-----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, Q8Adt5rdNHSUzIVEL9HjOtkUuZYebF2eKC9rVQMxvNdhvxQdHSObq0YAnwFMIwSL EhRqY3z/ZJhInBn3SplLRA== 0000950135-04-004665.txt : 20041004 0000950135-04-004665.hdr.sgml : 20041004 20041004135325 ACCESSION NUMBER: 0000950135-04-004665 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20040929 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041004 DATE AS OF CHANGE: 20041004 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROFINANCIAL INC CENTRAL INDEX KEY: 0000827230 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS BUSINESS CREDIT INSTITUTION [6159] IRS NUMBER: 042962824 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14771 FILM NUMBER: 041061579 BUSINESS ADDRESS: STREET 1: 10 M COMMERCE WAY CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 7819944800 MAIL ADDRESS: STREET 1: 10 M COMMERCE WAY CITY: WOBURN STATE: MA ZIP: 01801 FORMER COMPANY: FORMER CONFORMED NAME: BOYLE LEASING TECHNOLOGIES INC DATE OF NAME CHANGE: 19980605 8-K 1 b51980mfe8vk.txt MICROFINANCIAL INCORPORATED UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): SEPTEMBER 29, 2004 MICROFINANCIAL INCORPORATED (Exact name of registrant as specified in its charter) MASSACHUSETTS (State or other jurisdiction of incorporation) 1-14771 04-2962824 (Commission file number) (IRS Employer Identification No.) 10-M COMMERCE WAY, WOBURN, MA 01801 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (781) 994-4800 N/A (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2): [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. On September 29, 2004, TimePayment Corp. LLC and Leasecomm Corporation (each a wholly-owned subsidiary of the Registrant and collectively, the "Borrowers") and the Registrant entered into a Revolving Credit Agreement (the "Credit Agreement"), by and among the Borrowers, the Registrant, The CIT Group/Commercial Services, Inc., as Agent ("CIT"), and the other financial institutions from time to time party thereto, as Lenders. The Credit Agreement provides for a secured line of credit of $30 million and CIT agrees that it will, on a best efforts basis, attempt to secure commitments from an additional Lender or Lenders in the aggregate additional amount of up to $20 million. Loans to the Borrowers under the Credit Agreement in the amount of $11,322,231.15 were funded on September 29, 2004. Portions of the funded loans were used to repay existing indebtedness under a senior secured credit facility with a bank group and an unsecured credit facility with a financial institution. Both existing credit facilities were paid in full and terminated. In addition, the Borrowers will use the loans under the Credit Agreement for working capital needs and for ongoing general corporate purposes. The Registrant guarantees the loans and obligations under the Credit Agreement. The obligations of the Borrowers and the Registrant under the Credit Agreement and such guarantee are secured by the grant of a security interest in the Borrowers' assets and the Registrant's pledge of its ownership interests in the Borrowers to CIT. The borrowings under the Credit Agreement are subject to monthly interest payments, periodic commitment fees and various other fees, as described in the Credit Agreement. Borrowings under the Credit Agreement will bear interest at a base rate of prime plus 1.5% or a LIBOR rate, dependent on the Borrowers' election. Borrowings based on LIBOR will bear interest at a rate of LIBOR plus 4.0%. Availability under the Credit Agreement is subject to the satisfaction of a borrowing base, as described in the Credit Agreement. The revolving credit facility established pursuant to the Credit Agreement will expire on September 29, 2007, at which time all outstanding amounts under the credit facility will be due and payable. The Credit Agreement will, however, automatically renew on for a one year period on September 29, 2007 and on September 29th of each year thereafter provided that there is no then existing event of default at such time and neither CIT nor the Borrowers have given at least 180 days prior written notice of their intent not to renew the Credit Agreement. If the Borrowers terminate the Credit Agreement prior to March 29, 2006, the Borrowers have agreed to pay to CIT an early termination fee in the amount of $1.5 million. The Borrowers may under certain circumstances, as described in the Credit Agreement, terminate the Credit Agreement prior to March 29, 2006 without liability for such early termination fee. The Credit Agreement contains standard representations, covenants and events of default for a facility of this type, including among other things, certain financial tests and limitations with respect to: distributions, dividends, payment of certain indebtedness and certain fees, transactions with affiliates, investments, capital expenditures, incurrence of additional indebtedness, liens, acquisitions, asset dispositions, sales of lease and equipment portfolios, establishing special purpose corporations for the securitization and financing of lease receivables, and other customary restrictions. The Credit Agreement provides that upon an event of default the Borrowers will, at CIT's election, incur additional interest on their periodic interest payments until such event of default is cured or waived. Also, an occurrence of an event of default allows CIT to accelerate the payment of the loans and/or suspend or terminate the commitments to lend, in addition to the exercise of other legal remedies, including foreclosing on collateral. Under certain events of default relating to bankruptcy, insolvency or -2- receivership of the Borrowers or the Registrant, the obligations of CIT and Lenders to make further loans are automatically terminated and the amounts outstanding automatically become due and payable immediately. In addition, the Credit Agreement contains default provisions relating to the occurrence of certain change of control events, including (i) the failure of Richard Latour to be at all times the chief executive officer of the Registrant and TimePayment Corp. LLC and the executive vice president of Leasecomm corporation, (ii) the failure of James Jackson to be at all times the chief financial officer of the Registrant and Borrowers or (iii) certain changes to the existing composition of the board of directors of the Registrant or Borrowers (in each such instance, without the replacement within 60 days by individuals who are reasonably acceptable to CIT). The Registrant and the Borrowers have also executed and delivered certain other related agreements and documents pursuant to the Credit Agreement, including pledge, guaranty and security agreements. Copies of the Credit Agreement and related agreements are attached hereto as Exhibits 10.1 through 10.7 and are incorporated herein by reference. The Registrant issued a press release dated September 30, 2004 announcing the credit facility, which press release is attached hereto as Exhibit 99.1. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement and related documents. ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT. The information described above under "Item 1.01. Entry into a Material Definitive Agreement" is hereby incorporated herein by reference. ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES. In connection with the Credit Agreement, the Registrant issued to CIT a warrant certificate dated September 29, 2004 (the "Warrant") which entitles the holder thereof to purchase fifty thousand (50,000) shares of the Registrant's common stock at a per share purchase price of $0.825. The Warrant expires on June 10, 2007. The Warrant was issued pursuant to the terms of that certain Warrant Purchase Agreement, dated as of September 29, 2004, by and between the Registrant and CIT. Pursuant to a Registration Rights Agreement, dated as of September 29, 2004, by and between the Registrant and CIT, the Registrant has agreed to provide customary incidental registration rights with respect to the shares of the Registrant's common stock issuable under the Warrant, as well as providing that the Registrant will file with the SEC an S-3 registration statement with respect to such shares no later than December 31, 2004. Copies of the Warrant Purchase Agreement, the Warrant and the Registration Rights Agreement are attached hereto as Exhibits 10.8 through 10.10 and are incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to such agreements. -3- ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (C) EXHIBITS
EXHIBIT EXHIBIT TITLE Exhibit 10.1 Revolving Credit Agreement, dated as of September 29, 2004, by and among Leasecomm Corporation and TimePayment Corp. LLC, as Borrowers, MicroFinancial Incorporated, The CIT Group/Commercial Services, Inc., as Agent, and the other financial institutions from time to time party thereto, as Lenders. Exhibit 10.2 $30,000,000 Revolving Credit Note, dated as of September 29, 2004, issued by Leasecomm Corporation and TimePayment Corp. LLC and payable to the order of The CIT Group/Commercial Services, Inc. Exhibit 10.3 Guaranty, dated as of September 29, 2004, by MicroFinancial Incorporated in favor of The CIT Group/Commercial Services, Inc., as Agent. Exhibit 10.4 Pledge Agreement, dated as of September 29, 2004, by and between MicroFinancial Incorporated and The CIT Group/Commercial Services, Inc., as Secured Party, on behalf of the Lenders. Exhibit 10.5 Security Agreement, dated as of September 29, 2004, by and among Leasecomm Corporation, TimePayment Corp. LLC and The CIT Group/Commercial Services, Inc., as Agent. Exhibit 10.6 Intellectual Property Security Agreement, dated as of September 29, 2004, by and among Leasecomm Corporation, TimePayment Corp. LLC and The CIT Group/Commercial Services, Inc., as Agent. Exhibit 10.7 Revolving Credit Assignment of Leases, dated as of September 29, 2004, by and among Leasecomm Corporation, TimePayment Corp. LLC and The CIT Group/Commercial Services, Inc., as Agent. Exhibit 10.8 Warrant Purchase Agreement, dated as of September 29, 2004, by and between MicroFinancial Incorporated and The CIT Group/Commercial Services, Inc., as Investor. Exhibit 10.9 Warrant Certificate, dated as of September 29, 2004, for the purchase of 50,000 shares of common stock, issued by MicroFinancial Incorporated in favor of The CIT Group/Commercial Services, Inc. Exhibit 10.10 Registration Rights Agreement, dated as of September 29, 2004, by and between MicroFinancial Incorporated and The CIT Group/Commercial Services, Inc., as Holder. Exhibit 99.1 Press release dated September 30, 2004.
-4- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to the signed on its behalf by the undersigned hereunto duly authorized. Dated: October 4, 2004 MICROFINANCIAL INCORPORATED (Registrant) By: /s/ James Jackson ------------------------------------ Name: James Jackson Title: Vice President and Chief Financial Officer -5- EX-10.1 2 b51980mfexv10w1.txt EX-10.1 REVOLVING CREDIT AGREEMENT DATED 9-29-2004 EXHIBIT 10.1 EXECUTION COPY REVOLVING CREDIT AGREEMENT AMONG THE LENDERS PARTY HERETO THE CIT GROUP/COMMERCIAL SERVICES, INC., AS AGENT AND LEASECOMM CORPORATION AND TIMEPAYMENT CORP. LLC DATED: AS OF SEPTEMBER 29, 2004 TABLE OF CONTENTS SECTION I DEFINITIONS.............................................. 1 1.1 DEFINITIONS................................................. 1 1.2 RULES OF INTERPRETATION..................................... 16 SECTION II DESCRIPTION OF CREDIT................................... 17 2.1 REVOLVING CREDIT LOANS...................................... 17 2.2 THE NOTES................................................... 18 2.3 NOTICE AND MANNER OF BORROWING OR CONVERSION OF LOANS....... 18 2.4 FUNDING OF LOANS............................................ 19 2.5 INTEREST RATES AND PAYMENTS OF INTEREST..................... 20 2.6 FEES........................................................ 21 2.7 PAYMENTS AND PREPAYMENTS OF THE LOANS....................... 22 2.8 METHOD OF PAYMENT AND ALLOCATION OF PAYMENTS................ 23 2.9 INDEMNITY................................................... 24 2.10 COMPUTATION OF INTEREST AND FEES; DUE DATE................. 25 2.11 CHANGED CIRCUMSTANCES; ILLEGALITY.......................... 25 2.12 INCREASED COSTS............................................ 26 2.13 CAPITAL REQUIREMENTS....................................... 27 2.14 DEFAULTING LENDER; REPLACEMENT LENDER...................... 27 SECTION III CONDITIONS OF LOANS.................................... 28 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS....................... 28 3.2 CONDITIONS PRECEDENT TO ALL LOANS........................... 29 SECTION IV REPRESENTATIONS AND WARRANTIES.......................... 30 4.1 ORGANIZATION; QUALIFICATION; BUSINESS....................... 30 4.2 CORPORATE AUTHORITY......................................... 30 4.3 VALID OBLIGATIONS........................................... 30 4.4 CONSENTS OR APPROVALS....................................... 31 4.5 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES................ 31 4.6 FINANCIAL STATEMENTS........................................ 31 4.7 CHANGES..................................................... 31 4.8 SOLVENCY.................................................... 31 4.9 DEFAULTS.................................................... 32 4.10 TAXES...................................................... 32 4.11 LITIGATION................................................. 32 4.12 SUBSIDIARIES............................................... 32 4.13 INVESTMENT COMPANY ACT..................................... 32 4.14 COMPLIANCE................................................. 32 4.15 ERISA...................................................... 33 4.16 ENVIRONMENTAL MATTERS...................................... 33 4.17 RESTRICTIONS ON THE BORROWER............................... 34 4.18 LABOR RELATIONS............................................ 34 4.19 MARGIN RULES............................................... 34 4.20 DISCLOSURE................................................. 34 SECTION V SECTION V AFFIRMATIVE COVENANTS.......................... 35 5.1 FINANCIAL STATEMENTS........................................ 35 5.2 CONDUCT OF BUSINESS......................................... 36
5.3 MAINTENANCE AND INSURANCE................................... 36 5.4 TAXES....................................................... 37 5.5 INSPECTION.................................................. 37 5.6 MAINTENANCE OF BOOKS AND RECORDS............................ 37 5.7 USE OF PROCEEDS............................................. 37 5.8 FURTHER ASSURANCES.......................................... 38 5.9 NOTIFICATION REQUIREMENTS................................... 38 5.10 ERISA REPORTS.............................................. 38 5.11 ENVIRONMENTAL COMPLIANCE................................... 39 5.12 LENDER'S CONSULTANT........................................ 39 5.13 USA PATRIOT ACT........................................... 39 5.14 IRON MOUNTAIN AGREEMENT.................................... 39 SECTION VI FINANCIAL COVENANTS..................................... 40 6.1 CONSOLIDATED TANGIBLE CAPITAL FUNDS......................... 40 6.2 BAD DEBT ALLOWANCE.......................................... 40 6.3 LIMITS OF DEALER BUSINESS CONCENTRATIONS.................... 40 6.4 MAXIMUM LEVERAGE RATIO...................................... 40 SECTION VII NEGATIVE COVENANTS..................................... 40 7.1 INDEBTEDNESS................................................ 40 7.2 CONTINGENT LIABILITIES...................................... 41 7.3 ENCUMBRANCES................................................ 41 7.4 SPECIAL PURPOSE SUBSIDIARIES................................ 42 7.5 MERGER; CONSOLIDATION; SALE OR LEASE OF ASSETS.............. 42 7.6 SUBSIDIARY STOCK; GUARANTEES................................ 43 7.7 RESTRICTED PAYMENTS......................................... 43 7.8 PAYMENTS ON SUBORDINATED DEBT............................... 43 7.9 INVESTMENTS; PURCHASES OF ASSETS............................ 43 7.10 ERISA COMPLIANCE........................................... 44 7.11 TRANSACTIONS WITH AFFILIATES............................... 44 7.12 FISCAL YEAR................................................ 44 7.13 UNDERWRITING PROCEDURES.................................... 44 7.14 AUTHORIZATION TO FILE FINANCING STATEMENTS................. 44 SECTION VIII DEFAULTS.............................................. 45 8.1 EVENTS OF DEFAULT........................................... 45 8.2 REMEDIES.................................................... 47 SECTION IX ASSIGNMENT; PARTICIPATION............................... 48 9.1 ASSIGNMENT.................................................. 48 9.2 PARTICIPATIONS.............................................. 49 SECTION X THE AGENT................................................ 50 10.1 APPOINTMENT OF AGENT; POWERS AND IMMUNITIES................ 50 10.2 ACTIONS BY AGENT........................................... 51 10.3 INDEMNIFICATION............................................ 51 10.4 REIMBURSEMENT.............................................. 51 10.5 NON-RELIANCE ON AGENT AND OTHER LENDERS.................... 52 10.6 RESIGNATION OR REMOVAL OF AGENT............................ 52 SECTION XI MISCELLANEOUS........................................... 53
11.1 NOTICES.................................................... 53 11.2 EXPENSES................................................... 54 11.3 MARSHALLING................................................ 54 11.4 INDEMNIFICATION............................................ 54 11.5 SURVIVAL OF COVENANTS, ETC................................. 55 11.6 SET-OFF.................................................... 55 11.7 NO WAIVERS................................................. 55 11.8 JOINT AND SEVERAL.......................................... 56 11.9 AMENDMENTS, WAIVERS, ETC................................... 56 11.10 BINDING EFFECT OF AGREEMENT............................... 57 11.11 CAPTIONS; COUNTERPARTS.................................... 57 11.12 ENTIRE AGREEMENT, ETC..................................... 57 11.13 WAIVER OF JURY TRIAL...................................... 57 11.14 GOVERNING LAW............................................. 57 11.15 SEVERABILITY.............................................. 58 11.16 CONFIDENTIALITY........................................... 58 11.17 LOST NOTE, ETC............................................ 58
Schedule 1 - Commitment of the Lenders EXECUTION COPY REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT is made as of September 29, 2004 by and among LEASECOMM CORPORATION, a Massachusetts corporation having its chief executive office at 10M Commerce Way, Woburn, Massachusetts 01801 ("LEASECOMM"), TIMEPAYMENT CORP. LLC, a Delaware limited liability company having its chief executive office at 10M Commerce Way, Woburn, Massachusetts 01801 ("TIMEPAYMENT"), (Leasecomm and TimePayment are hereafter together referred to as the "BORROWER"); THE CIT GROUP/COMMERCIAL SERVICES, INC. having its head office at 1211 Avenue of the Americas, New York, New York 10036 (together with its successors, "CIT"); the other financial institutions from time to time party hereto (together with CIT, the "LENDERS"); and THE CIT GROUP/COMMERCIAL SERVICES, INC., as agent for the Lenders (in such capacity, the "AGENT"). WHEREAS, the Borrower has requested and CIT has agreed to establish a revolving loan credit facility for the Borrower. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION I DEFINITIONS 1.1 DEFINITIONS. All capitalized terms used in this Agreement or in the Notes or in any certificate, report or other document made or delivered pursuant to this Agreement (unless otherwise defined therein) shall have the meanings assigned to them below: ACCOUNTING CHANGES. See Section 1.2. ADJUSTED COST. The Original Cost less any dealer reserve, hold backs and discounts to the Borrower, sales taxes, insurance, shipping, delivery, handling and other similar charges applicable to any Equipment. AFFECTED LENDER. See Section 2.11(a). AFFILIATE. With reference to any Person, (including an individual, a corporation, a partnership, a trust and a governmental agency or instrumentality), (i) any director, officer or employee of that Person, (ii) any other person controlling, controlled by or under direct or indirect common control of that person, (iii) any other Person directly or indirectly holding 5% or more of any class of the capital stock or other equity interests (including options, warrants, convertible securities and similar rights) of that Person or (iv) any other Person 5% or more of any class of whose capital stock or other equity interests (including options, warrants, convertible securities and similar rights) is held directly or indirectly by that Person. -2- AGENT. See Preamble. AGREEMENT. This Revolving Credit Agreement, including the Exhibits and Schedules hereto, as the same may be supplemented or amended from time to time. AMPAC SUBORDINATED DEBT shall mean the $2,000,000 unsecured Subordinated Promissory Note dated as of June 10, 2004 between TimePayment Corp. LLC as borrower and AMPAC Capital Solutions, LLC as subordinated lender. BASE RATE. shall mean the rate of interest per annum announced by JP Morgan Chase Bank N.A. from time to time as its prime rate in effect at its principal office in the City of New York. Such rate is not intended to be the lowest rate charged by JP Morgan Chase Bank to its borrowers. Any change in the Base Rate of interest hereunder due to a change in the JP Morgan Chase Bank N.A. prime rate will take effect as of the first day of the following month following such change. ASSIGNEE. See Section 9.1. BASE RATE LOAN. Any Loan bearing interest determined with reference to the Base Rate plus one and one-half (1 1/2%) percent per annum. BORROWER. See Preamble. BORROWER'S ACCOUNTANTS. Vitale Caturano & Company or such other independent certified public accountants as are selected by the Borrower and reasonably acceptable to the Agent. BORROWING BASE. As at the date of any determination thereof, an amount equal to the sum of: (a) in the case of Eligible Leases which are Finance Leases (other than Security Monitoring Agreements which are agreements of the Borrowers' dealers to sell, service or install central station monitoring equipment and/or monitoring services) or in the case of Eligible Installment Sales Contracts, the lesser of (x) 100% of the Adjusted Cost of the Equipment subject to such Eligible Leases or Eligible Installment Sales Contracts, or (y) 75% of the aggregate amount of all Eligible Lease Receivables relating to all such Eligible Leases or Eligible Installment Sales Contracts, discounted to present value by a percentage equal to the Base Rate (which calculation shall not take into account rental payments due or payable under such Eligible Leases or Eligible Installment Sales Contracts beyond 60 months after the commencement date of such Eligible Leases or Eligible Installment Sales Contracts); PLUS (b) in the case of Eligible Leases which are Operating Leases (other than Rental Contracts or Security Monitoring Agreements), the lesser of (x) 75% of the aggregate Net Book Value of the Equipment subject to such Operating Leases or (y) 75% of the aggregate amount of all Eligible Lease Receivables relating to all such Eligible Leases, discounted to present value by a percentage equal to the Base Rate (which calculation shall not take into account rental -3- payments due or payable under such Eligible Leases beyond 60 months after the commencement date of such Eligible Leases); PLUS (c) in the case of Eligible Installment Finance Contracts, an amount equal to 75% of the aggregate amount of all Eligible Lease Receivables relating to all such Eligible Installment Finance Contracts, discounted to present value by a percentage equal to the Base Rate (which calculation shall not take into account payments due or payable under such Eligible Installment Finance Contracts beyond 60 months after the commencement date of such Eligible Installment Finance Contracts); MINUS (d) Borrowing Base Reserves, if any, at the date of determination of the Borrowing Base; PROVIDED, HOWEVER, that notwithstanding the foregoing, there shall be excluded from the Borrowing Base (x) any Lease or Eligible Installment Finance Contract to the extent that the Receivables due pursuant to such Lease or Eligible Installment Finance Contract, when added to the Receivables due pursuant to all other Leases and Eligible Installment Finance Contracts with lessees and account debtors in the same state would exceed 20% of Gross Lease Installments, (y) any Lease or Eligible Installment Finance Contract to the extent that the Receivables due pursuant to such Lease or Eligible Installment Finance Contract, when added to all other Receivables due from the same account debtor, would exceed the lesser of (i) $1,000,000.00, or (ii) one percent (1%) of the Commitments at such time (for purposes hereof, determination of the calculation shall be made on a lease by lease and contract by contract basis but the Borrowing Base shall include the aggregate of all such calculations), and (z) all Leases or Eligible Installment Finance Contracts generated by or through a particular Dealer if fifty (50%) percent of the said Leases or Eligible Installment Finance Contracts generated by or through said Dealer are greater than ninety (90) days past due. Provided further, however, that notwithstanding the foregoing, the Borrowing Base shall not contain more than 15% in the aggregate of Eligible Leases and Eligible Finance Contract with a credit grade of Q, U or W. BORROWING BASE MATURITY DATE. September 29, 2007. BORROWING BASE REPORT. A report of a Borrowing Computation satisfactory to the Agent in the form annexed hereto as EXHIBIT G and signed by any Responsible Officer. CIT shall have the right, exercisable from time to time, to make reasonable changes to the form of the Borrowing Base report upon thirty (30) days advance written notice. BORROWING BASE RESERVES. At the time of any determination of the Borrowing Base, such reserves as the Agent may from time to time determine to establish, in the exercise of its reasonable credit judgment based upon its review of the financial information delivered pursuant to Section 5.1, the results of inspection and reviews of books and records as contemplated by Section 5.5 and other information concerning the business, operations and prospects of the Borrower. BORROWING COMPUTATION. See Section 2.4(c). BUSINESS DAY. (i) For all purposes other than as covered by clause (ii) below, any day other than a Saturday, Sunday or legal holiday on which banks in New York, New York are -4- open for the conduct of a substantial part of their commercial banking business; and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, LIBOR Loans, any day that is a Business Day described in clause (i) and that is also a day for trading by and between banks in U.S. Dollar deposits in the interbank Eurodollar market. CAPITAL EXPENDITURES. For any period, the aggregate amount of all payments made by any Person directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment which, in accordance with GAAP, would be added as a debit to the fixed asset account of such Person, including, without limitation, Capitalized Lease Obligations, but excluding therefrom the purchase of Equipment as inventory for the purpose of being leased under an Operating Lease, expenditures made with the net proceeds of insurance recoveries or exchange of equipment on a trade-in basis. CAPITALIZED LEASE OBLIGATIONS. As to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, consistently applied. CERTIFICATE OF EXEMPTION. See Section 2.8. CLOSING DATE. The first date on which the conditions set forth in Sections 3.1 and 3.2 have been satisfied and any Loans are to be made hereunder. CODE. The Internal Revenue Code of 1986 and the rules and regulations thereunder, collectively, as the same may from time to time be supplemented or amended and remain in effect. COLLATERAL. All of the property, rights and interests of the Borrower and its Subsidiaries that are or are intended to be subject to the security interests and liens created by the Security Documents. COMMITMENT. With respect to any Lender, the maximum dollar amount which such Lender has agreed to loan to the Borrower upon the terms and subject to the conditions of this Agreement, initially as set forth on SCHEDULE 1 attached hereto, as such Lender's Commitment may be modified from time to time as provided in this Agreement, including termination or reduction of such Commitment in accordance with Sections 2.1 and 8.2 hereof. SCHEDULE 1 shall be amended from time to time to reflect any changes in the Commitments of the Lenders. CONSOLIDATED TANGIBLE CAPITAL FUNDS. The sum, with respect to the Parent and its Subsidiaries, including the Borrower, on a consolidated basis, of (a) the capital stock, (b) additional paid-in capital, (c) retained earnings and (d) Subordinated Debt LESS (x) net organizational costs and net good will, and (y) treasury stock. -5- CONSUMER FINANCE LEASE. A Finance Lease between the Borrower, as lessor, and a lessee who is an individual and who takes under the Lease primarily for personal, family or household purposes. DEALER. A Person who (i) is domiciled in the United States of America, (ii) is not the subject of and has not taken any action described in subsections (f) and (g) of Section 8.1 and (iii) is engaged in the business of selling equipment or assigning agreements, contracts or leases and related equipment in the United States of America. DEALER AGREEMENT. An agreement between the Borrower and a Dealer, substantially in the form of EXHIBIT F-1 hereto, setting forth the rights and obligations of each with respect to an agreement, contract or lease that has been assigned by such Dealer to the Borrower and which has not been modified, amended, restated or otherwise rewritten in any respect more than two times. DEBT ISSUE COSTS. Those amounts characterized as "debt issue costs" in accordance with GAAP on the Initial Financial Statements or the most recent financial statements delivered pursuant to Section 5.1(a) or (b) hereof. DEFAULT. An Event of Default or event or condition that, but for the requirement that time elapse or notice be given, or both, would constitute an Event of Default. DEFAULTING LENDER. See Section 2.14 DRAWDOWN DATE. The Business Day on which any Loan is made or is to be made. ELIGIBLE INSTALLMENT SALES CONTRACT. Any installment sales contract, purchase money security agreement or other similar chattel paper (including any and all schedules, supplements and amendments thereto and modifications thereof) entered into by the Borrower or its predecessor in interest as seller and a third party as buyer in connection with a sale of Equipment. ELIGIBLE INSTALLMENT FINANCE CONTRACT. An Installment Finance Contract: (a) which is in full force and effect; (b) the assignee under which is the Borrower; (c) to which the Borrower has good and marketable title, and which is assignable by the Borrower; (d) which is non-cancelable and provides that the third party obligor's obligations thereunder are absolute and unconditional, and not subject to defense, deduction, setoff or claim and as to which no defenses, setoffs, claims or counterclaims exist or have been asserted, the form of which shall be substantially in accordance with EXHIBIT H annexed hereto; -6- (e) which is not subject to any Encumbrance other than that in favor of the Agent for the benefit of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; (f) the third party obligor under which (i) is domiciled in the United States of America, (ii) is not the subject of and has not taken any action described in subsections (f) and (g) of Section 8.1 and (iii) is not otherwise been determined by the Agent to be unacceptable; (g) which is in a form reasonably acceptable to the Agent; (h) under which no payment is more than 90 days past due; (i) under which no default has occurred other than to the extent permissible hereunder; and (j) which has not been modified, amended, restated or otherwise rewritten more than two times. ELIGIBLE INTEREST RATE CONTRACTS. Interest rate swap agreements, interest rate collar agreements, options on any of the foregoing and any other agreements or arrangements designed to provide protection against fluctuations in interest rates, in each case purchased by the Borrower from a Lender with respect to Loans and reasonably acceptable to the Agent. ELIGIBLE LEASE. A Lease: (a) Which is in full force and effect; (b) The lessor under which is the Borrower; (c) Which is assignable by the lessor thereunder; (d) Which is non-cancelable and provides that the lessee's obligations thereunder are absolute and unconditional, and not subject to defense, deduction, set-off or claim and as to which no defenses, set-offs, claims or counterclaims exist or have been asserted; (e) Which is not subject to any Encumbrance other than that in favor of the Agent for the benefit of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; (f) Which is a Finance Lease or Operating Lease; (g) The lessee under which (i) is domiciled in the United States of America, (ii) is not the subject of and has not taken any action described in subsections (f) and (g) of Section 8.1 and (iii) has not otherwise been determined by the Agent to be unacceptable; (h) Which is in a form substantially in accordance with EXHIBIT H attached hereto; (i) Under which no payment is more than 90 days past due; -7- (j) Under which no default has occurred other than to the extent permissible under clause (i) immediately above; (k) Which is not a Consumer Finance Lease; (l) Which, if an Operating Lease, has a present value of all Fixed Rentals thereunder as of the date such Operating Lease is to be included in the Borrowing Base of at least 75% of the Original Cost of the Equipment leased thereunder; and (m) which has not been modified, amended, restated or otherwise rewritten with respect to terms of payment or in any other material respect more than two times. ELIGIBLE LEASE RECEIVABLES. As at the date of determination thereof, the unpaid balance of Receivables through the applicable term under an Eligible Lease, an Operating Lease an Eligible Installment Sales Contract or an Eligible Installment Finance Contract. ENCUMBRANCES. See Section 7.3. ENVIRONMENTAL LAWS. Any and all applicable federal, state and local environmental, health or safety statutes, laws, regulations, rules and ordinances (whether now existing or hereafter enacted or promulgated), of all governmental agencies, bureaus or departments to the extent the foregoing may now or hereafter have jurisdiction over the Borrower or any of its Subsidiaries and all applicable judicial and administrative and regulatory decrees, judgments and orders, including common law rulings and determinations, relating to injury to, or the protection of, real or personal property or human health or the environment, including, without limitation, all requirements pertaining to reporting, licensing, permitting, investigation, remediation and removal of emissions, discharges, releases or threatened releases of Hazardous Materials into the environment or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of such Hazardous Materials. EQUIPMENT. All present and hereafter acquired equipment (as defined in the UCC) including, without limitation, all machinery, equipment, furnishings and fixtures, and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto and all proceeds thereof of whatever sort, and all guarantees, warranties and rights against manufacturers under purchase agreements or otherwise and other parties in connection therewith, all maintenance records and contracts relating thereto, and all insurance thereon and all insurance proceeds payable in connection therewith. ERISA. The Employee Retirement Income Security Act of 1974 and the rules and regulations thereunder, collectively, as the same may from time to time be supplemented or amended and remain in effect. ERISA AFFILIATE. Any trade or business, whether or not incorporated, that is treated as a single employer with the Borrower under Section 414(b), (c), (m) or (o) of the Code and Section 4001(a)(14) of ERISA. -8- ERISA EVENT. (a) Any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Pension Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Pension Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (e) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Pension Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Pension Plan; (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Pension Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability (as defined in Part I of Subtitle E of Title IV of ERISA) with respect to any Multiemployer Plan or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the occurrence of a "Prohibited Transaction" with respect to which the Borrower or any of the Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any such Subsidiary could otherwise be liable; and (i) any other event or condition with respect to a Plan or Multiemployer Plan that could reasonably be expected to result in liability of the Borrower. EVENT OF DEFAULT. Any event described in Section 8.1. FINANCE LEASE. A Lease characterized as a "finance lease" in accordance with GAAP. FIXED RENTALS. The periodic rental payments under a Lease, the amounts of which are fixed and do not vary from time to time based on usage, cash flow or any other factor. FOREIGN LENDER. See Section 2.9. GAAP. Generally accepted accounting principles, consistently applied. GROSS LEASE INSTALLMENTS. The aggregate Receivables due to the Borrower from all leases of equipment. GUARANTEES. As applied to the Parent and its Subsidiaries, all guarantees, endorsements or other contingent or surety obligations with respect to obligations of others whether or not reflected on the consolidated balance sheet of the Borrower and their Subsidiaries, including any obligation to furnish funds, directly or indirectly (whether by virtue of partnership arrangements, by agreement to keep-well or otherwise), through the purchase of goods, supplies or services, or by way of stock purchase, capital contribution, advance or loan, or to enter into a contract for any of the foregoing, for the purpose of payment of obligations of any other Person. -9- HAZARDOUS MATERIAL. Any substance (i) the presence of which requires or may hereafter require notification, investigation or remediation under any Environmental Law; (ii) which is or becomes defined as a "hazardous waste", "hazardous material" or "hazardous substance" or "pollutant" or "contaminant" under any present or future Environmental Law or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and any applicable local statutes and the regulations promulgated thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and which is or becomes regulated pursuant to any Environmental Law by any governmental authority, agency, department, commission, board, agency or instrumentality of the United States, any state of the United States, or any political subdivision thereof to the extent any of the foregoing has or had jurisdiction over the Borrower; or (iv) without limitation, which contains gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated biphenyls ("PCB's"). INDEBTEDNESS. As applied to any Person, all (i) liabilities or obligations, direct and contingent, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person at the date as of which Indebtedness is to be determined, including, without limitation, lease obligations required to be shown as a liability on the balance sheet of the lessee in accordance with generally accepted accounting principles; (ii) liabilities or obligations of others for which such Person is directly or indirectly liable, by way of guaranty (whether by direct guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to purchase or advance or keep in funds or other agreement having the effect of a guaranty) or otherwise; (iii) liabilities or obligations secured by liens on any assets of such person, whether or not such liabilities or obligations shall have been assumed by it; and (iv) non-cancelable liabilities under all Operating Leases. INITIAL FINANCIAL STATEMENTS. See Section 4.6. INSTALLMENT FINANCE CONTRACT. Any agreement (including any and all schedules, supplements and amendments thereto and modifications thereof) entered into by the Borrower or its predecessor in interest as a service provider and a third party as buyer in connection with the rendering of services to such third party. INTEREST EXPENSE. For any period, the consolidated interest expense (including imputed interest on capitalized lease obligations) and amortized debt discount on Indebtedness of the Parent and its Subsidiaries for such period. INTEREST PERIOD. With respect to each LIBOR Loan, the period commencing on the date of the making or continuation of or conversion to such LIBOR Loan and ending one (1), two (2), three (3) or six (6) months thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Conversion, PROVIDED that: (i) any Interest Period (other than an Interest Period determined pursuant to clause (iii) below) that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day, except that with respect to any Interest Period for a LIBOR Loan, if such Business Day falls in the next calendar month, such Interest Period shall end on the immediately preceding Business Day; -10- (ii) any Interest Period for a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iii) below, end on the last Business Day of a calendar month; (iii) any Interest Period with respect to a Revolving Credit Loan that would otherwise end after the Borrowing Base Maturity Date shall end on the Borrowing Base Maturity Date; (iv) notwithstanding clauses (iii) and (iv) above, no Interest Period for a LIBOR Loan shall have a duration of less than one month, and if any Interest Period applicable to a LIBOR Loan would be for a shorter period, such Interest Period shall not be available hereunder; and (v) for purposes of determining the availability of Interest Periods, such Interest Periods shall be deemed available if (x) J.P. Morgan Chase Bank quotes an applicable rate or CIT determines LIBOR, as provided in the definition of LIBOR, (y) the LIBOR determined by J.P. Morgan Chase Bank or CIT will adequately and fairly reflect the cost of maintaining or funding its loans bearing interest at LIBOR, for such Interest Period, and (z) such Interest Period will end on or before the earlier of Anniversary Date or the last day of the then current term of this Financing Agreement. If a requested Interest Period shall be unavailable in accordance with the foregoing sentence, the Company shall continue to pay interest on the Obligations at the applicable per annum at the Base Rate. INVENTORY. All of the Borrower's present and hereafter acquired inventory (as defined in the UCC) and including, without limitation, all merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods and materials used or usable in manufacturing, processing, packaging or shipping same in all stages of production from raw materials through work-in-process to finished goods and all proceeds thereof of whatever sort. INVESTMENT. As applied to the Borrower and its Subsidiaries, the purchase or acquisition of any share of capital stock, partnership interest, evidence of indebtedness or other equity security of any other Person (including any Subsidiary), any loan, advance or extension of credit (excluding Accounts Receivable arising in the ordinary course of business) to, or contribution to the capital of, any other Person (including any Subsidiary), any real estate held for sale or investment, any securities or commodities futures contracts held, any other investment in any other Person (including any other Borrower or any Subsidiary), and the making of any commitment or acquisition of any option to make an Investment. LEASE. Any lease agreement, installment sales contract or other agreement (including any and all schedules, supplements and amendments thereon and modifications thereof) entered into or acquired by the Borrower or the Parent as lessor or seller with respect to Equipment. LENDERS. CIT, the other financial institutions parties hereto and listed on Schedule 1 attached hereto and each other Person that may after the date hereof become an Assignee and, -11- thereby, a party to this Agreement as a "Lender" hereunder, but from and after the effective date that any Person shall have assigned its entire Commitment pursuant to Section 9.1, "Lenders" shall no longer include such Person. LIBOR LOAN. Any Loan bearing interest at a rate determined with reference to the LIBOR Rate. LIBOR RATE. At any time of determination, and subject to availability, for each applicable Interest Period, a variable rate of interest equal to: (a) at CIT's election (i) the applicable LIBOR quoted to CIT by the J.P. Morgan Chase Bank (or any successor thereof), or (ii) the rate of interest determined by CIT at which deposits in U.S. dollars are offered for the relevant Interest Period based on information presented on Telerate Systems at Page 3750 as of 11:00 A.M. