,598,828, (ii) Investments in MFCC existing as of the Effective Date in an amount not to exceed $8,951,000, provided that such transfers were made subject to the Holders' Liens, and (iii) Investments in Medallion Business Credit, LLC existing as of the Effective Date in an amount not to exceed $7,274; (f) make, or commit to make, or acquire or commit to acquire, any Loan unless, with respect to such Loan, the Company reasonably believes it 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 is not included in the Net Finance Assets; or (g) fail to file upon making or acquiring a Loan, all required Company Financing Statements and Mortgage Assignments, deliver to the Collateral Agent for the benefit of the Holders and, for so long as the Intercreditor Agreement and Collateral Agency Agreement are in effect, the Collateral Agent for the benefit of the Funding Banks, 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 receives a first priority perfected security interest or mortgage interest therein, provided that it shall not be a breach of this covenant if any Loan that would otherwise cause a breach hereof is not in a material amount and is not included in the Net Finance Assets. 10 Section 10.9. Restricted Payments. The Company will not, and will not permit any Subsidiary to, make, or obligate itself to make, any Restricted Payment. Section 10.10. Portfolio Purchases and Acquisitions. Without the prior written consent of the Required Holders, the Company will not make or obligate itself to make any (a) Portfolio Purchase, (b) acquisition of stock or other equity interests or (c) other asset acquisition, excluding for purposes hereof the acquisition of assets (other than Loans) provided that such acquisitions are made in the ordinary course of business and are consistent with past practices. Section 10.11. Amendments of Agreements. The Company will not, and will not permit any Subsidiary to, consent to any amendment, supplement, waiver or other modification of any of the terms (including acceleration, covenant, default, subordination, sinking fund, repayment, interest rate or redemption provisions) contained in, or applicable to, or any security for, any Permitted Debt or other instrument evidencing or applicable to Permitted Debt if such amendment, supplement, or other modification would have a materially adverse effect on the interests of the Holders. Section 10.12. Capital Expenditures. The Company will not, and will not permit any Subsidiary to, expend or commit to expend for itself more than an aggregate of $500,000 in any fiscal year for capital expenditures, for the acquisition of Equipment or for leasehold improvements. Section 10.13. Net Finance Assets. The Company shall not suffer or permit the aggregate unpaid balance of Senior Debt to exceed Net Finance Assets. Section 10.14. Minimum EBIT to Interest Expense Ratio. The Company shall not suffer or permit the ratio, at the end of (a) each fiscal quarter of the Company ending during the period commencing October 1, 2001 and ending on June 30, 2002, of (i) EBIT of the Company for such fiscal quarter to (ii) Interest Expense of the Company for such fiscal quarter to be less than 1.20:1, and (b) any fiscal quarter of the Company ending after July 1, 2002, of (i) EBIT of the Company for such fiscal quarter to (ii) Interest Expense of the Company for such fiscal quarter to be less than 1.30:1. For purposes of calculating this covenant with respect to all fiscal quarters commencing on or after January 1, 2002, (x) the professional fees listed on Schedule V to the Bank Loan Agreement (as in effect on the Effective Date), to the extent that they were expensed in any such quarter and were deducted from EBIT for such quarter, shall be added to EBIT otherwise determined in accordance with this Agreement for such quarter, and (y) each of the following shall be deducted from Interest Expense otherwise determined in accordance with this Agreement for any such quarter to the extent they were included in Interest Expense for such quarter: (i) all amendment fees payable in connection with this Third Amendment or Amendment No. 6 or Amendment No. 7 to the Bank Loan Agreement, to the extent such fees were expensed in such quarter, (ii) all Make-Whole Amounts payable hereunder, to the extent such 11 amounts were expensed in such quarter, (iii) all interest accrued hereunder for such quarter with respect to the incremental increases of 100 basis points as of the Effective Date and the incremental increases of 50 basis points on each of June 1, 2002, September 1, 2002, December 1, 2002, March 1, 2003 and June 1, 2003, and (iv) all interest accrued under the Bank Loan Agreement for such quarter with respect to the incremental increases of 20 basis points as of the Amendment No. 7 Effective Date, and the incremental increases of 50 basis points on each of June 1, 2002, September 1, 2002, December 1, 2002, March 1, 2003 and June 1, 2003; provided that in each case, the aggregate amount of such professional fees, the aggregate amount of such amendment fees, the aggregate amount of such make-whole premiums, the aggregate amount of such excess interest due the Holders and the aggregate amount of such excess interest due the Funding Banks shall not exceed the respective aggregate amounts set forth for each such category on Schedule V to the Bank Loan Agreement (as in effect on the Effective Date). Section 10.15. Intercompany Receivables. The Company shall not suffer or permit the aggregate principal amount of Total Intercompany Receivables to exceed (a) from the Effective Date through May 14, 2002, $17,548,828 (comprised of the sum of $8,598,828 plus Yellow Cab Loans of an aggregate principal amount of not more than $8,951,000 transferred by the Company to MFCC prior to the Effective Date) at any time, and (b) on and after May 15, 2002, $8,951,000 (which shall be comprised solely of Yellow Cab Loans of an aggregate principal amount of not more than $8,951,000 transferred by the Company to MFCC prior to the Effective Date). Section 10.16. CFO. The Company shall at all times employ a chief financial officer or interim chief financial officer or a firm performing such function. Section 10.17. Effectiveness of Note Documents. The Company shall ensure that each of the Note Documents, including the Guaranty and the MFCC Guaranty, shall be in full force and effect, and not canceled, 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 proceedings to cancel, revoke or rescind any of the Note Documents. Section 10.18. Additional Indebtedness. The Company shall not, and shall not permit any Subsidiary, to incur additional Indebtedness without the prior written consent of the Required Holders, excluding for purposes hereof (a) Indebtedness arising under the Note Documents, (b) Indebtedness arising under the Bank Loan Agreement, subject to the terms and conditions of the Intercreditor Agreement, and (c) unsecured current liabilities incurred in the ordinary course and paid within ninety (90) days after the due date thereof (unless diligently contested in good faith by appropriate proceedings and, if required by the 12 Holders, reserved against in conformity with GAAP) other than liabilities for money borrowed or evidenced by bonds, debentures, notes or similar instruments. Section 10.19. Liens. The Company shall not, and shall not permit any Subsidiary, to create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired, provided that the foregoing restriction shall not apply to the following liens (the "Permitted Liens"): (a) Liens created under the Company Security Agreement, MFCC Security Agreement and any other Liens in favor of the Holders (including but not limited to any Liens in favor of the Holders on the Yellow Cab Loans permitted to be transferred to MFCC in an amount not more than $8,951,000, provided that such transfers were made subject to the Holders' Liens; (b) Liens existing on property at the time acquired by the Company after the date of the financial statements referred to in Section 7.1(b) hereof, provided that any such Lien was not incurred, directly or indirectly, in anticipation or contemplation of such acquisition; (c) Liens constituting renewals, extensions or refundings of Liens permitted by clause (b) above, provided that the principal amount of the Indebtedness secured by any such new Lien does not exceed the principal amount of the Indebtedness being renewed, extended or refunded at the time of renewal, extension or refunding thereof and that such new Lien attaches only to the same property theretofore subject to such earlier Lien; (d) Liens securing taxes, assessments or governmental charges or levies, or the claims or demands of materialmen, mechanics, carriers, workmen, repairmen, warehousemen, landlords and other like Persons, not yet delinquent or which are being actively contested in good faith by appropriate proceedings and in respect of which adequate reserves in conformity with GAAP have been provided on the books of the Company; (e) other Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of its property or assets, or materially impair the use thereof in the operation of its business; (f) attachment, judgment and other similar Liens arising in connection with court proceedings, provided that execution or other enforcement of such Liens is effectively stayed, the claims secured thereby are being actively contested in good faith by appropriate proceedings and adequate reserves in conformity with GAAP have been provided on the books of the Company; (g) Liens arising in connection with, and securing the cost of, the acquisition of Equipment, provided that such Lien attaches to such Equipment concurrently with or within 90 days after the acquisition thereof (by purchase, 13 construction or otherwise), and provided further that the aggregate amount of Indebtedness securing all such Liens shall not at any time exceed $1,000,000; and (h) Liens securing the Company's obligations under the Bank Loan Agreement, subject to the terms and conditions of the Intercreditor Agreement. Section 10.20. Securitizations. The Company shall not enter into any securitization or similar transaction (i.e., any transfer of its assets in connection with any sale, assignment or other transfer of any receivables, including accounts receivable, loan receivables, lease receivables or other payment obligations or any interest in any of the foregoing, which may in each case include any collections and other proceeds thereof, any collection or deposit accounts related thereto, or any collateral, guarantees or other property or claims supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables) without the prior written consent of the Required Holders or as otherwise permitted by Section 10.3(b) hereof. Section 10.21. Dividends. The Company shall not make payments of any dividend on or any distribution in respect of any Capital Stock of the Company and its Subsidiaries other than the payment of 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. Subject to the foregoing, dividends may be declared at any time but the Company shall not make payments of Dividends prior to July 1, 2002, the Company shall not make payments of Dividends in excess of $2,000,000 between July 1, 2002 and September 12, 2002, and for any Dividend paid after September 12, 2002, the Company shall deliver to the Holders, not less than five days prior to such payment, a certificate demonstrating pro forma compliance after such payment with respect to any amortization payments to be made with respect to Senior Debtor for the remainder of 2002. Section 10.22. Subsidiaries. The Company will not at any time form, create, own, acquire or allow to exist any Subsidiary, other than MFCC. 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 in Sections 7.1(d), 8.8, 9.6, 9.8, 9.10, 9.12 or Section 10 hereof, provided that if, within five (5) days of a default under Section 10.13 hereof, the Company cures such default, no such default shall have occurred for purposes hereof; or" Amendment to Section 11(f). Section 11(f) of each of the Existing Note Purchase Agreements is hereby amended by replacing the figure "$1,000,000" in the three places where it appears therein with the figure "$250,000". 14 New Section 11(l). Section 11 of each of the Existing Note Purchase Agreements is hereby amended by (a) replacing the words "; or" at the end of subsection (j) with a period, (b) replacing the period at the end of subsection (k) with the word "; or" and (c) adding in the proper alphabetical order the following: "(l) there exists an Event of Default under the Bank Loan Agreement." New Section 22.8. Section 22 of each of the Existing Note Purchase Agreements is hereby amended by adding the following: "Section 22.8. Indemnification. The Company and its Subsidiaries further agree to indemnify and save harmless each Holder and each of their respective officers, directors, employees, agents and Affiliates (each an "Indemnified Party" and collectively the "Indemnified Parties") from and against any and all actions, causes of action, suits, losses, liabilities and damages and expenses (including, without limitation, reasonable attorneys' fees actually incurred) in connection therewith (herein called the "Indemnified Liabilities") incurred by any Indemnified Party as a result of, or arising out of or relating to: (i) any of the transactions contemplated hereby or by the other Note Documents, (ii) any Indemnified Party's providing payroll and other cash management services to the Company or any of its Subsidiaries, or (iii) the use of any proceeds of the Notes or any of the other Note Documents, except for any Indemnified Liabilities arising on account of the gross negligence or willful misconduct of the Indemnified Party seeking indemnity under this Section 22.8; provided however, that, if and to the extent such agreement to indemnify may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which shall be permissible under applicable law. The parties hereto further hereby agree that such indemnification obligation provided in this Section 22.8 shall be Company Obligations under the Note Documents. The agreements in this Section 22.8 shall survive the payment of the Notes and related obligations and the termination of the Note Purchase Agreement." Amendments to Definitions. The following definitions set forth in Schedule B to each of the Existing Note Purchase Agreements shall be and are hereby amended by deleting and restating in their entirety the following definitions: "Default Rate" shall refer to the rate per annum set forth in clause (b) of the first paragraph of each of the Notes. "Dividends" shall mean for both the most recently completed fiscal quarter of the Company and the most recently completed four fiscal quarters of the Company, the sum of all (a) paid cash dividends on Capital Stock of the Company plus (b) accrued and unpaid cash dividends on Capital Stock of the Company and its Subsidiaries. "Excess Dividends" shall have the meaning specified in Section 8.8(d). 15 "EBIT" shall mean, with respect to the Company and its Subsidiaries 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 and its Subsidiaries for such period, computed in accordance with GAAP. "Eligible Commercial Loan" shall mean (i) the Permitted Commercial Loan and (ii) any other Commercial Loan which, as of March 3, 2002, qualified for inclusion in the Net Finance Assets, provided that, in each case, (w) the Loan satisfies the Eligibility Requirements, (x) the Loan is secured by Eligible Real Estate, Eligible Equipment, Eligible Inventory or Eligible Receivables, (y) the Loan is made to a Person that is operating as a going concern at all times and (z) the monetary terms, payment terms, financial covenants, negative covenants and any other material terms governing the Loan are not amended, modified or waived after March 3, 2002 on account of the Person to whom such Loan was made being unable to comply (for whatever reason) with such terms. "Eligibility Requirements" with respect to any Loan, shall mean the following requirements: (i) such Loan is made to, and is a recourse obligation of, the Person to whom such Loan is made, (j) such Loan is a Medallion Loan or an Eligible Commercial Loan, (k) such Loan is in compliance with the SBI Act and all SBA Regulations promulgated thereunder and, after giving effect to such Loan, the Company and its business and operations taken as a whole, is in compliance with the SBI Act and all SBA Regulations promulgated thereunder, (l) such Loan is pledged in accordance with Section 2.1 of the Company Security Agreement, (m) the representations, warranties and covenants contained in Section 4.1 of the Company Security Agreement are true and correct, and have been complied with, with respect to such Loan, (n) the Collateral Agent, on behalf of the Holders, has a perfected, first priority security interest in such Loan, subject to the terms of the Intercreditor Agreement; (o) the monetary terms, payment terms, financial covenants, negative covenants and any other material terms governing such Loan have not been amended, modified or waived more than once in any 12-month period on account of the Person to whom such Loan was made being unable to comply (for whatever reason) with such terms, and (p) such Loan, if a Medallion Loan originated after March 21, 2002, is in accordance with the written and approved loan policies of Funding in effect as 16 of the Effective Date hereof, provided that the Holders hereby consent to the amending of such policies to reflect a change in the maximum loan to value ratio on primary Medallion collateral, excluding any third-party side collateral or cross-collateralization, from seventy-five percent (75%) to eighty percent (80%). "Indebtedness" shall mean as to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication, all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date Indebtedness of such Person is to be determined (other than dividends on Capital Stock declared but not paid to the extent such dividends are not Restricted Payments), and including: (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (c) every reimbursement obligation (contingent or otherwise) of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account, or upon the application, of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), (e) every obligation of such Person under any Capital Lease, (f) every obligation of such Person under any Synthetic Lease, (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively "receivables"), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (h) every obligation of such Person (an "equity related purchase obligation") to purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock issued by such Person or any rights measured by the value of such Capital Stock, 17 (i) every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps (for which payment has not at the time been made in its entirety), floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a "derivative contract"), (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law, (k) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clause (a) through (j) (the "primary obligation") of another Person (the "primary obligor"), in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation, and (l) all indebtedness for borrowed money secured by any Lien upon property owned by such Person (whether or not the holder of such indebtedness has any recourse against such Person). The "amount" or "principal amount" of any Indebtedness at any time of determination represented by (s) any letter of credit shall mean its face amount (excluding any reimbursement obligations with respect to any drawing under such a letter of credit which have been paid), (t) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (u) any Capital Lease shall be the principal component of the aggregate of the rentals obligation under such Capital Lease payable over the term thereof that is not subject to termination by the lessee, (v) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than Borrower or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (w) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (x) any derivative contract shall be determined by the Agent in a manner consistent with its ordinary practices for valuing derivative contracts, (y) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be 18 comprised in such redemption or purchase price and (z) any guaranty or other contingent liability referred to in clause (k) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligations is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Note Documents" shall mean 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, the Collateral Agency Agreement, the MFCC Guaranty, the MFCC Pledge Agreement, the MFCC Pledge 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 and its Subsidiaries, any of the following: (i) any defeasance, redemption, repurchase or other acquisition or retirement for value prior to the 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); (ii) 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 the scheduled maturity of any Indebtedness permitted by Section 10.18 hereof; (iii) the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company or its Subsidiaries or of any warrants, rights or options to purchase or acquire any Capital Stock of the Company or its Subsidiaries (other than pursuant to and in accordance with stock option plans and other benefit plans for management or employees of the Company and its Subsidiaries, 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 its Subsidiaries or of any warrants, rights or options to purchase or acquire any Capital Stock of the Company or its Subsidiaries otherwise permitted this parenthetical clause shall not be permitted following the occurrence and during the continuance of any Default or Event of Default); (iv) any expenditure or the incurrence of any liability to make any expenditure for any Investment not permitted by Section 10.8 hereof; (v) when incurred during the continuance of a Default or Event of Default any expenditure or the incurrence of any liability to make any expenditure for any Investment permitted by Section 8.3 hereof (other than Loans made in the ordinary course of business); (vi) the payment of any principal of, interest on, or any amounts due in respect of, any Indebtedness not permitted by Section 10.18 hereof; (vii) the payment of any principal of, or interest on, or any other amounts due in respect of, any Subordinated Debt; and (viii) the setting aside of any amount or other property for payment of Indebtedness described above, by means of a sinking fund, defeasance or otherwise. 