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period, provided that, if at least two such offered rates appear on the Telerate System at Page 3750 in respect of such Interest Period, the arithmetic mean of all such rates (as determined by CIT) will be the rate used; divided by (b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of Eurocurrency Reserve Requirements in effect on the day which is two (2) Business Days prior to the beginning of such Interest Period. LIBOR RESERVE PERCENTAGE. For any Interest Period, the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, established by the Board of Governors of the Federal Reserve System and any other banking authority, domestic or foreign, to which any Lender is subject with respect to "Eurocurrency Liabilities" (as defined in regulations issued from time to time by such Board of Governors). The LIBOR Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any such reserve percentage. LOAN DOCUMENTS. This Agreement, the Notes, the Security Documents, the Parent Guarantee, the Warrants, the Registration Rights Agreement, together with any agreements, instruments or documents executed and delivered pursuant to or in connection with any of the foregoing. LOANS. The Revolving Credit Loans made or to be made by the Lenders to the Borrower pursuant to Section II of this Agreement. LONDON BANKING DAYS. Any day other than a Saturday, Sunday or legal holiday on which banks in London, England are open for the conduct of a substantial part of their banking business and that is also a day for trading by and between banks in U.S. Dollar deposits in the interbank Eurodollar market. MAJORITY LENDERS. (a) As of the Closing Date and as of any date as of which there are less than four Lenders, the holders of seventy-five percent (75%) of the outstanding principal amount of the Loans on such date; (b) as of any date as of which there are four (4) Lenders, the holders of sixty-six and two thirds percent (66 2/3%) of the outstanding principal amount of the Loans on such date; and (c) as of any date as of which there are more than four Lenders, the holders of fifty-one (51%) percent of the outstanding principal amount of the Loans on such date. -12- MATERIAL ADVERSE EFFECT means, with respect to any event, occurrence, circumstance or other matter of whatever nature, a material adverse effect on (a) the business, assets, operations or financial condition of the Borrower, its Parent or Subsidiaries (if any) taken as a whole (exclusive of events, occurrences, circumstances and other matters resulting from changes in general economic, civil or political conditions, legal standards or regulatory conditions); or (b) the ability of the Borrower, its Parent or Subsidiaries (if any) to perform any material obligations under any Loan Document. MAXIMUM LEVERAGE RATIO. The ratio of Total Outstandings on a consolidated basis (excluding Subordinated Debt) to the sum of the capital stock, additional paid in capital, retained earnings and Subordinated Debt. MULTIEMPLOYER PLAN. Any plan which is a Multiemployer Plan as defined in Section 4001(a)(3) of ERISA. NET BOOK VALUE. At a particular date, as to any Eligible Equipment or Eligible Inventory, the Original Cost of such Eligible Equipment or Eligible Inventory less aggregate depreciation thereon calculated from the date of acquisition thereof in accordance with the Borrower's standard accounting and depreciation practices using the straight line method over the estimated life of such Eligible Equipment or Eligible Inventory, with salvage value determined by the Borrower in accordance with such practices. NON-RECOURSE INDEBTEDNESS. Indebtedness of the Borrower or the Parent, as the case may be, for which the remedy for nonpayment or non-performance of any obligation or any default in respect thereof is strictly and absolutely limited to any collateral securing such Indebtedness and in respect of which neither the Borrower nor the Parent is subject to any personal liability. NOTE RECORD. Any internal record, including a computer record, maintained by any Lender with respect to any Loan. NOTES. The Revolving Credit Notes. NOTICE OF BORROWING OR CONVERSION. The notice, substantially in the form of EXHIBIT B hereto, to be given by the Borrower to the Agent to request a Loan or to convert an outstanding Loan of one Type into a Loan of another Type, in accordance with Section 2.4. OBLIGATIONS. Any and all obligations of the Borrower to the Agent and the Lenders of every kind and description pursuant to or in connection with the Loan Documents (including, without limitation, in connection with Revolving Credit Loans) direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument, if any, and including obligations to perform acts and refrain from taking action as well as obligations to pay money. OPERATING LEASE. A Lease characterized as an "operating lease" in accordance with GAAP. -13- ORIGINAL COST. The Borrower's purchase price for any Equipment as invoiced by the supplier thereof. PARENT. MicroFinancial Incorporated (f/k/a Boyle Leasing Technologies, Inc.), a Massachusetts corporation, and the sole stockholder of the Borrower. PARENT GUARANTEE. The Guaranty made by the Parent in favor of the Agent for the benefit of the Lenders, dated the Closing Date and guaranteeing all Obligations. PARENT STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement, dated as of the date hereof, granted to the Agent by the Parent as security for the Parent's obligations in respect of the Parent Guaranty. PARTICIPANT. See Section 9.2. PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. PENSION PLAN. Any Plan which is an "employee pension benefit plan" (as defined in ERISA), other than a Multiemployer Plan that is subject to Section 412 of the Code or Section 302 of ERISA. PERMITTED ENCUMBRANCES. See Section 7.3. PERSON. Any individual, corporation, partnership, trust, unincorporated association, business or other legal entity, any government or governmental agency or political subdivision thereof, a court, and any other legal entity, whether acting in an individual, fiduciary or other capacity. PLAN. Any "employee pension benefit plan" or "employee welfare benefit plan" (each as defined in ERISA) maintained by the Borrower or any Subsidiary. PROHIBITED TRANSACTION. Any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code to which a statutory, regulatory or administrative exemption is not applicable. QUALIFIED INVESTMENTS. As applied to the Borrower and its Subsidiaries, investments in (i) notes, bonds or other obligations of the United States of America or any agency thereof that as to principal and interest constitute direct obligations of or are guaranteed by the United States of America; (ii) certificates of deposit, demand deposit accounts or other deposit instruments or accounts maintained in the ordinary course of business with banks or trust companies organized under the laws of the United States or any state thereof that have capital and surplus of at least $100,000,000, (iii) commercial paper that is rated not less than prime-one or A-1 or their equivalents by Moody's Investors Service, Inc. or Standard & Poor's -14- Corporation, respectively, or their successors, (iv) any repurchase agreement secured by any one or more of the foregoing, and (v) advances to employees for employee loans or for business related expenses to be incurred in the ordinary course of business and consistent with past practices in an amount not to exceed $500,000 in the aggregate outstanding at any one time, PROVIDED that no advances or loan to any single employee shall exceed $100,000 in the aggregate. RECEIVABLES. Any of the Borrower's accounts, accounts receivable, notes, bills, drafts, acceptances, instruments, documents, chattel paper and other debts, obligations and liabilities in whatever form owing to the Borrower from any Person for goods sold or leased or for services rendered by the Borrower or its predecessor in interest, or however otherwise established or created, all guaranties and security therefor, any right, title and interest of the Borrower in the goods or services which gave rise thereto, including rights to reclamation and stoppage in transit and any rights of an unpaid seller of goods or services; whether any of the foregoing be now existing or hereafter arising, now or hereafter received by or owing or belonging to the Borrower. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement, dated as of the date hereof, by and among the Parent and the Holders (as defined therein). RENTAL CONTRACT. A Lease which is month-to-month and which is cancelable. RESPONSIBLE OFFICER. The chief financial officer of the Borrower and any other officer of the Borrower designated by the chief financial officer to sign Borrowing Base Reports and Notices of Borrowing or Conversion. RESTRICTED PAYMENT. Any dividend, distribution, loan, advance, guaranty, extension of credit or other payment, whether in cash or property to or for the benefit of any Person who holds an equity interest in the Borrower or any of its Subsidiaries, whether or not such interest is evidenced by a security, and any purchase, redemption, retirement or other acquisition for value of any capital stock of the Borrower or any of its Subsidiaries, whether now or hereafter outstanding, or of any options, warrants or similar rights to purchase such capital stock or any security convertible into or exchangeable for such capital stock. REVOLVING CREDIT ASSIGNMENT OF LEASES. The assignment of leases, dated the Closing Date, by the Borrower in favor of the Agent for the benefit of the Lenders, as amended, supplemented and in effect from time to time, and any supplement thereto in the form of Exhibit A to the Revolving Credit Assignment of Leases as executed and delivered by the Borrower and the Agent from time to time. In the event the Iron Mountain Agreement (or such other replacement agreement reasonably acceptable to the Agent) is no longer in effect, or after an Event of Default, thereafter at the Agent's option exercisable from time to time, said Revolving Credit Assignment of Leases shall require each Lease to bear a legend approved by Agent indicating such Lease is assigned to Agent. REVOLVING CREDIT LOAN. See Section 2.1(a) hereof. REVOLVING CREDIT NOTES. See Section 2.2. -15- SECURITY AGREEMENT. The security agreement, dated the Closing Date, between the Borrower and the Agent, as amended, supplemented and in effect from time to time, and any supplement thereto in the form of Exhibit A to the Security Agreement as executed and delivered by the Borrower and the Agent from time to time. SECURITY DOCUMENTS. The Revolving Credit Assignment of Leases, the Security Agreement (All Assets), Security Agreement - Intellectual Property, the Parent Security Agreement, the Parent Stock Pledge, and any additional documents evidencing or perfecting the Agent's lien on the Collateral. SPECIAL PURPOSE SUBSIDIARY. A subsidiary which is a special purpose corporation for the securitization and financing of lease receivables, none of the assets of which constitutes any part of the Collateral. SUBORDINATED DEBT. Indebtedness of the Parent of any of its Subsidiaries, including the Borrower, which is expressly subordinated and made junior to the payment and performance in full of the Obligations and the Guaranteed Obligations (as defined in the Parent Guaranty) including, without limitation, (a) those certain subordinated capital notes of the Parent issued to those subordinated note holders listed Exhibit C hereto, and (b) the AMPAC Subordinated Debt. SUBSIDIARY. Any corporation, association, joint stock company, business trust or other similar organization of which 50% or more of the ordinary voting power for the election of a majority of the members of the board of directors or other governing body of such entity is held or controlled by the Parent, the Borrower or a Subsidiary of the Parent or Borrower; or any other such organization the management of which is directly or indirectly controlled by the Parent, the Borrower or a Subsidiary of the Parent or Borrower through the exercise of voting power or otherwise; or any joint venture, whether incorporated or not, in which the Parent or Borrower has a 50% ownership interest. SUBSIDIARY GUARANTEES. Guarantees of all Obligations, in form and substance satisfactory to the Agent, made by each Subsidiary of the Borrower other than a Special Purpose Subsidiary. TOTAL COMMITMENT. The sum of the Commitments of the Lenders as in effect from time to time, as such Commitments may be modified from time to time, including termination or reduction of such amount in accordance with Sections 2.1 and 8.2 hereof. It is understood and agreed that CIT will commit to fund $30,000,000.00 pursuant to the terms of this Agreement and as Agent will, on a best efforts basis, attempt to secure commitments for an additional lender or lenders in the aggregate additional amount of up to $20,000,000.00. In no instance shall CIT be required to fund in excess of $30,000,000.00. TOTAL OUTSTANDINGS. At any time, the aggregate outstanding principal balance of the Loans at the time. TYPE. A Base Rate Loan or a LIBOR Loan. -16- UCC. The Uniform Commercial Code as enacted in any state of the United States or in the District of Columbia or the United States Virgin Islands insofar as any such statute, as in effect from time to time, may be relevant to the creation, perfection, continuation and enforcement of Encumbrances on Collateral. 1.2 RULES OF INTERPRETATION. (a) All terms of an accounting character used herein but not defined herein shall have the meanings assigned thereto by GAAP applied on a consistent basis. All calculations for the purposes of Section VI hereof shall be made in accordance with GAAP, consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. If any "Accounting Changes" (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in this Agreement or any other Loan Document, then the Borrower, the Agent and the Lenders agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrower's and its Subsidiaries' financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made; provided, however, that the agreement of the Majority Lenders to any required amendments of such provisions shall be sufficient to bind all Lenders. "Accounting Changes" means (i) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (ii) changes in accounting principles concurred in by the Borrower's certified public accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and EITF 88 16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (iv) the reversal of any reserves established as a result of purchase accounting adjustments. If the Agent, the Borrower and the Majority Lenders agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change. If the Agent, the Borrower and the Majority Lenders cannot agree upon the required amendments within thirty (30) days following the date of implementation of any Accounting Change, then (i) all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shall be made without regard to the underlying Accounting Change, and (ii) the Borrower shall deliver to the Agent and the Lenders (at the same time the applicable financial statements are required to be delivered hereunder) a reconciliation showing the differences between (a) such financial statements prepared in accordance with GAAP giving effect to such Accounting Change, and (b) such financial statements prepared in accordance with GAAP without regard to the underlying Accounting Change. -17- (b) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented and in effect from time to time in accordance with its terms and the terms of this Agreement. (c) The singular includes the plural and the plural includes the singular. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) The words "include", "includes" and "including" are not limiting. (f) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. (g) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them in such Uniform Commercial Code. SECTION II DESCRIPTION OF CREDIT 2.1 REVOLVING CREDIT LOANS. (a) Upon the terms and subject to the conditions set forth in this Agreement, and in reliance upon the representations, warranties and covenants of the Borrower herein, each of the Lenders agrees, severally and not jointly, to make revolving credit loans (the "REVOLVING CREDIT LOANS") to the Borrower at the Borrower's request from time to time from and after the Closing Date and prior to the Borrowing Base Maturity Date, PROVIDED that the Total Outstandings (after giving effect to all requested Revolving Credit Loans) shall not at any time exceed the lesser of (i) the Borrowing Base and (ii) the Total Commitment, and PROVIDED, FURTHER that the sum of the aggregate principal amount of outstanding Revolving Credit Loans made by each Lender shall not at any time (after giving effect to all requested Revolving Credit Loans) exceed such Lender's Commitment, and PROVIDED, FURTHER, that the sum of the aggregate principal amount of outstanding Revolving Credit Loans based on Eligible Leases having original terms of more than 60 months shall not at any time (after giving effect to all requested Revolving Credit Loans) exceed 15% of the aggregate principal amount of all outstanding Revolving Credit Loans. Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay and prepay amounts, up to the limits imposed by this Section 2.1, from time to time between the Closing Date and the Borrowing Base Maturity Date upon request given to the Agent pursuant to Section 2.4. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in Section 3.1, in the case of the initial Revolving Credit Loans to be made on the Closing Date, and Section 3.2 in the case of all other Revolving Credit Loans, have been satisfied as of the date of such request. Additionally, at the Closing Date only, the Borrower shall have excess Revolving Loan availability, of at least $5,000,000.00. -18- (b) No LIBOR Loan shall be requested or made for less than $500,000 in principal amount and in integral multiples of $100,000 in excess of such minimum amount. No more than six (6) LIBOR Loans may be outstanding at any time. (c) Upon the terms and subject to the conditions of this Agreement, the Borrower may convert all or any part (in integral multiples of $500,000) of any outstanding Loan into a Loan of another Type on any Business Day (which, in the case of a conversion of an outstanding LIBOR Loan shall be the last day of the Interest Period applicable to such LIBOR Loan). The Borrower shall give the Agent prior notice of each such conversion (which notice shall be effective upon receipt) in accordance with Section 2.4. (d) All Commitments shall automatically terminate at 2:30 p.m. New York time on the Borrowing Base Maturity Date. 2.2 THE NOTES. The Revolving Credit Loans shall be evidenced by separate promissory notes for each Lender, each such note to be in substantially the form of EXHIBIT A hereto, dated as of the Closing Date and completed with appropriate insertions (each such note being referred to herein as a "Revolving Credit Note" and collectively as the "Revolving Credit Notes"). One Revolving Credit Note shall be payable to the order of each Lender in a principal amount equal to such Lender's highest possible Commitment. The Borrower irrevocably authorizes each of the Lenders to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal on the Revolving Credit Notes, an appropriate notation on its Note Record reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on the Note Records shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lenders, but the failure to record, or any error in so recording, any such amount on any Lender's Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due. 2.3 NOTICE AND MANNER OF BORROWING OR CONVERSION OF LOANS. (a) Whenever the Borrower desires to obtain or continue a Loan hereunder or convert an outstanding Loan of one Type into a Loan of another Type, the Borrower shall give the Agent a written Notice of Borrowing or Conversion (or a telephonic notice promptly confirmed by a written Notice of Borrowing or Conversion), which Notice shall be irrevocable and which must be received no later than 2:00 p.m. Boston time (i) one Business Day before the day on which the requested Loan is to be made or continued as or converted to a Base Rate Loan, and (ii) three Business Days before the day on which the requested Loan is to be made or continued as or converted to a LIBOR Loan. Such Notice shall specify (A) the effective date and amount of each such Loan or portion thereof requested to be made, continued or converted, subject to the limitations set forth in this Agreement, (B) the interest rate option requested to be applicable thereto, and (C) the duration of the applicable Interest Period, if any (subject to the provisions of the definition of the term "Interest Period"). If such Notice fails to specify the interest rate option to be applicable to the requested Loan, then the Borrower shall be deemed to have requested a Base Rate Loan. If such written confirmation of any telephonic notification differs -19- in any material respect from the action taken by the Agent, the records of the Agent shall control absent manifest error, and shall be accompanied by a Borrowing Base Report. If the Agent receives a Notice of Borrowing or Conversion after the time specified in subsection (a) above, such Notice shall not be effective. In no event shall the Borrower be permitted to request a LIBOR LOAN or renew or convert to a LIBOR LOAN if an Event of Default has occurred under any of the Loan Documents. (b) Subject to the provisions of the definition of the term "Interest Period" herein, the duration of each Interest Period for a LIBOR Loan shall be as specified in the applicable Notice of Borrowing or Conversion. If no Interest Period is specified in a Notice of Borrowing or Conversion with respect to a requested LIBOR Loan, then the Borrower shall be deemed to have selected an Interest Period of one month's duration for a requested LIBOR Loan. If the Agent does not receive an effective Notice of Borrowing or Conversion with respect to an outstanding LIBOR Loan, or if, when such Notice must be given prior to the end of the Interest Period applicable to such outstanding Loan, the Borrower shall have failed to satisfy any of the conditions hereof, the Borrower shall be deemed to have elected to convert such outstanding LIBOR Loan in whole into a Base Rate Loan on the last day of the then current Interest Period with respect thereto. (c) Each Notice of Borrowing or Conversion requesting borrowing of a Revolving Credit Loan shall be accompanied by a Borrowing Base Report containing a computation by the Borrower in form satisfactory to the Agent (hereinafter referred to as a "BORROWING COMPUTATION") certified by a Responsible Officer, setting forth (i) a complete description of the Equipment to be acquired or financed with respect to which such Revolving Credit Loan has been requested, (ii) the Original Cost and Adjusted Cost of such Equipment, (iii) a complete description of the Leases covering such Equipment, (iv) the name of the lessees under such Leases, (v) a statement that such Equipment and Leases, subject to the acceptance by the Agent of such Equipment or the applicable lessee, satisfy the conditions to qualify as Eligible Equipment Leases or Eligible Rental Contracts, respectively, and (vi) such other information with respect to such Equipment and Leases as is reasonably requested by the Agent in the Borrowing Computation or otherwise. Within two Business Days after receipt of such information in the form indicated above, the Agent shall notify the Borrower if any of such Equipment or lessees are unacceptable to the Agent. In the event the Agent does not so notify the Borrower, the Agent shall be deemed to have accepted such Equipment and lessees. The acceptance or deemed acceptance of any lessee under any Lease at any one time by the Agent shall not operate as an acceptance of such lessee at any future time. 2.4 FUNDING OF LOANS. (a) PRO RATA FUNDING. All Loans shall be made by the Lenders PRO RATA in accordance with their respective Commitments, PROVIDED, HOWEVER that the failure of any Lender to make any Loan shall not relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). (b) NOTICE. The Agent shall promptly notify the Lenders of each Notice of Borrowing or Conversion received pursuant to Section 2.4 and of each Lender's portion of the -20- requested Loan. Not later than 1:00 p.m. (New York time) on the proposed Drawdown Date of such Loan, each Lender will make available to the Agent, at its head office, in immediately available funds, the amount of such Lender's PRO RATA share of the amount of such requested Loan. Upon receipt by the Agent of such amount, and upon receipt of the documents required by Section 3 and the reasonable satisfaction of the other conditions set forth therein (to the extent applicable) the Agent shall make available to the Borrower the balance of such Loan. The failure or refusal of any Lender to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its PRO RATA share of any requested Loans shall not relieve any other Lender from its several obligation hereunder to make available to the Agent the amount of such other Lender's PRO RATA share of any requested Loans. (c) ADVANCE BY AGENT. The Agent may, unless notified to the contrary by any Lender prior to a Drawdown Date, assume that each Lender has made available to the Agent on such Drawdown Date the amount of such Lender's PRO RATA share of the Loans to be made on such Drawdown Date, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Lender makes available to the Agent such amount on a date after such Drawdown Date, such Lender shall pay to the Agent on demand an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Agent for federal funds acquired by the Agent during each day included in such period, TIMES (ii) the amount of such Lender's PRO RATA share of any such Loans TIMES (iii) a fraction, the numerator of which is the number of days that elapse from and including such Drawdown Date to the date on which the amount of such Lender's PRO RATA share of such Loans shall become immediately available to the Agent, and the denominator of which is 365. A statement of the Agent submitted to such Lender with respect to any amounts owing under this paragraph shall be PRIMA FACIE evidence of the amount due and owing to the Agent by such Lender. If the amount of such Lender's PRO RATA share of such Loans is not made available to the Agent by such Lender within three (3) Business Days following such Drawdown Date, the Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Revolving Credit Loans made on such Drawdown Date. 2.5 INTEREST RATES AND PAYMENTS OF INTEREST. (a) BASE RATE LOANS. Each Base Rate Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Base Rate plus one and one-half (1 1/2%) per annum, which rate shall change contemporaneously with any change in the Base Rate. Such interest shall be payable monthly in arrears on the first Business Day of each month, commencing October 1, 2004, and when such Loan is due (whether at maturity, by reason of acceleration or otherwise). (b) LIBOR LOANS. Each LIBOR Loan shall bear interest on the outstanding principal amount thereof, for each Interest Period applicable thereto, at a rate per annum equal to the LIBOR Rate plus four (4%) percent per annum. Such interest shall be payable for such Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. -21- (c) DEFAULT INTEREST. If a material Event of Default shall occur, then at the option of the Agent the unpaid balance of Loans shall bear interest, to the extent permitted by law, compounded daily at an interest rate equal to two (2%) percent per annum above the interest rate applicable to each such Loan in effect on the day such Event of Default occurs, until such Event of Default is cured or waived. (d) ADDITIONAL INTEREST. So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System (or any other banking authority, domestic or foreign, to which such Lender is subject) to maintain reserves with respect to liabilities or assets consisting of or including "Eurocurrency Liabilities" (as defined in regulations issued from time to time by such Board of Governors), the Borrower shall pay to the Agent for the account of each such Lender additional interest on the unpaid principal amount of each LIBOR Loan made by such Lender from the date of such Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder (rounded, if necessary, to the nearest 1/8 of 1%) obtained by subtracting (i) the LIBOR Rate for the Interest Period for such LIBOR Loan from (ii) the rate obtained by dividing such LIBOR Rate by a percentage equal to 100% minus the Eurodollar Reserve Percentage of such Lender for such Interest Period. Such additional interest shall be determined by such Lender and notified to the Borrower through the Agent, and shall be payable on each date on which interest is payable on such LIBOR Loan. (e) MAXIMUM INTEREST. All agreements between the Borrower and the Lenders are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Obligations or otherwise, shall the amount paid or agreed to be paid to the Lenders for the use or the forbearance of the Obligations exceed the maximum permissible under applicable law. As used herein, the term "applicable law" shall mean the law of the State of New York in effect as of the date hereof provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then the Loan Documents shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrower and the Lenders in the execution, delivery and acceptance of the Loan Documents to contract in strict compliance with the laws of the State of New York from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision of any of the Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever the Lenders should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance of the Obligations and not to the payment of interest. This provision shall control every other provision of all Loan Documents. 2.6 FEES. (a) The Borrower shall pay to the Agent, payable at the end of each month, an Unused Line Fee of one quarter of one percent (.25%) per annum computed on the difference between the Total Commitment and the average daily Revolving Loan balance due to Agent. For purposes of calculating the amount of the Revolving Line of Credit for this Unused Line -22- Fee, Revolving Line of Credit shall be the committed amount at the time of the monthly calculation. (b) The Borrower shall pay to the Agent a monthly Collateral Management Fee in an amount to be determined based solely on fees incurred by the Agent associated with the hiring or retention a Collateral Monitoring Agent for other third party professional to monitor cash flow and collateral on behalf of the Agent. Such Collateral Management Fee shall not exceed $9,000.00 per month (plus reimbursable out-of-pocket expenses associated therewith) for the first six (6) months with a reasonable downward adjustment thereafter. 2.7 PAYMENTS AND PREPAYMENTS OF THE LOANS. (a) All Revolving Credit Loans, with all interests and costs hereunder shall be due and payable on the Borrowing Base Maturity Date. Provided however, so long as there is then no Event of Default, this Agreement shall automatically renew annually thereafter on the anniversary of the Closing Date for one (1) year periods unless either the Agent or the Borrower gives written notice of its intent not to renew this Agreement at least one hundred eighty (180) days prior to said anniversary date. (b) LIBOR Loans may be prepaid at any time, subject to the provisions of Section 2.10, upon three (3) Business Days' notice, and Base Rate Loans may be prepaid at any time, without premium or penalty, upon one Business Day's notice. Upon the written request of the Borrower given sixty (60) days in advance and in conjunction with any such prepayment in full of all of the Revolving Credit Loans, the Agent shall, simultaneously with receipt of such prepayment, release the Agent's Encumbrance on such items of Collateral granted to the Agent pursuant to the Security Documents, PROVIDED that (i) no Default shall have occurred and be continuing, (ii) the Agent shall have received from the Borrower a Borrowing Base Report demonstrating that upon such release the Borrower shall be in compliance with the terms of Section 2.1 hereof, and (iii) the Agent shall have received a certification from a Responsible Officer certifying that no Default has occurred and is continuing, that the Borrower has complied with the provisions of Section 7.4 hereof and Section 2(b)(ii) of the Security Agreement and that upon such release and after giving effect thereto the Borrower shall be in compliance with Section 2.1 hereof and no Default shall have occurred and be continuing. Provided however, notwithstanding the terms hereof, should the Borrower prepay the Loans in full and/or terminate this Agreement prior to the eighteenth (18th) month anniversary of the initial funding hereunder, the Borrower shall pay to the Agent, and the Agent shall earn, an early termination fee of One Million Five Hundred Thousand ($1,500,000.00) Dollars. Provided further, if the Agent does not arrange for commitments from other Lenders or increase its own commitment to reach the full Fifty Million ($50,000,000.00) Dollars Revolving Credit Loan Facility within ninety (90) days of the initial funding hereunder, then, the Borrower may at any time thereafter terminate this Agreement and prepay the entire Revolving Credit Loan balances without penalty or premium. However, should the Agent subsequent to the ninety (90) day period increase the commitment to the $50,000,000.00 facility (through other lenders or for its own account) and Borrower has not provided prepayment or notice of termination, then the Borrower's right to prepay and terminate this Agreement without the payment of the $1,500,000.00 termination fee shall terminate. -23- (c) If at any time the Total Outstandings exceed the lesser of (i) the Borrowing Base and (ii) the Total Commitment, then the Borrower shall immediately pay the amount of any such excess to the Agent for application to the Loans. 2.8 METHOD OF PAYMENT AND ALLOCATION OF PAYMENTS. (a) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made in lawful money of the United States in immediately available funds, without set-off or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to each Lender such additional amount in Dollars as shall be necessary to enable such Lender to receive the same net amount which such Lender would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to each Lender certificates or other valid vouchers or other evidence of payment reasonably satisfactory to the Agent for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. The Lenders may, and the Borrower hereby authorizes the Lenders to, debit the amount of any payment not made by such time to the demand deposit accounts of the Borrower with the Lenders or to their Note Records. Each Lender organized under the laws of a jurisdiction outside the United States (each, a "Foreign Lender") as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax under an applicable statute or tax treaty shall provide to the Borrower and the Agent a properly completed and executed IRS Form W 8ECI or Form W 8BEN or other applicable form, certificate or document prescribed by the IRS or the United States certifying as to such Foreign Lender's entitlement to such exemption (each, a "Certificate of Exemption"). Any foreign Person that seeks to become a Lender under this Agreement shall provide a Certificate of Exemption to the Borrower and the Agent prior to becoming a Lender hereunder. No foreign Person may become a Lender hereunder if such Person fails to deliver a Certificate of Exemption in advance of becoming a Lender. (b) All payments of principal of and interest in respect of Revolving Credit Loans shall be made to the Agent, for the benefit of the Lenders, PRO RATA in accordance with their respective Commitments, and payments of any other amounts due hereunder shall be made to the Agent to be allocated among the Agent and the Lenders as their respective interests appear. All such payments shall be made at the Agent's head office or at such other location that the Agent may from time to time designate, in each case in immediately available funds. (c) If the Commitments shall have been terminated or the Obligations shall have been declared immediately due and payable pursuant to Section 8.2, all funds received from or on behalf of the Borrower (including as proceeds of Collateral) by any Lender in respect of Obligations (except funds received by any Lender as a result of a purchase of a participant interest pursuant to Section 2.8(d) below) shall be remitted to the Agent, and all such funds, -24- together with all other funds received by the Agent from or on behalf of the Borrower (including proceeds of Collateral) in respect of Obligations, shall be applied by the Agent in the following manner and order: (i) first, to reimburse the Agent and the Lenders, in that order, for any amounts payable pursuant to Sections 11.2 and 11.3 hereof; (ii) second, to the payment of any fees due and payable to the Agent; (iii) third, to the payment of interest due on the Revolving Credit Loans; (iv) fourth, to the payment of the outstanding principal balance of the Revolving Credit Loans; (v) fifth, to the payment of any other Obligations payable by the Borrower; and (vii) any remaining funds shall be paid to whoever shall be entitled thereto or as a court of competent jurisdiction shall direct. (d) Each of the Lenders and the Agent hereby agrees that if it should receive any amount (whether by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Loan Documents, or otherwise) in respect of principal of, or interest on, the Revolving Credit Loans or any fees which are to be shared among the Lenders, which, as compared to the amounts theretofore received by the other Lenders with respect to such principal, interest or fees, is in excess of such Lender's PRO RATA share of such principal, interest or fees, such Lender shall share such excess, less the costs and expenses (including, reasonable attorneys' fees and disbursements) incurred by such Lender in connection with such realization, exercise, claim or action, PRO RATA with all other Lenders in proportion to their respective Commitments, and such sharing shall be deemed a purchase (without recourse) by such sharing party of participant interests in the Loans or such fees, as the case may be, owed to the recipients of such shared payments to the extent of such shared payments; provided, however, that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 2.9 INDEMNITY. If the Borrower for any reason (including, without limitation, pursuant to Sections 2.7(b), 2.11 and 8.2 hereof) makes any payment of principal with respect to any LIBOR Loan on any day other than the last day of an Interest Period applicable to such Loan, or fails to borrow or continue or convert to a LIBOR Loan or fails to prepay a LIBOR Loan after having given notice thereof, the Borrower shall pay to the Agent for the benefit of the Lenders any amount required to compensate the Lenders for any additional losses, costs or expenses which they may reasonably incur as a result of such payment or failure, including, without limitation, any loss (including loss of anticipated profits), costs or expense incurred by reason of the liquidation or re-employment of deposits or other funds required by the Lenders to fund or maintain such Loan. Without limiting the foregoing, the Borrower shall pay to the Agent a "yield maintenance fee" in an amount computed as follows: the current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the expiration date of the Interest Period of the Loan as to which the prepayment is made, shall be subtracted from the interest rate applicable (pursuant to Section 2.5(b) or (c)) to each LIBOR Loan in effect at the time of prepayment. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the Interest Period of the Loan as to which the prepayment is made. Said amount shall be reduced to present value calculated by using the above referenced United States Treasury securities rate and the number of days remaining in the Interest Period of the Loan as to which -25- prepayment is made. The resulting amount shall be the yield maintenance fee due to the Lenders upon the payment of a Loan under the circumstances described in the first sentence of this Section. The Borrower shall pay such amount upon presentation by the Agent of a statement setting forth the amount and the Agent's (or the affected Lenders') calculation thereof pursuant hereto, which statement shall be deemed true and correct absent manifest error. If the Obligations are declared immediately due and payable pursuant to Section 8.2, then any amount provided for in this Section shall be due and payable in the same manner as though the Borrower had made a prepayment of the Loans. 2.10 COMPUTATION OF INTEREST AND FEES; DUE DATE. (a) Interest and all fees payable hereunder shall be computed daily on the basis of a year of 360 days and paid for the actual number of days for which due. (b) If the due date for any payment of principal is extended by operation of law, interest shall be payable for such extended time. If any payment required by this Agreement becomes due on a day that is not a Business Day such payment may be made on the next succeeding Business Day (subject to clause (i) of the definition of the term "Interest Rate Period"), and such extension shall be included in computing interest and fees in connection with such payment. 2.11 CHANGED CIRCUMSTANCES; ILLEGALITY. (a) Notwithstanding any other provision of this Agreement, in the event that: (i) on any date on which the LIBOR Rate would otherwise be set the Agent shall have determined in good faith (which determination shall be final and conclusive) that adequate and fair means do not exist for ascertaining the LIBOR Rate, or (ii) at any time the Agent or any Lender shall have determined in good faith (which determination shall be final and conclusive and, if made by any Lender, shall have been communicated to the Agent in writing) that: (A) the making or continuation of or conversion of any Loan to a LIBOR Loan has been made impracticable or unlawful by (1) the occurrence of a contingency that materially and adversely affects the interbank Eurodollar market or (2) compliance by the Agent or such Lender in good faith with any applicable law or governmental regulation, guideline or order or interpretation or change thereof by any governmental authority charged with the interpretation or administration thereof or with any request or directive of any such governmental authority (whether or not having the force of law); or (B) the LIBOR Rate shall no longer represent the effective cost to the Agent or such Lender for U.S. dollar deposits in the interbank market for deposits in which it regularly participates; then, and in any such event, the Agent shall forthwith so notify the Borrower thereof. Until the Agent notifies the Borrower that the circumstances giving rise to such notice no longer apply, the obligation of the Lenders to allow selection by the Borrower of the Type of Loan affected by the -26- contingencies described in this Section (herein called "AFFECTED LOANS") shall be suspended. If, at the time the Agent so notifies the Borrower, the Borrower has previously given the Agent a Notice of Borrowing or Conversion with respect to one or more Affected Loans but such Loans have not yet gone into effect, such notification shall be deemed to be a request for Base Rate Loans. (b) In the event of a determination of illegality pursuant to subsection (a)(ii)(A) above, the Borrower shall, with respect to the outstanding Affected Loans, prepay the same, together with interest thereon and any amounts required to be paid pursuant to Section 2.10, on such date as shall be specified in such notice (which shall not be earlier than the date such notice is given) and may, subject to the conditions of this Agreement, borrow a Loan of another Type in accordance with Section 2.1 hereof by giving a Notice of Borrowing or Conversion pursuant to Section 2.4 hereof. 2.12 INCREASED COSTS. In case any change in law, regulation, treaty or official directive or the interpretation or application thereof by any court or by any governmental authority charged with the administration thereof or the compliance with any guideline or request of any central bank or other governmental authority (whether or not having the force of law): (i) subjects any Lender to any tax with respect to payments of principal or interest or any other amounts payable hereunder by the Borrower or otherwise with respect to the transactions contemplated hereby (except for taxes on the overall net income of such Lender imposed by the United States of America or any political subdivision thereof), or (ii) imposes, modifies or deems applicable any deposit insurance, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, any Lender (other than such requirements as are already included in the determination of the LIBOR Rate), or (iii) imposes upon any Lender any other condition with respect to its obligations or performance under this Agreement, and the result of any of the foregoing is to increase the cost to the Lender, reduce the income receivable by such Lender or impose any expense upon such Lender with respect to any Loans or its obligations under this Agreement, such Lender shall notify the Borrower and the Agent thereof. The Borrower agrees to pay to such Lender the amount of such increase in cost, reduction in income or additional expense as and when such cost, reduction or expense is incurred or determined, upon presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender's calculation thereof and the assumptions upon which such calculation was based, which statement shall be deemed true and correct absent manifest error, provided, that the Borrower shall not be obligated to pay any such amount which arose prior to the date that is one hundred eighty (180) days preceding the date of such demand or is attributable to periods prior to the date which is one hundred eighty (180) days preceding the date of such demand. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of -27- general application or applicable law or regulation, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by the Borrower pursuant to this Section 2.12. 