19 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 in proper alphabetical order to read as follows: "Budget" shall mean an itemized 13-week cash flow forecast in form satisfactory to Nightingale & Associates LLC. "Company Obligations" shall mean, all of the indebtedness, obligations and liabilities of the Company under any of the Note Documents whether direct or indirect, joint or several, fixed, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, now existing or hereafter arising, created, assumed, incurred or acquired including (A) any obligation or liability in respect of any breach of any representation or warranty, and (B) all post-petition interest and funding loss. "Financial Banks" shall mean the lending institutions that from time to time are signatories to the Financial Agreement. "Funding Banks" shall mean the lending institutions that from time to time are signatories to the Bank Loan Agreement. "Intercreditor Collateral Agent" shall mean the Collateral Agent, as defined in the Intercreditor Agreement. "Maturity Date" shall mean the earlier of (i) June 30, 2003 and (ii) the date that all the Notes shall become due and payable pursuant to Section 12. "MFCC" shall mean Medallion Funding Chicago Corp., a Delaware corporation. "MFCC Guaranty" shall mean the Guaranty dated as of the date hereof, by MFCC to the Holders, in form and substance satisfactory to the Holders, as the same may be amended, restated, modified or supplemented form time to time. "MFCC Pledge Agreement" shall mean the Pledge Agreement dated as of the date hereof, between the Company and the Collateral Agent, for the benefit of the Holders, in form and substance satisfactory to the Holders, as the same may be amended, restated, modified or supplemented from time to time. "MFCC Security Agreement" shall mean the Security Agreement dated as the date hereof, between MFCC and the Collateral Agent, for the benefit of the Holders, in form and substance satisfactory to the Holders, as the same may be amended, restated, modified or supplemented form time to time. "Monthly Permitted Asset Sales" shall mean, for each calendar month for the period commencing on July 1, 2002 and ending on January 31, 2003, sales of assets otherwise permitted under this Agreement in an aggregate principal amount 20 equal to the amount necessary to result in Net Cash Proceeds of not more than $10,667,000 for any such calendar month. "Permitted Commercial Loan" shall mean the Commercial Loan made by the Company to Route 110 Service Corp. and 516 Realty Corp. with an outstanding principal amount of no greater than $450,000 as of the Effective Date. "Permitted Commercial Sale" shall mean the sale by the Company of Commercial Loans of an aggregate outstanding principal amount of $3,000,000 to Freshstart Capital Corp. for a price payable in cash in an amount equal to 100% of the aggregate outstanding principal amount of such Commercial Loans, plus any interest, fees or costs accrued and unpaid with respect to such Commercial Loans. "Permitted Sales" shall mean (i) the Permitted Commercial Sale and (ii) any sales permitted by Section 9.13 hereof. "Synthetic Lease" shall mean any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes. "Third Amendment" shall mean this Third Amendment Agreement among the Company, MFCC, the Guarantor and the Holders. "Variance Report" shall mean the weekly variance from the Budget delivered with respect to the prior week in form satisfactory to Nightingale & Associates LLC. Amendment of 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 E 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 F hereto. Waivers. Events of Default. Each Holder hereby waives the Company's compliance with certain covenants on the terms and conditions and as more fully set forth on Schedule B hereto. Consents. Permitted Commercial Sale. On the Effective Date, the Holders consent to the Permitted Commercial Sale. Make-Whole Amounts. The Holders consent to the deferral of payment of the Make-Whole Amounts due and payable, or that may become due and payable, with respect to (i) the prepayment of $1,000,000 received by the Holders on February 11, 2002, (ii) the prepayment of $11,086,000 to be received on or before the Effective Date pursuant to Section 6.7 herein, and (iii) any further prepayments received after the Effective Date, until the earlier of (x) the Maturity Date and (y) the payment in full of all amounts due and payable under the Notes, 21 provided that any amounts so deferred shall accrue interest at the same rate as the Notes during such deferral period. Consent to Amendment of Bank Loan Agreement, Etc. For purposes of Section 2 of the Intercreditor Agreement and Section 10.11 hereof, each of the Holders hereby consents to (a) Amendment No. 3 and Amendment No. 4 to the Financial Agreement in the forms attached hereto as Exhibit A and Exhibit B, respectively, and (b) Amendment No. 6 and Amendment No. 7 to the Bank Loan Agreement in the forms attached hereto as Exhibit C and Exhibit D, respectively. 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: 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. 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). 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 22 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. No Default or Event of Default. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. 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. 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 this Amendment 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, other than filings which have been made. 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. Priority; Continued Effectiveness. Except as otherwise permitted under the Note Purchase Agreements, the Collateral Agent, for the ratable benefit of the Holders, 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, the Parent Pledge Agreement and the MFCC Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Holders, 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, the Parent Pledge Agreement and the MFCC Pledge Agreement. 23 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. Conditions Precedent. This Third Amendment Agreement shall be effective when each of the following conditions shall have been satisfied (the "Effective Date"): 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. Representations and Warranties. The representations and warranties of the Company set forth in Section 5 hereof are true and correct as of the Effective Date. Related Transactions. (a) Kaye Scholer LLP on behalf of the Holders shall have received executed copies of Amendment No. 3 and Amendment No. 4 to the Financial Agreement in the forms attached hereto as Exhibit A and Exhibit B, respectively. (b) Kaye Scholer LLP on behalf of the Holders shall have received executed copies of Amendment No. 6 and Amendment No. 7 to the Bank Loan Agreement in the forms attached hereto as Exhibit C and Exhibit D, respectively. 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 the first installment of the Amendment Fee set forth in section 7.5 hereof. Payment of Fees. The Company shall have paid those fees and disbursements of the Holders' special counsel, Kaye Scholer LLP, and Kaye Scholer LLP's financial advisor, Nightingale & Associates LLC, incurred in connection with the negotiation, preparation, execution and delivery of this Amendment, as evidenced by invoices submitted at or prior to closing. Replacement Notes. The Holders shall each have received amended and restated replacement Notes executed by the Company issued pursuant to Section 13.2 of the Existing Note Purchase Agreements, with such Notes to mature upon the earlier of (a) June 30, 2003, and (ii) acceleration of the Notes upon an Event of Default pursuant to Section 12 of the Existing Note Purchase Agreements. Principal Repayment. The Holders shall have received a cash payment of $11,086,000, which shall be applied in full to reduce the outstanding principal of the Notes. 24 MFCC Documents. The Holders shall have received the MFCC Guaranty executed by MFCC in favor of the Holders, the MFCC Security Agreement, executed by MFCC in favor of the Collateral Agent for the benefit of the Holders, and the MFCC Pledge Agreement, executed by the Company in favor of the Collateral Agent for the benefit of the Holders. Opinion. Kaye Scholer LLP on behalf of the Holders shall have received a favorable opinion of Willkie Farr & Gallagher, counsel for the Company, in form and substance reasonably satisfactory to the Holders. Consent of Banks. The Company shall have received the required consents of the Funding Banks and the Financial Banks to all the transactions contemplated hereunder. Refinancing Proposals. Kaye Scholer LLP on behalf of the Holders shall have received all proposals, indication letters or commitments provided by potential refinancing sources for the Company or the Parent received on or before the date hereof. Upon receipt of all of the foregoing, this Amendment shall become effective. Miscellaneous. GOVERNING LAW. This amendment shall be governed by, and construed in accordance with, the law of the State of New York (without giving effect to the conflicts of laws principles thereof). Counterparts. This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Amendment. 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. 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. Amendment Fee. The Company shall pay to the Holders an amendment fee (the "Amendment Fee"), calculated and payable as follows: (i) a fee equal to 0.20% of the outstanding principal balance of the Notes as of March 1, 2002 , which fee shall be paid on or before the Effective Date and shall be fully earned and non-refundable as of the Effective Date; and (ii) an additional fee equal to 0.20% of the outstanding principal balance of the Notes on the Term-Out Date (as defined in the Bank Loan Agreement on the date hereof), which fee shall be paid on such Term-Out Date and shall be fully earned and non-refundable as of such Term-Out Date. Expenses. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay and to remain current in the payment of any and all expenses relating to 25 the subject matter of this Amendment incurred by the Holders, including but not limited to the reasonable out-of-pocket expenses of the Holders and the reasonable fees and expenses of Kaye Scholer LLP, special counsel for the Holders, and Kaye Scholer LLP's financial advisor, Nightingale & Associates LLC. 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. Release. 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. Remainder of this page intentionally left blank 26 This Third Amendment is hereby accepted and agreed to as of the date aforesaid. Medallion Funding Corp. By /s/ Alvin Murstein -------------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By /s/ James E. Jack -------------------------------------- Name: James E. Jack Title: Chief Financial Officer This Third Amendment is hereby accepted and agreed to as of the date aforesaid. The Travellers Insurance Company By /s/ Denise T. Duffe ------------------------------------- Name: Denise T. Duffe Title: Investment Officer First Citicorp Life Insurance Company By Travelers Asset Management International Company LLC By /s/ Denise T. Duffe ------------------------------------- Name: Denise T. Duffe Title: Investment Officer Citicorp Life Insurance Company By Travelers Asset Management International Company LLC By /s/ Denise T. Duffe ------------------------------------- Name: Denise T. Duffe Title: Investment Officer United of Omaha Life Insurance Company By /s/ Curtis R. Caldwell ------------------------------------- Name: Curtis R. Caldwell Title: First Vice President Companion Life Insurance Company By /s/ Curtis R. Caldwell ------------------------------------- Name: Curtis R. Caldwell Title: Authorized Signatory 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, Inc. By /s/ Alvin Murstein ------------------------------------------- Name: Alvin Murstein Title: Chief Executive Officer and Director By /s/ Michael Leible ------------------------------------------- Name: Michael Leible Title: President Medallion Financial Corp. By /s/ Alvin Murstein ------------------------------------------- Name: Alvin Murstein Title: President and Director By /s/ James E. Jack ------------------------------------------- Name: James E. Jack Title: Chief Financial Officer Medallion Funding Chicago Corp. By /s/ Alvin Murstein ------------------------------------------- Name: Alvin Murstein Title: Chairman and Chief Executive Officer By /s/ James E. Jack ------------------------------------------- Name: James E. Jack Title: Chief Executive Officer Schedule A Name of Holder of Principal Amount and Series Of Outstanding Notes Outstanding Notes Held as Of The Effective Date The Travelers Insurance Company $7,314,222 Series A $7,314,222 Series B First Citicorp Life Insurance Company $ 731,422 Series A $ 731,422 Series B Citicorp Life Insurance Company $ 731,422 Series A $ 731,422 Series B $ 365,711 Series A $ 365,711 Series B United of Omaha Life Insurance Company $6,217,089 Series A $6,217,089 Series B Companion Life Insurance Company $1,097,133 Series A $1,097,133 Series B Schedule B Waived Events of Default MFCC/Yellow Cab Loans. Each Holder hereby waives any Default or Event of Default which may have occurred and may be continuing under Sections 9.5 and 10.2(b) of the Existing Note Purchase Agreements as a result of the creation or existence of MFCC or the transfer of Yellow Cab Loans to MFCC prior to the Effective Date in an aggregate principal amount of not more than $8,951,000, provided such transfers were and shall remain subject to the Liens of the Holders or the Collateral Agent for the benefit of the Holders. Interest Payment Deferral. Each Holder hereby waives any Default or Event of Default which may have occurred under Section 6.7 of the Existing Note Purchase Agreements as a result of the Company's failure to pay interest due with respect to the prepayment of $1,000,000 received by the Holders on February 11, 2002, provided such payment is made by the Effective Date. Make-Whole Amount. Each Holder hereby waives, until the earlier of (x) the Maturity Date and (y) the payment in full of all amounts due and payable under the Notes, any Default or Event of Default which have occurred or would otherwise occur as a result of the Company's failure to pay the Make-Whole Amounts due and payable with respect to (i) the prepayment of $1,000,000 received on February 11, 2002, (ii) the prepayment of $11,086,000 received pursuant to Section 6.7 herein, and (iii) any further prepayments received by the Holders after the Effective Date. Minimum Net Finance Assets. Each Holder hereby waives any Default or Event of Default which may have occurred under Section 10.6 of the Existing Note Purchase Agreements for (i) the fiscal quarter ended September 30, 2001 and (ii) the month ended November 30, 2001, provided that at no time was the ratio less than 0.90:1.0. Minimum Net Income to Interest Expense Ratio. Each Holder hereby waives any Default or Event of Default which may have occurred under Section 10.7 of the Existing Note Purchase Agreements for (i) for the fiscal quarter ended September 30, 2001, and (ii) for the fiscal year ended December 31, 2001, provided that at no time was the ratio less than 0.70:1.0. Limitations on Loans and Investments. Each Holder hereby waives any Default or Event of Default which occurred or would otherwise occur under Section 10.8(e) hereof solely with respect to: (i) Investments in the Parent existing as of the Effective Date, provided that as of such date, such Investments did not exceed $8,598,828; (ii) Investments in MFCC existing as of the Effective Date, provided that as of such date, such Investments did not exceed $8,951,000, and such transfers were and shall remain subject to the Liens of the Holders or the Collateral Agent for the benefit of the Holders; and (iii) Investments in Medallion Business Credit, LLC existing as of the Effective Date, provided that as of such date, such Investments did not exceed $7,274. Portfolio Purchases. Each Holder hereby waives any Default or Event of Default that may have occurred under Section 10.10 hereof solely as a result of the Company's purchase, on January 31, 2002, of Loans from the Parent for an aggregate purchase price of $8,085,294.10. Net Finance Assets. Each Holder hereby waives any Default or Event of Default that may have occurred under Section 10.13 of the Existing Note Purchase Agreements for (i) the fiscal quarter ended September 30, 2001 and (ii) the month ended November 30, 2001, provided that the aggregate unpaid balance of all Senior Debt did not exceed Net Finance Assets (i) by more than $486,684 for the fiscal quarter ended September 30, 2001, and (ii) by more than $600,000 for the month ended November 30, 2001. Minimum EBIT to Interest Expense Ratio. Each Holder hereby waives any Default or Event of Default that may have occurred under Section 10.14 of the Existing Note Purchase Agreements for (i) the fiscal quarter ended September 30, 2001 and (ii) the month ended November 30, 2001, provided that at no time was the ratio less than 0.70:1.0. Remainder of this page intentionally left blank 2 Exhibit A Amendment No. 3 to the Financial Agreement Exhibit B Amendment No. 4 to the Financial Agreement Exhibit C Amendment No. 6 to the Bank Loan Agreement Exhibit D Amendment No. 7 to the Bank Loan Agreement Exhibit E Form of Series A Notes Medallion Funding Corp. 8.350% Senior Secured Note, Series A, Due June 30, 2003 No. RA-[___] April [__], 2002 [$_________] 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 [insert name of payee], or registered assigns, the principal sum of [_______________] Dollars on June 30, 2003, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof, together with any Make-Whole Amount for which payment has been deferred by agreement of the Company and the holder hereof (as set forth in the Note Purchase Documents referred to below), at the rate of 8.35% per annum from the date hereof to and including May 31, 2002, at the rate of 8.85% per annum from June 1, 2002 to and including August 31, 2002, at the rate of 9.35% per annum from September 1, 2002 to and including November 30, 2002, at the rate of 9.85% per annum from December 1, 2002 to and including February 28, 2003, at the rate of 10.35% per annum from March 1, 2003 to and including May 31, 2003, and at the rate of 10.85% per annum from June 1, 2003 and thereafter, payable monthly in arrears, on the first Business Day of each month, commencing with the first Business Day in the month of April 2002, until the principal hereof shall have become due and payable, and (b) without duplication of amounts under clause (a), to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and during the continuance of an Event of Default (as defined in the Note Purchase Agreements referred to below), payable monthly in arrears 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) the rate otherwise borne hereunder plus 2% 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 8.35% Senior Secured Notes, Series B, due June 30, 2003, 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. 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 prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements. 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 amends and restates in its entirety that certain 7.35% Senior Secured Note, Series A, due June 1, 2004, number RA-[___], in the aggregate principal amount of [$__________] pursuant to that certain Third Amendment Agreement dated as of April [__], 2002 to the Note Purchase Agreements dated as of June 1, 1999. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. Remainder of this page intentionally left blank 2 Medallion Funding Corp. By: -------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: -------------------------------- Name: James E. Jack Title: Chief Financial Officer Exhibit F Form of Series B Notes Medallion Funding Corp. 8.350% Senior Secured Note, Series B, Due June 30, 2003 No. RB-[___] April [__], 2002 [$_________] PPN 58403# AD 9 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 [insert name of payee], or registered assigns, the principal sum of [_______________] Dollars on June 30, 2003, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof, together with any Make-Whole Amount for which payment has been deferred by agreement of the Company and the holder hereof (as set forth in the Note Purchase Agreements referred to below), at the rate of 8.35% per annum from the date hereof to and including May 31, 2002, at the rate of 8.85% per annum from June 1, 2002 to and including August 31, 2002, at the rate of 9.35% per annum from September 1, 2002 to and including November 30, 2002, at the rate of 9.85% per annum from December 1, 2002 to and including February 28, 2003, at the rate of 10.35% per annum from March 1, 2003 to and including May 31, 2003, and at the rate of 10.85% per annum from June 1, 2003 and thereafter, payable monthly in arrears, on the first Business Day of each month, commencing with the first Business Day in the month of April 2002, until the principal hereof shall have become due and payable, and (b) without duplication of amounts under clause (a), to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and during the continuance of an Event of Default (as defined in the Note Purchase Agreements referred to below), payable monthly in arrears 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) the rate otherwise borne hereunder plus 2% 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 8.35% Senior Secured Notes, Series A, due June 30, 2003, 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. 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 prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements. 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 amends and restates in its entirety that certain 7.35% Senior Secured Note due September 1, 2004, number RB-[___], in the aggregate principal amount of [$_________] pursuant to that certain Third Amendment Agreement dated as of April [__], 2002 to the Note Purchase Agreements dated as of June 1, 1999. 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. Remainder of this page intentionally left blank 2 Medallion Funding Corp. By: --------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: --------------------------------- Name: James E. Jack Title: Chief Financial Officer TABLE OF CONTENTS ----------------- SECTION 1. Amendments to Existing Note Purchase Agreements........................................2 - ---------- ----------------------------------------------- Section 1.1 Reletter Sections 7.1(c)-(g); add new Section 7.1(c)...................................2 ----------- ---------------------------------------------------- Section 1.2 New Sections 7.1(i) and (j)............................................................3 ----------- --------------------------- Section 1.3 New Section 7.2........................................................................4 ----------- --------------- Section 1.4 New Section 7.3(c).....................................................................4 ----------- ------------------ Section 1.5 Amendment to Section 8.1...............................................................4 ----------- ------------------------ Section 1.6 Amendment to Section 8.2...............................................................5 ----------- ------------------------ Section 1.7 Amendment to Section 8.7...............................................................5 ----------- ------------------------ Section 1.8 Amended and Restated Section 8.8.......................................................5 ----------- -------------------------------- Section 1.9 Amendment to Section 9.5...............................................................7 ----------- ------------------------ Section 1.10 New Section 9.12.......................................................................7 ------------ ---------------- Section 1.11 New Sections 9.13 and 9.14.............................................................7 ------------ -------------------------- Section 1.12 Amended and Restated Section 10........................................................8 ------------ ------------------------------- Section 1.13 Amendment to Section 11(c)(i).........................................................14 ------------ ----------------------------- Section 1.14 Amendment to Section 11(f)............................................................14 ------------ -------------------------- Section 1.15 New Section 11(l).....................................................................15 ------------ ----------------- Section 1.16 New Section 22.8......................................................................15 ------------ ---------------- Section 1.17 Amendments to Definitions.............................................................15 ------------ ------------------------- Section 1.18 Addition of Definitions...............................................................20 ------------ ----------------------- Section 1.19 Amendment of Notes....................................................................21 ------------ ------------------ SECTION 2. Waivers...............................................................................21 - ---------- ------- Section 2.1 Events of Default.....................................................................21 ----------- ----------------- SECTION 3. Consents..............................................................................21 - ---------- -------- Section 3.1 Permitted Commercial Sale.............................................................21 ----------- ------------------------- Section 3.2 Make-Whole Amounts....................................................................21 ----------- ------------------ SECTION 4. Consent to Amendment of Bank Loan Agreement, Etc......................................22 - ---------- ------------------------------------------------- SECTION 5. Representations and Warranties........................................................22 - ---------- ------------------------------ Section 5.1 Organization; Power and Authority.....................................................22 ----------- --------------------------------- Section 5.2 Authorization, Etc....................................................................22 ----------- ------------------- Section 5.3 Compliance with Laws, Other Instruments, Etc..........................................22 ----------- -------------------------------------------- Section 5.4 No Default or Event of Default........................................................23 ----------- ------------------------------ Section 5.5 Compliance............................................................................23 ----------- ---------- Section 5.6 No Consents...........................................................................23 ----------- ----------- Section 5.7 Representations in Note Purchase Agreements...........................................23 ----------- ------------------------------------------- Section 5.8 Priority; Continued Effectiveness.....................................................23 ----------- --------------------------------- Section 5.9 Investment Company Act................................................................24 ----------- ---------------------- SECTION 6. Conditions Precedent..................................................................24 - ---------- -------------------- Section 6.1 Execution.............................................................................24 ----------- --------- Section 6.2 Representations and Warranties........................................................24 ----------- ------------------------------ Section 6.3 Related Transactions..................................................................24 ----------- --------------------
i Section 6.4 Amendment Fee.........................................................................24 ----------- ------------- Section 6.5 Payment of Fees.......................................................................24 ----------- --------------- Section 6.6 Replacement Notes.....................................................................24 ----------- ----------------- Section 6.7 Principal Repayment...................................................................24 ----------- ------------------- Section 6.8 MFCC Documents........................................................................25 ----------- -------------- Section 6.9 Opinion...............................................................................25 ----------- ------- Section 6.10 Consent of Banks......................................................................25 ------------ ---------------- Section 6.11 Refinancing Proposals.................................................................25 ------------ --------------------- SECTION 7. Miscellaneous.........................................................................25 - ---------- ------------- Section 7.1 Governing Law.........................................................................25 ----------- ------------- Section 7.2 Counterparts..........................................................................25 ----------- ------------ Section 7.3 Captions..............................................................................25 ----------- -------- Section 7.4 References to Existing Note Purchase Agreements or Security Agreement.................25 ----------- --------------------------------------------------------------------- Section 7.5 Amendment Fee.........................................................................25 ----------- ------------- Section 7.6 Expenses..............................................................................25 ----------- -------- Section 7.7 Ratification..........................................................................26 ----------- ------------ SECTION 8. Release...............................................................................26 - ---------- ------- Section 8.1 Release...............................................................................26 ----------- -------
ii EX-10.81 18 dex1081.txt FORM OF 8.35% SENIOR SECURED NOTE, SERIES A Exhibit 10.81 Medallion Funding Corp. 8.35% Senior Secured Note, Series A, Due June 30, 2003 No. RA- April 1, 2002 $ PPN 58403# AC 1 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 on June 30, 2003, with interest ----------------------- (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof, together with any Make-Whole Amount for which payment has been deferred by agreement of the Company and the holder hereof (as set forth in the Note Purchase Documents referred to below), at the rate of 8.35% per annum from the date hereof to and including May 31, 2002, at the rate of 8.85% per annum from June 1, 2002 to and including August 31, 2002, at the rate of 9.35% per annum from September 1, 2002 to and including November 30, 2002, at the rate of 9.85% per annum from December 1, 2002 to and including February 28, 2003, at the rate of 10.35% per annum from March 1, 2003 to and including May 31, 2003, and at the rate of 10.85% per annum from June 1, 2003 and thereafter, payable monthly in arrears, on the first Business Day of each month, commencing with the first Business Day in the month of April 2002, until the principal hereof shall have become due and payable, and (b) without duplication of amounts under clause (a), to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and during the continuance of an Event of Default (as defined in the Note Purchase Agreements referred to below), payable monthly in arrears 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) the rate otherwise borne hereunder plus 2% 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 8.35% Senior Secured Notes, Series B, due June 30, 2003, 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. 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 prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements. 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 amends and restates in its entirety that certain 7.35% Senior Secured Note, Series A, due June 1, 2004, number RA-7, in the aggregate principal amount of $10,000,000 pursuant to that certain Third Amendment Agreement dated as of April 1, 2002 to the Note Purchase Agreements dated as of June 1, 1999. 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. Remainder of this page intentionally left blank 2 Medallion Funding Corp. By: ------------------------------------ Name: Alvin Murstein Title: Chief Executive Officer By: ------------------------------------ Name: James E. Jack Title: Chief Financial Officer EX-10.82 19 dex1082.txt FORM OF 8.35% SENIOR NOTE, SERIES B Exhibit 10.82 Medallion Funding Corp. 8.35% Senior Secured Note, Series B, Due June 30, 2003 No. RB-13 April 1, 2002 $ PPN 58403# AD 9 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 on June 30, 2003, with interest -------------------------- (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof, together with any Make-Whole Amount for which payment has been deferred by agreement of the Company and the holder hereof (as set forth in the Note Purchase Agreements referred to below), at the rate of 8.35% per annum from the date hereof to and including May 31, 2002, at the rate of 8.85% per annum from June 1, 2002 to and including August 31, 2002, at the rate of 9.35% per annum from September 1, 2002 to and including November 30, 2002, at the rate of 9.85% per annum from December 1, 2002 to and including February 28, 2003, at the rate of 10.35% per annum from March 1, 2003 to and including May 31, 2003, and at the rate of 10.85% per annum from June 1, 2003 and thereafter, payable monthly in arrears, on the first Business Day of each month, commencing with the first Business Day in the month of April 2002, until the principal hereof shall have become due and payable, and (b) without duplication of amounts under clause (a), to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and during the continuance of an Event of Default (as defined in the Note Purchase Agreements referred to below), payable monthly in arrears 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) the rate otherwise borne hereunder plus 2% 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 8.35% Senior Secured Notes, Series A, due June 30, 2003, 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. 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 prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements. 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 amends and restates in its entirety that certain 7.35% Senior Secured Note due September 1, 2004, number RB-7, in the aggregate principal amount of $10,000,000 pursuant to that certain Third Amendment Agreement dated as of April 1, 2002 to the Note Purchase Agreements dated as of June 1, 1999. 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. Remainder of this page intentionally left blank 2 Medallion Funding Corp. By: -------------------------------- Name: Alvin Murstein Title: Chief Executive Officer By: -------------------------------- Name: James E. Jack Title: Chief Financial Officer EX-10.83 20 dex1083.txt GUARANTY, DATED AS OF APRIL 1, 2002 Exhibit 10.83 ================================================================================ Guaranty Dated as of April 1, 2002 by Medallion Funding Chicago Corp. 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, as amended and $22,500,000 7.20% Senior Secured Notes, Series B due September 1, 2004, as amended of Medallion Funding Corp. ================================================================================ Table of Contents
Section Heading Page Section 1. Definitions.................................................................1 - ---------- ----------- Section 2. Guaranty of Payment and Performance.........................................2 - ---------- ----------------------------------- Section 3. Intercreditor Agreement.....................................................2 - ---------- ------------------------ Section 4. Guarantor's Agreement to Pay Enforcement Costs, etc.........................2 - ---------- ---------------------------------------------------- Section 5. Waivers by Guarantor; Noteholders' Freedom to Act...........................3 - ---------- ------------------------------------------------- Section 6. Unenforceability of Obligations Against Borrower............................3 - ---------- ------------------------------------------------ Section 7. Subrogation; Subordination..................................................4 - ---------- --------------------------- Section 8. Setoff......................................................................4 - ---------- ------ Section 9. Further Assurances..........................................................4 - ---------- ------------------ Section 10. Release.....................................................................5 - ----------- ------- Section 11. Termination; Reinstatement..................................................5 - ----------- -------------------------- Section 12. Successors and Assigns......................................................5 - ----------- ---------------------- Section 13. Amendments and Waivers......................................................5 - ----------- ---------------------- Section 14. Notices.....................................................................5 - ----------- ------- Section 15. Governing Law; Consent to Jurisdiction......................................6 - ----------- -------------------------------------- Section 16. Waiver of Jury Trial........................................................6 - ----------- -------------------- Section 17. Miscellaneous...............................................................6 - ----------- -------------
i Guaranty, dated as of April 1, 2002 ("Guaranty"), by Medallion Funding Chicago Corp., a Delaware 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 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 Guarantor is a wholly-owned subsidiary of the Borrower, the success of which may impact the success of the Guarantor; 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 Third Amendment to the Note Agreements 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: 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 or 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. 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 Section 362(a) of the Federal Bankruptcy Code and the operation of Section.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 1. Intercreditor Agreement. The Noteholders acknowledge and agree that this Guaranty granted for the benefit of the Noteholders, shall constitute "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. 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 Section 4 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 interests shall be reduced to such maximum permitted amount. 2 Waivers by Guarantor; Noteholders' 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 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. 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, all such amounts otherwise subject to acceleration under the terms of the Note Agreements, the other Note 3 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 2. Subrogation; Subordination. 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. 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. Provisions Supplemental. The provisions of this Section.7 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. 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. 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 Noteholders 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 4 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. Release. Notwithstanding any provision of this Guaranty to the contrary, this Guaranty shall not be released without the prior written consent of the Required Holders. 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 Section 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 Sections.5 and 7, 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. 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 Section 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). 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 right hereunder preclude any other or further exercise thereof or the exercise of any other right. 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 5 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. 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 14. 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. 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 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.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. [Remainder of page intentionally left blank] 6 In Witness Whereof, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Medallion Funding Chicago Corp. By: /s/ Alvin Murstein ------------------------------------------ Alvin. Murstein Chairman & Chief Executive Officer By: /s/ James E. Jack ------------------------------------------ James. E. Jack Chief Financial Officer Address: EX-10.84 21 dex1084.txt STOCK PLEDGE AGREEMENT, DATED AS OF APRIL 1, 2002 Exhibit 10.84 STOCK PLEDGE AGREEMENT ---------------------- DATED as of April 1, 2002 between MEDALLION FUNDING CORP. and FLEET NATIONAL BANK, as Collateral Agent and secured party, for the benefit 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 -----------------
Page ---- 1. Pledge of Stock, etc.....................................................................................1 --------------------- 1.1 Pledge of Stock.................................................................................1 --------------- 1.2 Intercreditor Agreement.........................................................................1 ----------------------- 1.3 Additional Stock................................................................................1 ---------------- 1.4 Pledge of Cash Collateral Account...............................................................2 --------------------------------- 2. Definitions..............................................................................................2 ----------- 3. Security for Obligations.................................................................................2 ------------------------ 4. Liquidation, Recapitalization, etc.......................................................................3 ---------------------------------- 4.1 Distributions Paid to Collateral Agent..........................................................3 -------------------------------------- 4.2 Cash Collateral Account.........................................................................3 ----------------------- 4.3 Company's Rights to Cash Collateral, etc........................................................3 ---------------------------------------- 5. Warranty of Title; Authority.............................................................................3 ---------------------------- 6. Dividends, Voting, etc., Prior to Maturity...............................................................4 ------------------------------------------ 7. Remedies.................................................................................................4 -------- 7.1 In General......................................................................................4 ---------- 7.2 Sale of Stock Collateral........................................................................5 ------------------------ 7.3 Registration of Stock...........................................................................7 --------------------- 7.4 Private Sales...................................................................................7 ------------- 7.5 Company's Agreements, etc.......................................................................8 ------------------------- 7.6 Waiver by Collateral Agent or Noteholders.......................................................8 ----------------------------------------- 8. Release of Collateral; Subordination of Lien............................................................8 --------------------------------------------- 9. Marshalling; Obligations Secured by Property Other Than Stock Collateral.................................9 ------------------------------------------------------------------------ 10. Company's Obligations Not Affected.......................................................................9 ---------------------------------- 11. Transfer, etc., by Company...............................................................................9 -------------------------- 12. Further Assurances.......................................................................................9 ------------------ 13. Collateral Agent's Exoneration..........................................................................10 ------------------------------ 14. Indemnity...............................................................................................11 --------- 15. Collateral Agent May Perform; Actions of Collateral Agent...............................................11 --------------------------------------------------------- 16. Collateral Agent's Duties...............................................................................11 -------------------------
17. Resignation of Collateral Agent; Successor Collateral Agent.............................................12 ----------------------------------------------------------- 18. No Waiver, etc..........................................................................................12 -------------- 19. Notice, etc.............................................................................................13 ----------- 20. Termination.............................................................................................13 ----------- 21. Overdue Amounts.........................................................................................13 --------------- 22. Governing Law; Consent to Jurisdiction..................................................................13 -------------------------------------- 23. Waiver of Jury Trial....................................................................................13 -------------------- 24. Miscellaneous...........................................................................................13 -------------