2.13 CAPITAL REQUIREMENTS. If after the date hereof any Lender reasonably determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on such Lender's or such holding company's capital as a consequence of such Lender's commitment to make Loans hereunder to a level below that which such Lender or such holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Lender to be material, then such Lender shall notify the Borrower and the Agent thereof. The Borrower agrees to pay to such Lender the amount of such reduction of capital as and when such reduction is determined, payable within 30 days after presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender's calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error) unless within such 30 day period the Borrower shall have prepaid in full all obligations to such Lender, in which event no amount shall be payable to such Lender under this Section. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 2.14 DEFAULTING LENDER; REPLACEMENT LENDER. Within thirty (30) days after (a) receipt by the Borrower of written notice and demand from any Lender (each, an "Affected Lender") for payment of additional amounts or increased costs as provided in Sections 2.8(a), 2.11, 2.12 or 2.13, or (b) any Lender (a "Defaulting Lender") shall fail to advance its pro rata share of any Loans made as provided under Section 2.4 hereof, the Borrower may, at its option, notify the Agent and such Affected Lender or Defaulting Lender, as applicable, of its intention to replace such Affected Lender or Defaulting Lender, as applicable. So long as no Default or Event of Default has occurred and is continuing, the Borrower, with the consent of the Agent (which consent shall not be unreasonably withheld, conditioned or delayed), may obtain, at the Borrower's expense, a replacement Lender (each, a "Replacement Lender") for the Affected Lender or Defaulting Lender, as applicable, which Replacement Lender must be reasonably satisfactory to the Agent. If the Borrower obtains a Replacement Lender within sixty (60) days following notice of its intention to do so, any such Affected Lender or Defaulting Lender must sell and assign its respective Loans and Commitment to such Replacement Lender for an amount equal to the principal balance of all Loans held by such Affected Lender or Defaulting Lender, as applicable, including all accrued interest and fees with respect thereto and all other amounts due to such Affected Lender or Defaulting Lender, as applicable, through the date of such sale and such assignment shall not require the payment of an assignment fee to the Agent; provided, the Borrower shall have reimbursed any such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. The foregoing notwithstanding, the Borrower shall not have the right to obtain a Replacement Lender for an Affected Lender if the Affected Lender -28- rescinds its demand for increased costs or additional amounts within fifteen (15) days following its receipt of the Borrower's notice of intention to replace such Affected Lender. Furthermore, if the Borrower gives a notice of intention to replace and does not so replace such Affected Lender within sixty (60) days thereafter, the Borrower's rights under this Section 2.14 shall terminate with respect to such Affected Lender, if applicable, the Borrower shall promptly pay any increased costs or additional amounts demanded by such Affected Lender pursuant to the applicable provisions hereof. SECTION III CONDITIONS OF LOANS 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of the Lenders to make any Revolving Credit Loans is subject to the satisfaction, on or prior to the Closing Date, of the following conditions: (a) The Agent shall have received the following agreements, documents, certificates and opinions in form and substance satisfactory to the Agent and duly executed and delivered by the parties thereto: (i) This Agreement; (ii) The Revolving Credit Notes; (iii) The Security Documents; (iv) The Parent Guarantee; (v) UCC-1 Financing Statements and UCC-3 Termination Statements; (vi) Borrowing Base Report as of a date within five (5) Business Days of the Closing Date; (vii) Notice of Borrowing or Conversion as of the Closing Date; (viii) A certificate of the Clerk or an Assistant Clerk of the Borrower with respect to resolutions of the Board of Directors and/or Manager(s) authorizing the execution and delivery of the Loan Documents and identifying the officer(s) authorized to execute, deliver and take all other actions required under this Agreement, and providing specimen signatures of such officers, and certifying that neither the Articles of Organization nor the Bylaws of the Borrower and/or Certificate of Formation or Operating Agreement has been amended; (ix) A certificate of the Secretary of State of each Borrower's jurisdiction of incorporation as to legal existence and good standing of each Borrower in such state and good standing in Massachusetts (foreign registration); -29- (x) An opinion addressed to the Lenders from Edwards & Angell, counsel to the Borrower; and (xi) Such other documents, instruments, opinions and certificates and completion of such other matters, as the Agent may reasonably deem necessary or appropriate. (b) No litigation, arbitration, proceeding or investigation shall be pending or threatened which questions the validity or legality of the transactions contemplated by any Loan Document or seeks a restraining order, injunction or damages in connection therewith, or which, in the judgment of the Agent, might adversely affect the transactions contemplated hereby or except as disclosed on EXHIBIT C hereto, might have a materially adverse affect on the assets, business, financial condition or prospects of the Borrowers. (c) All necessary filings and recordings against the Collateral shall have been completed and the Agent's liens on the Collateral shall have been perfected, as contemplated by the Security Documents. (d) The Borrower shall have paid to the Agent all fees to be paid hereunder (including pursuant to Section 2.6 hereof) on or prior to the Closing Date. 3.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the Lenders to make any Loan, including the initial Loans, or continue or convert Loans of one Type to Loans of another Type is further subject to the following conditions: (a) timely receipt by the Agent of the Notice of Borrowing or Conversion and a Borrowing Base Report with respect to any Loan; (b) the representations and warranties contained in Section IV shall be true and accurate in all material respects on and as of the date of such Notice of Borrowing and on the effective date of the making, continuation or conversion of each Loan as though made at and as of each such date (except to the extent that such representations and warranties expressly relate to an earlier date) except for changes expressly permitted or contemplated by this Agreement; (c) no Default shall have occurred and be continuing at the time of, and immediately after the making of, such requested Loans; (d) the resolutions referred to in Section 3.1 shall remain in full force and effect; (e) no change shall have occurred in any law or regulation or interpretation thereof that, in the opinion of counsel for any Lender, would make it illegal or against the policy of any governmental agency or authority for such Lender to make Loans hereunder; and (f) The Agent shall have received fully executed employment and non-competition agreements of all key employees of the Borrower, Parent and Subsidiaries. The making, continuation or conversion of each Loan shall be deemed to be a representation and warranty by the Borrower on the date of the making, continuation or conversion of such Loan as -30- to the accuracy of the facts referred to in subsection (b) of this Section 3.2 and of the satisfaction of all of the conditions set forth in this Section 3.2. SECTION IV REPRESENTATIONS AND WARRANTIES In order to induce the Agent and the Lenders to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants to the Agent and the Lenders that except as set forth on EXHIBIT C attached hereto: 4.1 ORGANIZATION; QUALIFICATION; BUSINESS. (a) Each of the Borrower and its Subsidiaries (i) is a corporation and/or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is duly qualified and in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction (all of which are listed on EXHIBIT C attached hereto) where the nature of its properties or business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect on the business, financial condition, assets or properties of the Borrower or of the Borrower and its Subsidiaries taken as a whole. (b) Since the date of the Initial Financial Statements, the Borrower has continued to engage in substantially the same business as that in which it was then engaged and is engaged in no unrelated business. 4.2 CORPORATE AUTHORITY. The execution, delivery and performance of the Loan Documents and the transactions contemplated hereby are within the corporate and/or liability company power and authority of each Borrower and have been authorized by all necessary corporate and limited liability company proceedings, and do not and will not (a) contravene any provision of the charter documents, by-laws or Operating Agreement of either Borrower or any law, rule or regulation applicable to the Borrower, (b) contravene any provision of, or constitute an event of default or event that, but for the requirement that time elapse or notice be given, or both, would constitute an event of default under, any other agreement, instrument, order or undertaking binding on either Borrower, or (c) result in or require the imposition of any Encumbrance on any of the properties, assets or rights of either Borrower, except in favor of the Agent and the Lenders. 4.3 VALID OBLIGATIONS. The Loan Documents and all of their respective terms and provisions are the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally, and except as the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. The Security Documents have effectively created in favor of the Agent and the Lenders legal, valid and enforceable security interests in the Collateral and such security interests are fully perfected first -31- priority security interests, except as to Permitted Encumbrances (as applicable); provided that such representation regarding security interests, priority and perfection shall not include those items of Collateral in which a security interest may not be perfected by filing of a UCC-1 Financing Statement. 4.4 CONSENTS OR APPROVALS. The execution, delivery and performance of the Loan Documents and the transactions contemplated herein do not require any approval or consent of, or filing or registration with, any governmental or other agency or authority, or any other Person, except under or as contemplated by the Security Documents or as required of the Parent pursuant to any securities regulations. 4.5 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES. Each of the Borrower and its Subsidiaries has good title to all of the properties, assets and rights of every name and nature now purported to be owned by it, including, without limitation, such properties, assets and rights as are reflected in the Initial Financial Statements (except such properties, assets or rights as have been disposed of in the ordinary course of business since the date thereof), free from all Encumbrances except Permitted Encumbrances, and, except as so disclosed, free from all defects of title that might materially adversely affect such properties, assets or rights, taken as a whole. All real property owned or leased by the Borrower is described in EXHIBIT C hereto. 4.6 FINANCIAL STATEMENTS. Each Borrower has furnished to the Lenders the Parent's consolidated balance sheets as of December 31, 2003, and its own consolidated statements of income, changes in stockholders' equity and cash flow for the fiscal year then ended and related footnotes, audited and certified by the Borrower's Accountants. The Borrower has also furnished to the Lenders the Parent's unaudited consolidated balance sheet as of June 30, 2004 and consolidated statement of income for the three months ended June 30, 2004 (the "INITIAL FINANCIAL STATEMENTS") in each case certified by the principal financial officer of the Borrower, subject to normal, recurring year-end adjustments that shall not in the aggregate be material in amount. All such financial statements were prepared in accordance with GAAP (except, for such quarterly statements, for the absence of footnotes and subject to year- end adjustments) applied on a consistent basis throughout the periods specified and present fairly the financial position of the Parent and its Subsidiaries as of such dates and the results of the operations of the Parent and its Subsidiaries for such periods. At the date hereof, the Borrower has no Indebtedness or other material liabilities, debts or obligations, whether accrued, absolute, contingent or otherwise, and whether due or to become due, including, but not limited to, liabilities or obligations on account of taxes or other governmental charges, that are not set forth on the Initial Financial Statements or on EXHIBIT C hereto. 4.7 CHANGES. Between the date of the Initial Financial Statements and the Closing Date, there have been no changes in the assets, liabilities, financial condition, business or prospects of the Parent, the Borrower or any of its Subsidiaries other than changes in the ordinary course of business, the effect of which has not, in the aggregate, had a Material Adverse Effect. 4.8 SOLVENCY. The Borrower has and, after giving effect to the Loans, will have, assets (both tangible and intangible) having a fair saleable value in excess of the amount required to pay the probable liability on its then-existing debts (whether matured or unmatured, liquidated -32- or unliquidated, fixed or contingent); the Borrower has and will have access to adequate capital for the conduct of its business and the discharge of its debts incurred in connection therewith as such debts mature; the Borrower was not insolvent immediately prior to the making of the Loans and immediately after giving effect thereto, the Borrower will not be insolvent. These representations shall be computed on a consolidated basis. 4.9 DEFAULTS. As of the date of this Agreement, no Default exists. 4.10 TAXES. The Borrower and each Subsidiary has filed all federal, state and other tax returns required to be filed, and all material taxes, assessments and other governmental charges due from the Borrower and each Subsidiary have been fully paid, except for such taxes, assessments or charges that are being contested in good faith by appropriate proceedings and with respect to which (a) adequate reserves have been established and are being maintained in accordance with GAAP and (b) no lien has been filed to secure such taxes, assessments or charges. All such contests at the date hereof are described on EXHIBIT C hereto. If the federal and state income tax returns of the Borrower, Parent or any Subsidiary has been audited or otherwise examined by any federal or state taxing authority, the Borrower will promptly pay (subject to its rights of appeal) all taxes, assessments, fines, penalties and interest and notify Agent of said results together with evidence of payment thereof. The Borrower and each Subsidiary have established on their books reserves adequate for the payment of all federal, state and other tax liabilities. 4.11 LITIGATION. There is no litigation, arbitration, proceeding or investigation pending, or, to the knowledge of the Borrower's or any Subsidiary's officers, threatened, against the Borrower or any Subsidiary that, if adversely determined, may reasonably be expected to result in a material judgment not fully covered by insurance (after giving effect to deductibles), may reasonably be expected to result in a forfeiture of all or any substantial part of the property of the Borrower or their Subsidiaries, or may reasonably be expected to have a Material Adverse Effect. 4.12 SUBSIDIARIES. As of the date of this Agreement, all Special Purpose Subsidiaries and all other Subsidiaries of the Borrower and Parent are listed on EXHIBIT C hereto. The Borrower or a Subsidiary of the Borrower is the owner, free and clear of all liens and encumbrances, of all of the issued and outstanding stock of each Subsidiary subject only to all outstanding warrants and pledges to CIT. All shares of such stock have been validly issued and are fully paid and nonassessable, and no rights to subscribe to any additional shares have been granted, and no options, warrants or similar rights are outstanding. 4.13 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Investment Company Act of 1940, as amended. 4.14 COMPLIANCE. The Borrower has all necessary permits, approvals, authorizations, consents, licenses, franchises, registrations and other rights and privileges (including patents, trademarks, trade names and copyrights) to allow it to own and operate its business without any violation of law or the rights of others except to the extent that any such violation would not have a Material Adverse Effect; and the Borrower and each Subsidiary are duly authorized, qualified and licensed under and in compliance with all applicable laws, -33- regulations, authorizations and orders of public authorities, including, without limitation, Environmental Laws, except to the extent that any such failure to be so authorized, qualified, licensed or in compliance would not have a material adverse effect on the business, financial condition or operation of the Borrower and its Subsidiaries taken as a whole. The Borrower and each Subsidiary have performed all obligations required to be performed by it under, and is not in default under or in violation of, its Certificate of Formation, Certificate of Incorporation or By-Laws, or any agreement, lease, mortgage, note, bond, indenture, license or other instrument or undertaking to which it is a party or by which any of it or any of its properties are bound, except for violations none of which, either individually or in the aggregate, would have any Material Adverse Effect. 4.15 ERISA. The Borrower and each of its Affiliates are in compliance in all material respects with ERISA and the provisions of the Code applicable to the Pension Plans; neither the Borrower nor any of its Affiliates have engaged in a Prohibited Transaction which would subject the Borrower, any of its Affiliates or any Pension Plan to a material tax or penalty imposed on a Prohibited Transaction; no Pension Plan has incurred any "accumulated funding deficiency" (as defined in ERISA); except as set forth in the Initial Financial Statements, the aggregate fair market value of all assets of the Pension Plans which are single-employer plans is at least equal to the aggregate present value of all accrued benefits under such Pension Plans, both as determined in the most recent actuarial reports for such Pension Plans using the actuarial assumptions used for funding purposes therein; neither the Borrower nor any of its Affiliates has incurred any liability to the Pension Benefit Guaranty Corporation over and above premiums required by law; and neither the Borrower nor any of its Affiliates has terminated any Pension Plan in a manner which could result in the imposition of a lien on the property of the Borrower or any of its Affiliates. 4.16 ENVIRONMENTAL MATTERS. (a) The Borrower and each of its Subsidiaries have obtained all permits, licenses and other authorizations which are required under all Environmental Laws, except to the extent failure to have any such permit, license or authorization would not have a Material Adverse Effect. The Borrower and each of its Subsidiaries are in compliance with the terms and conditions of all such permits, licenses and authorizations, and are also in compliance with all applicable orders, decrees, judgments and injunctions, issued, entered, promulgated or approved under any Environmental Law, except to the extent failure to comply would not have a Material Adverse Effect. (b) No written notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or, to the best of the Borrower's knowledge, threatened by any governmental or other entity with respect to any alleged failure by the Borrower or any of its Subsidiaries to have any permit, license or authorization required in connection with the conduct of its business or to comply with any Environmental Laws. (c) No material oral or written notification of a release of a Hazardous Material has been filed by or on behalf of the Borrower or any of its Subsidiaries and no property now or previously owned, leased or used by the Borrower or any of its Subsidiaries is listed or to the -34- best of Borrower's knowledge proposed for listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or on any similar state list of sites requiring investigation or clean-up. (d) There are no recorded liens or Encumbrances arising under or pursuant to any Environmental Laws on any of the real property or properties owned, leased or used by the Borrower or any of its Subsidiaries and no governmental actions have been taken or, to the best of the Borrower's knowledge, are in process which could subject any of such properties to such liens or Encumbrances or, as a result of which the Borrower or any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any property owned by it in any deed to such property. 4.17 RESTRICTIONS ON THE BORROWER. The Borrower is not party to or bound by any contract, agreement or instrument, nor subject to any charter or other corporate restriction which will, under current or foreseeable conditions, have a Material Adverse Effect. 4.18 LABOR RELATIONS. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened, except for such complaints, grievances and arbitration proceedings which, if adversely decided, would not have a Material Adverse Effect, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries, except for any such labor action as would not have a Material Adverse Effect, and (iii) to the best knowledge of the Borrower, no union representation question existing with respect to the employees of the Borrower or any of its Subsidiaries and, to the best knowledge of the Borrower, no union organizing activities are taking place, except for any such question or activities as would not have a Material Adverse Effect. 4.19 MARGIN RULES. The Borrower does not own or have any present intention of purchasing or carrying, and no portion of any Loan shall be used for purchasing or carrying, any "margin security" or "margin stock" as such terms are used in Regulations G, U or X of the Board of Governor's of the Federal Reserve System. 4.20 DISCLOSURE. No representation or warranty made by the Borrower in any Loan Document and no document or information furnished to the Lenders by or on behalf of or at the request of the Borrower in connection with any of the transactions contemplated by the Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained therein taken as a whole, not misleading in light of the circumstances in which they are made. All projections provided to the Agent and the Lenders are prepared based on estimates and assumptions, which the Borrower believes to be reasonable and fair in light of current conditions and current facts known to the Borrower and, as of the Closing Date, reflect the Borrower's good faith and reasonable estimates of the future financial performance of the Borrower for the period set forth therein. Such projections are not -35- facts and are not a guaranty of future performance, and actual results may differ from the projections. SECTION V SECTION V AFFIRMATIVE COVENANTS So long as the Lenders have any obligation to lend hereunder or any Loan or other Obligation remains outstanding, the Borrower covenants as follows: 5.1 FINANCIAL STATEMENTS. The Borrower shall furnish to the Lenders: (a) as soon as available to the Borrower, but in any event within 90 days after the end of each of fiscal year, the Parent's consolidated and consolidating balance sheets as of the end of, and related consolidated statements of income and retained earnings and consolidated statement of cash flow for, such year, audited and certified by the Borrower's Accountants in the case of such consolidated statements, and certified by the chief financial officer of the Borrower in the case of such consolidating statements; and, concurrently with such financial statements, a copy of the Borrower's Accountants management report and a written statement by the Borrower's Accountants that, in the making of the audit necessary for their report and opinion upon such financial statements they have obtained no knowledge of any Default or, if in the opinion of such accountants any such Default exists, they shall disclose in such written statement the nature and status thereof and provided that in issuing such statement the Borrower's Accountants shall not be required to go beyond the scope of their audit; (b) as soon as available to the Borrower, but in any event within 45 days after the end of each quarter, the Parent's consolidated balance sheet as of the end of, and related consolidated statements of income, retained earnings and cash flow for, the quarter then ended and portion of the year then ended, certified by a Responsible Officer of the Borrower, subject to normal, recurring year-end adjustments that shall not in the aggregate be material in amount; (c) as soon as available, but in any event on a weekly basis, a Borrowing Base Report, together with such other information regarding Eligible Lease Receivables as the Agent may require; (d) as soon as available, but in any event within 30 days after the first day of each fiscal year, the Parent's and the Borrower's projections for such fiscal year, prepared on a monthly basis and including consolidated balance sheets and statements of income, retained earnings and cash flows; (e) concurrently with the delivery of each financial statement pursuant to subsections (a) and (b) of this Section 5.1, a report in substantially the form of EXHIBIT D hereto signed on behalf of the Borrower by a Responsible Officer; (f) promptly after the receipt thereof by the Parent or the Borrower, copies of any reports (including any so-called management letters) submitted to the Parent or the Borrower by independent public accountants in connection with any annual or interim review of the accounts of the Parent or the Borrower made by such accountants; -36- (g) promptly after the same are delivered to its stockholders or the Securities and Exchange Commission, copies of all proxy statements, financial statements and reports as the Parent or the Borrower shall send to its stockholders or as the Parent or the Borrower may file with the Securities and Exchange Commission or any governmental authority at any time having jurisdiction over the Parent or the Borrower or their Subsidiaries; (h) at least 30 days prior to the date any amendments or modifications are made to the agreements and other instruments evidencing Indebtedness in excess of $100,000.00 for borrowed money of the Borrower (other than Obligations) which is not Subordinated Debt, notification setting forth in detail the proposed amendments or modifications; (i) promptly after the date on which the aggregate amount of Receivables due from any individual account debtor exceeds $1,000,000.00, a detailed breakdown of the obligations due from such account debtor in form satisfactory to the Agent; and (j) from time to time, such other financial data and information about the Parent, the Borrower or their Subsidiaries (including, without limitation, a report in substantially the form of EXHIBIT D hereto) as the Agent or the Lenders may reasonably request. 5.2 CONDUCT OF BUSINESS. The Borrower and each of its Subsidiaries shall: (a) duly observe and comply in all material respects with all applicable laws, regulations, decrees, orders, judgments and valid requirements of any governmental authorities relative to its corporate existence, rights and franchises, to the conduct of its business and to its property and assets (including without limitation all Environmental Laws and ERISA), and shall maintain and keep in full force and effect and comply with all licenses and permits necessary in any material respect to the proper conduct of its business; (b) maintain its corporate existence and remain or engage substantially in the same business as that in which it is now engaged and in no unrelated business. 5.3 MAINTENANCE AND INSURANCE. The Borrower shall maintain its properties in good repair, working order and condition as required for the normal conduct of its business. The Borrower shall maintain, or cause its lessees to maintain, with responsible insurance companies such insurance on such of its properties, in such amounts and against such risks as are customarily maintained by similar businesses in the micro leasing industry; PROVIDED, that the Borrower may continue to self-insure Equipment in the manner in which it is currently conducting its business; and PROVIDED, FURTHER, that the Borrower shall (x) not materially change the manner in which it self-insures Equipment without the prior written consent of the Agent; or (y) file with the Agent upon the request of the Agent a detailed list of the insurance then in effect, stating, as applicable, the names of the insurance companies, the amounts and rates of the insurance, dates of expiration thereof and the properties and risks covered thereby each naming the Agent as "Mortgagee" and "Loss Payee" together with a Lender's Loss Payable Endorsement; and (z) within 45 days after notice in writing from the Agent, obtain such additional insurance as the Agent may reasonably request including, without limitation, business interruption coverages and general and product liability coverages naming the Agent as an "additional insured". -37- 5.4 TAXES. The Borrower shall pay or cause to be paid all taxes, assessments or governmental charges on or against it or any of its Subsidiaries or its or their properties on or prior to the time when they become due; except for any tax, assessment or charge that is being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established and are being maintained in accordance with GAAP and so long as no Encumbrance shall have been filed to secure such tax, assessment or charge. 5.5 INSPECTION. The Borrower shall permit the Agent, any Lender and their designees, at any reasonable time and at reasonable intervals of time, and upon reasonable notice (or if a Default shall have occurred and is continuing, at any time and without prior notice), to (i) visit and inspect the properties of the Borrower and its Subsidiaries, (ii) examine and make copies of and take abstracts from the books and records of the Borrower and its Subsidiaries, and (iii) discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with their appropriate officers and (following the occurrence and during the continuance of a Default hereunder) accountants, all at the reasonable expense of the Borrower. Without limiting the generality of the foregoing, the Borrower will permit periodic reviews (as determined by the Agent) of the books and records of the Borrower and its Subsidiaries to be carried out by the Agent's commercial finance examiners, provided that in the absence of a Default or unless requested or required by regulatory authorities or by official policy of any Lender, and the Agent may, in its sole discretion, in lieu of such reviews by its own commercial finance examiners accept reports of examinations of such books and records performed by commercial finance examiners acting on behalf of other lenders to the Borrower to minimize examination expense. The Borrower shall also permit the Agent to arrange for verification of Eligible Lease Receivables, under reasonable procedures, directly with any account debtors or by other methods. Absent an Event of Default, the reimbursable expenses referred to above in this Section 5.5 shall be limited only to those incurred by the Agent. In addition to the Collateral Management Fee, the Borrower shall pay to the Agent Examination Fees of $850.00 per day per examiner plus out-of-pocket expenses. Absent an Event of Default, said examination shall be limited to once annually and may be conducted by Agent or other professionals retained by Agent. 5.6 MAINTENANCE OF BOOKS AND RECORDS. The Borrower and each of its Subsidiaries shall keep adequate books and records of account, in which true and complete entries will be made reflecting all of its business and financial transactions, and such entries will be made in accordance with GAAP consistently applied and applicable law. 5.7 USE OF PROCEEDS. (a) The Borrower will use the proceeds of Loans solely to finance or refinance Receivables arising from Leases, Installment Finance Contracts, for portfolio purchases, Rental Contracts for the working capital needs of the Borrower and for ongoing general corporate purposes. Initial proceeds of the Loans may be applied to the repayment of the existing senior secured lender debt. (b) No portion of any Loan shall be used for the "purpose of purchasing or carrying" any "margin stock" or "margin security" as such terms are used in Regulations G, U and X of the Board of Governors of the Federal Reserve System, or otherwise in violation of such regulations. -38- 5.8 FURTHER ASSURANCES. At any time and from time to time the Borrower shall, and shall cause each of its Subsidiaries to, execute and deliver such further instruments and take such further action as may reasonably be requested by the Agent to effect the purposes of the Loan Documents. 5.9 NOTIFICATION REQUIREMENTS. The Borrower shall furnish to the Agent: (a) immediately upon becoming aware of the existence of any condition or event that constitutes a Default, written notice thereof specifying the nature and duration thereof and the action being or proposed to be taken with respect thereto; (b) promptly upon becoming aware of any litigation seeking damages in excess of $250,000 or of any investigative proceedings by a governmental agency or authority commenced or threatened against the Borrower or any of its Subsidiaries of which they have notice, the outcome of which would or might have a Materially Adverse Effect, written notice thereof and the action being or proposed to be taken with respect thereto; (c) promptly upon becoming aware of any investigative proceedings by a governmental agency or authority commenced or threatened against the Borrower or any of its Subsidiaries regarding any potential material violation of Environmental Laws or any spill, release, discharge or disposal of any Hazardous Material and promptly after receipt of any notice of the type referred to in Section 4.16, written notice thereof (together with a copy of any such notice) and the action being or proposed to be taken with respect thereto; and (d) promptly after any occurrence or after becoming aware of any condition affecting the Borrower or any Subsidiary which could reasonably be expected to result in a Material Adverse Effect, written notice thereof. 5.10 ERISA REPORTS. (a) Each Plan shall comply in all material respects with ERISA and the Code, except to the extent failure to comply in any instance would not have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole. (b) With respect to any Plan, the Borrower shall, or shall cause its ERISA Affiliates to, furnish to the Agent promptly (i) as soon as possible and in any event within 10 days after the Borrower or any of its ERISA Affiliates knows that any ERISA Event has occurred or is expected to occur, a statement of the chief financial officer of the Borrower describing such ERISA Event, including copies of any notice concerning such ERISA Event received from the PBGC, a plan administrator, or from a Multiemployer Plan sponsor, and the action, if any, the Borrower or such ERISA Affiliate proposes to take with respect thereto; and (ii) promptly after filing thereof, a copy of the annual report of each Pension Plan (Form 5500 or comparable form) required to be filed with the IRS and/or the Department of Labor. Promptly after the adoption of any Pension Plan, the Borrower shall notify the Agent of such adoption. -39- 5.11 ENVIRONMENTAL COMPLIANCE. (a) The Borrower and its Subsidiaries will comply in all material respects with all applicable Environmental Laws in all jurisdictions in which any of them operates now or in the future, and the Borrower and its Subsidiaries will comply in all material respects with all such Environmental Laws that may in the future be applicable to the Borrower's or any Subsidiary's business, properties and assets. (b) If the Borrower or any Subsidiary shall (i) receive notice that any material violation of any Environmental Law may have been committed or is about to be committed by the Borrower or any Subsidiary, (ii) receive notice that any administrative or judicial complaint or order has been filed or is about to be filed against the Borrower or any Subsidiary alleging a material violation of any Environmental Law requiring the Borrower or any Subsidiary to take any action in connection with the release of Hazardous Materials into the environment or (iii) receive any notice from a federal, state or local government agency or private party alleging that the Borrower or any Subsidiary may be liable or responsible for any material amount of costs associated with a response to or cleanup of a release of Hazardous Materials into the environment or any damages caused thereby, the Borrower or such Subsidiary shall provide the Agent with a copy of such notice within five (5) days after the Borrower or such Subsidiary's receipt thereof. Within fifteen (15) days after the Borrower or any Subsidiary has learned of the enactment or promulgation of any Environmental Law which may result in any Material Adverse Effect, the Borrower or such Subsidiary shall provide the Agent with notice thereof. 5.12 LENDER'S CONSULTANT. The Lender may retain a Collateral Management Agent to monitor and establish: (i) a review of (A) any tax refund issues, (B) establish collateral monitoring procedures with respect to the maintenance of Collateral Lease reviews and (ii) the performance of field examinations and monthly validation of financial statements. The Borrower shall pay all fees therefore as set forth herein. 5.13 USA PATRIOT ACT. The Borrower and Parent warrants, represents and covenants that they: (i) are familiar with, and comply with, the anti-money laundering laws and guidelines ("AML Policies") of the Untied States of America; (ii) acknowledge that your transactions with residents of the Untied States are also subject to the AML Policies of the United States, including the USA Patriot Act; (iii) will make all reasonable efforts to comply with all applicable AML Policies, including, if appropriate, the USA Patriot Act; (iv) acknowledge that our performance hereunder is subject to Lender's compliance with all applicable AML Policies, including the USA Patriot Act; and (v) will provide all such information about your ownership, officers, directors and business structure as we may require. 5.14 IRON MOUNTAIN AGREEMENT. At all times during which any Loan or any Obligation remains outstanding and unpaid, the Borrower will, at Borrowers' sole cost and expense, maintain in full force and effect the Customer Agreement by and between Iron Mountain Records Management, Inc. and the Parent dated March 26, 2003, as same has been amended by the Fourth Addendum to Customer Agreement dated on or about the date hereof wherein among other terms the Agent has been joined as a party thereto. -40- SECTION VI FINANCIAL COVENANTS So long as any Loan or other Obligation remains outstanding or the Lenders have any obligation to make any Loan hereunder, the Borrower covenants as follows: 6.1 CONSOLIDATED TANGIBLE CAPITAL FUNDS. The Borrower shall maintain Consolidated Tangible Capital funds of $42,500,000.00 during the entire term that this Agreement shall be in full force and effect and/or any of the Obligations remain outstanding and unpaid. 6.2 BAD DEBT ALLOWANCE. The Borrower shall at all times maintain a balance sheet allowance for bad debt of the Parent and its Subsidiaries, including the Borrower, of at least 9% of Gross Lease Installments. 6.3 LIMITS OF DEALER BUSINESS CONCENTRATIONS. Commencing 180 days after the Closing Date and continuing until all Obligations are paid, no single Dealer shall generate more than twenty (20%) percent of the then outstanding Eligible Leases. 6.4 MAXIMUM LEVERAGE RATIO. The Borrower's Maximum Leverage Ratio shall not exceed 3.0:1.0 during the entire term that this agreement shall be in full force and effect and/or any of the Obligations remain outstanding and unpaid. SECTION VII NEGATIVE COVENANTS So long as any Loan or other Obligation remains outstanding or the Lenders have any obligation to make any Loan hereunder, the Borrower covenants as follows: 7.1 INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries shall create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness other than the following: (a) Obligations; (b) Indebtedness existing as of the date of this Agreement and disclosed on EXHIBIT C hereto; (c) Indebtedness for taxes, assessments or governmental charges to the extent that payment therefor shall at the time not be required to be made in accordance with Section 5.4; (d) current liabilities on open account for the purchase price of services, materials and supplies incurred by the Borrower in the ordinary course of business (not as a result of borrowing), so long as all of such open account Indebtedness shall be promptly paid and discharged when due or in conformity with customary trade terms and practices, except for any such open account Indebtedness which is being contested in good faith by the Borrower, as to -41- which adequate reserves required by GAAP have been established and are being maintained and as to which no Encumbrance has been placed on any property of the Borrower or any of its Subsidiaries; (e) Guarantees permitted under Section 7.2 hereof; (f) Subordinated Debt; (g) Accrued payroll and severance pay; (h) intra-Borrower debt incurred in the ordinary course of business; and (i) purchase money debt and capital leases incurred in the ordinary course of business. 7.2 CONTINGENT LIABILITIES. Neither the Borrower nor any of its Subsidiaries shall create, incur, assume, guarantee or be or remain liable with respect to any Guarantees other than (i) Guarantees existing on the date of this Agreement and disclosed on EXHIBIT C hereto, and (ii) Guarantees resulting from the endorsement of negotiable instruments for deposit or collection in the ordinary course of business. 7.3 ENCUMBRANCES. Neither the Borrower nor any of its Subsidiaries shall create, incur, assume or suffer to exist any mortgage, pledge, security interest, lien or other charge or encumbrance, including the lien or retained security title of a conditional vendor upon or with respect to any of its property or assets ("ENCUMBRANCES"), or assign or otherwise convey any right to receive income, including the sale or discount of accounts receivable with or without recourse, except the following ("PERMITTED ENCUMBRANCES"): (a) Encumbrances in favor of the Agent or any of the Lenders to secure Obligations; (b) Encumbrances existing as of the date of this Agreement and disclosed in EXHIBIT C hereto; (c) liens for taxes, fees, assessments and other governmental charges to the extent that payment of the same may be postponed or is not required in accordance with the provisions of Section 5.4; (d) landlords' and lessors' liens in respect of rent not in default or liens in respect of pledges or deposits under workmen's compensation, unemployment insurance, social security laws, or similar legislation (other than ERISA) or in connection with appeal and similar bonds incidental to litigation; mechanics', warehouseman's, laborers' and materialmen's and similar liens, if the obligations secured by such liens are not then delinquent or are being contested in good faith by appropriate proceedings, with adequate reserves maintained in accordance with GAAP; deposits, pledges and other liens securing the performance of bids, tenders, contracts (other than for the payment of money); and deposits, pledges and other liens securing statutory obligations or surety, indemnity, performance, or other similar bonds incidental to the conduct of the Borrower's or a Subsidiary's business in the ordinary course and that do not in the aggregate -42- materially detract from the value of its property or materially impair the use thereof in the operation of its business; (e) judgment liens securing judgments unless (i) such liens are not fully covered by insurance, and shall not have been in existence for a period longer than 10 days after the creation thereof or, if a stay of execution shall have been obtained, for a period longer than 10 days after the expiration of such stay, or (ii) do not give rise to an Event of Default under Section 8.1 (f) rights of lessors under capital leases; (g) easements, rights of way, restrictions and other similar charges or Encumbrances relating to real property and not interfering in a material way with the ordinary conduct of the Borrower' business or arising in the ordinary course of business and not securing monetary obligations; (h) liens constituting a renewal, extension or replacement of any Permitted Encumbrance; or (i) restrictions under federal and state securities laws regarding the transfer of securities. 7.4 SPECIAL PURPOSE SUBSIDIARIES. It is specifically understood and agreed that without the written authority of CIT, the establishment of Special Purpose Subsidiaries of the Parent or Borrower for the purposes of the disposition or transfer of assets for purposes of securitization of collateral pools or other assets shall not be permitted during the first eighteen (18) months after the Closing Date. Thereafter, upon advance written notice to Agent, absent an Event of Default and subject to the provisions of section 7.5, the Parent or Borrower may create a Special Purpose Subsidiary upon the following terms and conditions: (a) The purpose of said Subsidiary shall be for the sole purpose of the securitization and sale of equipment portfolios. (b) Copies of all constituent documents, transactional documents and other documents reasonably requested by Agent shall be promptly delivered to Agent. 7.5 MERGER; CONSOLIDATION; SALE OR LEASE OF ASSETS. Without the prior written consent of the Agent, neither the Borrower nor any of its Subsidiaries shall liquidate, merge or consolidate into or with any other person or entity, or sell, lease or otherwise dispose of any assets or properties, other than the disposition of scrap, waste and obsolete or unusable items and Qualified Investments, in each case in the ordinary course of business. The merger of Borrower Subsidiaries (if any) with Borrower shall be permitted. Sales of equipment and lease portofolios shall be upon the following terms and conditions: (a) Said portfolios sales shall be only to Dealers that originated the leases relative to the equipment in said portfolios. (b) 100% of the proceeds of any such sale shall be applied to the repayment of the Obligations. -43- (c) The proceeds of such Sales in any given calendar year shall not exceed $5,000,000.00 in the aggregate without the prior written consent of the Agent. (d) No repayment of Revolving Credit Notes from the proceeds of any such sale shall permanently reduce the Revolving Credit Loan availability. 7.6 SUBSIDIARY STOCK; GUARANTEES. The Borrower shall not permit any of its Subsidiaries to issue any additional shares of its capital stock or other equity securities, any options therefor or any securities convertible thereto other than to the Borrower. Except for existing warrants, neither the Borrower nor any of its Subsidiaries shall sell, transfer or otherwise dispose of any of the capital stock or other equity securities of a Subsidiary, except to the Borrower or any of its wholly-owned Subsidiaries. The Borrower shall not create or acquire any Subsidiary, except a Special Purpose Subsidiary, unless such Subsidiary shall execute and deliver a Subsidiary Guarantee to the Agent. 7.7 RESTRICTED PAYMENTS. Neither the Borrower nor any of its Subsidiaries shall pay, make, declare or authorize any Restricted Payment other than: (a) compensation paid to employees, officers and directors in the ordinary course of business and consistent with prudent business practices including severance pay and bonuses approved by the Board of Directors and repurchase of employee stock in the event of the death or disability not to exceed $100,000.00 per employee; (b) dividends payable solely in common stock; (c) dividends paid by any Subsidiary to the Borrower; (d) cash dividends paid by the Borrower to the Parent not to exceed, in the aggregate in any fiscal year, an amount equal to fifty percent (50%) of Borrower's consolidated net income for the immediately preceding fiscal year, PROVIDED that both at the time such cash dividend is declared or paid, and after giving effect to the payment thereof, no Default shall have occurred and be continuing. 7.8 PAYMENTS ON SUBORDINATED DEBT. The Borrower shall not make any prepayment of principal or interest on, or any other payments in respect of Subordinated Debt (as said debt has been amended) but may make regularly scheduled payments of cash interest and principal payments on the Subordinated Debt, until the Obligations have been paid in full. In the Event of Default under any of the Loan Documents, such payments shall immediately terminate. PROVIDED that immediately prior to making any such payment and after giving effect thereto there shall not have occurred and be continuing any Default Provided however, the AMPAC Subordinated Debt repayment shall be governed by the terms of the $2,000,000.00 Subordinated Promissory Note dated as of June 10, 2004. 7.9 INVESTMENTS; PURCHASES OF ASSETS. Neither the Borrower nor any of its Subsidiaries shall make or maintain any Investments or purchase or otherwise acquire any material amount of assets other than: (a) Investments existing on the date hereof in Subsidiaries; -44- (b) Qualified Investments; (c) Capital Expenditures; (d) purchases of Equipment, Installment Finance Contracts, Leases, security monitoring agreements and inventory in the ordinary course of business; (e) normal trade credit extended in the ordinary course of business and consistent with prudent business practice; and (f) those acquisitions permitted under Section 7.4 herein. 7.10 ERISA COMPLIANCE. Neither the Borrower nor any of its ERISA Affiliates nor any Plan shall (i) engage in any Prohibited Transaction which would have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole, (ii) incur any "accumulated funding deficiency" (within the meaning of Section 412(a) of the Code and Section 302 of ERISA), whether or not waived, (iii) permit to exist any material amount of "unfunded benefit liabilities" (within the meaning of Section 4001(a)(18) of ERISA), (iv) terminate any Pension Plan in a manner which could result in the imposition of a lien on any property of the Borrower or any of its Subsidiaries, (v) fail to make any required contribution to any Multiemployer Plan or (vi) completely or partially withdraw from a Multiemployer Plan if such complete or partial withdrawal will result in any material withdrawal liability under Title IV of ERISA. 7.11 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any purchase, sale, lease or other transaction with any Affiliate except (i) transactions in the ordinary course of business on terms that are no less favorable to the Borrower than those which might be obtained at the time in a comparable arm's-length transaction with any Person who is not an Affiliate and (ii) employment contracts with senior management of the Borrower entered into in the ordinary course of business and consistent with prudent business practices. Notwithstanding the foregoing, the Borrower will not, and will not permit any Subsidiary to, directly or indirectly, pay any management, consulting, overhead, indemnity, guarantee or other similar fee or charge to any Affiliate. 7.12 FISCAL YEAR. The Borrower and its Subsidiaries shall not change their fiscal years without the prior written consent of the Agent. 7.13 UNDERWRITING PROCEDURES. The Borrower shall not make any material change in its underwriting and credit approval procedures without the prior written consent of the Majority Lenders. 7.14 AUTHORIZATION TO FILE FINANCING STATEMENTS. The Borrower Parent and Subsidiaries hereby irrevocably authorize the Agent at any time and from time to time during which any Loans are outstanding, to file, in any filing office in any Uniform Commercial Code jurisdiction where the filing of an initial financing statement is necessary or desirable to perfect the interests of the Agent or the Lenders in the collateral for the Obligations and for the obligations of the Borrower or Parent in respect of the Parent Guarantee, any initial financing -45- statements and amendments thereto that (a) indicate the collateral (i) as all assets of the Borrower or Parent or words of similar effect, regardless of whether any particularly asset comprised in the collateral falls within the scope of Article 9 of the Uniform Commercial Code of the state of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other information required by part 5 of Article 9 of the Uniform Commercial Code of the state of such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including whether each of the Borrower or Parent is in an organization, the type of organization and any organization identification numbers issued to either of the Borrower or Parent. Each of the Borrower or Parent agree to furnish any such information to the Agent as soon as reasonably practicable upon the Agent's request. Each of the Borrower or Parent also ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof. SECTION VIII DEFAULTS 8.1 EVENTS OF DEFAULT. There shall be an Event of Default hereunder if any of the following events occurs: (a) the Borrower or the Parent shall fail to pay any principal of any Loan, or any interest, fees or other amounts owing under any Loan Document or in respect of any Obligation when the same shall become due and payable, whether at maturity or at any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower or its Subsidiaries shall fail to perform or comply with any term, covenant or agreement applicable to it contained in Sections 5.1, 5.2, 5.6, 5.7, 5.9, 5.11, 5.12, 6 and 7 of this Agreement. Provided however, with respect to any default under Sections 5.1(d), 5.5, 5.12 and 6.3, the Borrower shall have seven (7) business days to remedy such default. (c) the Borrower or its Subsidiaries shall fail to perform any term, covenant or agreement (other than as specified in subsections 8.1(a) or (b) hereof) contained in this Agreement or any other Loan Document and such default shall continue for 30 days; or (d) any representation or warranty of the Borrower or its Subsidiaries made in this Agreement or any other Loan Document or in any certificate delivered hereunder or thereunder shall prove to have been false in any material respect upon the date when made deemed to have been made; or (e) unless deferred under Section 7.1(c) or 7.1(d) herein, the Borrower, the Parent or any of their Subsidiaries shall fail to pay when due (after any applicable period of grace) any amount payable under any Indebtedness exceeding $100,000.00 in principal amount or under any agreement for the use of real or personal property requiring aggregate payments in excess of $100,000.00 in any twelve month period, or fail to observe or perform any term, covenant or agreement evidencing or securing such Indebtedness or relating to such agreement for the use of real or personal property; or -46- (f) the Borrower, the Parent or any of its Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar official of itself or of all or a substantial part of its property, (ii) be generally not paying its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect), (v) take any action or commence any case or proceeding under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or any other law providing for the relief of debtors, (vi) fail to contest in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the United States Bankruptcy Code or other law, (vii) take any action under the laws of its jurisdiction of incorporation or organization similar to any of the foregoing, or (viii) take any corporate action for the purpose of effecting any of the foregoing; or (g) a proceeding or case shall be commenced against the Borrower, the Parent or any of its Subsidiaries, without the application or consent of the Borrower, the Parent or such Subsidiary in any court or competent jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets, or (iii) similar relief in respect of it, under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts or any other law providing for the relief of debtors, and such proceeding or case shall continue undismissed, or unstayed and in effect, for a period of 30 days; or an order for relief shall be entered in an involuntary case under the Federal Bankruptcy Code, against the Borrower, the Parent or such Subsidiary; or action under the laws of the jurisdiction of incorporation or organization of the Borrower, the Parent or any of its Subsidiaries similar to any of the foregoing shall be taken with respect to the Borrower, the Parent or such Subsidiary and shall continue unstayed and in effect for a period of 30 days; or (h) a judgment or order for the payment of money shall be entered against the Borrower or any of its Subsidiaries by any court, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or such Subsidiary, that in the aggregate exceeds $500,000.00 in value, the payment of which is not fully covered by insurance in excess of any deductibles not exceeding $5,000.00 ($500,000.00 in the case of Directors' and Officers' liability insurance coverage) in the aggregate, and such judgment, order, warrant or process shall continue undischarged or unstayed for 30 days; or (i) the Borrower or any Affiliate shall fail to pay when due any material amount that they shall have become liable to pay to the PBGC or to a Pension Plan under Title IV of ERISA, unless such liability is being contested in good faith by appropriate proceedings, the Borrower or the Affiliate, as the case may be, has established and is maintaining adequate reserves in accordance with GAAP and no lien shall have been filed to secure such liability; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Pension Plan or Pension Plans; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Pension Plan or Pension Plans must be terminated; or (j) any of the Loan Documents (including without limitation any Guaranty executed pursuant to the Loan) shall be cancelled, terminated, revoked or rescinded otherwise then in -47- accordance with the express terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at law or in equity or other legal proceeding to cancel, revoke or rescind any Loan Document shall be commenced by or on behalf of the Borrower, or any court or other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or shall issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; or (k) any failure of Richard Latour to be at all times the duly elected and acting chief executive officer of TimePayment Corp. LLC, the Parent and Executive Vice President of Leasecomm Corporation or the imposition of any material restriction on his right to exercise the powers and authority of such office and to manage the business of the Borrower in a manner consistent with past practices, unless, in the event of his ceasing to act as such chief executive officer, a replacement reasonably acceptable to the Agent is appointed within 60 days of such cessation; or (l) any failure of James Jackson to be at all times the duly elected and chief financial officer of the Borrower and Parent or the imposition of any material restriction on his right to exercise the powers and authority of such office and to manage the financial affairs of the Borrower in a manner consistent with past practices, unless, in the event of his ceasing to act as such chief financial officer, a replacement reasonably acceptable to the Agent is appointed within 60 days of such cessation; (m) more than one-third of the members of the Board of Directors of the Parent or of the Borrower at the beginning of any year fail to remain in office throughout such year, unless such former members of the Board of Directors are replaced with Persons reasonably acceptable to the Agent within 60 days; or (n) any default or event of default under any Subordinated Debt. 8.2 REMEDIES. Upon the occurrence of an Event of Default described in subsections 8.1(f) and (g), immediately and automatically, and upon the occurrence of any other Event of Default, at any time thereafter while such Event of Default is continuing, at the option of the Agent or the Majority Lenders and upon the Agent's declaration: (a) the obligation of the Lenders to make any further Loans shall terminate; (b) the unpaid principal amount of the Loans together with accrued interest and all other Obligations shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived; and (c) the Agent and the Lenders may exercise any and all rights they have under this Agreement, the other Loan Documents or at law or in equity, and proceed to protect and enforce their respective rights by any action at law or in equity or by any other appropriate proceeding. No remedy conferred upon the Agent and the Lenders in the Loan Documents is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be an addition to every other remedy given hereunder or now or hereafter existing at law or in equity -48- or by statute or by any other provision of law. Without limiting the generality of the foregoing or of any of the terms and provisions of any of the Security Documents, (i) if and when the Agent exercises remedies under the Security Documents with respect to the Collateral, the Agent may, in its sole discretion, determine which items and types of Collateral to dispose of and in what order and may dispose of Collateral in any order the Agent shall select in its sole discretion, and the Borrower consents to the foregoing and waives all rights of marshalling with respect to all Collateral. SECTION IX ASSIGNMENT; PARTICIPATION 9.1 ASSIGNMENT. (a) Each Lender shall have the right to assign at any time any portion of its Commitment hereunder and its interests in the risk relating to the Revolving Credit Loans in an amount equal to or greater than $5,000,000.00 to other Lenders or to banks or financial institutions approved by the Agent (such approval not to be unreasonably withheld or delayed) (each an "ASSIGNEE"), provided that any Lender which proposes to assign less than its total Commitment must retain a Commitment of at least $5,000,000.00, and provided, further, that if no Default or Event of Default shall have occurred and be continuing, each such Assignee which is not a Lender, an Affiliate of a Lender or a Federal Reserve Bank shall be subject to prior approval by the Borrower (such approval not to be unreasonably withheld or delayed) provided that (i) no Person proposed to become a Lender after the Closing Date and determined by the Agent or, to the extent no Event of Default exists at such time, by the Borrower in good faith to be acting in the capacity of a vulture fund or distressed debt purchaser may be an Assignee, and (ii) no Person or Affiliate of such Person proposed to become a Lender after the Closing Date and that holds Subordinated Debt or capital stock issued by the Parent may be an Assignee. Each such Assignee shall execute and deliver to the Agent and the Borrower a counterpart joinder in the form of EXHIBIT E hereto and shall pay to the Agent, solely for the account of the Agent, an assignment fee of $3,500. Upon the execution and delivery of such counterpart joinder, (a) such Assignee shall, on the date and to the extent provided in such counterpart joinder, become a "Lender" party to this Agreement and the other Loan Documents for all purposes of this Agreement and such other Loan Documents and shall have all rights and obligations of a "Lender" with a Commitment as set forth in such counterpart joinder, and the transferor Lender shall, on the date and to the extent provided in such counterpart joinder, be released from its obligations hereunder and under the other Loan Documents to a corresponding extent (and, in the case of an assignment covering all of the remaining portion of an assigning Lender's rights and obligations under this Agreement, such transferor shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 11.3 and to any fees accrued for its account hereunder and not yet paid); (b) the assigning Lender, if it holds any Revolving Credit Notes, shall promptly surrender such Revolving Credit Notes to the Agent for cancellation and delivery to the Borrower, provided that if the assigning Lender has retained any Commitment, the Borrower shall execute and deliver to the Agent for delivery to such assigning Lender a new Revolving Credit Note in the amount of the assigning Lender's retained Commitment; (c) the Borrower shall issue to such Assignee a Revolving Credit Note in the amount of such Assignee's Commitment dated the Closing Date or such other date as may be -49- specified by such Assignee and otherwise completed in substantially the form of EXHIBIT A; (d) this Agreement shall be deemed appropriately amended to reflect (i) the status of such Assignee as a party hereto and (ii) the status and rights of the Lenders hereunder; and (e) the Borrower shall take such action as the Agent may reasonably request to perfect any security interests or mortgages in favor of the Lenders, including any Assignee which becomes a party to this Agreement. For so long as no Event of Default exists hereunder, no Lender shall make an assignment under this Section 9.1 unless and until the proposed assignee specifically acknowledges it (i) is not subject to capital adequacy or similar requirements under Section 2.13 hereof, (ii) does not require the payment of any increased costs under Section 2.12 hereof, (iii) is not unable to fund LIBOR Loans under Section 2.3 hereof, and (iv) will comply in all respects with the provisions of Section 2.4 hereof. (b) If the Assignee, or any Participant pursuant to Section 9.2 hereof, is organized under the laws of a jurisdiction other than the United States or any state thereof, such Assignee shall execute and deliver to the Borrower, simultaneously with or prior to such Assignee's execution and delivery of the counterpart joinder described above in Section 9.1(a), and such Participant shall execute and deliver to the Lender granting the participation, a United States Internal Revenue Service Form 4224 or Form 1001 (or any successor form), appropriately completed, wherein such Assignee or Participant claims entitlement to complete exemption from United States Federal Withholding Tax on all interest payments hereunder and all fees payable pursuant to any of the Loan Documents. The Borrower shall not be required to pay any increased amount to any Assignee or other Lender on account of taxes to the extent such taxes would not have been payable if the Assignee or Participant had furnished one of the Forms referenced in this Section 9.1(b) unless the failure to furnish such a Form results from (i) a condition or event affecting the Borrower or an act or failure to act of the Borrower or (ii) the adoption of or change in any law, rule, regulation or guideline affecting such Assignee or Participant occurring (x) after the date on which any such Assignee executes and delivers the counterpart joinder, or (y) after the date such Assignee shall otherwise comply with the provisions of Section 9.1(a), or (z) after the date a Participant is granted its participation. (c) Any Lender may at any time pledge all or any portion of its rights under the Loan Documents, including any portion of any Note, to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or any enforcement thereof shall release such Lender from its obligations under any of the Loan Documents. 9.2 PARTICIPATIONS. Each Lender shall have the right at any time and from time to time, without the consent of or notice to the Borrower, to grant participations to one or more banks or other financial institutions (each a "PARTICIPANT") in all or any part of any Loans owing to such Lender and the Note held by such Lender. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents, PROVIDED that the documents evidencing any such participation may provide that, except with the consent of such Participant, such Lender will not consent to (a) the reduction in or forgiveness of the stated principal of or rate of interest on or commitment fee with respect to the portion of any Loan subject to such participation, (b) the extension or postponement of any stated date fixed for payment of principal or interest or commitment fee with respect to the portion of any Loan subject to such participation, (c) the -50- waiver or reduction of any right to indemnification of such Lender hereunder, or (d) except as otherwise permitted hereunder, the release of any Collateral. Notwithstanding the foregoing, no participation shall operate to increase the Total Commitment hereunder or otherwise alter the substantive terms of this Agreement. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of such Note for all purposes under this Agreement and the Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. SECTION X THE AGENT 10.1 APPOINTMENT OF AGENT; POWERS AND IMMUNITIES. (a) Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Loan Documents and to execute such Loan Documents (other than this Agreement) and all other instruments relating thereto. Each Lender irrevocably authorizes the Agent to take such action on behalf of each of the Lenders and to exercise all such powers as are expressly delegated to the Agent hereunder and in the other Loan Documents and all related documents, together with such other powers as are reasonably incidental thereto. The obligations of the Agent hereunder are only those expressly set forth herein. The Agent shall not have any duties or responsibilities or any fiduciary relationship with any Lender except those expressly set forth in this Agreement. (b) Neither the Agent nor any of its directors, officers, employees or agents shall be responsible for any action taken or omitted to be taken by any of them hereunder or in connection herewith, except for their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, neither the Agent nor any of its Affiliates shall be responsible to the Lenders for or have any duty to ascertain, inquire into or verify: (i) any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any other Person whether contained herein or otherwise; (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the other Loan Documents or any other document referred to or provided for herein or therein; (iii) any failure by the Borrower or any of its Subsidiaries or any other Person to perform its obligations under any of the Loan Documents; (iv) the satisfaction of any conditions specified in Section III hereof, other than receipt of the documents, certificates and opinions specified in Section 3.1 hereof; (v) the existence, value, collectibility or adequacy of the Collateral or any part thereof or the validity, effectiveness, perfection or relative priority of the liens and security interests of the Lenders therein; or (vi) the filing, recording, re-filing, continuing or re-recording of any financing statement or other document or instrument evidencing or relating to the security interests or liens of the Lenders in the Collateral. (c) The Agent may employ agents, attorneys and other experts, shall not be responsible to any Lender for the negligence or misconduct of any such agents, attorneys or experts selected by it with reasonable care and shall not be liable to any Lender for any action -51- taken, omitted to be taken or suffered in good faith by it in accordance with the advice of such agents, attorneys and other experts. CIT, in its separate capacity as a Lender shall have the same rights and powers under the Loan Documents as any other Lender and may exercise or refrain from exercising the same as though it were not the Agent, and CIT and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower as if it were not the Agent. 10.2 ACTIONS BY AGENT. (a) The Agent shall be fully justified in failing or refusing to take any action under this Agreement as it reasonably deems appropriate unless it shall first have received such advice or concurrence of the Lenders and shall be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any of the Loan Documents in accordance with a request of the Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all future holders of the Notes. (b) Whether or not an Event of Default shall have occurred, the Agent may from time to time exercise such rights of the Agent and the Lenders under the Loan Documents as it determines may be necessary or desirable to protect the Collateral and the interests of the Agent and the Lenders therein and under such Loan Documents. In addition, the Agent may, without the consent of the Lenders, release Collateral valued by the Agent, in its sole discretion, of not more than $1,000,000 in any fiscal year. (c) Neither the Agent nor any of its directors, officers, employees or agents shall incur any liability by acting in reliance on any notice, consent, certificate, statement or other writing (which may be a bank wire, telex, facsimile or similar writing) reasonably believed by any of them to be genuine or to be signed by the proper party or parties. 10.3 INDEMNIFICATION. Without limiting the obligations of the Borrower hereunder or under any other Loan Document, the Lenders agree to indemnify the Agent ratably in accordance with their respective Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof or of any such other documents; PROVIDED, THAT no Lender shall be liable for any of the foregoing to the extent they result from the gross negligence or willful misconduct of the Agent. 10.4 REIMBURSEMENT. Without limiting the provisions of Section 10.3, the Lenders and the Agent hereby agree that the Agent shall not be obliged to make available to any Person any sum which the Agent is expecting to receive for the account of that Person until the Agent has determined that it has received that sum. The Agent may, however, disburse funds prior to determining that the sums which the Agent expects to receive have been finally and unconditionally paid to the Agent if the Agent wishes to do so. If and to the extent that the -52- Agent does disburse funds and it later becomes apparent that the Agent did not then receive a payment in an amount equal to the sum paid out, then any Person to whom the Agent made the funds available shall, on demand from the Agent refund to the Agent the sum paid to that Person. If the Agent in good faith reasonably concludes that the distribution of any amount received by it in such capacity hereunder or under the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 10.5 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender represents that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of the financial condition and affairs of the Borrower and decision to enter into this Agreement and the other Loan Documents and agrees that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decision in taking or not taking action under this Agreement or any other Loan Document. The Agent shall not be required to keep informed as to the performance or observance by the Borrower of this Agreement, the other Loan Documents or any other document referred to or provided for herein or therein or by any other Person of any other agreement or to make inquiry of, or to inspect the properties or books of, any Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning any Person which may come into the possession of the Agent or any of its affiliates. Each Lender shall have access to all documents relating to the Agent's performance of its duties hereunder at such Lender's request. Unless any Lender shall promptly object to any action taken by the Agent hereunder (other than actions to which the provisions of Section 11.9(b) are applicable and other than actions which constitute gross negligence or willful misconduct by the Agent), such Lender shall conclusively be presumed to have approved the same. 10.6 RESIGNATION OR REMOVAL OF AGENT. The Agent may resign at any time by giving thirty (30) days prior written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Lenders shall have the right to appoint a successor Agent which, provided that no Default or Event of Default has occurred and is continuing, shall be reasonably acceptable to the Borrower and shall be a financial institution having a combined capital and surplus in excess of $150,000,000. If no successor Agent shall have been so appointed by the Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which, provided that no Default or Event of Default has occurred and is continuing, shall be reasonably acceptable to the Borrower and shall be a financial institution having a combined capital and surplus in excess of $150,000,000. 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. -53- 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. SECTION XI MISCELLANEOUS 11.1 NOTICES. Unless otherwise specified herein, all notices hereunder to any party hereto shall be in writing and shall be deemed to have been given when delivered by hand, or when sent by electronic facsimile transmission or by telex, answer back received, or on the first Business Day after delivery to any overnight delivery service, freight pre-paid, or three days after being sent by certified or registered mail, return receipt requested, postage pre-paid, and addressed to such party at its address indicated below: If to the Borrower, c/o Leasecomm Corporation 10M Commerce Way Woburn, Massachusetts 01801 Attention: President and Chief Financial Officer with a copy to: Gerald P. Hendrick, Esq. Edwards & Angell 101 Federal Street Boston, MA 02110 Facsimile: (617) 439-4170 If to the Parent, at: 10M Commerce Way Woburn, Massachusetts 01801 Attention: President and Chief Financial Officer with a copy to: Gerald P. Hendrick, Esq. Edwards & Angell 101 Federal Street Boston, MA 02110 Facsimile: (617) 439-4170 If to Agent or CIT, at 1211 Avenue of the Americas New York, New York 10036 Attention: Stephen M. Leavenworth, Senior Vice President -54- with a copy to: Burton Winnick, Esquire Gadsby Hannah LLP 225 Franklin Street Boston, MA 02110 Facsimile: (617) 204-8015 if to any other Lender, to its address set forth on Schedule 1 attached hereto; or at any other address specified by such party in writing. 11.2 EXPENSES. The Borrower agrees to pay to the Agent upon written demand therefor (i) an amount equal to any and all reasonable out-of-pocket costs, expenses, and liabilities (including, without limitation, fees, disbursements, expenses and liabilities of or relating to, commercial finance examinations, collateral audits, appraisals, the Lender's consultants, or Collateral Management Agent, collateral examinations referred to in this Agreement, Uniform Commercial Code and other lien searches and filings fees, and legal counsel) incurred or sustained by the Agent in connection with the preparation of this Agreement, or the modification, amendment, approval, consent or waiver hereof or thereof, the documents and instruments contemplated hereby, the administration or interpretation of the Loan Documents, and (ii) from time to time any and all reasonable out-of-pocket costs or expenses, legal fees, disbursements and other expenses hereafter incurred or sustained by the Agent in connection with the administration of credit extended by the Agent to the Borrower, the preservation of or enforcement of their rights under the Loan collateral, and/or in respect of any of the Borrower's, Parent's or other obligations to the Agent. The Lenders and the Borrower authorize the Agent and the Lenders to, with prior written notice to the Borrower, to debit any accounts maintained by the Borrower with such any such Lender for any fees, expenses, or other amounts due and payable by the Borrower or Parent hereunder, under this Agreement or any of the other Loan Documents. On or after an Event of Default, all of the aforementioned fees incurred by any of the Lenders shall also be reimbursable to said Lenders. 11.3 MARSHALLING. Neither the Agent nor the Lenders shall be required to marshal any present or future collateral security for the Borrower's or Parent's obligations to the Agent or such Bank under the Loan Documents or to resort to such collateral security or other assurances of payment in any particular order, and all of their rights in respect of such collateral security shall be cumulative and in addition to all other rights, however existing or arising. To the extent that they lawfully may, the Borrower and Parent hereby agree that they will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the Agent's or such Bank's rights under any document, agreement or instrument evidencing or securing the Borrower's obligations to the Agent and the Lenders under the Loan Documents and, to the extent that it lawfully may, the Borrower hereby irrevocably waives the benefits of all such laws. 11.4 INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Lenders, as well as their respective shareholders, directors, agents, officers, attorneys, subsidiaries and affiliates, from and against all damages, losses, settlement payments, obligations, liabilities, claims, suits, penalties, assessments, citations, directives, demands, -55- judgments, actions or causes of action, whether statutorily created or under the common law, and reasonable costs and expenses incurred, suffered, sustained or required to be paid by an indemnified party by reason of or resulting from the transactions contemplated hereby, except any of the foregoing which result from the gross negligence or willful misconduct of the indemnified party. In any investigation, proceeding or litigation, or the preparation therefor, the Lenders shall select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. In the event of the commencement of any such proceeding or litigation, the Borrower shall be entitled to participate in such proceeding or litigation with counsel of its choice at its own expense, provided that such counsel shall be reasonably satisfactory to the Agent. The covenants of this Section 11.4 shall survive payment or satisfaction of payment of all amounts owing with respect to the Notes or any other Loan Document. 11.5 SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein, all covenants, agreements, representations and warranties made herein, in the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower pursuant hereto shall be deemed to have been relied upon by the Agent and the Lenders, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders of the Loans as herein contemplated, and shall continue in full force and effect so long as any amount due under any Loan Document remains outstanding and unpaid or any Lender has any obligation to make any Loans hereunder. All statements contained in any certificate or other paper delivered by or on behalf of the Borrower pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder. 11.6 SET-OFF. Regardless of the adequacy of any Collateral or other means of obtaining repayment of the Obligations, any deposits, balances or other sums credited by or due from the head office of any Lender or any of its branch offices to the Borrower may, at any time and from time to time after the occurrence of an Event of Default hereunder, without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are hereby expressly waived) be set off, appropriated, and applied by such Lender against any and all Obligations of the Borrower to such Lender or any of its affiliates in such manner as the head office of such Lender or any of its branch offices in its sole discretion may determine, and the Borrower hereby grants each such Lender a continuing security interest in such deposits, balances or other sums for the payment and performance of all such Obligations. ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHTS OF SETOFF WITH RESPECT TO SUCH DEPOSITS, BALANCES, OTHER SUMS AND PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. THE AGENT WILL PROVIDE NOTICE TO THE BORROWER OF ANY SETOFF HEREUNDER. 11.7 NO WAIVERS. No failure or delay by the Agent or any Lender in exercising any right, power or privilege hereunder or under the Notes or under any other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver shall -56- extend to or affect any Obligation not expressly waived or impair any right consequent thereon. No course of dealing or omission on the part of the Agent or the Lenders in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. The rights and remedies herein and in the Notes and the other Loan Documents are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law. 11.8 JOINT AND SEVERAL. The obligations of the Borrower under the Loan Documents shall be joint and several. 11.9 AMENDMENTS, WAIVERS, ETC. (a) Neither this Agreement nor the Revolving Credit Notes nor any other Loan Documents nor any provision hereof or thereof may be amended, waived, discharged or terminated except by a written instrument signed by the Agent on behalf of the Lenders or, as the case may be, by the Lenders or the Majority Lenders, and, in the case of amendments, by the Borrower. (b) Except where this Agreement or any of the other Loan Documents authorizes or permits the Agent to act alone and except as otherwise expressly provided in this Section 11.9(b), any action to be taken (including the giving of notice) by the Lenders may be taken, and any consent or approval required or permitted by this Agreement or any other Loan Document to be given by the Lenders may be given, and any term of this Agreement, any other Loan Document or any other instrument, document or agreement related to this Agreement or such other Loan Documents or mentioned therein may be amended, and the performance or observance by any of the Borrower or any other Person of any of the terms thereof and any Default or Event of Default (as defined in any of the above-referenced documents or instruments) may be waived (either generally or in a particular instance and either retroactively or prospectively), in each case only with the written consent of the Majority Lenders; PROVIDED, HOWEVER, that no such consent or amendment which affects the rights, duties or liabilities of the Agent shall be effective without the written consent of the Agent. Notwithstanding the foregoing, no amendment, waiver or consent shall do any of the following unless in writing and signed by ALL of the Lenders: (i) increase the Total Commitment (or subject the Lenders to any additional obligations) (ii) reduce the principal of or interest on any of the Revolving Credit Notes (including, without limitation, interest on overdue amounts) or any fees payable hereunder, (iii) postpone any date (including the Borrowing Base Maturity Date) fixed for any payment in respect of principal of or interest (including, without limitation, interest on overdue amounts) on the Revolving Credit Notes, or any fees payable hereunder, (iv) change the definition of "Majority Lenders" or the number of Lenders which shall be required for the Lenders or any of them to take any action under the Loan Documents; (v) change the definition of "Borrowing Base" set forth in Section 1.1, amend Section 2.1(a) or waive the limitations set forth in Section 2.1(a); (vi) amend this Section 11.9(b); (vii) change the Commitment of any Lender, except as permitted under Section IX hereof; (viii) except as permitted by Section 10.2(b) hereunder, release any Collateral; or (ix) amend Sections 2.5 or 2.6 hereof. -57- 11.10 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders and their respective successors and permitted assigns; PROVIDED that the Borrower may not assign or transfer its rights or obligations hereunder. 11.11 CAPTIONS; COUNTERPARTS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 11.12 ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby and supersede all prior agreements (including the Existing Agreement and all term sheets) with respect to the subject matter hereof, except for the letter agreements of even date herewith between the Borrower and the Agent with respect to fees payable to the Agent and to the Lenders, which letter agreements shall continue in full force and effect and shall not be superseded by this Agreement or any of the other Loan Documents. 11.13 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE BORROWER AND THE LENDERS 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 OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDERS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (b) ACKNOWLEDGES THAT THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH EACH IS A PARTY BECAUSE OF, AMONG OTHER THINGS, THE BORROWER'S WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 11.14 GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER CONSENTS TO THE JURISDICTION OF ANY OF THE FEDERAL OR STATE COURTS LOCATED IN THE STATE OF NEW YORK IN CONNECTION WITH ANY SUIT TO ENFORCE THE RIGHTS OF THE LENDERS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN -58- DOCUMENTS. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION BROUGHT IN THE COURTS REFERRED TO IN THE PRECEDING SENTENCE AND IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH ACTION THAT SUCH ACTION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 11.15 SEVERABILITY. The provisions of this Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. 11.16 CONFIDENTIALITY. The Agent and the Lenders shall hold all confidential information delivered by the Borrower to the Agent or any Lender pursuant to this Agreement relating to the Borrower or its business in accordance with such entity's customary procedures for handling confidential information of this nature and in accordance with safe and sound business practices and in any event may make disclosure to such of its respective Affiliates, officers, directors, employees, agents and representatives as need to know such information in connection with the Loans. If the Agent or any Lender is otherwise a creditor of Borrower, the Agent or such Lender, as the case may be, may use the information in connection with its other credits. The Agent or any Lender may also make disclosure reasonably required by any bona fide Participant, potential Assignee or potential Participant (each, a "TRANSFEREE"), or as required or requested by any governmental authority or representative thereof, or pursuant to legal process, or to its accountants, lawyers and other advisors, and shall require any Transferee to agree, in a writing to which the Borrower shall be the third party beneficiary, to hold all such information as confidential to the extent required by the first sentence of this Section 11.15. 11.17 LOST NOTE, ETC. Upon receipt of an affidavit of an officer of any Lender as to the loss, theft, destruction or mutilation of any Note or any Security Document which is not a public record and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or Security Document, if available, the Borrowers will issue, in lieu thereof, a replacement Note or other Security Document in the same principal amount thereof and otherwise of like tenor. -59- IN WITNESS WHEREOF, the undersigned have duly executed this Revolving Credit Agreement under seal as of the date first set above. LEASECOMM CORPORATION THE CIT GROUP/COMMERCIAL SERVICES, INC., individually as a Lender and as Agent By: /s/ Richard F. Latour By: /s/ Daniel B. Ciotti ---------------------------- ---------------------------------- Richard F. Latour, Executive Daniel B. Ciotti, Vice President Vice President TIMEPAYMENT CORP. LLC By its Manager By: /s/ Richard F. Latour ---------------------------- Richard F. Latour, Manager MICROFINANCIAL INCORPORATED By: /s/ Richard F. Latour ---------------------------- Richard F. Latour, President