STOCK PLEDGE AGREEMENT ---------------------- This STOCK PLEDGE AGREEMENT is made as of April 1, 2002, by and between MEDALLION FUNDING CORP., a New York corporation (the "Company"), and FLEET NATIONAL BANK, a national banking association, as collateral agent (hereinafter in such capacity, the "Collateral Agent") for the holders of the Notes from time to time (hereinafter, collectively, the "Noteholders") pursuant to those certain Note Purchase Agreements each dated as of June 1, 1999 (as amended and in effect from time to time, the "Note Agreements"), among Medallion Funding Corp. and the Noteholders. WHEREAS, the Company is the direct legal and beneficial owner of all of the issued and outstanding shares of each class of the capital stock of the corporation described on Annex A (the "Subsidiary"); ----- - WHEREAS, it is a condition to the Third Amendment (as defined in the Note Agreements) that the Company execute and deliver to the Collateral Agent, for the benefit of the Noteholders and the Collateral Agent, a pledge agreement in substantially the form hereof; WHEREAS, the Company wishes to grant pledges and security interests in favor of the Collateral Agent, for the benefit of the Noteholders, as herein provided; NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Pledge of Stock, etc. -------------------- Pledge of Stock. The Company hereby pledges, assigns, grants a security interest - --------------- in, and delivers to the Collateral Agent, for the benefit of the Noteholders, all of the shares of capital stock of the Subsidiary of every class, as more fully described on Annex A hereto, to be held by the Collateral Agent, for the ----- - benefit of the Noteholders, subject to the terms and conditions hereinafter set forth. The certificates for such shares, accompanied by undated stock powers or other appropriate instruments of assignment thereof duly executed in blank by the Company, have been delivered to the Collateral Agent. Intercreditor Agreement. The Collateral Agent, on behalf of the Noteholders, - ----------------------- acknowledges and agrees that the Stock Collateral granted to the Collateral Agent for the benefit of the Noteholders pursuant to this Agreement, shall constitute "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. Additional Stock. In case the Company shall acquire any additional shares of the - ---------------- capital stock of the Subsidiary or corporation which is the successor of the Subsidiary, or any securities exchangeable for or convertible into shares of such capital stock of any class of the Subsidiary, by purchase, stock dividend, stock split or otherwise, then the Company shall forthwith deliver to and pledge such shares or other securities to the Collateral Agent, for the benefit of the Noteholders, under this Agreement and shall deliver to the Collateral Agent forthwith any certificates therefor, accompanied by undated stock powers or other appropriate instruments of assignment duly executed by the Company in blank. The Company agrees that the Collateral Agent may from time to time attach as Annex A hereto an updated list ----- of the shares of capital stock or securities at the time pledged with the Collateral Agent hereunder. Pledge of Cash Collateral Account. The Company also hereby pledges, assigns, - --------------------------------- grants a security interest in, and delivers to the Collateral Agent, for the benefit of the Noteholders, the Cash Collateral Account and all of the Cash Collateral as such terms are hereinafter defined. Definitions. The term "Obligations" shall have the meaning provided therefor in - ----------- the Company Security Agreement (as defined in the Note Agreements); all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Note Agreements. Terms used herein and not defined in the Note Agreements or otherwise defined herein that are defined in the Note Agreements have such defined meanings herein, unless the context otherwise indicated or requires, and the following terms shall have the following meanings: Cash Collateral. See Section 4. --------------- Cash Collateral Account. See Section 4. ----------------------- Notes. As defined in the Note Agreements. ----- Stock. The shares of stock described in Annex A attached hereto and ----- ----- - any additional shares of stock at the time pledged with the Collateral Agent hereunder. Stock Collateral. The property at any time pledged to the Collateral ---------------- Agent hereunder (whether described herein or not) and all income therefrom, increases therein and proceeds thereof, including without limitation that included in Cash Collateral, but excluding from the definition of "Stock Collateral" any income, increases or proceeds received by the Company to the extent expressly permitted by Section 6. Time Deposits. See Section 4. ------------- Security for Obligations. This Agreement and the security interest in and pledge - ------------------------ of the Stock Collateral hereunder are made with and granted to the Collateral Agent, for the benefit of the Noteholders, as security for the payment and performance in full of all the Obligations. 2. Liquidation, Recapitalization, etc. ---------------------------------- Distributions Paid to Collateral Agent. Any sums or other property paid or - -------------------------------------- distributed upon or with respect to any of the Stock, whether by dividend or redemption or upon the liquidation or dissolution of the issuer thereof or otherwise, shall, except to the limited extent provided in Section 6, be paid over and delivered to the Collateral Agent to be held by the Collateral Agent, for the benefit of the Noteholders, as security for the payment and performance in full of all of the Obligations. In case, pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, any distribution of capital shall be made on or in respect of any of the Stock or any property shall be distributed upon or with respect to any of the Stock, the property so distributed shall be delivered to the Collateral Agent, for the benefit of the Noteholders, to be held by it as security for the Obligations. Except to the limited 2 extent provided in Section 6, all sums of money and property paid or distributed in respect of the Stock, whether as a dividend or upon such a liquidation, dissolution, recapitalization or reclassification or otherwise, that are received by the Company shall, until paid or delivered to the Collateral Agent, be held in trust for the Collateral Agent, for the benefit of the Noteholders, as security for the payment and performance in full of all of the Obligations. Cash Collateral Account. All sums of money that are delivered to the Collateral - ----------------------- Agent pursuant to this Section 4 shall be deposited into an interest bearing account with the Collateral Agent (the "Cash Collateral Account"). Some or all of the funds from time to time in the Cash Collateral Account may be invested in time deposits, including, without limitation, certificates of deposit issued by the Collateral Agent (such certificates of deposit or other time deposits being hereinafter referred to, collectively, as "Time Deposits"), that are satisfactory to the Collateral Agent after consultation with the Company, provided, that, in each such case, arrangements satisfactory to the Collateral - -------- Agent are made and are in place to perfect and to insure the first priority of the Collateral Agent's security interest therein. Interest earned on the Cash Collateral Account and on the Time Deposits, and the principal of the Time Deposits at maturity that is not invested in new Time Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral Account, all sums from time to time standing to the credit of the Cash Collateral Account, any and all Time Deposits, any and all instruments or other writings evidencing Time Deposits and any and all proceeds or any thereof are hereinafter referred to as the "Cash Collateral." Company's Rights to Cash Collateral, etc. Except as otherwise expressly provided - ---------------------------------------- in Section 15, the Company shall have no right to withdraw sums from the Cash Collateral Account, to receive any of the Cash Collateral or to require the Collateral Agent to part with the Collateral Agent's possession of any instruments or other writings evidencing any Time Deposits. Warranty of Title; Authority. The Company hereby represents and warrants that: - ---------------------------- (i) the Company has good and marketable title to, and is the sole record and beneficial owner of, the Stock described in Section 1, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances except the pledge and security interest created by this Agreement and Permitted Liens, (ii) all of the Stock described in Section 1 is validly issued, fully paid and non-assessable, (iii) the Company has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to pledge and grant a security interest in all of the Stock Collateral pursuant to this Agreement, and the execution, delivery and performance hereof and the pledge of and granting of a security interest in the Stock Collateral hereunder have been duly authorized by all necessary corporate or other action and do not contravene any law, rule or regulation or any provision of the Company's charter documents or by-laws or of any judgment, decree or order of any tribunal or of any agreement or instrument to which the Company is a party or by which it or any of its property is bound or affected or constitute a default thereunder, and (iv) the information set forth in Annex A hereto relating to the Stock is true, ----- - correct and complete in all respects. The Company covenants that it will defend the rights of the Noteholders and security interest of the Collateral Agent, for the benefit of the Noteholders, in such Stock against the claims and demands of all other persons whomsoever. The Company further covenants that it will have the like title to and right to pledge and grant a security interest in the Stock Collateral hereafter pledged or in which a security interest is 3 granted to the Collateral Agent hereunder and will likewise defend the rights, pledge and security interest thereof and therein of the Noteholders. Dividends, Voting, etc., Prior to Maturity. So long as no Default or Event of - ------------------------------------------ Default shall have occurred and be continuing, the Company shall be entitled to receive all cash dividends paid in respect of the Stock, to vote the Stock and to give consents, waivers and ratifications in respect of the Stock; provided, -------- however, that no vote shall be cast or consent, waiver or ratification given by - ------- the Company if the effect thereof would in the reasonable judgment of the Required Holders impair any of the Stock Collateral or be inconsistent with or result in any violation of any of the provisions of the Loan Agreement or any of the other Loan Documents. All such rights of the Company to receive cash dividends shall cease in case a Default or an Event of Default shall have occurred and be continuing. All such rights of the Company to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Collateral Agent's option, as evidenced by the Collateral Agent's notifying the Company of such election, cease in case a Default or an Event of Default shall have occurred and be continuing. 3. Remedies. -------- In General. If a Default or an Event of Default shall have occurred and be - ---------- continuing, the Collateral Agent shall thereafter have the following rights and remedies (to the extent permitted by applicable law) in addition to the rights and remedies of a secured party under the Uniform Commercial Code of the State of New York (the "New York UCC"), all such rights and remedies being cumulative, not exclusive, and enforceable alternatively, successively or concurrently, at such time or times as the Collateral Agent deems expedient: (a) if the Collateral Agent so elects and gives notice of such election to the Company, the Collateral Agent may vote any or all shares of the Stock (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) for any lawful purpose, including, without limitation, if the Collateral Agent so elects, for the liquidation of the assets of the issuer thereof, and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner thereof (the Company hereby irrevocably constituting and appointing the Collateral Agent the proxy and attorney-in-fact of the Company, with full power of substitution, to do so); (b) the Collateral Agent may demand, sue for, collect or make any compromise or settlement the Collateral Agent deems suitable in respect of any Stock Collateral; (c) the Collateral Agent may sell, resell, assign and deliver, or otherwise dispose of any or all of the Stock Collateral, for cash or credit or both and upon such terms at such place or places, at such time or times and to such entities or other persons as the Collateral Agent thinks expedient, all without demand for performance by the Company or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by law; (d) the Collateral Agent may cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees; and 4 (e) the Collateral Agent may set off against the Obligations any and all sums deposited with it or held by it, including without limitation, any sums standing to the credit of the Cash Collateral Account and any Time Deposits issued by the Collateral Agent. (f) Each of the Noteholders acknowledges and agrees that (i) it shall only have recourse to the Collateral through the Collateral Agent and that it shall have no independent recourse to the Collateral and (ii) the Collateral Agent shall have no obligation to take any action, or refrain from taking any action, except upon instructions from the Required Holders in accordance with the provisions hereunder. Sale of Stock Collateral. In the event of any disposition of the Stock - ------------------------ Collateral as provided in clause (c) of Section 7.1, the Collateral Agent shall give to the Company at least five Business Days prior written notice of the time and place of any public sale of the Stock Collateral or of the time after which any private sale or any other intended disposition is to be made. The Company hereby acknowledges that five Business Days prior written notice of such sale or sales shall be reasonable notice. The Collateral Agent may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereunder imposed by statute, rule of law or otherwise (all of which are hereby expressly waived by the Company, to the fullest extent permitted by law). The Collateral Agent may buy any part or all of the Stock Collateral at any public sale and if any part or all of the Stock Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely-distributed standard price quotations, the Collateral Agent may buy at private sale and may make payments thereof by any means. The Collateral Agent may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling and the like, to reasonable attorneys' fees, travel and all other expenses which may be incurred by the Collateral Agent in attempting to collect the Obligations or to enforce this Agreement or in the prosecution or defense of any action or proceeding related to the subject matter of this Agreement, and then to the Obligations in accordance with this Section 7.2. The proceeds of any collection or sale of, or other realization upon, all or any part of the Stock Collateral shall be applied by the Collateral Agent, following application of such proceeds in accordance with the terms of Section 5 of the Intercreditor Agreement in the following order of priority: first, to payment of the expenses of sale or other realization, including reasonable compensation to the Collateral Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Collateral Agent in connection therewith, and any other unreimbursed expenses for which the Collateral Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations (after taking into account amounts not then due and payable), pro rata in accordance with the --- ---- respective outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations, to payment to the Company or its successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. 5 The Collateral Agent may make distributions hereunder in cash or in kind, but such distributions to the Noteholders shall in all events be made pro rata on the basis of the outstanding principal amount of the Obligations. Distributions made under clause "second" above may also be made in a combination of cash or property, but distributions to the Noteholders shall be made pro rata on the basis of the outstanding principal amount of the Obligations. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations, shall continue to be Obligations for which the Company or Funding remains liable. In making the determinations and allocations required by this Section 7.2 or otherwise by this Agreement, the Collateral Agent may rely upon information supplied by the Noteholders as to the amounts of the Obligations, or as to other matters (with each such matter being conclusively deemed to be proved or established by a certificate executed by an officer of such Person), and the Collateral Agent shall have no liability to any of the Noteholders for actions taken in reliance upon such information. All distributions made by the Collateral Agent pursuant to this Section 7.2 shall be final, and the Collateral Agent shall have no duty to inquire as to the application by the Noteholders of any amount distributed to them. However, if at any time the Collateral Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Collateral Agent may in its discretion, but shall not, subject to this Section 7.2, be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Noteholders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Collateral Agent hereunder or under any Security Document, the Collateral Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations, the Collateral Agent shall nonetheless apply the proceeds for the benefit of the Noteholders in the proportion and subject to the priorities of Section 7.2 hereof. Only after such applications, and after payment by the Collateral Agent of any amount required by Sections 9-615(a)(3) and 9-615(b) of the New York UCC, need the Collateral Agent account to the Company for any surplus. To the extent that any of the Obligations are to be paid or performed by a person other than the Company, the Company, to the extent permitted by law, waives and agrees not to assert any rights or privileges which it may have under Sections 9-210, 9-620, 9-621, 9-623, and 9-625 of the New York UCC. If any Noteholder acquires custody, control or possession of any Stock Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Noteholder shall promptly cause such Stock Collateral or proceeds to be delivered to or put in the custody, possession or control of the Collateral Agent or, if the Collateral Agent shall so designate, an agent of the Collateral Agent (which agent may be a branch or affiliate of the Collateral Agent or any Noteholder in the same form of payment received, with appropriate endorsements, in the country in which such Stock Collateral is held for distribution in accordance with the provisions of this Section. Until such time as the provisions of the immediately preceding sentence have 6 been complied with, such Noteholder shall be deemed to hold such Stock Collateral and proceeds in trust for the Collateral Agent. Registration of Stock. If the Collateral Agent shall determine to exercise its - --------------------- right to sell any or all of the Stock pursuant to this Section 7, and if in the opinion of counsel for the Collateral Agent it is necessary, or if in the reasonable opinion of the Collateral Agent it is advisable, to have the Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Collateral Agent, advisable to register such Stock under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for a period of 9 months from the date such registration statement became effective, and to make all amendments thereto or to the related prospectus or both that, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Collateral Agent shall designate and to cause such issuer to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. Private Sales. The Company recognizes that the Collateral Agent may be unable to - ------------- effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act, federal banking laws, and other applicable laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Company agrees that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act, or such other federal banking or other applicable laws, even if the issuer would agree to do so. Subject to the foregoing, the Collateral Agent agrees that any sale of the Stock shall be made in a commercially reasonable manner, and the Company agrees to use its best efforts to cause the issuer of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Company's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Collateral Agent, advisable to exempt such Stock from registration under the provisions of the Securities Act, and to make all amendments to such instruments and documents which, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Company further agrees to use its best efforts to cause such issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Collateral Agent shall designate and, if required, to cause such issuer to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. 7 Company's Agreements, etc. The Company further agrees to do or cause to be done - ------------------------- all such other acts and things as may be reasonably necessary to make any sales of any portion or all of the Stock pursuant to this Section 7 valid and binding and in compliance with any and all applicable laws (including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Company's expense. The Company further agrees that a breach of any of the covenants contained in this Section 7 will cause irreparable injury to the Collateral Agent and the Noteholders, that the Collateral Agent and the Noteholders have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 7 shall be specifically enforceable against the Company by the Collateral Agent and the Company hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. Waiver by Collateral Agent or Noteholders. The Collateral Agent's or any - ----------------------------------------- Noteholder's failure at any time or times hereafter to require strict performance by the Company or the Subsidiary of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Note Documents shall not waive, affect or diminish any right of the Collateral Agent or any Noteholder at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement or any of the Note Documents, and any waiver of any Default or Event of Default shall not waive or affect any other Default or Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any other Note Documents shall be deemed to have been waived by any act or knowledge of the Collateral Agent or any Noteholder, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Collateral Agent or such Noteholder and directed to the Company or the Subsidiary specifying such waiver. Release of Collateral; Subordination of Lien. To the extent permitted by the - -------------------------------------------- Note Agreements and the Intercreditor Agreement, the Collateral Agent, for the benefit of the Noteholders, is hereby authorized, upon receipt of a request from either the Company or the Subsidiary, to release any Stock Collateral and to provide such releases with respect to any Stock Collateral in connection with any sale, exchange or other disposition thereof permitted under the Note Agreements so long as (i) the Collateral Agent obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Holders, the Collateral Agent may release any Stock Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Note Agreements, the Collateral Agent shall, on the written instructions of the Required Holders, subordinate by written instrument the lien on all or any portion of the Stock Collateral to any other lender extending to the Company or the Subsidiary indebtedness permitted by the terms of the Note Agreements. 8 Marshalling; Obligations Secured by Property Other Than Stock Collateral. None - ------------------------------------------------------------------------ of the Collateral Agent or any Noteholder shall be required to marshal any present or future collateral security for (including but not limited to this Agreement and the Stock Collateral), or other assurances of payment of, the Obligations, or to resort to such collateral security or other assurances of payment in any particular order. All of the Collateral Agent's rights hereunder and of the Noteholders in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, the Company hereby agrees that it will not invoke any law relating to the marshalling of collateral that might cause delay in or impede the enforcement of the Collateral Agent's rights under this Agreement or under any other instrument evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and to the extent that it lawfully may the Company hereby irrevocably waives the benefits of all such laws. To the extent that the Obligations are now or hereafter secured by property other than the Stock Collateral, or by a guarantee, endorsement or property of any other Person, then the Collateral Agent shall have the right to, and upon the direction of the Required Holders shall, proceed against such other property, guarantee or endorsement upon the occurrence of a Default and during the continuance of an Event of Default, and the Collateral Agent shall have the right, with the consent of the Required Holders, to determine which rights, security, liens, security interests or remedies the Collateral Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Collateral Agent's rights or any of the Noteholders' rights under the Obligations, this Agreement or any other Note Document. Company's Obligations Not Affected. The obligations of the Company hereunder - ---------------------------------- shall remain in full force and effect without regard to, and shall not be impaired by (i) any exercise or nonexercise, or any waiver, by the Collateral Agent or any Noteholder of any right, remedy, power or privilege under or in respect of any of the Obligations or any security therefor (including this Agreement); (ii) any amendment to or modification of the Note Agreements, the other Note Documents or any of the Obligations; (iii) any amendment to or modification of any instrument (other than this Agreement) securing any of the Obligations, including without limitation, any of the Security Documents; or (iv) the taking of additional security for, or any other assurances of payment of, any of the Obligations or the release or discharge or termination of any security or other assurances of payment or performance for any of the Obligations; whether or not the Company shall have notice or knowledge of any of the foregoing. Transfer, etc., by Company. Without the prior written consent of the Collateral - -------------------------- Agent, the Company will not sell, assign, transfer or otherwise dispose of, grant any option with respect to, or pledge or grant any security interest in or otherwise encumber or restrict any of the Stock Collateral or any interest therein, except for the pledge thereof and security interest therein provided for in this Agreement and in that certain Stock Pledge Agreement between the Company and Fleet National Bank, as Agent, pursuant to that certain Amended and Restated Loan Agreement dated as of December 24, 1991, as amended from time to time. Further Assurances. The Company will do all such acts, and will furnish to the - ------------------ Collateral Agent all such financing statements, certificates, legal opinions and other documents and will obtain all such governmental consents and corporate approvals and will do or cause to be done 9 all such other things as the Collateral Agent may reasonably request from time to time in order to give full effect to this Agreement and to secure the rights of the Noteholders hereunder, all without any cost or expense to the Collateral Agent or any Noteholder. If the Collateral Agent so elects, a photocopy of this Agreement may at any time and from time to time be filed by the Collateral Agent as a financing statement in any recording office in any jurisdiction. 4. Collateral Agent's Exoneration. ------------------------------ (a) Under no circumstances shall the Collateral Agent be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Stock Collateral of any nature or kind or any matter or proceedings arising out of or relating thereto, other than (i) to exercise reasonable care in the physical custody of the Stock Collateral and (ii) after a Default or an Event of Default shall have occurred and be continuing to act in a commercially reasonable manner. Neither the Collateral Agent nor any Noteholder shall be required to take any action of any kind to collect, preserve or protect its or the Company's rights in the Stock Collateral or against other parties thereto. The Collateral Agent's prior recourse to any part or all of the Stock Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of any of the Obligations. (b) If at any time or times hereafter the Collateral Agent employs counsel for advice with respect to this Agreement or any other Note Agreements, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any other Note Agreements (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or any other Note Agreements), or relating to any Stock Collateral; or to protect, take possession of, or liquidate any Stock Collateral, or to attempt to enforce any security interest or lien in any Stock Collateral, or to represent the Collateral Agent in any pending or threatened litigation with respect to the affairs of Funding in any way relating to any of the Stock Collateral or to the Obligations or to enforce any rights of the Collateral Agent or any Noteholder or liabilities of the Company, any Person to whom the Company has made a Loan, or any Person which may be obligated to the Collateral Agent or such Noteholder by virtue of this Agreement or any other Note Agreement, instrument or document now or hereafter delivered to the Collateral Agent or any Noteholder by or for the benefit of the Company, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations secured by the Stock Collateral. Indemnity. Each of the Noteholders severally agree (i) to reimburse the - --------- Collateral Agent, on demand, in the amount of its pro rata share, for any expenses referred to in this Section 14 which shall not have been reimbursed or paid by the Company or paid from the proceeds of Stock Collateral as provided herein and (ii) to indemnify and hold harmless the Collateral Agent and its directors, officers, employees and agents, on demand, in the amount of such pro --- rata share, from and against any and all liabilities, obligations, losses, - ---- damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this Section 14, to the extent the same shall not have been reimbursed by the Company or paid from the proceeds of Stock Collateral as provided herein; provided that no Noteholder shall be liable to the Collateral - -------- Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Collateral 10 Agent or any of its directors, officers, employees or agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this Section 14, pro rata shares at any time shall be determined based upon the outstanding principal amount of the Notes at the time such expenses were incurred. Collateral Agent May Perform; Actions of Collateral Agent. If the Company fails - --------------------------------------------------------- to perform any agreement contained herein, the Collateral Agent may (but shall not be required to) itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Company, together with interest thereon at the rate specified in the Note Agreements, and until so paid shall be deemed part of the Obligations. The Collateral Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Note Agreements and the other Note Documents, the Collateral Agent shall take any action under or with respect to this Agreement which is requested by the Required Holders and which is not inconsistent with or contrary to the provisions of this Agreement or the Note Documents. The Collateral Agent shall have the right to decline to follow any such direction if the Collateral Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Note Documents, may not lawfully be taken or would involve it in personal liability, and the Collateral Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement the Collateral Agent may rely on any such direction given to it by the Required Holders and shall be fully protected, and shall under no circumstances (absent the gross negligence or willful misconduct of the Collateral Agent) be liable to the Company, any Noteholder or any other Person for taking or refraining from taking action in accordance therewith. The Collateral Agent may consult with counsel and shall be fully protected in taking any action hereunder in accordance with any advice of such counsel. The Collateral Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Stock Collateral from any court of competent jurisdiction. Collateral Agent's Duties. The powers conferred on the Collateral Agent - ------------------------- hereunder are solely to protect its interest and the interests of the Noteholders in the Stock Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Stock Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Collateral Agent shall have no duty as to any Stock Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Stock Collateral. The Collateral Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Collateral Agent makes no representation as to the value or condition of the Stock Collateral or any part thereof, as to the title of the Company to the Stock Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Collateral Agent shall incur no liability or responsibility in respect of any such matters. The Collateral Agent shall not be responsible for insuring the Stock Collateral, for the payment of taxes, charges, assessments or liens upon the Stock Collateral or otherwise as to the maintenance of the Stock Collateral. 11 The Collateral Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Collateral Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such Person may be liable due to its willful misconduct or gross negligence. Neither the Collateral Agent nor any officer, agent or representative thereof shall be personally liable for any action taken by any such Person in accordance with any notice given by the Required Holders pursuant to the terms of this Agreement even if, at the time such action is taken by any such Person, the Required Holders are not entitled to give such notice, except where the account officer of the Collateral Agent active upon the Company's accounts has actual knowledge that such Required Holders are not entitled to give such notice. 5. Resignation of Collateral Agent; Successor Collateral Agent. ----------------------------------------------------------- (a) The Collateral Agent may at any time resign by giving thirty (30) days prior written notice thereof to each Noteholder, the Company and the Subsidiary, provided that no resignation shall be effective until a successor -------- for the Collateral Agent is appointed. Upon such resignation, the Required Holders shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Collateral Agent may, on behalf of the Required Holders, appoint a successor Collateral Agent, which shall be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent. (b) In the event a successor agent is appointed pursuant to the provisions of the Note Agreements, such successor agent shall succeed to the rights, powers and duties of the Collateral Agent hereunder, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to the Note Agreements. Such former Agent agrees to take such actions as are reasonably necessary to effectuate the transfer of its rights, powers and duties to such successor agent. No Waiver, etc. Neither this Agreement nor any term hereof may be changed, - -------------- waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so modified or limited, and executed by the Collateral Agent, with the consent of the Required Holders (or, if required by the Note Agreements, with the consent of all of the Noteholders), and the Company. No act, failure or delay by the Collateral Agent shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver 12 by the Collateral Agent of any default or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. The Company hereby waives presentment, notice of dishonor and protest of all instruments, included in or evidencing any of the Obligations or the Stock Collateral, and any and all other notices and demands whatsoever (except as expressly provided herein or in the Note Agreements). Notice, etc. All notices, requests and other communications hereunder shall be - ----------- made in the manner set forth in Section 18 of the Note Agreements. Termination. Upon final payment and performance in full of the Obligations, this - ----------- Agreement shall terminate and the Collateral Agent shall, at the Company's request and expense, return such Stock Collateral in the possession or control of the Collateral Agent as has not theretofore been disposed of pursuant to the provisions hereof, together with any moneys and other property at the time held by the Collateral Agent hereunder. Overdue Amounts. Until paid, all amounts due and payable by the Company - --------------- hereunder shall be a debt secured by the Stock Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Loan Agreement. Governing Law; Consent to Jurisdiction. THIS AGREEMENT 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 Company agrees that any suit for the enforcement of this Agreement may be brought in the courts of the State of New York or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Company by mail at the address specified in Section 18 of the Note Agreements. The Company 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 is brought in an inconvenient court. Waiver of Jury Trial. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT - -------------------- TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company 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 Company (i) certifies that neither the Collateral Agent or any Noteholder nor any representative, agent or attorney of the Collateral Agent , or any Noteholder has represented, expressly or otherwise, that the Collateral Agent or 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 to which the Collateral Agent is a party, the Collateral Agent and the Noteholders are relying upon, among other things, the waivers and certifications contained in this Section 23. Miscellaneous. The headings of each section of this Agreement are for - ------------- convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations 13 hereunder shall be binding upon the Company and its respective successors and assigns, and shall inure to the benefit of the Collateral Agent and the Noteholders and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall be in no way affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Company may not assign any of its obligations hereunder without the prior written consent of the Collateral Agent and the Noteholders (and any such assignment without such consent shall be null and void). The Company acknowledges receipt of a copy of this Agreement. [Remainder of this page intentionally left blank] 14 IN WITNESS WHEREOF, intending to be legally bound, the Company and the Collateral Agent have caused this Agreement to be executed as of the date first above written. MEDALLION FUNDING CORP. By: /s/ Alvin Murstein ------------------------------ Alvin Murstein President By: /s/ James E. Jack ------------------------------ James E. Jack Executive Vice President & Chief Financial Officer FLEET NATIONAL BANK, as Collateral Agent By: /s/ Jeffrey H. Robinson ------------------------------ Name: Jeffrey H. Robinson Title: Senior Vice President The undersigned Subsidiary hereby joins in the above Agreement for the sole purpose of consenting to and being bound by the provisions of Sections 4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate fully and in good faith with the Collateral Agent and the Company in carrying out such provisions. MEDALLION FUNDING CHICAGO CORP. By: /s/ Alvin Murstein ------------------------------ Alvin Murstein Chairman & Chief Executive Officer By: /s/ James E. Jack ------------------------------ James E. Jack Chief Financial Officer ANNEX A TO PLEDGE AGREEMENT --------------------------- The issuer has no authorized, issued or outstanding shares of its capital stock of any class or any commitments to issue any shares of its capital stock of any class or any securities convertible into or exchangeable for any shares of its capital stock of any class except as otherwise stated in this Annex A. - ----- -
Number of Number of Number of Par or Record Class of Authorized Issued Outstanding Liquidation Issuer Owner Shares Shares Shares Shares Value - --------- --------- -------- ---------- --------- ----------- ----------- Medallion Medallion Common 1000 1000 1000 $0.01 Funding Funding Chicago Corp. Corp.
EX-10.85 22 dex1085.txt SECURITY AGREEMENT, DATED AS OF APRIL 1, 2002 Exhibit 10.85 SECURITY AGREEMENT among MEDALLION FUNDING CHICAGO CORP., as debtor, and FLEET NATIONAL BANK (f/k/a, Fleet Noteholder, National Association) as Collateral Agent and secured party, for the benefit of THE TRAVELERS INSURANCE COMPANY FIRST CITICORP LIFE INSURANCE COMPANY CITICORP LIFE INSURANCE COMPANY UNITED OF OMAHA LIFE INSURANCE COMPANY COMPANION LIFE INSURANCE COMPANY ------------------------------- dated as of April 1, 2002 ------------------------------- SECURITY AGREEMENT This SECURITY AGREEMENT, dated as of April 1, 2002, is between MEDALLION FUNDING CHICAGO CORP., a Delaware corporation (the "Company"), and FLEET ------- NATIONAL BANK (f/k/a Fleet Noteholder, National Association), a national banking association, as collateral agent (the "Collateral Agent") for the holders of the ---------------- Notes (as hereinafter defined) from time to time outstanding pursuant to the Note Purchase Agreements (hereinafter defined) (collectively, the "Noteholders" ----------- and individually, a "Noteholder"). ---------- RECITALS WHEREAS, the Noteholders have entered into the separate Note Purchase Agreements, each dated as of June 1, 1999 (as the same may have been amended, modified, supplemented or restated prior to the effectiveness hereof, the "Note ---- Purchase Agreements"), with Medallion Funding Corp., a New York corporation - ------------------- ("Funding") under and pursuant to which Funding issued and sold to the ------- Noteholders its (i) 7.20% Senior Secured Notes, Series A, due June 1, 2004 in the aggregate principal amount of $22,500,000 (the "Series A Notes") and (ii) -------------- 7.20% Senior Secured Notes, Series B, due September 1, 2004 in the aggregate principal amount of $22,500,000 (the "Series B Notes", and together with the -------------- Series A Notes, the "Notes"). ----- WHEREAS, in connection with the Note Purchase Agreements, Funding entered into a Security Agreement, dated as of June 1, 1999; WHEREAS, the Company is a wholly-owned subsidiary of Funding; WHEREAS, it is a condition to the effectiveness of the Third Amendment (as defined in the Note Purchase Agreements) that the Company guaranty the Obligations (as hereinafter defined) and, in order to secure such obligations pursuant to the Guaranty of even date herewith (the "Guaranty") issued by the -------- Company in favor of the Noteholders, execute and deliver to the Collateral Agent, for the benefit of the Noteholders, a security agreement in substantially the form hereof. NOW, THEREFORE, in consideration of the willingness of the Noteholders to amend the Note Purchase Agreements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Collateral Agent hereby covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Defined Terms. Capitalized terms defined in the foregoing caption and recitals shall have the respective meanings ascribed thereto. Capitalized terms defined in the Note Purchase Agreements and not otherwise defined in this Agreement shall have the meanings ascribed to those terms in the Note Purchase Agreements. In addition, as used herein, the following terms shall have the following meanings: "Accounts" shall have the meaning assigned to it in Section 9-102(2) -------- of the UCC. "Books and Records" shall mean all books, records, computer files and ----------------- other Information relating to any of the Collateral. "Chattel Paper" shall have the meaning assigned to it in Section ------------- 9-102(11) of the UCC. "Collateral" shall mean all assets, including all of the following ---------- property and to the extent otherwise not included, all other personal and fixture property of every kind and nature, now owned or at any time hereafter acquired by the Company or in which the Company now has or at any time in the future may acquire any right, title or interest: (a) all Loans; (b) all property and rights, including, but not limited to, Underlying Collateral, which now or hereafter secure any of the Loans; (c) all Books and Records; (d) all amounts deposited in any Collateral Account; (e) all Contracts; (f) all rights and remedies of the Company with respect to, or in connection with, any contract, security interest, guaranty or other document, instrument or agreement relating to or affecting any Loans or any Underlying Collateral; (g) all General Intangibles; (h) all Instruments; (i) all Chattel Paper; (j) all Equipment; (k) all Inventory; (l) all Investments; (m) all Investment Property; (n) all Accounts; 2 (o) all Receivables; (p) all Documents; (q) all property and rights, including, but not limited to, items described in clauses (b) through (o) hereof, repossessed, or otherwise acquired in connection with any Loans or the exercise by the Company of any rights of a secured party under or with respect to any of the Loans or this Agreement or arising out of the sale or disposition of any Loans, any other Collateral, or in connection with the sale of any repossessed property; (r) all parts, accessions, accessories, goods, appurtenant or related to any of the foregoing, replacement parts, trade names, closes in action, now or hereafter affixed thereto, arising therefrom, used in connection therewith, or related to the use, possession or operation thereof; (s) all cash and Short-Term Investments; (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; (v) commercial tort claims (the Collateral Agent acknowledges that the attachment of its security interest in any commercial tort claim as original collateral is subject to the Company's compliance with Section 2.4(d) hereof); and (w) to the extent not otherwise included, all Proceeds, products, substitutions and replacements of any and all of the foregoing. "Collateral Account" shall mean the one or more accounts of the ------------------ Company maintained with the Collateral Agent and containing such reasonable terms as shall be agreed to by the Collateral Agent. "Contracts" shall mean all contracts and agreements, including, but --------- not limited to, loan agreements, security agreements, guaranties, intercreditor agreements, office leases, lease agreements for mobile goods (as defined in the UCC) (whether or not covered by a certificate of title), indemnity agreements, license agreements, rental agreements and all other contracts and agreements of every kind and nature whatsoever. "Depository Accounts" shall mean accounts of the Company containing ------------------- any deposits or other sums credited to the Company, whether in regular or special depository accounts or otherwise. "Documents" shall have the meaning assigned to it in Section 9-102(30) --------- of the UCC. 3 "Equipment" shall mean all machinery, equipment, fixtures, vehicles, --------- office equipment, furniture, furnishings, inventories, supplies, computer equipment and all other equipment whatsoever, wherever located, together with all attachments, components, parts, equipment and accessories installed therein or affixed thereto, including, but not limited to, all equipment as defined in Section 9-102(33) of the UCC and all products, profits, rents and proceeds of any of the foregoing; all whether now owned or hereafter created or acquired. "General Intangibles" shall have the meaning assigned to it in Section ------------------- 9-102(42) of the UCC and shall include, but not be limited to, all interests in and to Permits and Licenses, Medallion Rights, tax refund claims, patents, patent applications, rights to sue and recover for past infringement of patents, trademarks, tradenames, trademark applications, copyrights, copyright applications, trade secrets, licenses and know-how. "Information" shall mean books, records, delivery receipts, copies of ----------- checks and stubs, security documents, division of interest files, bank reconciliation statements, remittances, revenue accounting records, invoices, leases, licenses, authorizations for expenditures, contracts and such other documents, and all other recorded information and data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics. "Instruments" shall have the meaning assigned to it in Section ----------- 9-102(47) of the UCC. "Inventory" shall mean all inventory, goods, raw materials, components --------- and other personal property, wherever located, including, but not limited to, all inventory as defined in Section 9-102(48) of the UCC. "Investment" in any Person shall mean any loan, advance, or extension ---------- of credit to or for the account of; any guaranty, endorsement or other direct or indirect contingent liability in connection with the obligations, Capital Stock or dividends of; any ownership, purchase or acquisition of any assets, business, Capital Stock, obligations or securities of; or any other interest in or capital contribution to; such Person. "Investment Property" shall have the meaning assigned to it in Section ------------------- 9-102(49) of the UCC, including, without limitation, securities as defined in the UCC. "Law" shall mean any law, regulation, guideline, treaty or directive --- or condition or interpretation thereof, including without limitation, any request, guideline or policy, whether or not having the force of law. "Loan" shall mean any loan, advance or extension of credit made in the ---- ordinary course of business by the Company to or for the account of any client or customer of the Company. Any loan, advance or extension of credit made at a different point in time shall be deemed to be a separate and distinct Loan. 4 "Medallion" shall mean the plate which displays the license number of --------- a licensed Taxicab on the outside of the vehicle and which is issued by the New York City Taxi and Limousine