EXECUTION COPY SCHEDULE 1 COMMITMENTS OF THE LENDERS LENDER COMMITMENT THE CIT GROUP/COMMERCIAL SERVICES, INC. $30,000,000 EX-10.2 3 b51980mfexv10w2.txt EX-10.2 $30,000,000 REVOLVING CREDIT NOTE EXHIBIT 10.2 EXECUTION COPY REVOLVING CREDIT NOTE $30,000,000.00 September 29, 2004 FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and unconditionally, jointly and severally, promises to pay to the order of THE CIT GROUP/COMMERCIAL SERVICES, INC., ("Payee") at its head office, at 1211 Avenue of the Americas, New York, New York 10036, as Agent; (a) on the Borrowing Base Maturity Date (as defined in the Revolving Credit Agreement referred to below), the principal amount of THIRTY MILLION AND 00/100 DOLLARS ($30,000,000.00) or, if less, the aggregate unpaid principal amount of Revolving Credit Loans advanced by the Payee to the Borrower pursuant to the Revolving Credit Agreement dated as of September 29, 2004, as amended or supplemented from time to time (the "Revolving Credit Agreement"), by and among the Borrower, the Agent and the Lenders; PROVIDED, interest on the principal balance hereof from time to time outstanding from the date hereof through and including the date on which such principal amount is paid in full, at the times and at the rates provided in the Revolving Credit Agreement. This Revolving Credit Note evidences borrowings under, is subject to the terms and conditions of and has been issued by the Borrower in accordance with the terms of the Revolving Credit Agreement and is one of the Revolving Credit Notes referred to therein. The Payee and any holder hereof is entitled to the benefits and subject to the conditions of the Revolving Credit Agreement and may enforce the agreements of the Borrower contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. This Revolving Credit Note is secured by the Security Documents described in the Revolving Credit Agreement. All capitalized terms used in this Revolving Credit Note and not otherwise defined herein shall have the same meanings herein as in the Revolving Credit Agreement. The Borrower has the right in certain circumstances and the obligation under certain other circumstances to repay or prepay the whole or part of the principal of this Revolving Credit Note on the terms and conditions specified in the Revolving Credit Agreement. If any Event of Default shall occur, the entire unpaid principal amount of this Revolving Credit Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Revolving Credit Agreement. The Borrower and every endorser and guarantor of this Revolving Credit Note or the obligation represented hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Revolving Credit Note, assent to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or Person primarily or secondarily liable. EXECUTION COPY This Revolving Credit Note shall be deemed to take effect as a sealed instrument under the laws of the State of New York and for all purposes shall be construed in accordance with such laws (without regard to conflicts of laws rules). IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to be signed under seal by its duly authorized officer as of the day and year first above written. LEASECOMM CORPORATION By: /s/ Richard F. Latour ----------------------------- Richard F. Latour, Executive Vice President TIMEPAYMENT CORP. LLC By its Manager By: /s/ Richard F. Latour ----------------------------- Richard F. Latour, President EX-10.3 4 b51980mfexv10w3.txt EX-10.3 GUARANTY DATED 9-29-2004 EXHIBIT 10.3 EXECUTION COPY GUARANTY This GUARANTY, dated as of this 29th day of September, 2004, by MICROFINANCIAL INCORPORATED, a Massachusetts corporation with its chief executive office at 10M Commerce Way, Woburn, Massachusetts 01801 (the "Guarantor"), in favor of THE CIT GROUP/COMMERCIAL SERVICES, INC., having its head office at 1211 Avenue of the Americas, New York, New York 10036 (together with its successors and assigns, "CIT"), as agent (in such capacity, the "Agent") for the Lenders under that certain Revolving Credit Agreement dated of even date herewith (the "Credit Agreement"). Terms defined in the Credit Agreement and not defined herein are used herein with the meanings given them in the Credit Agreement. WHEREAS, Leasecomm Corporation, a Massachusetts corporation ("Leasecomm") and TimePayment Corp. LLC ("TimePayment" and together with Leasecomm, the "Borrower"), each a wholly owned subsidiary of the Guarantor, and CIT, the Lenders and the Agent are entering into the Credit Agreement contemporaneously herewith; WHEREAS, the Agent and the Lenders are unwilling to enter into the Credit Agreement unless the Guarantor shall execute and deliver this Guaranty; NOW, THEREFORE, in order to induce the Agent and the Lenders to enter into the Credit Agreement and to make Loans to the Borrower thereunder, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Guarantor agrees as follows: 1.GUARANTY. The Guarantor hereby unconditionally guarantees to the Agent for the benefit of the Lenders the payment and performance by the Borrower of all Obligations under the Credit Agreement, the Notes and the other Loan Documents whether direct or indirect, absolute or contingent, due or to become due or now existing or hereafter arising, including, without limitation, all fees, costs, expenses and other amounts required to be paid thereunder (the "Guaranteed Obligations"), whether upon demand, at stated maturity of the Loans, upon acceleration for default or otherwise, strictly in accordance with the terms of the Loan Documents as the same may at any time be amended, modified, renewed or extended. In addition, "Guaranteed Obligations" shall also include any and all costs and expenses incurred by the Agent and the Lenders in enforcing this Guaranty, including, without limitation, reasonable attorneys' fees and expenses incurred in connection therewith. It is understood and agreed by the Guarantor that this is a guaranty of payment and not a guaranty of collection only and that the Agent and the Lenders may proceed against the Guarantor under this Guaranty, in one or more actions, suits or proceedings, without pursuing or exhausting any right or remedy the Agent or any Lender may have against the Borrower, any other guarantor or any other Person obligated with respect to, or against any collateral securing the Guaranteed Obligations or any part thereof under the Security Documents. 2.REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents and warrants to the Agent and the Lenders: (a) It is duly organized and validly existing and in good standing under the laws of the Commonwealth of Massachusetts, and has full power, authority and legal right and all licenses, authorizations, consents and approvals necessary to own its properties as currently owned and to carry on the business in which it is engaged or presently proposes to engage, and is duly and validly qualified to do business and is in good standing in all jurisdictions in which the character of the properties owned by it or the transaction of its business requires it to qualify to do business, other than those jurisdictions where the failure to so qualify does not and will not have a material adverse effect on its business, operations, properties or condition, financial or otherwise or its ability to perform its obligations under this Guaranty, or on the rights and interests of the Agent or the Lenders or their respective successors and the assigns hereunder. (b) It has the power to execute, deliver and perform its obligations under this Guaranty and has taken all necessary action, corporate or otherwise, to authorize the execution, delivery and performance of this Guaranty. No consent or approval of any Person (including, without limitation, any stockholder of the Guarantor), and no consent, license, approval, authorization, declaration, notice to or filing with any governmental authority or regulatory body, is or will be required in connection with its execution, delivery or performance, or the validity or enforcement, of this Guaranty. (c) This Guaranty has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. (d) The execution and delivery of this Guaranty by it will not (i) violate or conflict with any provision of its certificate of incorporation or by-laws or (ii) violate or conflict with any provision of, or constitute a default under or breach of, or result in acceleration of any of its obligations under any contract, mortgage, note, lien, lease, franchise, license, permit, agreement, instrument, judgment, decrees, order, writ or award of any court or arbitrator to which it is a party or by which it or its property is bound. 3.OBLIGATIONS ABSOLUTE; REVIVAL. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of the validity, legality or enforceability of the Loan Documents, or any collateral for, or securing any of the Loans or any other Guaranteed Obligations or any part thereof or any other circumstance or circumstances which might otherwise constitute a legal or equitable discharge of, or a defense available to, a surety or guarantor and regardless of any law, rule, regulation, order, writ, judgment, decree, award or other administrative or judicial pronouncement now or hereafter in effect in any jurisdiction purporting to affect in any manner any of the terms of the Loan Documents. The Agent and the Lenders may at any time or times, in their absolute discretion: (a) upon application of the Borrower, extend or change the time, manner, place or other term of payment of any of the Loans, as applicable, or any part thereof; (b) waive compliance by the Borrower or any other guarantor with any term, covenant, agreement or condition on its part to be complied with under the Loan Documents; (c) obtain or release any collateral, or any guarantor (including the Guarantor) obligated with respect to, the Loan Documents or any of the Loans or any part thereof, for -2- failure to file, record, re-file, re-record or otherwise perfect, or for allowing to lapse any financing statements, pledge or other security interest, covering or relating to any collateral for, or securing, any of the Loans or any part thereof; (d) settle or compromise with the Borrower, as applicable, or any other Person obligated with respect to any of the Loans, or any part thereof, and subordinate upon any terms the Lenders' rights to receive payment of the Loans or any part thereof, and (e) amend or otherwise modify the Loans or any part thereof or the Loan Documents, or the liability of the Borrower or any other person or entity obligated with respect thereto, in any manner; all without notice to or the assent of the Guarantor and without affecting this Guaranty or the liability of the Guarantor hereunder, which shall continue with respect to the Guaranteed Obligations as extended, changed, modified, settled or compromised, until fully paid in cash or payment is otherwise duly provided for in a manner satisfactory to the Agent and the Lenders. This Guaranty, and the liability of the Guarantor hereunder, shall be reinstated and revived, and the Agent's and the Lenders' rights under this Guaranty shall continue, with respect to any amount (or portion thereof) at any time paid to or received by the Agent or any Lender on account of any of the Loans or the Loan Documents that shall, at any time after the Agent's or such Lender's receipt of such payment, be required to be restored or returned by the Agent or such Lender upon the bankruptcy, insolvency or reorganization of the Borrower or any other Person obligated with respect to any of the Loans, or for any other reason, all as though such amount (or portion thereof) had not been so paid or received by the Agent or such Lender. 4. WAIVER OF SUBROGATION CLAIMS; SUBORDINATION. (a) The Guarantor hereby waives any claims, rights or remedies which it may now have or hereafter acquire against the Borrower that arise hereunder and/or from the performance by it hereunder, including, without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification or participation in any claim, right or remedy of the Agent or any Lender against the Borrower or any security which the Agent or any Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise, and if any amount shall be paid to the Guarantor on account of such rights, each and every amount so paid shall forthwith be paid to the Agent, to be credited and applied against the Obligations, whether matured or matured. (b) The Guarantor hereby agrees that any and all of its rights to the payment of any and all present and future Indebtedness and dividends and distributions in respect of stock of the Borrower to the Guarantor shall be subordinate and subject to the rights of the Agent and the Lenders to payment in full of the Obligations, and if an Event of Default shall have occurred and payment in full of the Obligations shall have been demanded, all of the Obligations shall be paid in full and all of the Lenders' Commitments shall have terminated before any payment or other distribution shall be made by any Borrower to the Guarantor. -3- (c) The Guarantor hereby agrees that should any payment or distribution be received by the Guarantor contrary to the provisions of this Section or contrary to the provisions of the Credit Agreement, whether in connection with any insolvency, bankruptcy, liquidation, reorganization, arrangement, readjustment, composition, dissolution or other similar proceeding involving the Borrower, or otherwise, such payment or distribution shall be paid over to the Agent for application to the Obligations or any of the other Guaranteed Obligations, whether or not then due and in the order set forth in Section 2.8 of the Credit Agreement, and the Guarantor hereby irrevocably assigns to the Agent for the benefit of the Lenders all of its claims against and all rights in and to all Indebtedness due to the Guarantor from the Borrower, and the Guarantor hereby irrevocably authorizes and appoints the Agent to effect the collection of any amounts due thereon for application to the payment of the Guaranteed Obligations. 5.GUARANTOR'S CONSENT TO SET-OFF. Upon the occurrence of any default in payment of principal or interest of any Note in accordance with the terms thereof and after applicable grace periods, if any (whether upon demand, at stated maturity, upon acceleration for default or otherwise), or upon occurrence and continuance of a Default, each Lender is hereby irrevocably authorized at any time and from time to time without notice to the Guarantor, any such notice being expressly waived by the Guarantor, to set- off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect or contingent or matured or unmatured, at any time held or owing by the such Lender to or for the credit or the account of the Guarantor, or any part thereof, in such amounts as such Lender may elect, against and on account of the Guaranteed Obligations, in any currency, as such Lender may elect, whether or not such Lender has made any demand for payment. The rights of the Lenders under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Lenders may have. 6.WAIVER. The Guarantor hereby waives (a) acceptance of this Guaranty by the Agent and the Lenders and notice thereof, (b) presentment for payment, demand, notice of non payment, protest and notice of protest with respect to each of the Loans or the other Guaranteed Obligations or any part thereof and all other notices and (c) promptness by the Agent or any Lender in giving any notice to or making any claim or demand upon the Guarantor hereunder, but no act or omission of any kind in the premises shall in any way affect this Guaranty or impair the Agent's or any Lender's rights hereunder. 7.NOTICES. Except as otherwise provided for herein, all notices, requests, reports and other communications pursuant to this Guaranty shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by certified mail, return receipt requested), or telecopier (followed by a hard copy), addressed as follows: If to the Guarantor: MicroFinancial Incorporated 10M Commerce Way Woburn, Massachusetts 01801 Attention: Richard F. LaTour, President Telecopier: (781) 994-4710 -4- with a copy to: Edwards & Angell 100 Federal Street Boston, Massachusetts 02110 Attention: Gerald P. Hendrick, Esq. Telecopier: (617) 439-4170 If to CIT or the Agent: 1211 Avenue of the Americas New York, New York 10036 Attention: Stephen Leavenworth, Senior Vice President Telecopier: (212) 382-6875 with a copy to: Burton Winnick, Esq. Gadsby Hannah LLP 225 Franklin Street Boston, Massachusetts 02110 Telecopier: (617) 204-8015 If to any other Lender, at such Lender's address for notices set forth in the Credit Agreement; or at any other address specified by such party in writing. Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or commercial messenger service to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, or, if sent by telecopier, when electronically or verbally confined. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however that any such notice shall be deemed to have been given hereunder only when actually received by the party to which it is addressed. 8. APPLICATION OF PAYMENTS AND CONTINUING GUARANTY. All amounts paid hereunder (other than amounts paid in respect of costs and expenses of the Agent and the Lenders incurred in enforcing this Guaranty) shall be applied to reduce the Guaranteed Obligations. This Guaranty shall remain in full force and effect until the Guaranteed Obligations shall have been indefeasibly paid in full in cash or payment of the Guaranteed Obligations has been duly provided for in a manner satisfactory to the Agent and the Lenders, all expenses (which the Guarantor hereby agrees to pay) incurred by the Agent and the Lenders in enforcing this Guaranty have been paid, and all of the Commitments shall have terminated. This Guaranty may not be released, altered, modified or amended except in a writing signed by the Agent. -5- 9. GOVERNING LAW BINDING CHARACTER. This Guaranty shall be governed by and construed and enforced in accordance with the laws of the State of New York, without reference to its principles of conflict of laws. This Guaranty shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of the Agent, the Lenders, and their respective successors and assigns. Notwithstanding the foregoing, the Guarantor shall not be permitted to assign any of its obligations hereunder (voluntarily, by operation of law or otherwise) without the prior written consent of the Agent and the Lenders. 10. CONSENT TO JURISDICTION. The Guarantor irrevocably consents that any legal action or proceeding against it under, arising out of or in any manner relating to this Guaranty or any Loan Document may be brought in any court of the State of New York or any Federal Court sitting therein. The Guarantor, by the execution and delivery of this Guaranty, expressly and irrevocably assents and submits to the personal jurisdiction of any of such courts in any such action or proceeding. The Guarantor further irrevocably consents to the service of any complaint, summons, notice or other process relating to any such action or proceeding by delivery thereof to it by hand or by mail in the manner provided for in Section 7 hereof. The Guarantor hereby expressly and irrevocably waives any claim or defense in any such action or proceeding based on any alleged lack of personal jurisdiction, improper venue or forum non conveniens or any similar basis. The Guarantor shall not be entitled in any such action or proceeding to assert any defense given or allowed under the laws of any state other than the State of New York unless such defense is also given or allowed by the laws of the State of New York. Nothing in this Section 10 shall affect, or impair in any manner or to any extent the right of the Agent or any Lender to commence legal proceedings or otherwise proceed against the Guarantor in any jurisdiction or to serve process in any manner permitted by law. 11. WAIVER OF JURY TRIAL. THE GUARANTOR WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS GUARANTY OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. 12. SURVIVAL. The representations and warranties of the Guarantor set forth in Section 2 hereto shall survive the execution and delivery of this Guaranty. 13. REMEDIES. All remedies afforded by reason of this Guaranty are separate and cumulative remedies and it is agreed that no one of such remedies, whether exercised or not, shall be deemed to be in exclusion of any of the other remedies available to the Agent and the Lenders and shall in no way limit or prejudice any other legal or equitable remedy which the Agent or any Lender may have hereunder and with respect to the Guaranteed Obligations. The Guarantor agrees that included within the equitable remedies available hereunder is the right of the Lenders to elect to have any and all of the obligations and agreements of the Guarantor hereunder specifically performed. -6- EXECUTION COPY MICROFINANCIAL INCORPORATED By: /s/ Richard F. Latour ------------------------- Richard F. Latour President EX-10.4 5 b51980mfexv10w4.txt EX-10.4 PLEDGE AGREEMENT DATED 9-29-2004 EXHIBIT 10.4 EXECUTION COPY PLEDGE AGREEMENT This PLEDGE AGREEMENT (this "Agreement" or "Pledge Agreement"), dated as of the 29th day of September, 2004, is by and between MICROFINANCIAL INCORPORATED, a Massachusetts corporation (the "Pledgor"), and THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent (the "Secured Party"). Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement (defined below). W I T N E S S E T H: WHEREAS, Leasecomm Corporation, a Massachusetts corporation ("Leasecomm") and TimePayment Corp. LLC, a Delaware limited liability company qualified to do business in the Commonwealth of Massachusetts ("TimePayment") (together, the "Borrower"), and the Secured Party have entered into a Revolving Credit Agreement dated as of the date hereof (the "Credit Agreement"); and WHEREAS, the Pledgor is the holder of 100% of the stock ownership interest in Leasecomm and 100% of the membership interests in TimePayment; and WHEREAS, the Pledgor has guaranteed all Obligations of the Borrower as more particularly described in a certain Guaranty of even date herewith (the "Guaranty"); and WHEREAS, the obligation of the Secured Party to enter into the Credit Agreement and extend financial accommodations to the Borrower is subject to the condition, among others, that Pledgor execute and deliver to the Secured Party this Pledge Agreement, and pledge to the Secured Party all of its right, title and interest in and to the Interests (as herein defined) to secure the Guaranteed Obligations (as defined in the Guaranty). NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. PLEDGE OF INTERESTS. (a) As security for the Guaranteed Obligations of the Pledgor to the Agent under the Guaranty, the Pledgor hereby pledges and assigns to Secured Party all of its right, title and interest in and to the following property (such interest, whether certificated or uncertificated, together with the property referred to in Section 1(c) below, are herein referred to as the "Interests") to be held by the Secured Party in accordance with the terms and conditions set forth herein: One Hundred Percent (100%) of the Pledgor's stock ownership interest in Leasecomm; and One Hundred Percent (100%) of the Pledgor's membership interest in TimePayment. (b) All certificates (if any) representing any certificated Interests in TimePayment, accompanied by instruments of assignment thereof, and stock certificate(s) representing ownership of the stock of Leasecomm, accompanied by stock powers thereof, duly executed in blank by the Pledgor (the "Pledged Documents"), are simultaneously being delivered to the Secured Party. The Interests shall be held by the Secured Party to secure the Guaranteed Obligations, and shall continue to be held pursuant to this Pledge Agreement until full satisfaction of all Guaranteed Obligations in accordance with the terms and conditions hereof and the Credit Agreement. (c) In case the Pledgor shall acquire, directly or indirectly, any additional equity interest in either Borrower or any Affiliate, or any securities exchangeable for or convertible into interests of any class, by dividend, split, distribution of capital or otherwise, or shall acquire any additional marketable securities, whether or not related to the Interests, the Pledgor shall forthwith pledge, assign and deliver, or cause to be pledged, assigned and delivered, to Secured Party such interests or other securities to be held by Secured Party subject to, and in accordance with, the terms and conditions of this Pledge Agreement. 2. GUARANTEED OBLIGATIONS. The Interests now or hereafter pledged, assigned and delivered to Secured Party pursuant to the terms and conditions of this Pledge Agreement shall secure the Guaranteed Obligations of the Pledgor under the Guaranty. 3. DIVIDENDS; DISTRIBUTIONS UPON LIQUIDATION OR RECAPITALIZATION. The Pledgor agrees that, except as permitted pursuant to Section 7.7 of the Credit Agreement, (a) any sums paid upon or with respect to any of the Interests upon the liquidation or dissolution of either Borrower, and all cash or other dividends or distributions made by the Borrower on or in respect of the Interests, shall be paid over to Secured Party to be held by it as additional security for the Guaranteed Obligations, (b) upon the distribution of capital or principal on or in respect of any of the Interests, or upon the distribution of any property on or with respect to any of the Interests in connection with the recapitalization or reclassification of the capital or pursuant to the reorganization of the Borrower, the property so distributed shall be delivered to the Secured Party to be held as additional security for the Guaranteed Obligations, and (c) all sums of money and property paid or distributed on or in respect of the Interests upon such a liquidation, dissolution, recapitalization or reclassification, and all cash or other dividends or distributions made by the Borrower on or in respect of the Interests, which are received by the Pledgor shall be held in trust for Secured Party as additional security for the Guaranteed Obligations by Pledgor until paid or delivered to Secured Party. 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants to Secured Party that: (a) Pledgor has good and valid title to the Interests, free of any liens (except in favor of Secured Party), options or restrictions on transfer; (b) Pledgor is a duly formed Massachusetts corporation, in good standing under the laws of the Commonwealth of Massachusetts, and as such has full power, authority and legal right to enter into this Pledge Agreement, to pledge the Interests to Secured Party and otherwise perform and observe all of its obligations hereunder, without necessity of any consent or waiver of any other Person; (c) the execution, delivery and -2- performance of this Pledge Agreement by Pledgor does not contravene the terms of any law, indenture, agreement or undertaking by which it or any of its property or assets is bound; (d) the execution, delivery and performance by Pledgor of the terms and conditions of this Pledge Agreement will not result in the imposition or creation of any lien upon any of its property or assets under any law or any existing indenture, mortgage, deed of trust, loan or financing agreement or other agreement or instrument to which it is a party or by which it or any of its property or assets is or may be bound except for liens in favor of the Secured Party; and (e) this Pledge Agreement represents Pledgor's legal, valid and binding obligation, enforceable against it in accordance with the terms hereof, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and general equitable principles. 5. DEFENSE OF RIGHTS AND TITLE. Pledgor shall defend its title in the Interests, and Secured Party's rights and security interests therein, against the claims and demands of any other Person. 6. VOTING. Unless and until an Event of Default shall have occurred and be continuing, Pledgor shall be entitled to vote its Interests (if applicable) and to give consents, waivers and ratifications in respect thereof; provided, however, that no vote shall be cast, or consent, waiver or ratification given or action shall be taken which would be inconsistent with or violate any provision of this Pledge Agreement or the Credit Agreement or any other documents executed in connection therewith. As used herein, "Event of Default" shall: (i) have the meaning ascribed to such term in the Credit Agreement; and (ii) mean any breach by Pledgor of any term or provision of this Pledge Agreement which is not cured within ten (10) days after written notice thereof from the Secured Party. Pledgor's rights to vote and give consents, waivers and ratifications with respect to the Interests, at Secured Party's option, shall cease after the occurrence and during the continuance of an Event of Default, regardless of whether notice of such an Event of Default is given by Secured Party. 7. RIGHTS AND REMEDIES UPON DEFAULT. Upon and after the occurrence, and during the continuance, of any Event of Default, Secured Party without notice or demand (except to the extent required herein) shall have the following rights and remedies (such rights and remedies being cumulative and enforceable by Secured Party alternatively, successively or concurrently, and at such times deemed expedient by Secured Party): (a) All rights and remedies provided by law, including without limitation, those provided by the Uniform Commercial Code as enacted in the State of New York; (b) The right to vote any or all of the Interests (if applicable) and to give all consents, waivers and ratifications in respect thereof and otherwise to act with respect thereto as though it were the outright owner thereof (whether or not any or all of such Interests shall have been transferred into the name of Secured Party), and in connection therewith, Pledgor hereby irrevocably appoints Secured Party as its attorney-in-fact, with full power of substitution, to cast such votes and give such consents, waivers and ratifications; -3- (c) The right to demand, sue for, collect, or make any compromise or settlement that Secured Party deems expedient in respect of the Interests, whether or not any of the Guaranteed Obligations are due; (d) The right to sell, resell, assign and deliver, or otherwise dispose of any or all of the Interests or other property or assets held as security hereunder, upon such terms and at such times and at such places to such Persons deemed convenient by Secured Party, all without demand, notice or advertisement (except to the extent required herein or by any applicable law); and (e) The right to cause any or all of the Interests to be transferred into the name of Secured Party or the names of any of its nominees, provided that the Interests shall be held by the Secured Party or its nominee as security for the Guaranteed Obligations subject to and in accordance with the terms and conditions hereof. 8. SALE OF INTERESTS. (a) Secured Party will give Pledgor at least ten (10) days' prior written notice in accordance with Section 17 hereof of the time and place of any public sale of any Interests or of the time after which any private sale or any other intended disposition thereof is to be made. Any such notice shall be deemed to meet any requirement hereunder or under any applicable law (including, without limitation, the UCC) that reasonable notification be given of the time and place of such sale or other disposition. After deducting all costs and expenses of collection, storage, custody, sale or other disposition and delivery (including reasonable legal costs and reasonable attorneys' fees) and all other charges against the Interests, the residue of the proceeds of any such sale or disposition shall be applied to the payment of the Guaranteed Obligations and any surplus shall be returned to Pledgor or to any person or party lawfully entitled thereto (including, if applicable, any subordinated creditors of Pledgor). (b) Pledgor recognizes that Secured Party may be unable to effect a public sale of the Interests by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and in the rules and regulations promulgated thereunder (the "Act"). Pledgor agrees that any private sales of the Interests to a restricted group of purchasers in compliance with the Act shall not be deemed to have been made in a commercially unreasonable manner solely because such private sales were made at prices and other terms less favorable to the seller than if sold at public sales. Secured Party shall be under no obligation to delay a sale of any of the Interests for the period of time necessary to permit any issuer of the Interests to register such Interests for public sale under the Act, even if the issuer thereof would agree to cause their registration. 9. MARSHALLING. Secured Party shall not be required to marshal any present or future collateral security for or guaranties of the Guaranteed Obligations (including without limitation the Interests pledged hereunder), or to resort to such security or guaranties in any particular order. All of Secured Party's rights hereunder and in respect of the Interests and any other security and guaranties shall be cumulative and in addition to all other rights of Secured Party, however existing or arising. -4- 10. FURTHER ASSURANCES. Pledgor shall promptly execute and deliver to Secured Party upon request such financing statements, certificates, stock powers, proxies and other documents or instruments as Secured Party reasonably deems necessary to enable Secured Party to perfect, or from time to time renew or reaffirm, or perfect, or realize upon, or continue the perfection of, the security interest granted hereby, including, without limitation, such financing statements, certificates and other documents as may be necessary to perfect a security interest in any additional Interests hereafter acquired by Pledgor or in any replacements or proceeds thereof. Pledgor irrevocably authorizes and appoints Secured Party as its attorney-in-fact, with full power of substitution, to execute upon the occurrence, and during the continuance, of an Event of Default such financing statements, certificates and other documents. The rights and powers conferred on Secured Party by Pledgor are expressly declared to be coupled with an interest and shall be irrevocable until all the Obligations are paid and performed in full. Pledgor further agrees that a carbon, photographic or other reproduction of a security agreement or financing statement is sufficient as a financing statement under this Pledge Agreement. With respect to any Interests hereunder which are book entry or uncertificated securities, Pledgor authorizes Secured Party to cause the security interest therein to be noted on the books and records of the issuer thereof or other registrar therefor and to take such other actions as may be necessary to perfect Secured Party's security interest therein. Pledgor shall pay to Secured Party on demand all reasonable out-of-pocket fees, costs and expenses incurred by Secured Party in connection with the administration of this Pledge Agreement, including, without limitation, overnight courier fees, lien search fees, and filing and recording fees. 11. TRANSFERS. Pledgor shall 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 any of the Interests or any interest therein except as provided herein without the prior written consent of Secured Party. 12. WAIVERS. To the extent not prohibited by any applicable law that cannot be waived, the Pledgor hereby waives presentment, demand, notice, protest and, except as is otherwise provided herein, all other demands and notices in connection with this Pledge Agreement or the enforcement of Secured Party's rights hereunder or in connection with any of the Guaranteed Obligations or the Interests. The Pledgor further consents to and waives notice of the granting of renewals, any extension or postponement of the time for payment of any of the Guaranteed Obligations or any other indulgence, and the addition or release of the Interests or persons primarily or secondarily liable on any Guaranteed Obligations, the acceptance of partial payments on any of the Guaranteed Obligations or the Interests and/or the settlement or compromise thereof. No delay or omission on the part of Secured Party in exercising any right hereunder or under the Credit Agreement or under any other agreements, instruments or documents shall operate as a waiver of such right or of any other right hereunder. Any waiver of any such right on any one occasion shall not be construed as a bar to or waiver of any such right on any such future occasion. To the extent not prohibited by any applicable law that cannot be waived, Pledgor further waives any right it may have under the constitution of the State of New York or under the Constitution of the United States of America, to notice (other than any requirement of notice provided herein) or to a judicial hearing prior to the exercise of any right or remedy provided by this Agreement to Secured Party and waives its rights, if any, to set aside or invalidate any sale duly consummated in accordance with the foregoing provisions hereof on the grounds (if such be the case) that the sale was consummated without a prior judicial hearing. -5- PLEDGOR'S WAIVERS UNDER THIS SECTION HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY AND AFTER PLEDGOR HAS BEEN APPRISED AND COUNSELED BY ITS ATTORNEYS AS TO THE NATURE THEREOF AND ITS POSSIBLE ALTERNATIVE RIGHTS. 13. TERMINATION; ASSIGNMENT. This Pledge Agreement and the security interest in the Interests created hereby shall terminate when the Guaranteed Obligations have been paid and irrevocably discharged in full and any Pledged Documents that were delivered to the Secured Party shall be returned to the Pledgor. No waiver by Secured Party or by any other holder of the Guaranteed Obligations of any default shall be effective unless in writing nor 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 Secured Party of the Guaranteed Obligations held by it, Secured Party may assign or transfer its rights and interests under this Agreement in whole or in part to the purchaser or purchasers of such Guaranteed Obligations, whereupon such purchaser or purchasers shall become vested with all of the powers, rights and obligations of Secured Party hereunder, and Secured Party shall thereafter be forever released and fully discharged from any liability or responsibility thereafter arising hereunder with respect to the rights and interests so assigned. 14. REINSTATEMENT. The provisions of Section 13 hereof notwithstanding, this Pledge Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by Secured Party in respect of the Interests is rescinded or must otherwise be restored or returned by Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Pledgor or the Borrower, or upon the appointment of any intervenor or conservator of, or trustee or similar official for any of them or any substantial part of their properties, or otherwise, all as though such payments had not been made. 15. GOVERNMENTAL APPROVALS. Upon the exercise by Secured Party of any power, right, privilege or remedy pursuant to this Pledge Agreement which requires any consent, approval, registration, qualification or authorization of any governmental authority or instrumentality, Pledgor will execute and deliver, or will cause the execution and delivery of, all applications, certificates, instruments and other documents and papers that Secured Party may be required to obtain for such governmental consent, approval, registration, qualification or authorization; provided that neither the Pledgor nor the Borrower shall be required to effect a public registration of all of part of the Interests pursuant to the Act or other similar state securities law. 16. CERTAIN DEFINITIONS. Capitalized terms used herein without definition which are defined in the Credit Agreement shall have the respective meanings ascribed to them therein. 17. NOTICES. Except as otherwise herein provided, any notice or other communication required hereunder shall be in writing, and shall be served, given or delivered by hand, by overnight courier for which a receipt is received, or by certified mail, and in each case shall be effective upon actual receipt or refusal of delivery addressed to the party to be notified or to such other address as any party hereto may designate for itself by like notice, as follows: -6- (A) if to the Secured Party, at: The CIT Group/Commercial Services, Inc., as Agent 1211 Avenue of the Americas, 12th Floor New York, New York 10036 Attn: Stephen Leavenworth, Senior Vice President (B) if to the Pledgor at: MicroFinancial Incorporated 10-M Commerce Way Woburn, MA 01801 With a courtesy copy of any material notice to the Pledgor's counsel at: Edwards & Angell, LLP 101 Federal Street Boston, MA 02110 Attn: Gerald P. Hendrick, Esq. And to the Secured Party's counsel at: Gadsby Hannah LLP 225 Franklin Street Boston, MA 02110 Attn: Burton Winnick, Esquire provided, however, that the failure of the Secured Party to provide the Pledgor's counsel with a copy of such notice shall not invalidate any notice given to the Pledgor and shall not give the Pledgor any rights, claims or defenses due to the failure of the Secured Party to provide such additional notice. 18. OTHER MATTERS. This Pledge Agreement incorporates all discussions and negotiations between Pledgor and Secured Party concerning this Pledge Agreement. This Pledge Agreement shall inure to the benefit of and be binding upon Secured Party and Pledgor and their respective successors and assigns. No provision hereof may be altered, amended, waived, canceled or modified, except by a written instrument executed and acknowledged by a duly authorized officer of Secured Party. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The section headings in this Agreement are for convenience of reference only and shall not be considered in construing this Pledge Agreement. This Pledge Agreement may be executed in counterparts and by the different parties hereto on separate counterparts, each of which shall be an original, but together shall constitute one instrument. -7- 19. GOVERNING LAW; JURY TRIAL; WAIVERS OF SERVICE AND DAMAGES. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PLEDGOR AND THE SECURED PARTY EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER. THE PLEDGOR HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL THE SECURED PARTY BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURES APPEAR ON FOLLOWING PAGE.] -8- IN WITNESS WHEREOF, Pledgor and Secured Party have each executed this Pledge Agreement as a sealed instrument as of the date first above written. PLEDGOR: MICROFINANCIAL INCORPORATED By: /s/ Richard F. Latour ---------------------------- Richard F. Latour, President ACCEPTED AND AGREED SECURED PARTY: THE CIT GROUP/COMMERCIAL SERVICES, INC. AS AGENT By: /s/ Daniel B. Ciotti -------------------------------- Daniel B. Ciotti, Vice President -9- EX-10.5 6 b51980mfexv10w5.txt EX-10.5 SECURITY AGREEMENT DATED 9-29-2004 EXHIBIT 10.5 EXECUTION COPY SECURITY AGREEMENT SECURITY AGREEMENT (this "Agreement") dated as of the 29th day of September, 2004, among LEASECOMM CORPORATION, a Massachusetts corporation ("Leasecomm"), TIMEPAYMENT CORP. LLC, a Delaware limited liability company ("TimePayment" and together with Leasecomm, the "Borrower") and THE CIT GROUP/COMMERCIAL SERVICES, INC. (together with its successors and assigns, "CIT"), as agent (in such capacity, the "Agent") for the Lenders under (and as defined in) that certain Revolving Credit Agreement dated of even date herewith (as the same may be amended, modified, supplemented, extended or restated from time to time, the "Credit Agreement"). W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders are parties to a certain Revolving Credit Agreement, dated as of the date hereof (the "Credit Agreement"). NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make the Loans pursuant to the Credit Agreement, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms which are defined in the Credit Agreement are used herein as so defined. The terms "equipment," "inventory," "accounts," "chattel paper," "instruments," "documents," "general intangibles," "products," "deposit accounts" and "proceeds" shall have the respective meanings ascribed thereto in the UCC. The following terms shall have the following meanings: "Collateral" is defined in Section 2(a) hereof. "Contract Payments" means all rentals, additional rentals, installment payments and all other payments due or to become due under any Contract, including, without limitation, payments representing rent, principal, interest, taxes, insurance premiums and delinquency charges, and all insurance payments and claims for losses, together with all rights under or in respect of such Contract, including rights evidenced by an account, note, contract, security agreement, chattel paper or other evidence of indebtedness or security, all guaranties, warranties and indemnities in respect thereof, and all accounts, contract rights and general intangibles arising under any of the foregoing. "Contracts" means, collectively, all lease rental schedules, master leases relating to such lease rental schedules, leases, rental contracts, service contracts, agreements for use, sales contracts and chattel paper (including, without limitation, all Leases, Eligible Installment Sales Contracts, Installment Finance Contracts and Interest Rate Contracts) and any and all renewals, extensions, modifications and substitutions thereof and therefor. "Equipment" means all present and hereafter acquired equipment (as defined in the UCC) including, without limitation, all machinery, equipment, furnishings and fixtures, and all -2- additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto and all proceeds thereof of whatever sort, and all guarantees, warranties and rights against manufacturers under purchase agreements or otherwise and other parties in connection therewith, all maintenance records and contracts relating thereto, and all insurance thereon and all insurance proceeds payable in connection therewith. "Inventory" means all of the Borrower's present and hereafter acquired inventory (as defined in the UCC) and including, without limitation, all merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods and materials used or usable in manufacturing, processing, packaging or shipping same in all stages of production from raw materials. "Rental Contracts" means Leases which are month-to-month and which are cancelable. "Security Monitoring Agreements" means any agreement between a Dealer and a customer which provides for (i) the selling, servicing and installation by the Dealer of central station security/alarm monitoring equipment and related monitoring services or (ii) only monitoring services with respect to such equipment. "Software Systems" means, collectively, all computer programs, software, software systems and computer records relating to any Collateral described in Section 2(a) hereof, and the rights of the Borrower under any agreement licensing the use thereof including, without limitation, its billing and collection software system. All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York have the meanings assigned to them in such Uniform Commercial Code. SECTION 2. SECURITY INTEREST. (a) To secure the due payment and performance of all of the Obligations, including, without limitation, the strict performance and observance by the Borrower of all representations, warranties, covenants and conditions of this Agreement, the Credit Agreement, the Revolving Credit Notes and other Loan Documents, and any and all amendments thereto and replacements therefor, the Borrower hereby assigns, pledges, hypothecates, transfers and sets over to the Agent for the benefit of the Lenders, and grants to the Agent for the benefit of the Lenders, an Encumbrance upon and a security interest in all of the Borrower's right, title and interest in the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (all being collectively referred to as the "Collateral"): (i) all Contracts; (ii) all Contract Payments; (iii) all security pledged, assigned, hypothecated or granted to or held by the Borrower to secure the obligations of any lessees or obligors under any Contract; -3- (iv) all Equipment; (v) all Inventory; (vi) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection with any Contract or Equipment Collateral; (vii) all books, records, ledger cards, invoices and other instruments, and all credit information, reports and memoranda, relating to any Contract or Equipment Collateral; (viii) all evidences of the filing of financing statements and other statements, if any, and all amendments thereto, notices to other creditors or secured parties, and certificates from filing officers, in each case relating or pertaining to any of the foregoing; (ix) all electronically processed or recorded information relating or pertaining to any of the foregoing, whether in the possession or control of the Borrower or any third party; (x) (A) all Software Systems, (B) all of the tangible embodiments thereof and (C)(I) all of the intellectual property rights (including, by way of example and not limitation, all copyrights, patents and patentable inventions, trade secrets, trademarks and any and all other proprietary rights) contained or embodied therein, throughout the world, (II) all renewals, reissues, applications, and registrations thereof, and (III) all income, royalties, damages and payments now or hereafter due and/or payable under and with respect thereto, including (without limitation) damages and payments for past and future infringements thereof, (IV) the rights to sue and recover for past, present and future infringements thereof, and (V) all other proceeds of all of the foregoing, including (without limitation) (1) any rights pursuant to the Borrower's agreements with any other party relative thereto as well as (2) all of the rights (if any) to use the Software Systems (or any part thereof) granted by any third party to the Borrower; (xi) any Security Monitoring Agreements; (xii) any Rental Contracts; (xiii) any documents, general intangibles (including payment intangibles), and deposit accounts; and (xiv) to the extent not included in the foregoing, all other personal property of any kind or description; together with all books, records, writings, data bases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds (as defined in the UCC), insurance proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing. (b) Except as provided in Section 2(b)(ii) below, this Agreement shall create a continuing collateral assignment of and security interest in the Collateral and shall remain in full force and effect until the payment in full of the Obligations after the expiration of the Commitments of the Lenders under the Credit Agreement. Upon full payment of the Loans and the Revolving Credit Notes and satisfaction in full of the Obligations and termination of the -4- Lenders' Commitments under the Credit Agreement, this Agreement and Encumbrances hereunder shall terminate without further acts by any Person. Thereafter, the Agent shall, upon the Borrower's written request, promptly execute and deliver to the Borrower, at the Borrower's expense, termination statements for all financing statements filed by the Agent against the Borrower, as the Borrower shall reasonably require in order to terminate the security interests created hereunder and any collateral assignments of Collateral to the Agent, in each case with the Agent's sole representation and warranty that the Collateral is being reconveyed free and clear of any Encumbrance created by or as a result of any act of the Agent. SECTION 3. BORROWER'S TITLE: ENCUMBRANCES; SECURITY INTEREST (a) The Borrower represents and warrants that the Borrower is or, to the extent that Collateral is acquired after the date hereof, represents, warrants and agrees that it will be the owner of the Collateral, having good title thereto free from any and all Encumbrances except Encumbrances permitted to exist under subparagraphs (a) and (c) of Section 7.3 of the Credit Agreement (a "Permitted Lien"). (b) The Borrower will not create or assume or permit to exist any Encumbrance on or against the Collateral, except for Permitted Liens, and the Borrower will promptly notify the Agent of any such Encumbrance, except for Permitted Liens, made or asserted against the Collateral, and will defend the Collateral against, and take all such action as may be necessary to remove, any such Encumbrance other than Permitted Liens. (c) The Borrower represents and warrants that the Encumbrances and security interests which have been created and granted simultaneously with the execution of this Agreement constitute duly perfected first priority Encumbrances in favor of the Agent and the Lenders on the Collateral subject to no other Encumbrance other than Permitted Liens, except such representation regarding priority and perfection shall not include those items of Collateral in which a security interest may not be perfected by filing of the UCC-1 Financing Statement. (d) The Borrower represents and warrants that there are no such third party rights applicable to the Software Systems (or if such rights do exist, that they are assignable without the consent of any third party, and have been duly assigned for security by Borrower to the Agent for the benefit of the Lenders by operation of and pursuant to the terms and conditions of this Agreement). SECTION 4. STATE OF ORGANIZATION OF THE BORROWER; NAMES OF BORROWER. (a) Leasecomm represents and warrants that it does not have a state of organization other than the Commonwealth of Massachusetts. Leasecomm shall promptly notify the Agent of any change in the foregoing representation. Leasecomm has had no place of business or office where Leasecomm's books of account and records are kept other than its principal place of business located at 10M Commerce Way, Woburn, Massachusetts 01801 and its marketing office located 39899 Ballentine Drive, Suite 265, Newark, California. (b) Leasecomm shall at all times maintain its records as to the Collateral at its principal place of business at the address for Leasecomm's principal place of business specified in Section 4(a) hereof and Leasecomm agrees (i) to give the Agent at least 30 days prior written -5- notice of any change in the place where it maintains such records or of any change in location of its principal place of business and (ii) maintain all its properties in good working order and condition and, in the ordinary course of business, make all repairs, replacements, additions and improvements thereto which may be necessary for the use thereof in the conduct of its business. (c) TimePayment represents and warrants that it does not have a state of organization except than the State of Delaware. TimePayment shall promptly notify the Agent of any change in the foregoing representation. TimePayment has had no place of business or office where TimePayment's books of account and records are kept other than its principal place of business located at 10M Commerce Way, Woburn, Massachusetts 01801 and its marketing office located 39899 Ballentine Drive, Suite 265, Newark, California. (d) TimePayment shall at all times maintain its records as to the Collateral at its principal place of business at the address for TimePayment's principal place of business specified in Section 4(a) hereof and TimePayment agrees (i) to give the Agent at least 30 days prior written notice of any change in the place where it maintains such records or of any change in location of its principal place of business and (ii) maintain all its properties in good working order and condition and, in the ordinary course of business, make all repairs, replacements, additions and improvements thereto which may be necessary for the use thereof in the conduct of its business. SECTION 5. PERFECTION OF SECURITY INTEREST. The Borrower will join with the Agent in executing one or more all asset UCC financing statements or other notices appropriate under applicable law in form and substance satisfactory to the Agent and shall pay all filing or recording costs with respect thereto, and all costs of filing or recording this Agreement or any other instrument, agreement or document executed and delivered pursuant hereto (including the cost of all federal, state or local documentary, stamp or other taxes), in each case, in all public offices where filing or recording is deemed by the Agent to be necessary or desirable. The Borrower hereby authorizes the Agent to take all action at the expense of the Borrower (including, without limitation, the filing of any UCC financing statements or amendments thereto without the signature of the Borrower) which the Agent may deem necessary to perfect or otherwise protect the Encumbrances and security interest created hereunder and to obtain the benefits of this Agreement. Without limiting the generality of the foregoing, the Borrower shall, at the Borrower's expense, take and cause to be taken all such actions as the Agent may request in order to perfect and continue the perfection of the Encumbrances and security interests granted to the Agent and the Lenders in the Collateral, and without limiting the foregoing the Borrower shall, at the request of the Agent, deliver to the Agent all executed original counterparts of each Contract included in the Collateral (to the extent not already delivered to the Agent or approved third party depository), certified as such by the Borrower. The Agent shall have the right at any time at the Borrower's expense to cause the perfection of the Encumbrances and security interests granted to the Agent in the Collateral by whatever means reasonably deemed by the Agent to be necessary, and the Borrower shall cooperate fully with the Agent in connection therewith. In addition, upon request of the Agent at any time, with respect to any Loan made or to be made by the Lenders, the Borrower shall deliver to Agent the original bills of sale issued by the seller or the manufacturer of the Eligible -6- Equipment to which such Loan pertains showing the initial invoiced cost of all such Eligible Equipment and the Eligible Leases with respect thereto. SECTION 6. GENERAL COVENANTS. The Borrower covenants and agrees that it shall: (a) from time to time at the Agent's request, furnish the Agent with written statements and schedules further identifying and describing the Collateral in such detail as the Agent may reasonably require; (b) advise the Agent promptly, in sufficient detail, of any material adverse change in the Collateral, and of the occurrence of any event which would be reasonably likely to have a material adverse effect on the value of the Collateral or on the Agent's Encumbrance and security interest thereon; (c) comply or, with respect to the Collateral, cause the obligors thereof to comply, with all acts, rules, regulations and orders of any legislative, administrative or judicial body or official applicable to the Collateral or any part thereof or to the operation of the Borrower's business; (d) at all times use, or cause the obligors to use, the Collateral for lawful purposes only, with all reasonable care and caution; (e) cause the Encumbrance and security interests granted pursuant to this Agreement to be at all times (except as permitted under Section 3(c) hereof) a first priority duly perfected Encumbrance and security interest upon the Collateral, subject to no Encumbrances other than Permitted Liens; (f) promptly execute and deliver to the Agent, such further assignments, security agreements or other instruments, documents, certificates and assurances and take such further action as the Agent may from time to time in its reasonable discretion deem necessary to perfect, protect or enforce its Encumbrance and security interest on the Collateral or otherwise to effectuate the intent of this Agreement, including, without limitation, the right of the Agent upon the occurrence of, and during the continuance of, an Event of Default to (i) take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral, upon notice to the Borrower, as to any or all of the Collateral, by any available judicial procedure, or without judicial process (to the extent it is permissible to do so in view of the rights of lessees or other obligors who may have the right to possession of the Equipment), and, in connection therewith, the Borrower shall, upon request of the Agent and at the Borrower's expense, assemble the Collateral and make it available to the Agent at the Borrower's principal office or principal warehouse or such other locations as the Agent shall designate, and (ii) require the Borrower to, and upon such demand the Borrower shall (A) cause each obligor under the Contracts to make all Contract Payments directly to, in the Agent's sole discretion, either the Agent or to a post office box designated by the Agent to which only the Agent shall have access, (B) if the Borrower shall receive any Contract Payment or any other payment relating to Equipment (including, without limitation, any proceeds of insurance with respect to Equipment), hold such payment in trust by -7- the Borrower for the benefit of the Agent and shall not commingle such payment with any other moneys or assets of the Borrower, and (C) promptly turn over and remit to the Agent all sums thus received, in the identical form as received, with all such endorsements thereof as may be required, as contemplated by Section 8 hereof; in the event that the Borrower shall fail to notify the obligors to make payments to the Agent or to a post office designated by it, the Agent shall be entitled to do so, either in the name of the Borrower pursuant to its power of attorney in Section 11 hereof and in the Assignment of Leases, or in its own name; and (g) perform and observe all covenants, restrictions and conditions contained in the Loan Agreement providing for payment of taxes, maintenance of insurance and otherwise relating to the Collateral as though such covenants, restrictions and conditions were fully set forth in this Agreement. SECTION 7. ASSIGNMENT OF INSURANCE. (a) The Borrower shall maintain, or cause its obligors to maintain, with responsible insurance companies such insurance on such of the properties of the Borrower, in such amounts and against such risks as is customarily maintained by similar micro leasing businesses; provided that the Borrower may continue to self insure Equipment in the manner in which it is currently conducting its business; and provided, further that the Borrower shall (i) not materially change the manner in which it self-insures Equipment without the prior written consent of the Agent; (ii) file with the Agent upon the request of the Agent a detailed list of the insurance then in effect, stating, as applicable, the names of the insurance companies, the amounts and rates of the insurance, dates of expiration thereof and the properties and risks covered thereby; and (iii) within 10 days after notice in writing from the Agent, obtain such additional insurance as the Agent may reasonably request. (b) As further security for the due payment and performance of the Obligations, the Borrower hereby assigns to the Agent for the benefit of the Lenders all sums relating to the Collateral, including, but not limited to, returned or unearned premiums, which may become payable under or in respect of any self-insurance program maintained by the Borrower or in which the Borrower participates, any policy of insurance owned by the Borrower or payable to the Borrower covering the Collateral, and the Borrower hereby agrees that it shall pay to the Agent such sums under self-insurance programs maintained by the Parent or in which it participates directly to the Agent and hereby directs each insurance company issuing any such policy to make payment of such sums directly to the Agent upon notice from the Agent to such insurance company of the occurrence of an Event of Default as defined in the Credit Agreement. The Borrower hereby appoints the Agent as the Borrower's attorney-in-fact and in the Borrower's or in the Agent's name to do one or more of the following upon the occurrence of, and during the continuance of, an Event of Default under the Credit Agreement: (i) endorse any check or draft representing any such payment or execute any proof of claim, subrogation receipt or any other document required by such insurance company as a condition to or otherwise in connection with such payment or (ii) assign any such policies. All such sums received by the Agent shall be applied by the Agent to satisfaction of the Obligations or, to the extent that such sums represent unearned premiums in respect of any policy of insurance on the Collateral refunded by reason of cancellation, toward payment for similar insurance protecting the respective interests of the Borrower and the Agent, or as otherwise required by applicable law, -8- and to the extent not so applied shall be paid over to the Borrower. The Borrower shall send a notice to the insurers of the assignment contained herein and shall furnish the Agent with a copy of such notice and the insurers' receipt thereof upon the request of the Agent. If the Borrower shall fail to send such notice of assignment, the Agent may do so on behalf of the Borrower. SECTION 8. COLLECTIONS. At any time after the occurrence of, and during the continuance of, any Event of Default under Credit Agreement or if the Agent exercises the rights granted to it under this Agreement, the Borrower shall, at the request of the Agent, immediately upon receipt of any checks, drafts, cash or other remittances in payment of any part of the Collateral or in payment for any Collateral assigned, sold, transferred, or otherwise disposed of in accordance with the terms hereof and of the Credit Agreement, or in payment of or on account of its accounts, contracts, contract rights, notes, drafts, acceptances, general intangibles, chooses in action and all other forms of obligations relating to any of the Collateral so sold, transferred or otherwise disposed of, deliver any such items to the Agent accompanied by a remittance report in form supplied or approved by the Agent, such items to be delivered to the Agent in the same form received, endorsed or otherwise assigned by the Borrower where necessary to permit collection of items and, regardless of the form of such endorsement the Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest and all other notices with respect thereto. All such remittances shall be applied and credited by the Agent to the Obligations or as otherwise required by applicable law, and to the extent not so credited or applied, and to the extent not required to be paid over to any other party pursuant to applicable law, shall be paid over to the Borrower. SECTION 9. RIGHTS AND REMEDIES ON DEFAULT. (a) In the event of the occurrence of, and during the continuance of, any Event of Default: (i) the Agent shall at any time thereafter have the right, itself or through any of its agents, upon notice to the Borrower, as to any or all of the Collateral (to the extent it is permissible to do so in view of the rights of lessees or other obligors who may have the right to possession of certain Equipment) by any available judicial procedure, or without judicial process, to take possession of the Collateral and without liability for trespass to enter any, premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral, and, generally, to exercise any and all rights afforded to a secured party under the UCC or other applicable law; (ii) without limiting the generality of the foregoing, the Borrower agrees that the Agent shall have the right (subject to any rights of lessees or other obligors mentioned in clause (i) above) to sell, lease, or otherwise dispose of all or any part of the Collateral, and the unrestricted right and license to use, license to others, or assign to them, the Software Systems, whether in their then condition or after further preparation or processing, either at public or private sale or at any broker's board, in lots or in bulk, for cash or for credit, with or without warranties or representations, and upon such terms and conditions, all as the Agent in its sole discretion may deem advisable, and it shall have the right to purchase at any such sale; and, if -9- any Collateral shall require refurbishing, repairing, maintenance, preparation, or is in process or other unfinished state, the Agent shall have the right, at its option, to do such refurbishing, repairing, maintenance, preparation or processing, for the purpose of putting the Collateral in such salable or disposable form as it shall deem appropriate; (iii) the Agent shall at any time thereafter have the right to require the Borrower to, and upon such demand the Borrower shall (A) cause each obligor under the Contracts to make all Contract Payments and all other payments relating to the Collateral directly to, in the Agent's sole discretion, either the Agent or to a post office box designated by the Agent to which only the Agent shall have access, (B) if the Borrower shall receive any Contract Payment or any other payment relating to any Equipment (including, without limitation, any proceeds of insurance with respect to Equipment), hold the amount of such payment relating to the Collateral in trust by the Borrower for the benefit of the Agent and shall not commingle such payment with any other moneys or assets of the Borrower, and (C) promptly turn over and remit to the Agent all sums thus received, in the identical form as received, with all such endorsements thereof as may be required, as contemplated by Section 8 hereof; in the event that the Borrower shall fail to notify the obligors to make payments to the Agent or to a post office designated by it, the Agent shall be entitled to do so, either in the name of the Borrower pursuant to its power of attorney in Section 11 hereof and in the Assignment of Leases, or in its own name; and (iv) at the Agent's request, the Borrower shall (subject to any rights of lessees or other obligors mentioned in clause (i) above) assemble the Collateral and make available to the Agent at the Borrower's principal office or warehouse and make available to the Agent, without rent, all of the Borrower's premises and facilities for the purpose of the Agent's taking possession of, removing or putting the Collateral in salable or disposable form. (b) The Borrower hereby agrees that a notice sent at least ten (10) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be reasonable notice of such sale or other disposition. (c) The proceeds of any collection, sale, lease or other disposition of all or any part of the Collateral, and of all proceeds of the enforcement of any Encumbrance and security interests created under this Agreement or any other Loan Document, together with any sums then held by the Agent as part of the Collateral, shall be applied in the following order of priority: FIRST: To the Agent an amount equal to the fees, costs and expenses incurred by, and all other amounts owed or payable to, the Agent and the Lenders through the date of such enforcement or sale, including reasonable compensation for and expenses of the Agent's and the Lenders' representatives and counsel payable under the terms of the Credit Agreement, and all charges, expenses, indemnities, liabilities and advances incurred or made by or payable to the Agent and the Lenders in connection with such enforcement or sale provided for under the Credit Agreement, this Agreement or the other Loan Documents; SECOND: To the Agent in an aggregate amount equal to the sum of the unpaid commitment, facility and other fees and interest, if any, on the principal amount of the Loans; -10- THIRD: To the Agent in an aggregate amount equal to the sum of the unpaid principal on the Loans; FOURTH: To the Agent in an aggregate amount equal to the sum of any other unpaid Obligations; and FIFTH: Any surplus then remaining to the Borrower or the Person who may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. If, upon the sale, lease or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Agent and the Lenders are legally entitled the Borrower will be liable for the deficiency, together with interest thereon at the applicable rate set forth in Section 2.5 of the Credit Agreement, and the reasonable fees of any attorneys employed by the Agent to collect any Obligations; provided, however, that the foregoing shall not be deemed to require the Agent to resort to or initiate proceedings against the Collateral prior to the collection of any Obligations from the Borrower, the Parent or any other guarantor of the Obligations. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands against the Agent and the Lenders arising out of the repossession, removal, retention, sale or lease of the Collateral, provided that the Borrower does not waive any claim, damages or demand it may have arising out of the Agent's or Lenders' willful misconduct or gross negligence in connection with any action taken in respect of the Credit Agreement, this Agreement or the other Loan Documents. SECTION 10. COSTS AND EXPENSES. Any and all fees, costs and expenses, of whatever kind or nature, including the reasonable attorneys' fees and legal expenses incurred by the Agent and as Agent on behalf of the Lender in connection with the preparation of this Agreement and all other documents relating hereto and the consummation of the transactions contemplated by the Credit Agreement, the filing or recording of UCC financing statements and other documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, insurance premiums, encumbrances or otherwise protecting, maintaining, preserving or refurbishing the Collateral, or the enforcing, foreclosing, retaking, holding, storing, processing, selling, leasing or otherwise realizing upon the Collateral and the Agent's and the Lenders' Encumbrance and security interest thereon, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or relating to the transaction to which this Agreement relates, shall be borne and paid by the Borrower on demand by the Agent and if not paid within ten days of such demand shall be added to the principal amount of the Obligations. SECTION 11. POWER OF ATTORNEY. (a) The Borrower authorizes the Agent and does hereby make, constitute and appoint the Agent, and any officer, employee or agent of the Agent, with full power of substitution, as the Borrower's true and lawful attorney-in-fact, effective upon the occurrence of an Event of Default or if the Agent exercises any of its rights under this Agreement, with power in its own name or in the name of the Borrower: -11- (i) to endorse any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Agent; (ii) to sign and endorse any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, Encumbrances, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receive, compromise, settle and sue for monies due in respect of the Collateral; (v) to cause each obligor under the Contracts to make Contract Payments directly to the Agent; (vi) to notify lessees and other obligors with respect to the Collateral to make payments directly to the Agent; and (vii) generally, to do, at the Agent's option and at the Borrower's expense, at any time, or from time to time, all acts and things which the Agent reasonably deems necessary to protect, preserve and realize upon the Collateral and the Agent's security interest therein (including signing and filing any UCC Financing Statements or other agreements, documents, instruments or notices in the name of the Borrower or otherwise) in order to effect the intent of this Agreement and of the other Loan Documents, all as fully and effectively as the Borrower might or could do. (b) The Borrower hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. (c) This power of attorney, being coupled with an interest, shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding. SECTION 12. DISPOSITION OF COLLATERAL. The Borrower shall not be entitled to sell or otherwise dispose of any of the Collateral except as expressly permitted by the Credit Agreement. SECTION 13. NOTICES. All notices, requests and other communications pursuant to this Agreement shall be given in accordance with the Credit Agreement. SECTION 14. OTHER SECURITY. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or -12- other entity, then the Agent shall have the right in its sole discretion to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Agent's or any Lender's rights and remedies hereunder. SECTION 15. DEPOSITS. Any and all deposits or other sums at any time credited by or due from the Agent or any Lender to the Borrower, whether in regular or special depository accounts or otherwise, shall at all times constitute additional Collateral for the Obligations, and may be set-off by such party against any Obligations at any time whether or not they are then due and whether or not other Collateral held by the Agent is considered to be adequate. SECTION 16. CUSTODY, OF THE COLLATERAL. The Agent shall have no duty as to the collection of any Collateral in its possession or control or in the possession or control of any agent or nominee of the Agent, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. SECTION 17. WAIVERS; OBLIGATIONS ABSOLUTE. (a) No course of dealing among the Borrower, the Agent and the Lenders, nor any failure to exercise, nor any delay in exercising, on the part of the Agent or any Lender, any right, power or privilege hereunder or under the Credit Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (b) The Borrower acknowledges that this Agreement is a continuing obligation and that the Obligations hereunder shall extend to each and every extension or renewal of such obligation of the Borrower. SECTION 18. CUMULATIVE REMEDIES. All of the Agent's and the Lenders' rights and remedies with respect to the Collateral, whether established hereby or by the Credit Agreement or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently. SECTION 19. SEVERABILITY. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. -13- SECTION 20. MODIFICATION. This Agreement may not be amended or modified, nor may any provisions be waived, except by a writing signed by each of the parties hereto or, in the case of a waiver, by the party so waiving its rights. SECTION 21. COUNTERPARTS. This Agreement may be executed in as many counterparts as may be deemed necessary or convenient, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. SECTION 22. BINDING EFFECT. BENEFIT OF AGREEMENT AND ASSIGNMENT. The benefits and burdens of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties; provided, however, that the rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Agent and the Lenders, and any purported assignment or delegation without such consent shall be void. SECTION 23. GOVERNING LAW. This Agreement shall be governed and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within such State. SECTION 24. INDEMNITY. (a) The Borrower covenants and agrees to indemnify and hold harmless the Agent and the Lenders, and their respective officers, directors, employees, agents, attorneys-in-fact and affiliates, from and against any and all claims, suits, losses, penalties, demands, causes of action and judgments of any nature whatsoever and all liabilities and indebtedness of any and every kind and nature now or hereafter owing, arising, due or payable, including all costs and expenses (including reasonable attorneys fees and expenses) (all of the foregoing being herein collectively called "Liabilities"), which may be imposed on, incurred by or asserted, against any of them in connection with (i) the ownership or use of any of the Collateral or the security interest of the Agent in the Collateral, (ii) the failure on the part of the Borrower to comply and to cause the obligors and users under any Contracts to comply in all respects with the laws of the United States of America and other jurisdictions in which the Collateral or any part thereof may be operated and with all lawful acts, rules, regulations and orders of any commissions, boards or other legislative, executive, administrative or judicial bodies or officers having power to regulate or supervise any of the Collateral, and (iii) the execution, delivery, consummation, waiver, consent, amendment, enforcement, performance and administration of this Agreement, the Credit Agreement, the Security Documents and the other Loan Documents, or the use by the Borrower of the proceeds of each extension of credit under the Credit Agreement; provided, however, that the Borrower shall not have any obligation with respect to liabilities arising from the gross negligence or willful misconduct of the Agent or the Lenders. -14- (b) The Borrower agrees to defend and pay all costs, expenses and judgments incurred by it, the Agent or the Lenders in any action brought against the Borrower under the Contracts or in any actions brought by the Agent or the Lenders pursuant to this Agreement whether under or pursuant to the provisions of any Contract or to enforce any provisions of any Contract. (c) The obligations of the Borrower under this Section 24 shall survive the termination of this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURES APPEAR ON FOLLOWING PAGE.] -15- IN WITNESS WHEREOF the parties hereto have caused this Security Agreement to be duly executed as of the day and year first above written. LEASECOMM CORPORATION, as Borrower By:/s/ Richard F. Latour -------------------------- Richard F. Latour, Executive Vice President TIMEPAYMENT CORP. LLC, as Borrower By:/s/ Richard F. Latour --------------------------- Richard F. Latour, President THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent By:/s/ Daniel B. Ciotti --------------------------- Daniel B. Ciotti, Vice President EX-10.6 7 b51980mfexv10w6.txt EX-10.6 INTELLECTUAL PROPERTY SECURITY AGREEMENT DATED 9-29-2004 EXHIBIT 10.6 EXECUTION COPY INTELLECTUAL PROPERTY SECURITY AGREEMENT THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (herein the "Agreement") made as of this 29th day of September, 2004, by TIMEPAYMENT CORP. LLC, a Delaware limited liability company ("TimePayment"), and LEASECOMM CORPORATION, a Massachusetts corporation ("Leasecomm"), each with its principal place of business at 10M Commerce Way, Woburn, Massachusetts 01801 (Leasecomm and TimePayment are collectively referred to herein as the "Borrower"), and THE CIT GROUP/COMMERCIAL SERVICES, INC., as agent for the Lenders (as defined below), at its principal office at 1211 Avenue of the Americas, New York, New York 10036 (herein "Agent"). W I T N E S S E T H: WHEREAS, the Borrower, Agent and the lenders party thereto ("Lenders") are parties to a certain Revolving Credit Agreement of even date herewith, as the same may be amended from time to time (herein the "Credit Agreement"), which Credit Agreement provides (i) for the Lenders to make certain loans, advances and extensions of credit, all to or for the account of the Borrower and (ii) for the grant by the Borrower to Agent for the benefit of the Lenders of a security interest in certain of the Borrower's assets, including, without limitation, its patents, patentable inventions, patent applications and/or registrations, trademarks, servicemarks, trademark and servicemark applications and/or registrations, copyrights and copyright applications and/or registrations, tradenames, trade secrets, goodwill and licenses, all as more fully set forth therein; NOW THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower agrees as follows: 1. Definitions. Capitalized terms used herein and defined in the Credit Agreement shall have the meanings set forth therein unless otherwise specifically defined herein. 2. Grant of Security Interest. To secure the payment of the Obligations, the Borrower hereby grants to Agent, on behalf of the Lenders, a security interest, effective immediately, in all of the Borrower's right, title and interest in and to all of the following described property, whether now owned or hereafter acquired (collectively herein the "Intellectual Property Collateral"): (i) Patents and patent applications and/or registrations together with the inventions and improvements described and claimed therein and any inventions, whether now existing or invented or existing in the future, including, without limitation, the patents, applications, registrations and inventions, if any, listed on Schedule A, attached hereto and made a part hereof, and any and all continuations, divisionals, continuations in part, substitutes, reissues, renewals, re-examinations and extensions thereof, the corresponding foreign patent applications and foreign patents arising out of the patents, patent applications, registrations and inventions (the "Patents") and all income, royalties, damages and payments now and -2- hereafter due and/or payable in connection with the Patents including, without limitation, damages and payments for past or future infringements thereof (all of the foregoing are sometimes hereinafter individually and/or collectively referred to as the "Patent Collateral"); (ii) Trademarks and servicemarks and trade dress, whether registered or unregistered, and trademark registrations and/or applications, whether now owned or existing in the future, including, without limitation, the trademarks, servicemarks and trade dress and trademark, service mark and trade dress applications and registrations, if any, listed on Schedule B attached hereto and made a part hereof, and any and all reissues, renewals and extensions thereof, and any foreign applications and registrations arising out of the trademarks, servicemarks and trade dress, and all goodwill associated therewith ("Trademarks"), and all income, royalties, damages and payments now and hereafter due and/or payable in connection with the Trademarks including, without limitation, damages and payments for past or future infringements thereof (all of the foregoing are sometimes hereinafter individually and/or collectively referred to as the "Trademark Collateral"); (iii) Copyrights, whether registered or unregistered, and copyright registrations and/or applications whether now owned or existing in the future, including, without limitation, the copyrights and copyright applications and/or registrations, if any, listed on Schedule C attached hereto and made a part hereof, and any and all derivative works, renewals and extensions thereof ("Copyrights" and together with the Patents and Trademarks, the "Intellectual Property"), and all income, royalties, damages and payments now and hereafter due and/or payable in connection with the Copyrights including, without limitation, damages and payments for past or future infringements thereof (all of the foregoing are sometimes hereinafter individually and/or collectively referred to as the "Copyright Collateral"); (iv) Any license agreement in which the Borrower is now or in the future becomes licensed to use any patents, trademarks, copyrights or other intellectual property owned by a third party including, without limitation, the licenses, if any, listed on Schedule D attached hereto and made a part hereof, excluding any license agreement that by its terms prohibits transfer by the Borrower as contemplated herein (all of the foregoing are sometimes referred to herein individually and/or collectively as the "License Collateral"); (v) The goodwill of the Borrower's business connected with and symbolized by the Intellectual Property Collateral; and (vi) All cash and non-cash proceeds of the foregoing. 3. Agent's Rights. Upon the occurrence of any Event of Default hereunder, Agent shall have all the rights and remedies of a secured party under the Uniform Commercial Code and any other applicable state or federal laws. Agent will give the Borrower reasonable notice of the time and place of any public sale of the Intellectual Property Collateral or -3- the time after which any private sale of the Intellectual Property Collateral or any other intended disposition thereof is to be made. Unless otherwise provided by law, the requirement of reasonable notice shall be met if such notice is mailed, postage prepaid to the address of the Borrower set forth above at least ten (10) days before the date of such sale or disposition. In addition to the foregoing and all other rights and remedies of Agent upon the occurrence and during the continuance of any Event of Default hereunder, Agent shall thereupon have the immediate right to transfer or license to itself or to license or sell, assign and transfer to any other person all right, title and interest in and to all or any part of the Intellectual Property Collateral. A formal irrevocable power of attorney (in the form annexed hereto) is being executed and delivered by the Borrower to Agent concurrently with this Agreement to enable such rights to be carried out. The Borrower agrees that, upon the occurrence and during the continuance of an Event of Default, in the event Agent exercises its rights hereunder and/or pursuant to said power of attorney in accordance with its terms, after written notification of such exercise from Agent to the Borrower, the Borrower shall never thereafter, without the prior written authorization of the owner or owners of such Intellectual Property Collateral, use any of such Intellectual Property Collateral. The condition of the foregoing provision is such that unless and until there occurs an Event of Default under this Agreement, the Borrower shall continue to own and use the Intellectual Property Collateral in the normal course of its business and to enjoy the benefits, royalties and profits therefrom provided, however, that from and after the occurrence of an Event of Default such right will, upon the exercise by Agent of the rights provided by this Agreement, be revoked and the right of the Borrower to enjoy the uses, benefits, royalties and profits of said Intellectual Property Collateral will wholly cease, whereupon Agent or its transferee(s) shall be entitled to all of the Borrower's right, title and interest in and to the Intellectual Property Collateral thereby so assigned. This Agreement will not operate to place upon Agent any duty or responsibility to maintain the Intellectual Property Collateral. Prior to the occurrence of an Event of Default, the Borrower will make any and all filings, whether state, federal, foreign or otherwise, and pay any and all filing fees, whether state, federal, foreign or otherwise, required to maintain the Borrower's rights in the Intellectual Property Collateral material to the conduct of the Borrower's business or reasonably requested by the Agent to maintain Borrower's rights in such Intellectual Property Collateral. 4. Fees. The Borrower will pay all filing fees with respect to the security interest created hereby which Agent may deem reasonably necessary or advisable in order to perfect and maintain the perfection of its security interest in the Intellectual Property Collateral. 5. Representations and Warranties. The Borrower represents and warrants: (i) that except for the security interest granted hereby, Permitted Encumbrances and any licenses granted by the Borrower in the ordinary course of business, which licenses do not singularly in or the aggregate adversely effect the security interest granted hereby in any material respect, the Borrower lawfully possesses and owns the Intellectual Property Collateral and that the Intellectual Property Collateral will be kept free from all liens, security interests, claims and encumbrances whatsoever; -4- (ii) that the Borrower has not made or given any prior assignment, transfer or security interest in the Intellectual Property Collateral or any of the proceeds thereof; (iii) that the Intellectual Property Collateral is and will continue to be, in all respects, in full force and effect; (iv) and that there are no known infringements of the Intellectual Property Collateral. 6. Application of Proceeds. Upon the occurrence of an Event of Default, the proceeds of any sale, transfer or disposition of the Intellectual Property Collateral shall be applied first to all costs and expenses, including, but not limited to, reasonable attorneys' fees and expenses and court costs, incurred by Agent in connection with such sale and the exercise of Agent's rights and remedies hereunder and under the Credit Agreement; next, such proceeds shall be applied to the payment, in whole or in part, of the Obligations due Agent in such order as Agent may elect; and the balance, if any, shall be paid to the Borrower or as a court of competent jurisdiction may direct. 7. Defense of Claims. The Borrower will defend at its own cost and expense all actions, claims or proceedings affecting the Intellectual Property Collateral material to the conduct of the Borrower's business or the interest of Agent and Lenders therein. The Borrower agrees to reimburse Agent and Lenders for all costs and out-of-pocket expenses incurred by Agent and Lenders in defending any such action, claim or proceeding prior to the Borrower's assumption of such defense. 8. Applications, Renewals or Extensions. The Borrower shall promptly apply for and obtain all federal renewals or extensions of the Intellectual Property Collateral material to the conduct of the Borrower's business to the full extent permitted by law. If, before all Obligations have been satisfied in full, the Borrower applies for or obtains any Intellectual Property, the Borrower shall give Agent prompt written notice of such Intellectual Property, and the provisions of this Assignment shall apply thereto. The Borrower authorizes Agent to modify this Assignment by amending Schedules A, B, C or D to include any new Intellectual Property Collateral material to the conduct of the Borrower's business. The Borrower shall not abandon any of the Intellectual Property Collateral material to the conduct of the Borrower's business or the prosecution of any application for any such Intellectual Property without the prior written consent of Agent, which consent will not be unreasonably withheld or delayed. 9. Proceedings. The Borrower shall promptly notify Agent of the institution of, and any adverse determination in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office, or any other foreign or domestic governmental agency, court or body, regarding the Borrower's claim of ownership in any of the Intellectual Property Collateral. In the event of any material infringement of any of the Intellectual Property Collateral material to the conduct of the Borrower's business by a third party, the Borrower shall promptly notify Agent of such infringement and sue for and recover all damages for such infringement. If the Borrower shall fail to take such action within thirty (30) days after such notice is given to Agent, Agent may, but shall not be required to, take such action in the name of the Borrower, and the Borrower hereby -5- appoints Agent the true and lawful attorney of the Borrower, for it and in its name, place and stead, on behalf of the Borrower, to commence judicial proceedings in any court or before any other tribunal to enjoin and recover damages for such infringement, any such damages due to the Borrower, net of costs and reasonable attorneys' fees, to be applied to the Obligations. 10. Rights Cumulative. This Agreement shall be in addition to the Credit Agreement and the other Loan Documents and shall not be deemed to affect, modify or limit the Credit Agreement or other Loan Documents or any rights that Agent has under the Credit Agreement or other Loan Documents. The Borrower agrees to execute and deliver to Agent and Lenders (at the Borrower's expense) any further documentation or papers necessary to carry out the intent or purpose of this Agreement including, but not limited to, financing statements under the Uniform Commercial Code. 11. Construction and Invalidity. Any provisions hereof contrary to, prohibited by or invalid under any laws or regulations shall be inapplicable and deemed omitted herefrom, but shall not invalidate the remaining provisions hereof. (i) CHOICE OF LAW. THE BORROWER AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE GOVERNED BY THE LAWS OF STATE OF NEW YORK. THIS AGREEMENT TOGETHER WITH THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT OF THE BORROWER AND AGENT WITH RESPECT TO THE INTELLECTUAL PROPERTY COLLATERAL, CAN ONLY BE CHANGED OR MODIFIED IN WRITING AND SHALL BIND AND BENEFIT THE BORROWER, AGENT, LENDERS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. THE BORROWER, AGENT AND LENDERS EACH HEREBY EXPRESSLY WAIVES ANY RIGHT OF TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING HEREUNDER. 12. Events of Default. Any of the following constitutes an Event of Default under this Agreement: (i) The Borrower fails to perform or observe any agreement, covenant or condition required under this Agreement within ten (10) days after written notice in accordance with the Credit Agreement to Borrower; (ii) Any warranty or representation made by Borrower, in this Agreement shall be misleading in any material respect on the date made; or (iii) The occurrence of any Event of Default under the Credit Agreement which is not waived in writing by Agent or cured within the applicable grace period, if any. -6- 13. Notices. The Borrower covenants and agrees that, with respect to the Intellectual Property Collateral, it will give Agent written notice in the manner provided in the Credit Agreement of: (i) any claim by a third party that the Borrower has infringed on the rights of a third party; (ii) any suspected infringement by a third party on the rights of the Borrower; or (iii) any Intellectual Property Collateral created, arising or acquired by the Borrower after the date hereof. 14. Further Assurances. The Borrower will take any such action as Agent may reasonably require to further confirm, perfect or protect Agent's security interest granted under this Agreement in the Intellectual Property Collateral. In furtherance thereof, the Borrower hereby grants to Agent a power of attorney coupled with an interest which shall be irrevocable during the term of this Agreement to execute any documentation or take any action in the Borrower's behalf required to effectuate the terms, provisions and conditions of this Agreement. 15. Termination. This Agreement shall terminate upon termination of the Credit Agreement and full, final payment of all Obligations of the Borrower thereunder. Upon the Borrower's request, Agent shall within a reasonable time after any such termination execute and deliver to the Borrower (at the Borrower's expense) such documents and instruments as are reasonably necessary to evidence such termination and release of the security interest granted herein on any applicable public record. -7- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the 29th day of September, 2004. LEASECOMM CORPORATION, AS BORROWER By: /s/ Richard F. Latour -------------------------------------- Richard F. Latour, Executive President TIMEPAYMENT CORP. LLC, AS BORROWER By: /s/ Richard F. Latour -------------------------------------- Richard F. Latour, President THE CIT GROUP/COMMERCIAL SERVICES, INC., AS AGENT By: /s/ Daniel B. Ciotti --------------------------------------- Daniel B. Ciotti, Vice President -8- IRREVOCABLE POWER OF ATTORNEY LEASECOMM CORPORATION AND TIMEPAYMENT CORP. LLC, each with offices at 10M Commerce Way, Woburn, Massachusetts 01801 (collectively referred herein to as the "Borrower"), hereby grants to THE CIT GROUP/COMMERCIAL SERVICES, INC., with its principal office at 1211 Avenue of the Americas, New York, New York 10016 (hereinafter referred to as "Agent"), for the benefit of the Lenders (as defined in the Credit Agreement dated as of the date hereof by and among the Borrower, Agent and the lender parties thereto) the exclusive Irrevocable Power of Attorney to assign and transfer to Agent for the benefit of the Lenders or to any designee of Agent all right, title and interest in and to the Intellectual Property Collateral listed on the Schedules attached to the Intellectual Property Security Agreement (the "Agreement"), dated as of the date hereof, between the Borrower and Agent including, without limitation, all patents, patentable inventions, patent applications and/or registrations, trademarks, service marks, trademark and service mark applications and/or registrations, copyrights and copyright applications and/or registrations and licenses together with the goodwill of the business connected with or symbolized by such Intellectual Property Collateral and the Borrower's entire inventory of labels and decals bearing any marks not affixed to its products, and the right to operate and control, sell, assign, and transfer the business under those marks under the following terms and conditions: 1. The Power of Attorney granted hereunder shall be effective as of the date hereof and shall last for as long as any now existing or hereafter arising indebtedness, liabilities or obligations of the Borrower to Agent are outstanding under the Credit Agreement, dated on or about the date hereof, between the Borrower and Agent and upon payment of such indebtedness, liabilities or obligations of the Borrower to Agent, the Power of Attorney granted herein shall terminate without any further acts by any Person. 2. The Power of Attorney granted herein shall be irrevocable throughout the duration of its life as specified in Paragraph 1 hereinabove; 3. The Power of Attorney granted herein shall only be exercisable by Agent during the continuance of an Event of Default under the Agreement between Agent and the Borrower and as long as such Event of Default is not then the subject of a waiver; and 4. Agent shall give the Borrower ten (10) days prior written notice of the exercise of this power, and the waiver by Agent of any particular Event of Default as set forth in Paragraph 3 hereinabove shall have no force or effect unless in writing and signed by an authorized officer of Agent. Even then such waiver shall not constitute or be considered a waiver of any other Event of Default then existing or thereafter arising whether similar or not. -9- IN WITNESS WHEREOF, the Borrower has caused this Power of Attorney to be executed as of this 29th day of September, 2004. LEASECOMM CORPORATION By: /s/ Richard F. Latour ------------------------------------------- Richard F. Latour, Executive Vice President TIMEPAYMENT CORP. LLC By: /s/ Richard F. Latour ------------------------------------------- Richard F. Latour, President -10- COMMONWEALTH OF MASSACHUSETTS SUFFOLK, SS On this 29th day of September, 2004, before me, the undersigned notary public, personally appeared the above named Richard F. Latour, Executive President of LEASECOMM CORPORATION, proved to me through satisfactory evidence of identification, which was a state issued driver's license, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that (he) (she) signed it voluntarily for its stated purpose. /s/ Brenda Moffitt ------------------------------- Notary Public My commission expires: 10/28/09 COMMONWEALTH OF MASSACHUSETTS SUFFOLK, SS On this 29th day of September, 2004, before me, the undersigned notary public, personally appeared the above named Richard F. Latour, President of TIMEPAYMENT CORP. LLC, proved to me through satisfactory evidence of identification, which was a state issued driver's license, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that (he) (she) signed it voluntarily for its stated purpose. /s/ Brenda Moffitt ------------------------------- Notary Public My commission expires: 10/28/09 EX-10.7 8 b51980mfexv10w7.txt EX-10.7 REVOLVING CREDIT ASSIGNMENT OF LEASES DATED 9-29-2004 EXHIBIT 10.7 EXECUTION COPY REVOLVING CREDIT ASSIGNMENT OF LEASES 1. Pursuant to the Revolving Credit Agreement (the "Credit Agreement") and the Security Agreement (the "Security Agreement") both dated as of the date hereof, by and among LEASECOMM CORPORATION, a Massachusetts corporation and TIMEPAYMENT CORP. LLC, a Delaware limited liability company, both having an office at 10-M Commerce Way, Woburn, Massachusetts 01801 (together, the "Borrower"), the Lenders under (and as defined in) the Credit Agreement and THE CIT GROUP/COMMERCIAL SERVICES, INC., having its head office at 1211 Avenue of the Americas, New York, New York 10036, as agent for the Lenders (in such capacity, the "Agent"), and to secure the due payment and performance of all Obligations, including, without limitation, the strict performance and observance by the Borrower of all representations, warranties, covenants and conditions of this Agreement, the Revolving Credit Notes and the other Loan Documents, and any and all amendments thereto and replacements thereof, the Borrower hereby assigns, pledges, hypothecates, transfers and sets over to the Agent for the benefit of the Lenders and grants to the Agent and its successors and assigns for the benefit of the Lenders, for the Agent's and the Lenders' and their respective successors' and assigns' own proper use and benefit, a duly perfected first priority Encumbrance upon all the right, title and interest of the Borrower under, in and to all presently existing and hereafter acquired lease rental schedules, master leases relating to such lease rental schedules, leases, rental contracts, service contracts, agreements for use, sales contracts and chattel paper (including, without limitation, all Leases, Eligible Installment Sales Contracts, Eligible Interest Rate Contracts and Eligible Installment Finance Contracts), and any and all renewals, extensions, modifications and substitutions thereof (collectively, the "Contracts"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement and the Security Agreement. 2. As further security for the Obligations, the Borrower hereby assigns, pledges, hypothecates, transfers and sets over to the Agent for the benefit of the Lenders all Contract Payments, all Encumbrances granted by any lessee, buyer or owner of any Equipment covered by any Contract, and any additional collateral received from any lessee, buyer or owner under any Contract (collectively, together with the Contracts and the Contract Payments, the "Contract Collateral"). 3. The Borrower shall remain liable under each of the Contracts to perform all the obligations to be performed by it thereunder, all in accordance with and pursuant to the terms and provisions of such Contracts, and the Agent and the Lenders shall have no obligation or liability under any of the Contracts by reason of or arising out of this Assignment nor shall the Agent or the Lenders be required or obligated in any manner to perform or fulfill any of the obligations of the Borrower under or pursuant to any of the Contracts, or to make any payment, or to make any inquiry as to the nature or the amounts which may have been assigned to it or to which it may be entitled at any time or times. 4. The obligations of the Borrower under the Contracts may be performed by the Agent or its nominee, but only at the option of the Agent, without releasing the Borrower therefrom and without providing for or resulting in any assumption of liability thereunder. The Agent will provide the Borrower with written notice if the Agent decides to perform any obligations of the Borrower under any of the Contracts. 5. The Borrower does hereby constitute and appoint the Agent, its successors and assigns, as the Borrower's true and lawful attorney-in-fact, with full power of substitution, in the name of the Borrower or otherwise, to ask, require, demand, receive, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Contracts and the Contract Collateral, including, without limitation, the Contract Payments, or any guarantee thereof or sublease permitted thereunder, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Agent may deem to be necessary or advisable. This power of attorney, being coupled with an interest, shall be irrevocable until the payment in full of the Obligations and expiration of the Commitments. 6. The Borrower agrees that at any time and from time to time, upon the written request of the Agent and at the expense of the Borrower, the Borrower will promptly deliver to the Agent all executed original counterparts of each Lease and duly execute and deliver any and all such further instruments and documents and take such further action as the Agent may reasonably deem desirable in obtaining the full benefits of this Assignment and of the rights and powers herein granted. In the event the Iron Mountain Agreement (or such other replacement agreement acceptable to the Agent) is no longer in effect, or after an Event of Default, thereafter at the Agent's option exercisable from time to time all Leases shall require each Lease to bear a legend approved by Agent indicating such Lease is assigned to Agent. 7. At the request of Agent, the Borrower shall deposit any and all security deposits and any other cash reserves it receives with respect to the Contracts in an account maintained with the Agent. 8. In any suit, proceeding or action brought by the Agent under any of the Contracts or Contract Collateral, any, guarantee thereof or sublease permitted thereunder, for any installment of, or interest on, any rental or other sum owing thereunder, including, without limitation, any Payment, or to enforce any provisions of such Lease, any guarantee thereof or sublease permitted thereunder, the Borrower will save, indemnify and keep the Agent and the Lenders harmless from and against all expense, loss or damage suffered by reason of any defense, set off, counterclaim, recoupment or reduction of liability whatsoever of the lessee under such Lease or with respect to such Contract Collateral, or any guarantor or sublessee thereunder or its successors, arising out of a breach by the Borrower of any obligation under such Lease or Contract Collateral or any sublease permitted thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such lessee or any such guarantor or sublessee or its successors from the Borrower, and all such obligations of the Borrower shall be and remain enforceable against and only against the Borrower. 9. The Borrower hereby represents and warrants that (a) it is the sole owner of the Contract Collateral, (b) there are no Encumbrances against any of the Contract Collateral, (c) the Contracts satisfy the requirements with respect thereto set forth in the definition of "Eligible Leases", "Eligible Installment Sales Contract", "Eligible Installment Finance Contract" or "Eligible Interest Rate Contract", as applicable, contained in Section 1.1 to the Credit Agreement, (d) any Equipment which is the subject of any Lease included in the Contracts has been delivered to and accepted by the appropriate lessee, (e) there have been no prepayments or A-2 any sums under any of the Contracts, and (f) to its knowledge, no default exists under any of the Contracts. 10. Except as provided in the following paragraph, this Assignment shall create a continuing collateral assignment of and security interest in the Contract Collateral and shall remain in full force and effect until payment in full of the Obligations and the expiration of the Commitments of the Lenders under the Credit Agreement. Upon full payment of the Loans and the Revolving Credit Notes and satisfaction in full of the Obligations and termination of the Lenders' Commitments, this Agreement shall terminate and be of no further force or effect. The Agent shall promptly execute and deliver to the Borrower, at the Borrower's expense, such assignments and reassignments, as the Borrower shall reasonably require in order to terminate the collateral assignments of the Contract Collateral granted to the Agent, in each case with the Agent's sole representation and warranty that the Contract Collateral is being reconveyed free and clear of any Encumbrance created by or as a result of any act of the Agent. 11. This Assignment shall be binding upon the Borrower and its successors, and shall inure to the benefit of the Agent and the Lenders, including their respective successors and assigns. 12. Each reference to the "Assignment" or words of like import in any Assignment of Leases delivered under or pursuant to the Credit Agreement, this Assignment or the Security Agreement shall mean and be a reference to this Assignment as the same may be amended, amended and restated, supplemented or modified from time to time. This Assignment shall be governed by and construed and enforced in accordance with the laws of the State of New York without reference to its principles of conflict of laws. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURES APPEAR ON FOLLOWING PAGE.] A-3 IN WITNESS WHEREOF, the Borrower has caused this Assignment to be executed as of this 29th day of September, 2004. LEASECOMM CORPORATION By:/s/ Richard F. Latour --------------------------------- Richard F. Latour Executive Vice President TIMEPAYMENT CORP. LLC By:/s/ Richard F. Latour --------------------------------- Richard F. Latour, President AGREED: THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent By:/s/ Daniel B. Ciotti -------------------------------------- Daniel B. Ciotti, President A-4 EX-10.8 9 b51980mfexv10w8.txt EX-10.8 WARRANT PURCHASE AGREEMENT DATED 9-29-2004 Exhibit 10.8 EXECUTION COPY MICROFINANCIAL INCORPORATED 10-M Commerce Way Woburn, MA 01801 WARRANT PURCHASE AGREEMENT THE CIT GROUP/COMMERCIAL SERVICES, INC. 1211 Avenue of the Americas New York, NY 10036 September 29, 2004 Ladies and Gentlemen: The undersigned, MicroFinancial Incorporated, a Massachusetts corporation (the "Company"), agrees to issue and sell to The CIT Group/Commercial Services, Inc. ("CIT"), the Common Stock Purchase Warrants of the Company in the form of Exhibit A hereto, all being on the terms and subject to the conditions contained in this Agreement. Accordingly, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINED TERMS As used herein, the following terms shall have the respective meanings assigned to them in this Article I: "Agent" shall have the meaning ascribed to it in the Loan Agreement. "Articles of Organization" shall have the meaning ascribed to that term in Section 2.1(a) hereof. "Closing" shall have the meaning ascribed to that term in Article IV hereof. "Closing Date" means the date of the Closing. "Commission" means the Securities and Exchange Commission. "Common Stock" shall have the meaning ascribed to that term in Section 2.1(a) hereof. "Company" shall have the meaning ascribed to that term in the preamble hereto. "Effective Date of the Loan Agreement" shall mean the Closing Date, as defined in the Loan Agreement. "GAAP" shall have the meaning ascribed to that term in the Loan Agreement. "Investor Consent" means, at any particular date, the consent, approval or vote of the Majority Investors. "Investors" means (i) CIT so long as CIT shall continue to own and hold of record any of the Securities, (ii) each Permitted Transferee of CIT so long as such Permitted Transferee shall continue to own and hold of record any of the Securities, and (iii) each Permitted Transferee of any other Investor so long as such Permitted Transferee shall continue to own and hold of record any of the Securities. "Lenders" shall have the meaning ascribed to that term in the Loan Agreement. "Loan Agreement" means that certain Revolving Credit Agreement, as amended or modified from time to time, dated as of September _, 2004, by and among Leasecomm Corporation, TimePayment Corp. LLC, the Lenders, and the Agent (as defined therein). "Majority Investors" means those Investors holding at least 50.1% of the Common Stock issued or issuable upon exercise of the Warrants. "NASDAQ" means the National Association of Securities Dealers automated quotation system. "Permitted Transferee" means any Person. "Person" means an individual, corporation, partnership, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof. "Registration Rights Agreement" means that certain Registration Rights Agreement dated the date hereof between the Company and CIT. "SEC" means the United States Securities and Exchange Commission. "Securities" means the Warrants and the Warrant Shares. "Securities Act" means the Securities Act of 1933, as amended, or any federal statute or code which is a successor thereto. "Subsidiary" means, in relation to the Company at any particular time, any other corporation more than fifty percent (50%) of the outstanding voting shares in the capital of which shall be owned or controlled (whether directly or indirectly) by the Company and/or by any one or more of the Company's other Subsidiaries. "Warrants" shall have the meaning ascribed to that term in Section 2.2(a) hereof and shall in any event include all other warrants delivered in exchange or in substitution therefor. 2 "Warrant Shares" means the shares of Common Stock issuable upon exercise of the Warrants. ARTICLE II REPRESENTATIONS OF THE COMPANY The Company represents and warrants to the Lenders as follows: SECTION 2.1 CAPITALIZATION OF COMPANY. (a) The authorized capital stock of the Company will, on and as of the Closing Date, consist of (i) 25,000,000 shares of Common Stock, par value $0.01 per share (the "Common Stock"), of which 13,410,646 shares were outstanding as of September 29, 2004, and (ii) 5,000,000 shares of preferred stock, of which zero (0) shares were outstanding as of September 29, 2004. A description of the capital stock and of the voting powers, rights, and privileges thereof is stated in the Company's Articles of Organization (herein, the "Articles of Organization"). (b) Except as described in the Company's SEC Documents, there are no existing options, warrants, calls, preemptive (or similar) rights, subscriptions or other rights, agreements, arrangements or commitments of any character obligating the Company to issue, transfer or sell, or cause to be issued, transferred or sold, any shares of the capital stock of the Company or other equity interests in the Company or any securities convertible into or exchangeable for such shares of capital stock or other equity interests, and there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of its capital stock or other equity interests. Section 2.2 AUTHORIZATION OF WARRANTS. (a) The Company will, prior to the Closing Date, duly and properly authorize the issuance to CIT (i) a Warrant evidencing rights to purchase shares of the Company's Common Stock (each a "Warrant" and collectively, the "Warrants") and (ii) the shares of Common Stock issuable by the Company upon exercise of the Warrants. (b) The Warrants will be exercisable commencing as of the date hereof in accordance with the terms thereof at a price, subject to adjustment as therein provided, of eighty-two and one-half cents ($0.8250) per Warrant Share. The Warrants will be in substantially the form of Exhibit A annexed to this Agreement. Section 2.3 ADDITIONAL REPRESENTATIONS. (a) Incorporation. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and is qualified to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect upon the Company. The Company has all requisite corporate power and authority to carry on its business as now conducted and to carry out the transactions contemplated hereby. 3 (b) Authorization. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution, delivery and performance of the Warrants, this Agreement and the Registration Rights Agreement and the consummation of the transactions contemplated herein and therein has been taken. When executed and delivered by the Company, each of this Agreement, the Warrants and the Registration Rights Agreement shall constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and by general equitable principles, and except as the same may be limited by the indemnification obligations of the Company under the Registration Rights Agreement. The Company has all requisite corporate power to enter into this Agreement, the Warrants and the Registration Rights Agreement and to carry out and perform its obligations under the terms of this Agreement, the Warrants and the Registration Rights Agreement. (c) Valid Issuance of the Shares. The Warrant Shares will, upon issuance pursuant to the terms hereof, be duly authorized and validly issued, fully paid and nonassessable and not subject to any encumbrances, preemptive rights or any other similar contractual rights of the stockholders of the Company or others. (d) Financial Statements. (i) The Company has furnished to CIT the Company's consolidated and consolidating balance sheets as of December 31, 2003, and its consolidated and consolidating statements of income, changes in stockholders' equity and cash flow for the fiscal year then ended and related footnotes, audited and certified by the Company's Accountants. The Company has also furnished to CIT it's unaudited consolidated balance sheet as of June 30, 2004 and consolidated statement of income for the three months ended June 30, 2004 (the "Financial Statements") in each case certified by the principal financial officer of the Company, subject to normal, recurring year-end adjustments that shall not in the aggregate be material in amount. All such financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods specified and present fairly the financial position of the Company and its subsidiaries as of such dates and the results of the operations of the Company and its subsidiaries for such periods. At the date hereof, the Company has no Indebtedness or other material liabilities, debts or obligations, whether accrued, absolute, contingent or otherwise, and whether due or to become due, including, but not limited to, liabilities or obligations on account of taxes or other governmental charges, that are not set forth on the Financial Statements or on Exhibit C to the Credit Agreement. (ii) Since the date of the Financial Statements, there have been no changes in the assets, liabilities, financial condition, business or prospects of the Company other than changes in the ordinary course of business, the effect of which has not, in the aggregate, been materially adverse to the Company taken as a whole. (e) SEC Documents. The Company shall by the Closing furnish to each CIT, a true and complete copy of the Company's Annual Report on Form 10-K for the year ended December 31, 2003 (the "Annual Report") and any other statement, report, registration statement (other than registration statements on Form S-8) or definitive proxy statement filed by the Company with the SEC during the period commencing December 31, 2003 and ending on the date hereof (the "SEC Documents"). As of their respective filing dates, the SEC Documents complied in all 4 material respects with the requirements of the Exchange Act or the Securities Act, as applicable, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, as of their respective filing dates. (f) Consents. Except for (i) the filing and effectiveness of any registration required to be filed by the Company under the Securities Act in connection with the exercise by any Investor of its rights under the Registration Rights Agreement and (ii) any required state "blue sky" law filings in connection with the transactions contemplated under such registration statement, all consents, approvals, orders and authorizations required on the part of the Company in connection with the execution, delivery or performance of this Agreement, the Warrants and the Registration Rights Agreement and the consummation of the transactions contemplated herein and therein have been obtained and will be effective as of the Effective Date of the Loan Agreement. (g) No Conflict. The execution and delivery of this Agreement, the Warrants and the Registration Rights Agreement by the Company and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under (i) any provision of the Articles of Organization or By-laws of the Company or (ii) any material or instrument, permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulation, applicable to the Company or its properties or assets. (h) Brokers or Finders. Except as disclosed in the Credit Agreement or as set forth on Schedule 2.3(h), the Company has not dealt with any broker or finder in connection with the transactions contemplated by this Agreement, and the Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders' fees or agents commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. (i) New York Stock Exchange. The Common Stock is listed on the New York Stock Exchange. (j) Absence of Litigation. There is no litigation, arbitration, proceeding or investigation pending, or, to the knowledge of the Company's or any subsidiary's officers, threatened, against the Company or any subsidiary that, if adversely determined, may reasonably be expected to result in a material judgment not fully covered by insurance (after giving effect to deductibles), may reasonably be expected to result in a forfeiture of all or any substantial part of the property of the Company or its subsidiaries, or may reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement) on the assets, business or prospects of the Company and its subsidiaries taken as a whole. (k) Reserved. 5 (l) Contracts. All contracts, agreements and instruments required to be filed as an exhibit to the annual report of the Company are legal, valid, binding and in full force and effect and, to the knowledge of the Company, are enforceable by the Company in accordance with their respective terms, subject to (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors, (b) rules of law governing specific performance, injunctive relief or other equitable remedies, and (c) actions or omissions of Persons other than the Company, provided, however, that the Company has no actual knowledge of any material actions or omissions by such other Persons. Except as disclosed in the Annual Report and other than contracts or agreements relating exclusively to the Company's manufacturing activities, the Company has not granted rights to manufacture, produce, assemble, license, market or sell its products to any other person and is not bound by any contract or agreement that materially restricts the Company's exclusive right to develop, manufacture, assemble, distribute or sell its products. (m) Subsidiaries; Joint Ventures. The Company has no subsidiaries other than those listed on Exhibit C to the Credit Agreement. The Company is not a participant in any joint venture, partnership, or similar arrangement material to its business. (n) Taxes. The Company and each subsidiary has filed all federal, state and other tax returns required to be filed, and all material taxes, assessments and other governmental charges due from the Company and each subsidiary have been fully paid, except for such taxes, assessments or charges that are being contested in good faith by appropriate proceedings and with respect to which (a) adequate reserves have been established and are being maintained in accordance with GAAP and (b) no lien has been filed to secure such taxes, assessments or charges. All such contests at the date hereof are described on Exhibit C to the Credit Agreement. As of the date hereof, the Company and its subsidiaries have not executed any waiver that would have the effect of extending the applicable statute of limitations in respect of tax liabilities. The federal and state income tax returns of the Company and each subsidiary have not been audited or otherwise examined by any federal or state taxing authority. The Company and each subsidiary have established on their books reserves adequate for the payment of all federal, state and other tax liabilities. ARTICLE III SALE AND PURCHASE OF WARRANTS AT CLOSING At the Closing hereunder, the Company will issue and sell to CIT, subject to the terms and conditions hereof and in reliance upon the written representations and warranties of the Company, in consideration for CIT entering into the Loan Agreement, a Warrant to subscribe for and purchase fifty thousand (50,000) shares of Common Stock and the Company hereby acknowledges receipt of such consideration. 6 ARTICLE IV THE CLOSING The closing under this Agreement (the "Closing") will take place at 9:00 a.m., local time, on September 29, 2004, or at such other time and on such other date as may be mutually agreed upon in writing by CIT and the Company. At the Closing, the Company will (among other things) deliver to CIT the Warrants purchased by CIT hereunder, and CIT will deliver to the Company the total consideration payable by CIT for the Warrant. ARTICLE V REPRESENTATIONS OF CIT CIT represents and warrants to the Company that: (a) CIT is purchasing the Warrant from the Company in accordance with the terms hereof for CIT's own account without a view to any distribution thereof in violation of the Securities Act, but, subject, nevertheless, to any requirement of law that the disposition of CIT's property shall at all times be within CIT's control. CIT has been informed and understands that the Securities have not been registered pursuant to the provisions of Section 5 of the Securities Act and therefore cannot be offered, sold or transferred unless such Securities are registered under the provisions of the Securities Act or an exemption from such registration is available. (b) CIT represents that it is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act. CIT has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of such an investment and is able financially to bear the risks thereof. (c) CIT agrees that each stock certificate or instrument representing or evidencing any Securities shall bear a legend in or substantially in the following form: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER, AND ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE 1933 ACT." ARTICLE VI COVENANTS OF COMPANY The Company hereby covenants with each of the Investors that, except as otherwise expressly permitted or provided, in any particular instance, by a written Investor Consent: 7 SECTION 6.1 RECORDS AND ACCOUNTS. The Company will (i) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with GAAP and (ii) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. SECTION 6.2 FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Company will deliver to each of the Investors at their request: (a) as soon as practicable after the end of each Company fiscal year and in any event within 90 days after the end of each such fiscal year, a consolidated balance sheet of the Company and Subsidiaries as at the end of such year, and the related statements of income and cash flows or shareholders' equity of the Company and Subsidiaries setting forth in each case the corresponding figures for the preceding fiscal year, such statements to be certified by a firm of independent certified public accountants selected by the Company; (b) as soon as is practicable after the end of each fiscal quarter of each Company fiscal year and in any event within 45 days thereafter, consolidated balance sheet of the Company and Subsidiaries as of the end of such period and the related statements of income and cash flows and shareholders' equity of the Company and Subsidiaries, subject to changes resulting from year-end adjustments, such balance sheet and statements to be prepared and certified by an authorized representative of the company in an officer's certificate as having been prepared in accordance with GAAP except for footnotes and year-end adjustments; and (c) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of the Company. ARTICLE VII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION. SECTION 7.1 SURVIVAL OF REPRESENTATIONS. The representations and warranties of the Company and of CIT contained in this Agreement, or any agreement, instrument or document delivered pursuant to any of the provisions of this Agreement, shall survive the execution and delivery of this Agreement, any examination or investigation conducted by or on behalf of the Company or CIT, and the Closing hereunder. SECTION 7.2 INDEMNIFICATION FOR MISREPRESENTATIONS. The Company agrees to indemnify and hold the Investors harmless from and against, and to pay to the Investors, on demand by the Investors from time to time, the full amount of any loss, claim, damage, liability, cost or expense (including reasonable attorneys' fees) resulting to the Investors from any false, incorrect or misleading representation or warranty of the Company contained in this Agreement, or any agreement, instrument or document delivered by the Company to the Investors pursuant to any of the provisions of this Agreement. 8 ARTICLE VIII RESERVED ARTICLE IX MISCELLANEOUS SECTION 9.1 NOTICES. (a) All notices and other communications pursuant to this Agreement shall be in writing, either delivered in hand, mailed by United States registered or certified first-class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (i) if to the Company, at the address of the Company set forth on the first page hereof, or at such other address as shall have been furnished to the Investors in writing by the Company and a copy thereof shall in any event be simultaneously transmitted to Gerald P. Hendrick, Esq., Edwards & Angell, 101 Federal Street, Boston, MA 02110; (ii) if to any Investor, at such addresses (in each case) as shall have been furnished to the Company by such Investor in writing, and a copy thereof shall in any event be simultaneously transmitted to Burton Winnick, Esq., Gadsby Hannah LLP, 225 Franklin Street, Boston, MA 02110. (b) Any notice or other communication pursuant to this Agreement shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of receipt thereof by such officer or the sending of such facsimile or (ii) if sent by registered or certified first-class mail, postage prepaid, on the third business day following the mailing thereof. SECTION 9.2 GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.3 AMENDMENTS AND WAIVERS. (a) Except as otherwise provided by paragraph (b) of this Section 9.3, and except as otherwise expressly required by any other provisions of this Agreement, none of the terms or provisions contained in this Agreement, and none of the agreements, obligations or covenants of the Company contained in this Agreement, may be amended, modified, supplemented, waived or terminated unless (i) the Company shall execute an instrument in writing agreeing or consenting to such amendment, modification, supplement, waiver or termination, and (ii) the Company shall receive a prior written Investor Consent therefor. 9 (b) Each of the terms and provisions contained in this Section 9.3 or in the definitions of Permitted Transferee, Investor Consent or Majority Investors contained in Article I hereof may be amended, modified, supplemented, waived or terminated only by a written instrument or consent signed by the Company and by each of the Investors holding of record any Securities at the effective date thereof. (c) In connection with any action taken or to be taken pursuant to paragraph (a) of this Section 9.3, there shall be no obligation or requirement on the part of the Company, any of the Investors or any other Persons (i) to solicit or to attempt to solicit from all of the Investors the consent or approval of all of the Investors for such action, or (ii) to submit any notices of any kind to all of the Investors in advance of any action proposed to be taken pursuant to paragraph (a) of this Section 9.3. However, copies of all written consents or approvals given by Investors in connection with any action taken or to be taken pursuant to and in compliance with paragraph (a) of this Section 9.3 shall be sent by the Company, promptly after the receipt thereof by the Company, to each Investor who shall have failed or refused to give a written consent or approval for such action. (d) Any action taken pursuant to and in compliance with paragraph (a) of this Section 9.3 shall be binding upon the Company and upon all of the Investors, including all of the Investors who shall have failed or refused to give a written consent or approval for such action. SECTION 9.4 RIGHTS AND OBLIGATIONS SEVERAL. The rights and obligations of each of the parties hereto shall be several (and not joint), except as otherwise expressly provided by this Agreement. SECTION 9.5 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of any Investor in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.6 ASSIGNMENT. This Agreement shall inure to the benefit and be binding upon CIT and its heirs, successors and assigns. The Company's obligations under this Agreement shall not be assigned, and its duties under this Agreement shall not be delegated. SECTION 9.7 ENTIRE AGREEMENT. This Agreement, including Exhibit A hereto, the Warrants and the Registration Rights Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersede any prior understandings or agreements concerning the subject matter hereof. SECTION 9.8 SEVERABILITY. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. SECTION 9.9 BINDING EFFECT. All of the covenants and agreements of the Company contained in, and all of the rights granted by the Company pursuant to, this Agreement, shall inure to the benefit of each Investor, including each of the Permitted Transferees of such Investor. None of such covenants, agreements or rights shall be assignable 10 or transferable by any Investor to any Person except to a Person who is a Permitted Transferee of such Investor. SECTION 9.10 COUNTERPARTS. This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by each of the parties hereto. 