Commission or by any other Governmental Authority for a jurisdiction other than New York City with the authority to issue licenses for the operation of Taxicabs. "Medallion Rights" shall mean (a) all license, operating and/or ---------------- subscription rights to Taxicab Medallion(s), and all license, operating and/or subscription rights evidenced by such Medallion(s) and (b) all renewals thereof. "Note Documents" shall mean and collectively refer to the Note -------------- Documents (as defined in the Note Purchase Agreements) and all other agreements, instruments and documents, including, without limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust account agreements and all other written matters whether heretofore, now or hereafter executed by or on behalf of either the Borrower or the Company and/or delivered to the Collateral Agent or the Noteholders, with respect to this Agreement, or the transactions contemplated by this Agreement. "Obligations" shall mean all indebtedness, obligations, and ----------- liabilities of the Company under the Note Documents, including, without limitation, under or in respect of the Company's guaranty of the Obligations pursuant to the Guaranty. Without limiting the generality of the foregoing, the Obligations shall include the liability of Funding or the Company to any Noteholder for all balances owing to any Noteholder in any account maintained on such Noteholder's books under the Note Purchase Agreements or under any other agreement or arrangement now or hereafter entered into between Funding or the Company and the Collateral Agent or any Noteholder in connection therewith, and, in connection with this Agreement or the Note Purchase Agreements, (i) indebtedness owing by Funding or the Company to the Collateral Agent or any Noteholder, (ii) the liability of Funding or the Company 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 Funding or the Company to the Collateral Agent or any Noteholder under any instrument of guaranty or 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 Funding or the Company, including without limitation, any accommodation extended to Funding or the Company with respect to letters of credit, acceptance of drafts, or endorsement of notes or other instruments by the Collateral Agent or such Noteholder for the account and benefit of Funding or the Company. The Obligations shall also include interest, premium (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 Funding or the Company and due from Funding or the Company under this Agreement, the Note Purchase Agreements or under any other 5 agreement or arrangement which may be now or hereafter entered into between Funding or the Company and the Collateral Agent or the Noteholders and shall also include (i) any obligation or liability in respect of any breach of any representation or warranty, and (ii) all post-petition interest and funding losses. "Other Agreements" shall mean collectively any of the Note Documents ---------------- other than this Agreement. "Percentage of the Obligations" shall mean with respect to any ----------------------------- Noteholder the percentage which is equal to the product of (x) 100 times (y) a fraction, the numerator of which is the total amount of Obligations owing to such Noteholder, as the case may be, at the time of computation and the denominator of which is the total amount of the Obligations as of such time. "Permits and Licenses" shall mean (a) all applicable authorizations, -------------------- consents, certificates, licenses, rights-of-way permits, approvals, waivers, exemptions, encroachment agreements, variances, franchises, permissions, and permits of any Governmental Authority or any other Person and all documents and applications filed in connection therewith, and (b) all renewals thereof. "Permitted Liens" is defined in the Note Purchase Agreements. --------------- "Proceeds" shall have the meaning assigned to it in Section 9-102(64) -------- of the UCC and shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty existing from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Real Property" shall mean real property of a Person or an ultimate ------------- beneficial owner of such Person or machinery or Equipment of such Person or beneficial owner forming a part of, or affixed to, such real property. "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. "Stock" shall mean the shares of Capital Stock owned by the Company ----- and any additional shares of Capital Stock of any Person or any securities exchangeable for or convertible into shares of such capital stock or other equity interests of any class acquired by the Company, by purchase, stock dividend, distribution of capital or otherwise, but shall not include any shares of Capital Stock or any other securities, the pledge of which is subject to the receipt of consents (including lender consents) as may 6 be required under the Note Documents unless and until such consents are obtained; provided that the Company shall have used its best efforts to obtain such consents. "Taxicab" shall mean a motor vehicle carrying passengers for hire, ------- duly licensed as a taxicab by the New York City Taxi and Limousine Commission, or any other Governmental Authority for a jurisdiction other than New York City, and permitted to accept hails from passengers in the street. "UCC" shall mean, with respect to any jurisdiction, the Uniform --- Commercial Code as then in effect in that jurisdiction. Unless the context otherwise requires, references to the UCC contained herein shall mean the Uniform Commercial Code as then in effect in the State of New York. "Underlying Collateral" shall mean all of the Company's rights with --------------------- respect to, or interest in, any and all present and future Medallion Rights, Equipment, Real Property, machinery, Inventory, Receivables, Accounts, future accounts, accounts receivable, contracts, contract rights, General Intangibles, books, desks, notes, bills, drafts, acceptances, choses in action, Chattel Paper, Instruments, Documents and other forms of obligations, and property, real, personal or mixed, tangible or intangible, at any time owing to or owned by any Person to whom the Company has made a Loan, or any guarantor of such Person. SECTION 1.2. Accounting Terms. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP. SECTION 1.3. Rules of Construction. (a) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders, and words importing the singular number shall mean and include the plural number and vice versa. (a) The terms "hereby," "hereto," "hereof," "herein," and "hereunder" and any similar words refer to this Agreement as a whole and not to any particular provisions of this Agreement. The term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of this Agreement, and "Article," "Section," "Schedule," "Exhibit" and like references are to this Agreement unless otherwise specified. (b) Any defined term that relates to a document shall include within its definition any amendments, modifications, renewals, restatements, extensions, supplements, or substitutions which may have been heretofore or may be hereafter executed in accordance with the terms thereof. (c) References in this Agreement to particular sections of the UCC or to any other legislation shall be deemed to refer also to any successor sections thereof or 7 other redesignations for codification purposes. Unless otherwise indicated, references in this Agreement to the UCC shall mean the UCC as in effect in the State of New York. (d) All terms used in this Agreement that are not capitalized shall have the meanings provided by the UCC as in effect in the State of New York to the extent the same are used or defined therein. ARTICLE II CREATION OF SECURITY INTEREST SECTION 2.1. Grant of Security Interest to Collateral Agent. To induce the Noteholders to amend the Note Documents and, as security for any and all Obligations of Funding, the Company hereby grants, pledges and assigns to the Collateral Agent for the ratable benefit of the Noteholders a continuing lien on and security interest in the Collateral, which shall be a first priority lien (except for the Permitted Liens entitled to priority under applicable law) and, in furtherance of such grant, the Company hereby assigns for security all of the Collateral to the Collateral Agent for the ratable benefit of the Noteholders. SECTION 2.2. Intercreditor Agreement. The Collateral Agent, on behalf of the Noteholders, acknowledges and agrees that the Collateral granted to the Collateral Agent for the benefit of the Noteholders pursuant to this Agreement, shall constitute "Collateral" as defined in the Intercreditor Agreement and shall be subject to the provisions of the Intercreditor Agreement for so long as the Intercreditor Agreement may be in effect. SECTION 2.3. Perfection. At any time or times the Company shall execute and deliver to the Collateral Agent, at the Collateral Agent's request, all assignments, certificates of title, conveyances, assignment statements, financing statements, renewal financing statements, security agreements, affidavits, mortgages, mortgage assignments, trust deeds, notices and all other agreements, instruments and documents that the Collateral Agent reasonably may request, in form satisfactory to the Collateral Agent, and shall take any and all other steps reasonably requested by the Collateral Agent, in order to perfect and maintain the security interests and liens granted herein, and to consummate fully all of the transactions contemplated under this Agreement and any Other Agreements. SECTION 2.4. Recording, Registering, Filing, Etc. At any time or times when the Collateral Agent reasonably deems it necessary, the Company will perform, or will cause to be performed, each of the following: (a) Record, register and file such notices, certificates of title, financing statements, mortgage assignments, trust deeds and other documents or instruments as may, from time to time, be requested by the Collateral Agent to carry out fully the intent of this Agreement, with such administrations or governmental agencies as may be necessary or advisable in order to perfect, establish, confirm, and maintain the security 8 interests and liens created hereunder, as legal, valid, and binding security interests and liens upon the Collateral; (b) Furnish to the Collateral Agent evidence of every such recording, registration and filing; (c) Execute and deliver or perform, or cause to be executed and delivered or performed, such further and other instruments or acts as the Collateral Agent reasonably determines are necessary or desirable to carry out fully the intent and purpose of this Agreement or to subject the Collateral to the security interest and lien created hereunder, including, without limitation, defending the title of the Company to the Collateral by means of negotiation with and, if necessary, appropriate legal proceedings against, each party claiming an interest therein contrary or adverse to the Company's title to same; (d) If the Company shall, now or at any time hereafter, hold or acquire a commercial tort claim, the Company shall immediately notify the Collateral Agent in a writing signed by the Company of the particulars thereof and grant to the Collateral 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 Collateral Agent; and (e) In case of certain revisions to Article 9 of the UCC described in Section 6.16 hereof, comply with all of the requirements of and its agreements contained within such Section 6.16. SECTION 2.5. Delivery of Documents. (a) As promptly as practicable after the date hereof (but in no event later than 10 Business Days after the date hereof), the Company shall deliver to the Collateral Agent all instruments evidencing all Loans (collectively, the "Collateral Notes") of the Company then ---------------- outstanding and if any such Loan is secured by Real Property, a Mortgage Assignment with respect to each such Loan. In addition, each time the Company shall make a new Loan, the Company shall immediately deliver to the Collateral Agent the Collateral Note evidencing such Loan and if such Loan is secured by Real Property, a Mortgage Assignment with respect to each Loan. The Collateral Agent shall keep all Collateral Notes and Mortgage Assignments at its office in Farmington, Connecticut in a vault or other place of similar security. The Company and its authorized agents and representatives, which shall include its Independent Public Accountants, shall at all times, during normal business hours, have full access to examine, but not to remove, without the prior consent of the Collateral Agent, the Collateral Notes and Mortgage Assignments; provided, however, that (i) the Company and/or its authorized agent shall have given the Collateral Agent at least one (1) Business Day's prior notice, or such other notice as may be required by applicable provisions of the Investment Company Act of 1940, as amended, before seeking access to the Collateral Notes and Mortgage Assignments and (ii) the Collateral Agent shall, in its sole discretion, be entitled to have one of its 9 employees, agents or representatives present at all times or from time to time during any such period of access. (b) Upon the Collateral Agent's request, the Company shall immediately deliver to the Collateral Agent or its designee, at the Company's expense, copies of all Documents, Chattel Paper, security agreements, guarantees and other writings evidencing any Loan or its related Underlying Collateral. (c) Upon the Collateral Agent's request, the Company shall immediately endorse and deliver to the Collateral Agent or its designee all Documents, Instruments, Chattel Paper, security agreements, guarantees and other writings so requested by the Collateral Agent evidencing any Collateral of the Company, such Documents, Instruments, Chattel Paper, security agreements, guarantees and other writings to be held as Collateral under the terms of this Agreement. (d) The Collateral Agent shall have no obligation to inspect or examine any of the Collateral Notes, Mortgage Assignments or other documents delivered to it by the Company hereunder, and shall be entitled to assume, and shall be fully protected in assuming, without inspection or examination, that the Company has complied in full with its delivery obligations hereunder. (e) Pursuant to the terms hereof, the Company has assigned and delivered to the Collateral Agent all certificates representing the certificated securities pledged by the Company hereunder, together with instruments of transfer or assignment duly executed in blank as the Collateral Agent may have specified. In the event that the Company shall, after the date of this Agreement, acquire any other certificated securities to be pledged by it hereunder, the Company shall forthwith assign and deliver certificates representing such certificated securities to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify. To the extent that any securities are uncertificated (or in the case of uncertificated securities hereafter acquired by the Company), at the request of the Collateral Agent, the Company shall (i) make appropriate book-entry transfers reflecting the pledge of such securities created hereby for the account of the Collateral Agent or one or more nominees of the Collateral Agent with the issuer of such securities or other appropriate book-entry facility or financial intermediary, with the Collateral Agent having at all times the right to obtain definitive certificates (in the Collateral Agent's name or in the name of one or more nominees of the Collateral Agent) where the issuer customarily or otherwise issues certificates, all to be held as Collateral hereunder or (ii) take such other action to establish "control" (as such term is defined in the UCC) by the Collateral Agent over such uncertificated securities. The Company agrees that the Collateral Agent from time to time may attach hereto an updated Schedule A. The Company hereby acknowledges that the Collateral Agent may, in its discretion, appoint one or more financial institutions to act as the Collateral Agent's agent in holding in custodial account instruments or other financial assets in which the Collateral Agent is granted a security interest hereunder, including, without limitation, certificates of deposit and other instruments evidencing short term obligations. 10 SECTION 2.6. Further Assurances. (a) At any time or times, upon request by the Collateral Agent, in addition to the acts specifically required to be performed by the Company elsewhere under this Agreement, the Company shall do all other things and sign and deliver all other documents and instruments reasonably requested by the Collateral Agent to perfect, protect, maintain and enforce the security interests and liens of the Collateral Agent in the Collateral, and the first priority of such security interests and liens, and other rights granted hereunder or under any other present or future agreement between or among the Company and the Collateral Agent, including, without limitation, the Note Documents. Such acts shall include but not be limited to the marking of the Company's Books and Records, Chattel Paper and Instruments to show the Collateral Agent's security interests and liens and the recording of Mortgage Assignments and/or the filing of financing, renewal and/or continuation statements under the UCC or other documents evidencing the Collateral Agent's liens under applicable law and the delivery of any Collateral the physical possession of which is necessary or desirable in order for the Collateral Agent to perfect its liens. The Company authorizes the Collateral Agent to execute, file and/or record, any financing, renewal and/or continuation statement, any Mortgage Assignment or any other document or instrument which the Collateral Agent may require to perfect, protect, continue or enforce in accordance herewith any security interest, lien or other right hereunder or under any of the other Note Documents and authorizes the Collateral Agent to sign the Company's name on the same. Upon payment in full by the Company of all the Obligations in accordance with the terms thereof, the security interests and liens granted by the Company hereunder shall terminate, except that if, at any time, all or part of the payment of the monetary Obligations theretofore made by the Company or any other Person is rescinded or otherwise must be returned by the Collateral Agent or any Noteholder for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Company or such other Person), the security interests and liens granted hereunder or under any other present or future agreement between or among the Company and the Collateral Agent, and all rights of the Collateral Agent and all Obligations shall be reinstated as to monetary Obligations which were satisfied by the payment to be rescinded or returned, all as though such payment had not been made, and the Company shall sign and deliver to the Collateral Agent all documents and things necessary to perfect all terminated liens subject to the intervening liens, if any, granted by the Company to any Person. (b) A carbon, photographic, or other reproduction of this Agreement shall be sufficient as a UCC financing statement and may be filed at any time in any appropriate office in lieu thereof. (c) To the extent requested by the Collateral Agent, the Company will use its best efforts to cause each mortgagee of any and all real estate under any lease included in any Underlying Collateral and each landlord under any lease included in any Underlying Collateral to execute and deliver to the Collateral Agent assignments, in form and substance satisfactory to the Collateral Agent, by which such mortgagee or landlord waives its rights, if any, to the Collateral. 11 (d) The Company further agrees at the request of the Collateral Agent to do or cause to be done all such other acts and things as may be necessary or advisable to make any sales of any portion or all of the Stock pursuant to Section 5.2(g) valid and binding and in compliance with any and all applicable laws (including the Securities Act, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Company's expense. SECTION 2.7. Appointment of Collateral Agent as Attorney-in-Fact. The Company does hereby irrevocably make, constitute and appoint the Collateral Agent and any of its officers, employees or Collateral Agents as the true and lawful attorneys of the Company with power to: (a) sign the name of the Company on any financing statement, renewal financing statement, notice or other similar document that in the Collateral Agent's opinion must be filed in order to perfect or continue perfected the security interests granted in this Agreement or any Other Agreements and to effect such filing; (b) receive, endorse, assign and deliver, in the Company's name or in the name of the Collateral Agent, all checks, notes, drafts and other instruments relating to any Collateral, including receiving, opening and properly disposing of all mail addressed to the Company concerning the Collateral and, during the existence of an Event of Default (as hereinafter defined), to notify postal authorities to change the address for delivery of mail to such address as the Collateral Agent may designate; (c) sign the Company's name on any notices to any of the Company's clients or customers; and (d) upon the occurrence and during the continuance of an Event of Default, take or bring at the Company's cost, in the Company's name or in the name of the Collateral Agent, all steps, actions and suits deemed by the Collateral Agent necessary or desirable to effect collections in connection with any Notes, to enforce payment in connection with any Notes, to settle, compromise or release in whole or in part, any amounts owing in connection with any Notes, to prosecute any action or proceeding with respect to any Notes, to extend the time of payment in connection with any Notes, to make allowances and adjustments with respect thereto, to secure credit in the name of the Collateral Agent, and to do all other things necessary or desirable to realize upon the Collateral, including but not limited to the Underlying Collateral, and to carry out this Agreement and all Other Agreements. Neither the Collateral Agent nor its agents or attorneys will be liable for any act or omission nor for any error of judgment or mistake of fact unless such act, omission, error or mistake shall occur as a result of their gross negligence or willful 12 misconduct. This power, being coupled with an interest, is irrevocable so long as the Obligations remain unpaid. SECTION 2.8. Indemnity. In addition to all of the Collateral Agent's and Noteholders' other rights and remedies under the Note Documents, the Company will hold the Noteholders and the Collateral Agent harmless from and indemnify the Noteholders and the Collateral Agent or other designee of the Collateral Agent against all losses, damages, costs and expenses (including, without limitation, attorneys' fees, costs and expenses) incurred by any of them, whether prior to or from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or relating to any suit, investigation, action or proceeding by any Person, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any Person under any statute or regulation, including without limitation, any Federal or state antitrust laws, or under any common law or equitable cause or otherwise, all to the extent arising from or in connection with this Agreement or the other Note Documents or the enforcement of the rights of the Collateral Agent hereunder, other than losses, damages, costs and expenses resulting from, but only to the extent resulting from, the willful misconduct or gross negligence of the Person seeking indemnification. Each of the Noteholders severally agree (i) to reimburse the Collateral Agent, on demand, in the amount of its pro rata share, for any --- ---- expenses referred to in this Section 2.8 which shall not have been reimbursed or paid by the Company or paid from the proceeds of Collateral as provided herein and (ii) to indemnify and hold harmless the Collateral Agent and its directors, officers, employees and agents, on demand, in the amount of such pro rata share, --- ---- from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this Section 2.8, to the extent the same shall not have been reimbursed by the Company or paid from the proceeds of Collateral as provided herein; provided -------- that no Noteholder shall be liable to the Collateral Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Collateral Agent or any of its directors, officers, employees or Collateral Agents as determined by a final non-appealable order of a court of competent jurisdiction. For the purposes of this Section 2.8, pro rata shares at any time shall be determined based upon the --- ---- aggregate Exposures at the time such expenses were incurred. SECTION 2.9. Company Remains Liable. Anything herein to the contrary notwithstanding, (i) the Company shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent or the Noteholders of any rights under this Agreement or any of the other Note Documents shall not release the Company from any of its duties or obligations under the contracts and agreements included in the Collateral, and (iii) neither the Collateral Agent nor the Noteholders shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any of the other Note Documents nor shall the Collateral 13 Agent or any Noteholder be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 2.10. Collateral Agent May Perform; Actions of Collateral Agent. If the Company fails to perform any agreement contained herein, the Collateral Agent may (but shall not be required to) itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be jointly and severally payable by the Company, together with interest thereon at the rate specified in the Note Purchase Agreements, and until so paid shall be deemed part of the Obligations. The Collateral Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein. Subject to the other provisions of this Agreement, the Collateral Agent shall take any action under or with respect to this Agreement which is requested by the Required Holders and which is not inconsistent with or contrary to the provisions of this Agreement or the Note Documents. The Collateral Agent shall have the right to decline to follow any such direction if the Collateral Agent, being advised by counsel, determines that the directed action is not permitted by the terms of this Agreement or the other Note Documents, may not lawfully be taken or would involve it in personal liability, and the Collateral Agent shall not be required to take any such action unless any indemnity which is required hereunder in respect of such action has been provided. Subject to the other requirements of this Agreement, the Collateral Agent may rely on any such direction given to it by the Required Holders and shall be fully protected, and shall under no circumstances (absent the gross negligence and willful misconduct of the Collateral Agent) be liable to the Company, any Noteholder, or any other Person for taking or refraining from taking action in accordance therewith. The Collateral Agent may consult with counsel and shall be fully protected in taking any action hereunder in accordance with any advice of such counsel. The Collateral Agent shall have the right but not the obligation at any time to seek instructions concerning the administration of this Agreement, the duties created hereunder, or any of the Collateral from any court of competent jurisdiction. SECTION 2.11. Collateral Agent's Duties. The powers conferred on the Collateral Agent hereunder are solely to protect its interest and the interests of the Noteholders in the Collateral and shall not impose any duty upon it to exercise any such powers except as provided herein. Except for the safe custody of any Collateral in its possession and the accounting for monies actually received by it hereunder and performing its other express duties hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties contained herein, except for those made by it herein. The Collateral Agent makes no representation as to the value or condition of the Collateral or any part thereof, as to the title of the Company to the Collateral, as to the security afforded by this Agreement or as to the validity, execution, enforceability, legality or sufficiency of this Agreement, and the Collateral Agent shall incur no liability or 14 responsibility in respect of any such matters. The Collateral Agent shall not be responsible for insuring the Collateral, for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Collateral Agent may execute any of the powers granted under this Agreement and perform any duty hereunder or thereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. In no event will the Collateral Agent or any officer, agent or representative thereof be responsible for the consequences of any oversight or error of judgment whatsoever, or personally liable for any action taken or omitted to be taken, except that such Person may be liable due to its willful misconduct or gross negligence. Neither the Collateral Agent nor any officer, agent or representative thereof shall be personally liable for any action taken by any such Person in accordance with any notice given by the Required Holders pursuant to the terms of this Agreement even if, at the time such action is taken by any such Person, the Required Holders are not entitled to give such notice, except where the account officer of the Collateral Agent active upon the Company accounts has actual knowledge that such Required Holders are not entitled to give such notice. SECTION 2.12. Perfection of Security Interest. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Collateral Agent's security interest in the Collateral for the benefit of itself, the Administrative Collateral Agent and the Noteholders. The Collateral and the Collateral Agent's rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Company is the owner of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. SECTION 2.13. Concerning the Stock. (a) Any sums paid upon or in respect of any of the Stock upon the liquidation or dissolution of the issuer thereof (other than in connection with transactions permitted by the Note Purchase Agreements and pursuant to which the Collateral Agent obtains a first priority perfected security interest in any non-cash proceeds thereof and any net-cash proceeds thereof are paid in accordance with the terms thereof) shall be paid over to the Collateral Agent to be held by it as security for the Obligations; and, in case any distribution of capital shall be made on or in respect of any of the Stock, or any property shall be distributed upon or with respect to any of the Stock pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Collateral Agent to be held by it as security for the Obligations. All sums of money and property paid or distributed in respect of the Stock as required by the immediately preceding sentence upon such a liquidation, dissolution, recapitalization or reclassification which are received by the Company shall, until paid or delivered to the Collateral Agent, be held in trust for the Collateral Agent as security for the Obligations. 15 (b) The Collateral Agent may, at any time after the occurrence and during the continuance of an Event of Default, at its option, transfer to itself or any nominee for security purposes the Stock or any other security constituting Collateral, and, any time after the occurrence and during the continuance of an Event of Default, receive any income thereon and apply it to the Obligations. In addition and whether or not Obligations are due, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may demand, sue for, collect, or make any settlement or compromise it deems desirable with respect to the Collateral. Regardless of the adequacy of the Collateral or any other security for the Obligations, any deposits or other sums at any time credited by or due from the Collateral Agent to the Company may, upon the occurrence and during the continuance of an Event of Default, at any time be applied to or set off against any of the Obligations to the extent permitted by applicable law. (c) So long as no Event of Default is continuing, the Company shall (except as otherwise required by Section 2.13(a) hereof) be entitled to receive all cash dividends paid in respect of the Stock owned by it, to vote such Stock, and to give consents, waivers, and ratifications in respect of such Stock, provided that no vote shall be cast, and no consent, waiver, or ratification given or action taken which would be inconsistent with or violate any provisions of this Agreement, the Note Purchase Agreements, or the other Note Documents. All such rights of the Company to receive cash dividends shall cease in case an Event of Default shall have occurred and be continuing. All such rights of the Company to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Collateral Agent's option, as evidenced by the Collateral Agent's notifying the Company of such election, cease in case an Event of Default shall have occurred and be continuing. ARTICLE III PRIORITY OF SECURITY INTERESTS SECTION 3.1. Priority of Security Interests. The Company warrants and represents to the Collateral Agent and the Noteholders that, as to those assets for which perfection may be accomplished by filing or by possession under the UCC, the security interests granted to the Collateral Agent hereunder constitute and will constitute at all times a valid and perfected security interest vested in the Collateral Agent in and upon the Collateral. The Company further warrants and represents that the Collateral Agent's security interests in the Collateral for the benefit of itself and the Noteholders are not and hereinafter shall not become subordinate or junior to the security interests, liens or claims of any other Person, firm or corporation, including the United States or any department, agency or instrumentality thereof, or any state, county or local governmental agency, except for the Permitted Liens. The Company shall grant (without the prior written approval of the Required Holders) a security interest in or permit a lien or encumbrance upon any of the Collateral to anyone except the Collateral Agent for the benefit of itself and the Noteholders as long as any of the Obligations remain unpaid or any commitments to lend have not been terminated, except for the Permitted Liens. 16 ARTICLE IV COLLATERAL SECTION 4.1. Representations, Covenants and Warranties. The Company hereby makes the following representations, warranties and covenants to the Collateral Agent and the Noteholders, which shall survive the execution and delivery of the Note Documents and (except to the extent that any of such representations, and warranties and covenants expressly relate to earlier dates) shall be deemed repeated and confirmed as of each date on which any Note is issued by the Company. (a) The Company is now and at all times hereafter shall be the absolute owner, free and clear of all Liens (other than Permitted Liens) except security interests and rights of the Collateral Agent and the Noteholders granted herein, of indefeasible title to all of the Collateral belonging to it except for that portion of the Company's rights and/or obligations under any Loan in which the Company has granted a participation to any Person in accordance with Section 2.14 of the Bank Loan Agreement (as in effect on the Effective Date of the Note Purchase Agreement); (b) To the best of the Company's knowledge, each outstanding Loan does, and each future Loan will, represent a bona fide, valid and legally enforceable indebtedness according to its terms, and each Loan, at the time of creation thereof, except with the consent of the Collateral Agent and the Required Noteholders, will be subject to no offsets, discounts, counterclaims, contra-accounts or any other defense of any kind or character that materially adversely affects the value of the Loan; (c) With respect to each outstanding and future Loan, the Collateral Agent and the Noteholders may rely on all statements or representations made by the Company on or with respect to such Loans delivered hereunder or under the Note Purchase Agreements, and, unless otherwise indicated in writing by the Company, each outstanding Loan is, and each future Loan will be, genuine and in all respects what it purports to be, and, to the Company's knowledge, there are no, and, at the time of creation of each Loan there will not be any, to the Company's knowledge, facts, events or occurrences that would in any way materially impair the validity or enforcement thereof; (d) All of the outstanding Loans have been, and all future Loans will be, created, and are (or in the case of future Loans, will be) in compliance in all material respects with, and the form and content of each document related to all outstanding and future Loans, the security related thereto, and the transactions from which they arose comply (or, in the case of future Loans, will comply) in all material respects with, any and all applicable laws, ordinances, rules and regulations, Federal, state and/or local, with respect to the extension of credit and charging of interest, including, without limitation, as applicable, the Federal Consumer Credit Protection Act, the Federal Fair Credit Reporting Act, the Federal Trade Commission Act, the Federal Equal Credit Opportunity Act and all Federal, state and local laws related to licensing, usury, truth in lending, real estate settlement procedures, consumer protection, equal credit opportunity, fair debt collection, unfair and deceptive trade practices, rescission rights and disclosures, and with 17 all rules and regulations thereunder, all as amended, and any disclosures required with respect to any Loan the failure to make which would have a Material Adverse Effect on the Company were and will continue to be made properly and in a timely manner; (e) The original amount and unpaid balance of each Loan shown on the Company's books and records and on any statement or schedule delivered to the Collateral Agent are and will be true and correct, and the unpaid balance is and will be the amount actually owing to the Company; (f) If requested by the Required Holders at any time or from time to time, the Company shall cause a Lien search against each Person to whom a Loan has been made, satisfactory to the Collateral Agent, to be performed and delivered directly to the Collateral Agent, which Lien search shall indicate the absence of any Liens against such Person or the property of the Person on which the Company has a Lien, other than Liens in favor of the Company which have been assigned to the Collateral Agent or the Noteholders or Liens in favor of the Collateral Agent or the Noteholders and other than Permitted Liens; (g) The Company neither has extended nor will extend any credit of any kind or in any manner to any Person in connection with the transactions from which the Loans arose or will arise other than as the Company has indicated on and has had evidenced by, or will indicate or have evidenced by, in the case of future Loans, the Company's files related to the Loans; (h) Each security agreement, UCC filing, mortgage, title retention instrument, and other document and instrument, if any, which is security for the Loans contains, or will contain, in the case of future Loans, a correct and sufficient description of the Underlying Collateral covered thereby and each lien, mortgage or security interest which secures any outstanding Loan is, or any future Loan will be, valid; (i) To the best knowledge of the Company, except as disclosed to the Collateral Agent and the Noteholders, any and all policies of insurance related to the property securing any obligation of a Person to whom the Company has made a Loan, or any guarantor of such Loan, in connection with any Loan and any credit life insurance, credit disability insurance, or credit unemployment insurance are in full force and effect in accordance with the terms of all agreements between the Company and such Person or guarantor; (j) The Company has no knowledge of any fact which would impair in any material respect the value or validity of any Loan except as disclosed to the Collateral Agent; (k) The Company holds no commercial tort claim except as indicated in writing to the Collateral Agent and the Noteholders; and (l) The transactions contemplated herein, including the granting of security interests herein and the enforcement by the Collateral Agent and the Noteholders 18 of its rights hereunder if a Default or Event of Default occurs, do not and will not affect the validity of the pledges of the Underlying Collateral and the Loans secured by the Underlying Collateral are and will still be valid against the Obligors of such Loans. SECTION 4.2. Collections. (a) Subject to the provisions of this Agreement and the other Note Documents, the Company shall service, manage, enforce, and make Collections in connection with the Loans. "Collections," as used herein, means the collection of payment of principal and interest on the Loans, other payments made with respect to Loans, the cash proceeds realized from the enforcement of Loans and any security therefor, or the collateral, proceeds of credit or group life insurance, and all proceeds of insurance of any real or personal property which secures any of the Loans. (b) With respect to each of the Collections, the Company shall collect all Collections, receive all payments thereon and immediately deposit the proceeds thereof into a Depository Account. The Company in whose name such account is kept may withdraw funds from such account to use in the ordinary course of its business. SECTION 4.3. Rights of Collateral Agent Regarding Collateral. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have the right to, and upon the direction of the Required Holders shall, at any time and from time to time thereafter, without notice to the Company, (a) notify, and upon the direction of the Collateral Agent to the Company, the Company will notify, (i) all Persons to whom the Company has made Loans that the Collateral Agent has a security interest in such Collateral and direct all such Persons to make payments to the Collateral Agent or its designee, and to such banks and accounts (which may be the Collateral Account) as designated by the Collateral Agent or such designee, of all sums owing by them to the Company, and (ii) all banks in which the Company has any Depository Accounts of the occurrence of an Event of Default and direct all such Noteholders to transfer into the Collateral Account, or to such other account at such bank as shall be designated by the Collateral Agent or its designee, all amounts on deposit from time to time in the related Depository Accounts; (b) to settle, compromise, sell, assign, extend or renew any debt owing by any Persons to whom the Company has made a Loan; (c) to sell or assign such Collateral upon such terms as the Collateral Agent may deem advisable; and (d) to discharge and release in the name of the Company and the Collateral Agent any such debt. Any and all disbursements for costs and expenses incurred or paid by the Collateral Agent with respect to the enforcement, collection or protection of its interest in the Collateral, or against the Company, whether by suit or otherwise, notification of Persons to whom the Company has made Loans, including reasonable attorneys' fees actually incurred, court costs and similar expenses, if any, shall become a part of the Obligations secured by the Collateral, payable on demand. ARTICLE V DEFAULT SECTION 5.1. Events of Default. Any one of the following events will constitute an "Event of Default": 19 (a) failure of the Company to observe, perform or comply with any of the terms, provisions, conditions or covenants, or, in any material respect, any warranties or representations, contained in this Agreement other than in Section 4.1 hereof; (b) failure of the Company to observe, perform or comply with any of the terms, provisions, conditions, covenants, warranties or representations contained in Section 4.1 of this Agreement, which failure shall not have been remedied within 30 days after such failure shall first have become known to any officer of the Company; (c) the occurrence of an "Event of Default" as defined in the Note Purchase Agreements; or (d) any of the Note Documents shall cease to be in full force and effect. SECTION 5.2. Remedies. (a) Upon the occurrence of any Event of Default, the Collateral Agent shall have, in addition to any other rights and remedies contained in this Agreement or in any of the Other Agreements, all the rights and remedies of a secured party under the UCC, and all other rights and remedies provided by law, all of which shall be cumulative to the extent permitted by law. Upon the occurrence of any Event of Default and at any time thereafter if such or any other default shall then be continuing, the Collateral Agent shall have the right without further notice to the Company to, and upon the direction of the Required Holders shall, appropriate, take possession and control of, set off and apply to the payment of any or all of the Obligations, any or all Collateral, subject to and in the manner set forth in Section 5.3 hereof to enforce payment in connection with the Loans or any other Collateral to settle, compromise or release, in whole or in part, any amounts owing on the Collateral, to prosecute any action, suit or proceeding with respect to the Collateral, to extend the time of payment of any and all Collateral, to make allowances and adjustment with respect thereto, to issue credits in the name of the Company or the Collateral Agent, to sell, assign and deliver the Collateral (or any part thereof), at public or private sale, at broker's board, for cash, upon credit or otherwise, at the Collateral Agent's sole option and discretion and the Collateral Agent and any Noteholder or other Person interested in the Obligations may bid or become purchaser at any such sale, if public, free from any right of redemption, which is hereby expressly waived. The Company agrees that the giving of ten days' notice by the Collateral Agent, sent by certified mail, return receipt requested postage prepaid, to the address set forth below, designating the place and time of any public sale or of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be deemed to be reasonable notice thereof and the Company waives any other notice with respect thereto. The net cash proceeds resulting from the exercise of any of the foregoing rights or remedies shall be applied by the Collateral Agent in accordance with Section 5.3 hereof, and the Company shall remain liable to the Collateral Agent and the Noteholders for any deficiency, together with interest thereon at the rate provided in the Note Purchase Agreements with respect to the Obligations and the cost and expenses of collection of such deficiency, including (to the 20 extent permitted by law), without limitation, reasonable attorneys' fees actually incurred, expenses and disbursements. (b) If at any time or times hereafter the Collateral Agent employs counsel for advice with respect to this Agreement or any Other Agreements, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or any Other Agreements (including, without limitation, the interpretation or administration, or the amendment, waiver or consent with respect to any term, of this Agreement or any Other Agreements), or relating to any Collateral; or to protect, take possession of, or liquidate any Collateral, or to attempt to enforce any security interest or lien in any Collateral, or to represent the Collateral Agent in any pending or threatened litigation with respect to the affairs of the Company in any way relating to any of the Collateral or to the Obligations or to enforce any rights of the Collateral Agent, Noteholder or the Noteholders or liabilities of the Company, any Person to whom the Company has made a Loan, or any Person which may be obligated to the Collateral Agent or such Noteholder by virtue of this Agreement or any Other Agreement, instrument or document now or hereafter delivered to the Collateral Agent, Noteholder, or the Noteholders by or for the benefit of the Company, then in any of such events, all of the reasonable attorneys' fees actually incurred arising from such services, and any expenses, costs and charges relating thereto, shall be Obligations secured by the Collateral. (c) Upon the occurrence of an Event of Default, the Collateral Agent shall have the right to require the Company to assemble all Collateral not already in the Collateral Agent's possession and make it reasonably available to the Collateral Agent at one or more places to be designated by the Collateral Agent which are reasonably convenient to both parties, and to take possession of such Collateral and to enter and remain upon the various premises of the Company without cost or charge to the Collateral Agent, and to use the same, together with materials, supplies, books and records of the Company for the purpose of collecting such Collateral or liquidating such Collateral (plus any Collateral already in the Collateral Agent's possession), whether by foreclosure, auction or otherwise. In addition, the Collateral Agent may remove from such premises such Collateral, and any records with respect thereto, to the premises of the Collateral Agent or any Custodian for such time as the Collateral Agent may desire, in order to effectively collect or liquidate such Collateral. (d) Upon the occurrence of an Event of Default, the Collateral Agent shall have the right to, and upon the direction of the Required Holders shall, require the Company to establish and maintain a lockbox service (which may be the Collateral Account) with such Noteholder or Noteholders as may be acceptable to the Collateral Agent. In the event the Company (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or agents) shall receive any monies, checks, notes, drafts or any other items of payment relating to, or proceeds of, the Loans, the Company agrees with the Collateral Agent as follows: 21 (i) the Company shall hold all such items of payment in trust for the Collateral Agent and the Noteholders and as the property of Collateral Agent and the Noteholders, separate from the funds of the Company, and the Company shall immediately forward, or cause to be forwarded, the same to the lockbox service for application to the Notes; (ii) the Company shall forward to the Collateral Agent, on a daily basis, deposit slips related to all such items of payment received by the Company and, if requested by the Collateral Agent, copies of such checks and other items, together with a statement showing the application of that portion of such items of payment relating to payment in connection with the Loans and a collection report with regard thereto in form and substance satisfactory to the Collateral Agent; (iii) All such items of payment shall be the sole and exclusive property of the Collateral Agent for the benefit of the Noteholders immediately upon the earlier of receipt of such items by the Collateral Agent or the receipt of such items by the Company; (iv) The lockbox service shall be subject to the sole control of the Collateral Agent and the Collateral Agent shall have the right at all times in its sole discretion to apply all or part of such items of payment to the payment in accordance with Section 5.3 hereof. The Collateral Agent may, and upon the direction of the Required Holders shall, release to the Company all or any part of such items of payment; and (v) The Collateral Agent assumes no responsibility for such lockbox arrangement, including, without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any Noteholder thereunder. (e) Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may: (i) if the Collateral Agent so elects and gives notice of such election to the Company, vote any or all of the Stock possessing voting rights (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner thereof (the Company hereby irrevocably constituting and appointing the Collateral Agent the proxy and attorney-in-fact of the Company, with full power of substitution, to do so); and (ii) cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees, if it has not already done so. 22 (f) the Company recognizes that the Collateral Agent may be unable to effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act of 1933, as amended, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Company recognizes that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933, as amended, even if the issuer would agree to do so. SECTION 5.3. Application of Proceeds. (a) Upon receipt thereof in accordance with the terms of Section 5 of the Intercreditor Agreement, any proceeds of any lockbox collection or sale of, or other realization upon, all or any part of the Collateral shall be applied by the Collateral Agent in the following order of priority: first, to payment of the expenses of such lockbox or sale or other realization, including reasonable compensation to the Collateral Agent and its agents and counsel and all expenses, liabilities, advances incurred or made by the Collateral Agent in connection therewith, and any other unreimbursed expenses for which the Collateral Agent is to be reimbursed under this Agreement; second, to the payment of the Obligations, pro rata in accordance with the respective outstanding balances thereof (including principal, interest, fees and all other amounts due thereunder); and third, after indefeasible payment in full of all Obligations, to payment to the Company or its successors and assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Collateral Agent may make distributions hereunder in cash or in kind, but such distributions to the Noteholders shall in all events be made pro rata on the basis of the respective Exposure Percentages of the Obligations. Distributions made under clause "second" above may also be made in a combination of cash or property, but distributions to the Noteholders shall be made pro rata on the basis of the respective Exposure Percentages of the Obligations. Distributions made under clauses "first" and "third" may also be made in a combination of cash or property. Any deficiency remaining, after application of such cash or cash proceeds to the Obligations, shall continue to be Obligations for which the Company remains liable. (b) In making the determinations and allocations required by this Section 5.3 or otherwise by this Agreement, the Collateral Agent may rely upon information supplied by the Noteholders as to the amounts of the Obligations held by them, or as to other matters (with each such matter being conclusively deemed to be 23 proved or established by a certificate executed by an officer of such Person), and the Collateral Agent shall have no liability to any of the Noteholders for actions taken in reliance upon such information. All distributions made by the Collateral Agent pursuant to this Section 5.3 shall be final, and the Collateral Agent shall have no duty to inquire as to the application by the Noteholders, of any amount distributed to them. However, if at any time the Collateral Agent determines that an allocation was based upon a mistake of fact (including without limitation, mistakes based on an assumption that principal or interest or any other amount has been paid by payments that are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Collateral Agent may in its discretion, but shall not, subject to Section 5.3(d), be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Noteholders receive the distributions to which they would have been entitled if such mistake of fact had not been made. If any dispute or disagreement shall arise as to the allocation of any sum of money received by the Collateral Agent hereunder or under any Security Document, the Collateral Agent shall have the right to deliver such sum to a court of competent jurisdiction and therein commence an action for interpleader. (c) If any Noteholder acquires custody, control or possession of any Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Noteholder shall promptly cause such Collateral or proceeds to be delivered to or put in the custody, possession or control of the Collateral Agent or, if the Collateral Agent shall so designate, an agent of the Collateral Agent (which agent may be a branch or affiliate of the Collateral Agent or any Noteholder) in the same form of payment received, with appropriate endorsements, in the country in which such Collateral is held for distribution in accordance with the provisions of this Section 5.3. Until such time as the provisions of the immediately preceding sentence have been complied with, such Noteholder shall be deemed to hold such Collateral and proceeds in trust for the Collateral Agent. (d) If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the security interests created hereby are enforced with respect to some, but not all, of the Obligations, the Collateral Agent shall nonetheless apply the proceeds for the benefit of the Noteholders in the proportion and subject to the priorities of Section 5.3(a) hereof. To the extent that the Collateral Agent distributes proceeds collected with respect to one Obligation to or on behalf of the holder of another Obligation or a Noteholder obtains the equivalent of proceeds through the exercise of any right of setoff, counterclaim, cross action, voluntary payment by the Company, enforcement of claim, proceedings in bankruptcy, reorganization, liquidation or otherwise, the holder of the former Obligation shall be deemed to have purchased a participation in the latter Obligation or shall be subrogated to the rights of the holder thereof to receive any subsequent payments and distributions made with respect to the portion thereof paid or to be paid by the application of such proceeds; provided that if all or any part of such excess payment is thereafter recovered, such distribution and arrangements shall be rescinded and the amount restored to the extent of such recovery, without interest. If any Noteholder exercises any right of setoff, banker's lien or similar 24 right with respect to any Collateral for payment of any Obligations, each of the Noteholders agrees with each other Noteholder that if an amount to be set off is to be applied to Indebtedness of the Company to such Noteholder, other than Indebtedness evidenced by the Notes held by such Noteholder, as applicable, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Noteholder. SECTION 5.4. Release of Collateral; Subordination of Lien. To the extent permitted by the Note Purchase Agreements and the Intercreditor Agreement, the Collateral Agent, for the benefit of itself and the Noteholders, is hereby authorized, upon receipt of a request from the Company, to release any Collateral and to provide such releases and termination statements with respect to any Collateral in connection with any sale, exchange or other disposition thereof permitted under the Note Purchase Agreements so long as (i) the Collateral Agent obtains a first priority perfected security interest in any non-cash proceeds of such sale, exchange or other disposition and (ii) any net cash proceeds of such sale, exchange or other disposition are paid in accordance with the provisions hereunder. Whether or not so instructed by the Required Holders, the Collateral Agent may release any Collateral and may provide any release, termination statement or instrument of subordination required by order of a court of competent jurisdiction or otherwise required by applicable law. To the extent permitted by the Note Purchase Agreements, the Collateral Agent shall, on the written instructions of the Required Holders, subordinate by written instrument the Lien on all or any portion of the Collateral to any other lender extending to the Company indebtedness permitted by the terms of the Note Purchase Agreements, and (iii) the Collateral Agent is so instructed by the Required Holders in accordance with the terms of the Note Purchase Agreements. SECTION 5.5. Waiver by Collateral Agent or Noteholders. The Collateral Agent's or any Noteholder's failure at any time or times hereafter to require strict performance by the Company of any of the provisions, warranties, terms and conditions contained in this Agreement or any of the Other Agreements shall not waive, affect or diminish any right of the Collateral Agent or any Noteholder at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement or any of the Other Agreements, and any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement or any Other Agreement shall be deemed to have been waived by any act or knowledge of the Collateral Agent or any Noteholder, or their respective agents, officers or employees except by an instrument in writing signed by an officer of the Collateral Agent or such Noteholder and directed to the Company specifying such waiver. ARTICLE VI MISCELLANEOUS SECTION 6.1. Continuing Lien. The Collateral described in this Agreement secures all present and future Obligations of the Company. There is included 25 within the term "Collateral;" as used herein, all other property and all interests therein of any kind hereafter acquired by the Company, meeting or falling within the general description of the Collateral set forth herein and also the proceeds and products thereof. SECTION 6.2. Waivers by Company. (a) The Company irrevocably waives the right to direct the application of any and all payments which may be received by the Collateral Agent during the continuance of an Event of Default, and the Company does hereby irrevocably agree that, during the continuance of an Event of Default, the Collateral Agent shall have the continuing exclusive right to apply and reapply any and all such payments received in such manner as the Collateral Agent may deem advisable, notwithstanding any entry upon any of its books and records. (b) The Company also waives any and all notices of demand, notice or protest that the Company might be entitled to receive with respect to this Agreement by virtue of any applicable statute or law, and waives demand, protest, notice of protest, notice of default, release, compromise, settlement, extension or renewal of all commercial paper, accounts, contract rights, instruments, guaranties, and otherwise, at any time held by the Collateral Agent or the Noteholders on which the Company may in any way be liable, notice of nonpayment at maturity of any and all Loans, and notice of any action taken by the Collateral Agent or the Noteholders unless expressly required by this Agreement. SECTION 6.3. Parties. This Agreement and any of the Other Agreements, instruments and documents executed and delivered pursuant hereto or to consummate the transactions contemplated hereunder shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. SECTION 6.4. GOVERNING LAW. THIS AGREEMENT AND ANY OTHER AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE TO THE EXERCISE OF REMEDIES OR THE PERFECTION OF SECURITY INTERESTS UNDER THE UCC. SECTION 6.5. WAIVER OF JURY TRIAL AND SETOFF. EACH OF THE COLLATERAL AGENT AND THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER AGREEMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER AGREEMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE, HOWSOEVER ARISING, BETWEEN OR AMONG THE COMPANY AND ANY OF THE NOTEHOLDERS OR THE COLLATERAL AGENT, BETWEEN OR AMONG ANY NOTEHOLDERS AND BETWEEN OR AMONG THE COLLATERAL AGENT 26 AND ANY NOTEHOLDERS AND THE COMPANY HEREBY WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION). SECTION 6.6. Jurisdiction; Service of Process. The Company hereby irrevocably consents to the jurisdiction of the courts of the State of New York, County of New York and of any Federal Court located in the Southern District of New York, and agrees that venue in each of such Courts is proper in connection with any action or proceeding arising out of or relating to this Agreement, the Other Agreements, or any document or instrument delivered pursuant to this Agreement or the Other Agreements. Nothing herein shall affect the right of any Noteholder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. SECTION 6.7. Survival of Representations and Warranties. All representations and warranties of the Company and all terms, provisions, conditions and agreements to be performed by the Company contained in this Agreement and in the other Note Documents shall be true and correct, and satisfied, where applicable, at the time of the execution of this Agreement, and shall survive the execution and delivery of this Agreement and all Other Agreements. SECTION 6.8. Obligations Secured by Property Other Than Collateral. To the extent that the Obligations are now or hereafter secured by property other than the Collateral, or by a guarantee, endorsement or property of any other Person, then the Collateral Agent shall have the right to, and upon the direction of the Required Holders shall, proceed against such other property, guarantee or endorsement upon the occurrence and during the continuance of an Event of Default, and the Collateral Agent shall have the right, with the consent of the Required Holders, to determine which rights, security, liens, security interests or remedies the Collateral Agent shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Collateral Agent's rights or any of the Holders' rights under the Obligations, this Agreement or any Other Agreements. SECTION 6.9. Resignation of Collateral Agent; Successor Collateral Agent. (a) The Collateral Agent may at any time resign by giving ten (10) days prior written notice thereof to each Noteholder and the Company, provided -------- that no resignation shall be effective until a successor for the Collateral Agent is appointed. Upon such resignation, the Required Holders (or, if the Obligations have been paid in full) shall have the right to appoint a successor Collateral Agent. If no successor 27 Collateral Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Collateral Agent's giving of notice of resignation, then the retiring Collateral Agent may, on behalf of the Required Holders, as applicable, appoint a successor Collateral Agent, which shall be a bank or trust company incorporated and doing business within the United States of America having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent. (b) In the event a successor Collateral Agent is appointed pursuant to the provisions of the Note Purchase Agreements, such successor Collateral Agent shall succeed to the rights, powers and duties of the Collateral Agent hereunder, and the term "Collateral Agent" shall mean such successor Collateral Agent effective upon its appointment, and the former Collateral Agent's rights, powers and duties as Collateral Agent shall be terminated, without any other or further act or deed on the part of such former Collateral Agent or any of the parties to the Note Purchase Agreements or any holders of the Notes. Such former Collateral Agent agrees to take such actions as are reasonably necessary to effectuate the transfer of its rights, powers and duties to such successor Collateral Agent. SECTION 6.10. Amendment and Waiver. No modification or amendment of this Agreement shall be effective unless the same shall be in writing and signed by the Collateral Agent (acting with the requisite consent of the Noteholders as required by the Note Purchase Agreements) and the Company; provided, however, -------- ------- (i) no amendment or waiver shall adversely affect any of the Collateral Agent's rights, immunities or rights to indemnification hereunder or under any of the Note Documents or expand its duties or reduce any amount payable to the Collateral Agent hereunder without the written consent of the Collateral Agent; and (ii) any provisions of this Agreement affecting the rights and obligations of the Collateral Agent hereunder may not be amended without the written consent of the Collateral Agent. No waiver of any provision of this Agreement and no consent to any departure by any party hereto from the provisions hereof shall be effective unless such waiver or consent shall be set forth in a written instrument executed by the party against which it is sought to be enforced, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in the same, similar or other circumstances. SECTION 6.11. Termination. This Agreement and the security interest in the Collateral created hereby will terminate when the Obligations have been 28 irrevocably paid and finally discharged in full in accordance with the terms of the Note Purchase Agreements. No waiver by the Collateral Agent or any Noteholder or any other holder of the Notes of any default will be effective unless in writing or operate as a waiver of any other default or of the same default on a future occasion. In the event of a sale or assignment by any Noteholder of a Note or any portion thereof, such Noteholder may assign or transfer its rights and interest under this Agreement in whole or in part to the purchaser or purchasers of the Note, whereupon such purchaser or purchasers will become vested with all of the powers, rights and responsibilities of such Noteholder hereunder, and such Noteholder will thereafter be forever released and fully discharged from any liability or responsibility hereunder with respect to the rights, interest and responsibilities so assigned, other than liabilities arising out of actions taken prior to the date of assignment. The Company may not assign this Agreement without the express written consent of the Noteholders. SECTION 6.12. Notices. All notices, requests, consents, demands or other communications provided for herein shall be given in accordance with the terms of the Note Purchase Agreements. SECTION 6.13. Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 29 SECTION 6.14. Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be an original and both of which shall together constitute one and the same agreement. [Remainder of this page intentionally left blank] 30 IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written by the duly authorized officers of the parties hereto. MEDALLION FUNDING CHICAGO CORP. By: /s/ Alvin Murstein -------------------------------------- Alvin Murstein Chairman & Chief Executive Officer: By: /s/ James E. Jack -------------------------------------- James E. Jack Chief Financial Officer FLEET NATIONAL BANK, as Collateral Agent By: /s/ Jeffrey H. Robinson -------------------------------------- Name: Jeffrey H. Robinson Title:Senior Vice President EX-21.1 23 dex211.txt LIST OF SUBSIDIARIES OF MEDALLION FINANCIAL CORP. Exhibit 21.1 List of Subsidiaries of Medallion Financial Corp.
Name Jurisdiction of Incorporation or Formation - ---- ------------------------------------------ Medallion Funding Corp. New York Medallion Taxi Media, Inc. New York Medallion Taxi Media, Inc. Delaware Business Lenders LLC Delaware Medallion Capital, Inc. Delaware Medallion Business Credit LLC Delaware Freshstart Venture Capital Corp. Delaware Medallion Funding Chicago Corp. Delaware
EX-23.1 24 dex231.txt CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated April 2, 2002, included in this Form 10-K into Medallion Financial Corp.'s previously filed registration statements on Form S-8 (File Nos. 333-19057 and 333-27977). /s/ Arthur Andersen LLP New York, New York April 5, 2002 EX-99.1 25 dex991.txt LETTER TO THE SECURITIES AND EXCHANGE COMMISSION Exhibit 99.1 [Company Letterhead] April 8, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0408 Re: Temporary Note 3T to Article 3 of Regulation S-X ------------------------------------------------ Ladies and Gentlemen: Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Medallion Financial Corp. has obtained a letter of representation from Arthur Anderson LLP stating that the December 31, 2001 audit was subject to their quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Arthur Andersen LLP personnel working on the audit and availability of national office consultation. Availability of personnel at foreign affiliates of Arthur Andersen LLP is not relevant to this audit. Very truly yours, Medallion Financial Corp. By: /s/ James E. Jack ------------------------------- Name: James E. Jack Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----