11 If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Agreement and return such counterpart to the undersigned, whereupon this Agreement, as so accepted by you, shall become a binding agreement under seal between you and the undersigned. Very truly yours, MICROFINANCIAL INCORPORATED By: /s/ Richard F. Latour ------------------------------------ Richard F. Latour, President Dated as of: September 29, 2004 The foregoing Warrant Purchase Agreement with MicroFinancial Incorporated is hereby accepted by the undersigned on and as of the date thereof. INVESTOR: THE CIT GROUP/COMMERCIAL SERVICES, INC. By: /s/ Daniel B. Ciotti ------------------------------------ Daniel B. Ciotti, Vice President 12 EX-10.9 10 b51980mfexv10w9.txt EX-10.9 WARRANT CERTIFICATE DATED 9-29-2004 EXHIBIT 10.9 EXECUTION COPY THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY), REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE COMPANY, STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT. MICROFINANCIAL INCORPORATED (Incorporated under the laws of The Commonwealth of Massachusetts) WARRANT CERTIFICATE No. 4 September 29, 2004 To Purchase 50,000 Shares of Common Stock This is to certify that, for value received, THE CIT GROUP/COMMERCIAL SERVICES, INC. having an office at 1211 Avenue of the Americas, New York, NY 10036 ("CIT"), or any subsequent holder hereof (collectively with CIT, the "HOLDER"), is entitled to purchase from MICROFINANCIAL INCORPORATED a Massachusetts corporation (the "COMPANY"), in whole or in part, at an exercise price of $0.8250 per share, subject to adjustment as hereinafter provided (the "EXERCISE PRICE"), at any time after 9:00 a.m. (Boston time) on the date hereof (the "EXERCISABLE DATE") and prior to 5:00 p.m. (Boston time) on June 10, 2007, (the "EXPIRATION DATE"), 50,000 shares of fully paid and non-assessable shares of the Common Stock $0.01 par value, of the Company (the "COMMON STOCK"). As used herein, the period from the Exercisable Date through the Expiration Date shall be the "EXERCISE PERIOD". This Warrant Certificate, any other warrants issued as provided herein and any other warrants issued as provided in the Warrant Purchase Agreement (as defined below), are hereinafter collectively referred to as the "WARRANTS" and all shares of Common Stock and other securities purchased or purchasable upon exercise of this Warrant are hereinafter collectively referred to as "WARRANT SHARES." The number of shares of Common Stock and the Exercise Price are subject to adjustment as hereinafter set forth. Capitalized terms used herein and not expressly defined herein shall have the meanings assigned thereto in that certain Revolving Credit Agreement dated as the date hereof by and among CIT, as agent, TimePayment Corp. LLC, Leasecomm Corporation and the lenders party thereto, as amended, modified or restated from time to time (as amended, modified or restated, the "CREDIT AGREEMENT"). This Warrant has been issued pursuant to, and is entitled to the benefits of the Warrant Purchase Agreement dated the date hereof by and between the Company and the Holder. SECTION 1. EXERCISE OF WARRANT. 1.1 Time and Manner of Exercise. This Warrant may be exercised by the Holder hereof, in whole or in part, any time during the Exercise Period by surrender of this Warrant, with the form of subscription attached hereto (the "SUBSCRIPTION") completed and duly executed by such Holder, to the Company at its principal office at 10-M Commerce Way, Woburn, Massachusetts 01801, or at such other address as the Company may designate by notice in writing to the Holder hereof at the address of such Holder on the books of the Company. Notwithstanding the foregoing, the Holder may only exercise this Warrant in part if the Holder is exercising for at least 12,500 Warrant Shares (as adjusted for stock splits, stock dividends, subdivisions and the like) or all Warrant Shares represented by this Warrant, if less than 12,500 Warrant Shares (as adjusted for stock splits, stock dividends, subdivisions and the like) remain outstanding in the aggregate. 1.2 Payment. Payment in an amount equal to the product of (a) the number of shares of Common Stock designated in the Subscription, times (b) the Exercise Price shall be due to the Company, in cash or by certified or official bank check payable to the Company within five (5) Business Days after the date of exercise. 1.3 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in subsection 1.1, and at such time the person or persons in whose name or names any certificate or certificates for shares of Common Stock (or of the other securities or property to which such Holder is entitled upon such exercise in accordance with the terms hereof) shall be issuable upon such exercise as provided in subsection 1.2, shall be deemed to have become the Holder or Holders of record thereof. 1.4 Delivery of Stock Certificates, etc. As soon as practicable after the exercise of this Warrant, in whole or in part, and in any event within 10 days thereafter, the Company at its expense will cause to be issued in the name of and delivered to the Holder hereof, or as such Holder may direct: (a) a certificate or certificates for the number of full shares of Common Stock to which such Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash in an amount equal to the same fraction of the Exercise Price of one full share of Common Stock, which shall be paid to the Holders thereof on the Business Day next preceding the date of such exercise; (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, for the number of shares of Common Stock in respect of which this Warrant shall not have been exercised; - 2 - (c) each certificate representing shares of Common Stock issued upon exercise of this Warrant shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to, or in combination with, any other legend required under applicable state securities law and agreements or by-law provisions relating to the transfer of the Company's securities): THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY), REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE COMPANY, STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT. SECTION 2. INVESTMENT REPRESENTATIONS. The Holder hereof understands that this Warrant (and the Common Stock issuable upon exercise of this Warrant) to be purchased by such Holder have not been registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any similar Federal statute, and the rules and regulations of the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein. The Holder further understands that neither this Warrant nor the Common Stock issuable upon the exercise of this Warrant may be offered, sold or otherwise transferred, pledged or hypothecated unless or until this Warrant or the Common Stock issuable upon the exercise of this Warrant, as the case may be, is registered under the Securities Act or an exemption form such registration is available. The Holder hereof has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management and to obtain any additional information necessary to verify the accuracy of the information given to such Holder. The Holder hereof represents that such Holder is an accredited investor under Rule 501(a) of Regulation D of the Securities Act and that such Holder is able to bear the economic risk of such Holder's investment in the Company contemplated hereby. The Holder is acquiring this Warrant for its own account for investment purposes without a view to any distribution thereof in violation of the Securities Act. SECTION 3. MAINTENANCE OF WARRANT REGISTER; ASSIGNMENT AND TRANSFER AND REPLACEMENT. 3.1 Registered Holders. The Company will maintain a register containing the name and address of the Holder of this Warrant. The "REGISTERED HOLDER" of this Warrant shall be the person in whose name such Warrant is registered in said warrant register. Any registered Holder of this Warrant may change such Holder's address as shown on the warrant register by - 3 - written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the registered Holder of this Warrant shall be mailed, by certified or registered mail, return receipt requested, postage prepaid, or delivered to such registered Holder at its address as shown on the warrant register. 3.2 Assignment and Transfer of the Warrant. Subject to Section 9 and on the basis of the foregoing representations set forth in Section 2 above, this Warrant has not been registered under the Securities Act, and neither this Warrant nor the rights evidenced hereby shall be assigned, pledged, transferred or otherwise disposed of unless either (a) this Warrant first shall have been registered under the Securities Act, or (b) the Company first shall have been furnished with an opinion of legal counsel reasonably satisfactory to the Company stating that such sale or transfer is an exempted transaction under the Securities Act and, unless such opinion states that such Warrant may be transferred by the transferee immediately after acquisition without registration under the Securities Act, a written agreement by the transferee thereof not to sell or transfer such Warrant without complying with the requirements provided for in this subsection 3.2. Upon surrender of this Warrant to the Company for transfer as an entirety by the registered Holder (as permitted by this Section) at the offices of the Company referred to in Section 1.1 hereof, with the form of assignment attached hereto completed and duly executed by the registered Holder, the Company shall, at the Company's expense, issue a new Warrant of the same denomination to the assignee. 3.3 Replacement. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same at the holder's expense (a) in exchange and substitution for and upon surrender and cancellation of the mutilated Warrant, or (b) in lieu of the Warrant lost, stolen or destroyed, upon receipt of (i) a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction, and (ii) an indemnity reasonably satisfactory to the Company. SECTION 4. ADJUSTMENT OF STOCK ISSUABLE UPON EXERCISE. 4.1 Adjustment for Subdivisions, Combinations or Consolidation of Common Stock. If the outstanding shares of Common Stock are subdivided by stock split, stock dividends or otherwise, into a greater number of shares of Common Stock, concurrently with the effectiveness of such subdivision, the Exercise Price then in effect shall be proportionately decreased and the number of Warrant Shares shall be proportionately increased so that the number of shares of Common Stock issuable upon the exercise of this Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock and the aggregate consideration payable upon the exercise of this Warrant with respect to the Warrant Shares before giving effect to such subdivision shall not change. If the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, concurrently with the effectiveness of such combination or consolidation, the Exercise Price then in effect shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased so that the number of shares of Common Stock issuable upon the exercise of this Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock and the aggregate consideration payable upon the exercise of this Warrant - 4 - with respect to the Warrant Shares before giving effect to such combination or consolidation shall not change. 4.2 No Impairment. The Company will not, by amendment of its certificate of incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of the Warrants hereunder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any share of stock receivable upon the exercise of the Warrants above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares upon the exercise of all Warrants at the time outstanding. 4.3 Certificate as to Adjustment. In each case of an adjustment in the number of shares of Common Stock or the number or type of other stock, securities or property receivable on the exercise of the Warrants, the Company at its expense shall cause its chief financial officer (who may be the independent public accountants then auditing the books of the Company) to compute such adjustment in accordance with the terms of the Warrants and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of (a) the number of Warrant Shares issuable upon exercise of this Warrant, and (b) the Exercise Price. The Company will forthwith mail a copy of each such certificate to each Holder of a Warrant at the time outstanding. 4.4. Notices of Record Date: In case: (a) the Company shall take a record of the Holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of the Warrants) for the purpose of any stock split, stock dividend, subdivision, combination or consolidation, or (b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another person, or any conveyance of all or substantially all of the assets of the Company to another person, or (c) of any voluntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to each Holder of a Warrant at the time outstanding a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of any stock split, stock dividend, subdivision, combination or consolidation, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is expected to take place, and the time, if any is to be fixed, as of which the Holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, - 5 - dissolution, liquidation or winding-up. Such notice shall be mailed at least twenty (20) days prior to the date specified in the notice on which any such action is to be taken. 4.5 Adjustments For Consolidation, Merger, Sale of Assets, Reorganization, Etc. If the Company effects a capital reorganization or reclassification of the stock of the Company (other than a change in par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Company with or into another person (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any change in the Common Stock), or sells or otherwise disposes of all or substantially all the properties and assets of the Company as an entirety to any other person, the Holder of this Warrant, upon the exercise hereof at any time after the consummation of such reorganization, reclassification, consolidation, merger, sale or other disposition, shall be entitled to receive, in lieu of the Common Stock issuable upon such exercise prior to such consummation, the kind and number of shares of stock or other securities or property of the Company or of the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold or otherwise disposed to which such Holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation, merger, sale or other disposition such Holder had exercised this Warrant. The provisions of this subsection 4.5 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or other dispositions. The Company shall not effect any such merger, consolidation, or similar reorganization in which the Company does not survive or in which its Common Stock changes, unless prior to or simultaneously with the consummation thereof the successor corporation shall assume by written instrument executed and mailed or delivered to the Holder of this Warrant at the last address of such Holder appearing on the books of the Company, the obligations to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 4.6 Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the holders of this Warrant after the effective date of such dissolution pursuant to this Section 4 to a bank or trust company as a trustee for the holders of this Warrant. 4.7 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 4, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation, or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any stock or other securities, including in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant. - 6 - 4.8 Calculations Made to Nearest Cent or Full Share. All calculations under this Section 4 shall be made to the nearest cent or to the nearest full share, as the case may be (with one-half of a cent or a share being rounded to the next highest full cent or share). SECTION 5. OTHER NOTICES. In case at any time: (a) the Company shall declare any dividend or other distribution upon its Common Stock payable in stock to the Holders of its Common Stock; or (b) the Company shall propose a subdivision of its outstanding Common Stock into a greater number of shares of Common Stock or propose a combination of its outstanding Common Stock into a smaller number of shares of Common Stock; or (c) the Company shall propose any capital reorganization or any reclassification of capital stock of the Company or any consolidation, merger or sale of all or substantially all of its properties and assets; or (d) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, and in each of said cases, the Company shall cause notice thereof to be mailed to the Holder of this Warrant at the last address appearing on the books of the Company or given by such Holder to the Company for the purpose of notice. Such notices shall be mailed at least twenty (20) days prior to the date on which the books of the Company shall close, or a record date shall be taken for such dividend, distribution, stock split or combination or issue of rights or to vote upon such capital reorganization, reclassification, consolidation, merger or sale of properties and assets, as the case may be, and shall specify such record date or date for the closing of the transfer books. SECTION 6. RESERVATION OF STOCK ISSUABLE UPON EXERCISE. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for issuance and delivery upon the exercise of this Warrant, such number of its shares of Common Stock as shall from time to time be issuable upon the exercise of this Warrant; and if at any time the number of authorized but unissued shares of its Common Stock shall not be sufficient for such purpose, the Company will take such corporate actions as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of its Common Stock to such number of shares as shall be sufficient for such purpose. SECTION 7. RIGHTS AS STOCKHOLDER. The registered Holder of this Warrant, as such, shall not be entitled to vote or receive dividends or be deemed the Holder of shares of Common Stock for any purpose, nor shall anything contained in this Warrant be construed to confer upon the registered Holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any action by the Company (whether upon any recapitalization, issue of shares, reclassification of shares, consolidation, merger, conveyance or otherwise), receive notice of meetings or other action affecting stockholders (except for notices provided for in this - 7 - Warrant), receive dividends or subscription rights, or otherwise until this Warrant shall have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable as provided in Section 1 hereof, at which time the person or persons in whose name or names the certificate or certificates for the shares of Common Stock being purchased are to be issued shall be deemed the holder or holders of record of shares of Common Stock for all purposes. SECTION 8. REMEDIES. The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. SECTION 9. TRANSFERABILITY. This Warrant may be transferred or assigned in whole or in part by the Holder either to an affiliate (as that term is defined in the Securities Act) of the Holder or to anyone else except for a competitor if the Holder has complied with the terms and conditions of (i) this Warrant and (ii) all applicable federal and state securities laws; provided however that (other than in the case of a transfer or assignment of this Warrant to an affiliate of the Holder), such compliance shall include, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company. Subject to the provisions of this Warrant with respect to compliance with the Securities Act, title to this Warrant may be transferred by endorsement (by the Holder executing the Form of Assignment annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. For purposes of this Agreement, "competitor" shall mean any company that is primarily engaged in the business of manufacturing, selling, licensing or developing products that are competitive with products being manufactured, sold, leased, developed or licensed by the Company or any Subsidiary on or after the date hereof. Notwithstanding the foregoing, this Warrant may only be assigned in part if the Holder is assigning the right to receive at least 12,500 Warrant Shares (as adjusted for stock splits, stock dividends, subdivisions and the like) or all Warrant Shares represented by this Warrant if less than 12,500 Warrant Shares (as adjusted for stock splits, stock dividends, subdivisions and the like) remain outstanding in the aggregate. SECTION 10. NOTICES, ETC. All notices and other communications from the Company to the Holder of this Warrant shall be mailed by recognized overnight courier first class registered or certified air mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until an address is so furnished, to and at the address of the last Holder of this Warrant who has so furnished an address to the Company. - 8 - SECTION 11. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant is being delivered in The Commonwealth of Massachusetts and shall be construed and enforced in accordance with and governed by the laws of such commonwealth. All section headings herein are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or unenforceability of any other provision. IN WITNESS WHEREOF, MICROFINANCIAL INCORPORATED has caused this instrument to be duly executed by its duly authorized officer this 29th day of September, 2004. Attest: MICROFINANCIAL INCORPORATED /s/ James R. Jackson By: /s/ Richard F. Latour - --------------------------- ---------------------------- Chief Financial Officer Richard F. Latour, President - 9 - ELECTION TO PURCHASE MICROFINANCIAL INCORPORATED 10-M Commerce Way Woburn, Massachusetts 01801 Ladies and Gentlemen: The undersigned hereby subscribes for _______ shares of the Common Stock of MICROFINANCIAL INCORPORATED covered by the within Warrant and tenders payment herewith in the amount of $________________ in accordance with the terms thereof. Such payment is hereby tendered in the form of $ in cash or certified or bank check. You are instructed as follows: 1. To issue certificate(s) for said shares to Name: Address: 2. To deliver said certificate(s) by registered mail, return receipt requested, to Name: Address: Very truly yours, [INSERT HOLDER] __________________________________ Name: Title: Address: - 10 - FORM OF ASSIGNMENT [To be signed only upon transfer of Warrant] For value received, the undersigned hereby sells, assigns and transfers unto ____________ _______________________________ the right represented by the within Warrant to purchase ___________ shares of Common Stock of MICROFINANCIAL INCORPORATED to which the within Warrant relates, and appoints _____________________ Attorney to transfer such right on the books of MICROFINANCIAL INCORPORATED with full power of substitution in the premises. Dated: ________________________________________________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) (Address) Signed in the presence of: ___________________________________ - 11 - EX-10.10 11 b51980mfexv10w10.txt EX-10.10 REGISTRATION RIGHTS AGREEMENT DATED 9-29-2004 EXHIBIT 10.10 EXECUTION COPY MICROFINANCIAL INCORPORATED REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made as of this 29th day of September, 2004 by and among MicroFinancial Incorporated (the "Company"), and The CIT Group/Commercial Services, Inc. ("CIT"), along with its successors and assigns (the "Holders"). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Loan Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Leasecomm Corporation (the "Borrower"), a wholly-owned Subsidiary of Company, and CIT are parties to that certain Revolving Credit Agreement dated as of the date hereof by and among CIT as agent (as defined in the Loan Agreement), the lenders party thereto (the "Lenders") and the Borrower (as amended, modified or restated, the "Loan Agreement"); WHEREAS, in connection with the closing of the Loan Agreement, the Company has issued to CIT as of the date hereof certain Warrant Certificates to purchase shares of Common Stock (the "Warrants"); WHEREAS, the Company and CIT wish to enter into a Registration Rights Agreement as set forth herein; NOW THEREFORE, in consideration of CIT's agreement to the Loan Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Incidental Registration. 1.1 If the Company at any time proposes to register any of its equity securities under the Securities Act (other than a Registration (i) relating to shares of Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or (ii) in connection with an acquisition by the Company of another company), whether as a result of a primary or secondary offering or pursuant to registration rights granted to holders of other securities of the Company, the Company shall, each such time, subject to the provisions of Section 1.2, give prompt written notice to the Holders of its intention to do so and of such Holders' rights under this Section 1, at least 20 days prior to the anticipated filing date of the Registration Statement relating to such Registration. Such notice shall offer all of the Holders the opportunity to include in such Registration Statement such number of Registrable Securities as each such Holder may request. Upon the written request of any such Holder made within 10 days after the receipt of the Company's notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder), the Company shall use its best efforts to effect the Registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holders thereof; provided, that (x) if such Registration involves an underwritten offering, all Holders requesting to be included in the Company's Registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company; and (y) if, at any time after giving written notice of its intention to register any securities pursuant to this Section 1.1 and prior to the Effective Date of the Registration Statement filed in connection with such Registration, the Company shall determine for any reason not to register such securities, the Company shall give written notice to all Holders and shall thereupon be relieved of its obligation to register any Registrable Securities in connection with such Registration. If a Registration pursuant to this Section 1.1 involves an underwritten public offering, any Holder requesting to be included in such Registration may elect, in writing prior to the effective date of the Registration Statement filed in connection with such Registration, not to register such Registrable Securities in connection with such Registration. The Company shall pay all Registration Expenses in connection with each Registration of Registrable Securities requested pursuant to this Section 1. 1.2 Priority in Incidental Registrations. If a Registration pursuant to this Section 1 involves an underwritten offering and the managing underwriter advises the Company that, in its good faith opinion, the number of equity securities (including all Registrable Securities) which the Company, the Holders and any other persons intend to include in such Registration exceeds the largest number of securities which can be sold without having an adverse effect on such offering, including the price at which such Registrable Securities can be sold, the Company will include in such Registration (i) first, the securities that the Company proposes to sell for the account of other Persons holding certain warrants having registration rights pursuant to that certain Registration Rights Agreement, dated April 14, 2003 (ii) second, registrable securities held by Acorn Capital Group ("Acorn Registrable Securities") proposed to be registered by the holders thereof, pro rata based on the number of Acorn Registrable Securities proposed to be registered by each such holder, (iii) third, registrable securities held by Ampac Capital Solutions, LLC ("Ampac Registrable Securities") proposed to be registered by the holders thereof, pro rata based on the number of Ampac Registrable Securities proposed to be registered by each such holder, (iv) fourth, the Registrable Securities and (v) fifth, securities that the Company proposes to issue and sell for its own account. 1.3 Filing of Registration Statement. The Company shall file a Registration Statement on Form S-3 with the Commission no later than December 31, 2004 registering (i) the shares of Common Stock issuable to the Holders upon exercise of the Warrants, (ii) any other shares of Common Stock (or warrants exercisable for Common Stock) subject to registration rights (if such holders desire such shares to be registered). Such Registration (i) shall not be an underwritten offering and (ii) shall be subject to all provisions of this Agreement, including without limitation, Sections 2.2 and 2.11, provided, however that such Registration shall not be subject to the provisions of Section 1.2 hereof. The Company shall use its best efforts to have such Registration Statement declared Effective by the Commission within 180 days after the date hereof. 2. Registration Procedures. In connection with any offering of Registrable Securities registered pursuant to this Agreement, the Company shall: 2.1 Use commercially reasonable efforts to cause such Registration Statement to become and remain Effective as provided herein, provided that at least fifteen (15) days prior to filing with the Commission a Registration Statement or disclosure document constituting part of a Registration Statement or any amendments or supplements thereto, the Company will (x) 2 furnish to one counsel selected by the Holders of a majority of the Registrable Securities covered by such Registration Statement copies of all such documents proposed to be filed for said counsel's review and comment and (y) notify each Holder covered by such Registration Statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. 2.2 Prepare and file with the Commission such amendments and supplements to such Registration Statement and any disclosure document constituting part of such Registration Statement used in connection therewith as may be necessary to keep Effective such Registration Statement for a period of not less than 180 days or such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold (but not before the expiration of the 90 day period, if applicable, referred to in Section 4(3) of the Securities Act and Rule 174 under the Securities Act, or any successor thereto, if applicable), and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement. 2.3 Furnish to each Holder and each underwriter, if any, of Registrable Securities covered by such Registration Statement such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), and the disclosure document included in such Registration Statement (including each preliminary disclosure document), in conformity with the requirements of the Securities Act, and such other documents as any Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder. 2.4 Use commercially reasonable efforts to register or qualify such Registrable Securities under such other state securities or "blue sky" laws of such jurisdictions as any Holder, and underwriter, if any, of Registrable Securities covered by such Registration Statement reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and each underwriter, if any, to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided that the Company will not be required to (x) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2, (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction. 2.5 Immediately notify each Holder of such Registrable Securities at any time when a disclosure document relating thereto is required to be delivered under the Securities Act of the happening of any event which comes to the Company's attention if as a result of such event the disclosure document included in such Registration Statement contains an untrue statement of material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly prepare and furnish to such Holder a supplement or amendment to such disclosure document so that, as thereafter delivered to the Holders of such Registrable Securities, such disclosure document will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. 3 2.6 Use commercially reasonable efforts to cause all such Registrable Securities to be listed on a national securities exchange or the NASDAQ National Market and on each securities exchange upon which similar securities issued by the Company may then be listed, and enter into such customary agreements including a listing application and indemnification agreement in customary form, and to provide a transfer agent and registrar for such Registrable Securities covered by such Registration Statement no later than the effective date of such Registration Statement. 2.7 Enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as the Holders of a majority of the Registrable Securities being covered by such Registration Statement or the underwriters retained by such Holders, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including customary representations, warranties, indemnities and agreements. 2.8 Make available for inspection by any Holder covered by such Registration Statement, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's and its Affiliates' officers, directors and employees to supply all information and respond to all inquiries reasonably requested by any such Inspector in connection with such Registration Statement. 2.9 In connection with any underwritten offering, use commercially reasonable efforts to obtain (a) a "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as the Holders of a majority in interest of the Registrable Securities being sold and the underwriters reasonably request and (b) at the time of any underwritten sale pursuant to a Registration Statement, a "bring-down comfort letter", dated as of the date of such sale, from the Company's independent certified public accountants covering such matters of the type customarily covered by comfort letters as the Holders of a majority in interest of the Registrable Securities covered by such Registration Statement and the underwriters reasonably request. 2.10 Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to the Holders, as soon as reasonably practicable, an earnings statement covering a period of at least twelve months, beginning with the first month after the Effective Date of the Registration Statement, which earnings statement shall satisfy the provisions of the Securities Act and Rule 158 thereunder. 2.11 In the event of the issuance of any stop order suspending the effectiveness of a Registration Statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in such Registration Statement for sale in any jurisdiction, the Company will use its best efforts promptly to obtain the withdrawal of such order. 4 It shall be a condition precedent to the obligation of the Company to take any action with respect to securities of a Holder that such Holder shall furnish to the Company such information regarding the securities held by such Holder and the intended method of disposition thereof as the Company shall reasonably request and as shall be required in connection with the action taken by the Company. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.5, such Holder will forthwith discontinue disposition of Registrable Securities until such Holder's receipt of the copies of the supplemented or amended disclosure document contemplated by Section 2.5 hereof, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder's possession, of the disclosure document covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in Section 2.2 shall be extended by the greater of (x) three months or (y) the number of days during the period from and including the date of the giving of such notice pursuant to Section 2.5 hereof to and including the date when each Holder covered by such Registration Statement shall have received the copies of the supplemented or amended disclosure document contemplated by Section 5.6. 3. Indemnification. 3.1 Indemnification by the Company. In the event of any Registration of any securities of the Company under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless, to the full extent permitted by law, each of the Holders of any Registrable Securities covered by such Registration Statement, their respective directors and officers, general partners, limited partners and managing directors, each person who participates as an underwriter in the offering or sale of such securities and each other person, if any, who controls, is controlled by or is under common control with any such Holder or any such underwriter within the meaning of the Securities Act (and directors, officers, controlling persons, partners and managing directors of any of the foregoing), against any and all losses, claims, damages or liabilities, joint or several, and expenses (including any amounts paid in any settlement effected with the Company's consent, which consent will not be unreasonably withheld) to which such Holder, any such director or officer or general or limited partner or managing director or any such underwriter or controlling person may become subject under the Securities Act, state securities or "blue sky" laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary, final or summary disclosure document contained therein, or any amendment or supplement thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such Registration. The Company shall reimburse each such Holder and each such director, officer, general partner, limited partner, managing director or underwriter and controlling person 5 for any legal or any other expenses reasonably incurred by them in connection with investigating or defending such loss, claim, liability, action or proceeding, provided, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement or amendment or supplement thereto or in any such preliminary, final or summary disclosure document in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder in its capacity as a Holder in the Company or any such director, officer, general or limited partner, managing director or underwriter specifically stating that it is for use in the preparation thereof. The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any such director, officer, general partner, limited partner, managing director, underwriter or controlling person and shall survive the transfer of such securities by such Holder. 3.2 Indemnification by the Holders and Underwriters. Any Holder the Registrable Securities of which are included in any Registration Statement shall, severally (and not jointly with any other Holder), indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) above) the Company and its directors, officers, controlling persons from such Registration Statement, any preliminary, final or summary disclosure document contained therein, or any amendment or supplement, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or its representatives through an instrument duly executed by or on behalf of such Holder specifically stating that it is for use in the preparation of such Registration Statement, preliminary, final or summary disclosure document or amendment or supplement, or a document incorporated by reference into any of the foregoing. No Holders shall be liable in the aggregate for any amounts exceeding the product of the sale price per Registrable Security (after deduction of applicable underwriting discounts and commissions and transfer taxes) and the number of Registrable Securities sold pursuant to such Registration Statement or disclosure document by such Holder. 3.3 Notices of Claims, Etc. Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 3, such indemnified Party will, if a claim in respect thereof is to be made against an indemnifying party, promptly give written notice to the indemnifying party of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subsections of this Section, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party will be entitled to participate in and, jointly with any other indemnifying party similarly notified, to assume the defense thereof, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party's reasonable judgment a 6 conflict of interest between such indemnified party and the indemnifying party arises in respect of such claim after the assumption of the defense thereof, and the indemnifying party will not be subject to any liability for any settlement made without its consent (which consent shall not be unreasonably withheld). No indemnifying party will consent to any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel in any single jurisdiction for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels as may be reasonably necessary. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party will have the right to retain, at its own expense, counsel with respect to the defense of a claim. 3.4 Other Indemnification. Indemnification similar to that specified in the preceding subsections of this Section 3 (with appropriate modifications) shall be given by the Company and each Holder with respect to any required Registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act. 3.5 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section is for any reason held to be unenforceable although applicable in accordance with its terms, the Company, the Holders and the underwriters shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company, the Holders and the underwriters, in such proportions that the underwriters are responsible for that portion represented by the percentage that the underwriting discount appearing in the disclosure document bears to the public offering price appearing therein and the Company and the Holders are responsible for the balance; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. As between the Company and the Holders, such parties shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect (x) the relative benefits received by the Company, on the one hand, and the Holders of the Registrable Securities included in the offering on the other hand, from the offering of the Registrable Securities and any other securities included such offering, and (y) the relative fault of the Company, on the one hand, and the Holders of the Registrable Securities included in the offering, on the other, with respect to the statements or omissions which resulted in such loss, liability, claim, damage or expense, or action in respect thereof as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Holders of the Registrable Securities on the other, with respect to such offering shall be deemed to be in the same proportion as the sum of the total purchase price paid to the Company in respect of the Registrable Securities plus the total net proceeds from the offering of any securities included in 7 such offering (before deducting expenses) received by the Company bears to the amount by which the total net proceeds from the offering of Registrable Securities (before deducting expenses but after deducting applicable underwriting discounts and commissions and transfer taxes) received by the Holders of the Registrable Securities with respect to such offering exceeds the purchase price paid to the Company in respect of the Registrable Securities, and in each case the net proceeds received from such offering shall be determined as set forth in the disclosure document. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders of the Registrable Securities, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders of the Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. Notwithstanding anything to the contrary contained herein, the Company and the Holders agree that any contribution required to be made by such Holder pursuant to this Section 3.5 shall not exceed the net proceeds from the offering of Registrable Securities (before deducting expenses but after deducting applicable underwriting discounts and commissions and transfer taxes) received by such Holder with respect to such offering. For purposes of this Section, each Person, if any, who controls a Holder or an underwriter within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such Holder or underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. 3.6 Rule 144. The Company will furnish to any Holder, upon request made by such Holder at any time, a written statement signed by the Company, addressed to such Holder, describing briefly the action the Company has taken or proposes to take to comply with the current public information requirements of Rule 144 or Rule 144A. The Company will, at the request of any Holder, remove from the stock certificates representing such Registrable Securities that portion of any restrictive legend which relates to the registration provisions of the Securities Act on the second anniversary date of this Agreement, provided that the Holder is not at this time (or within the previous 90 days) an affiliate of the Company. 4. Deferral; Blackout. Notwithstanding anything in this Agreement to the contrary, if the Company shall furnish to the Holders named in any registration statement filed hereunder a certificate signed by the President or Chief Executive Officer of the Company stating that the Board of Directors of the Company has made the good faith determination (after consultation with counsel) (i) that continued use by the Holders of the Registration Statement for purposes of effecting offers or sales of Registrable Securities pursuant thereto would require, under the Securities Act, premature disclosure in such registration statement (or the prospectus relating thereto) of material, nonpublic information (the "Non-Public Information") concerning the Company, its business or prospects or any proposed material transaction involving the Company, (ii) that such premature disclosure would be materially adverse to the Company or any such proposed material transaction or would make the successful consummation by the Company of any such material transaction significantly less likely and (iii) that it is therefore essential to suspend the use by the Holders of such registration statement (and the prospectus relating 8 thereto) for purposes of effecting offers or sales of Registrable Securities pursuant thereto, then the right of the Holders to use the registration statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Registrable Shares pursuant thereto shall be suspended for a period (the "Suspension Period") of not more than 120 days after delivery by the Company of the certificate referred to above in this Section 4. During the Suspension Period, none of the Holders shall offer or sell any Registrable Securities pursuant to or in reliance upon the registration statement (or the prospectus relating thereto). Notwithstanding the foregoing (a) if disclosure of the Non-Public Information is made during a Suspension Period, then the Company shall promptly terminate the Suspension Period and immediately notify the Holders of such termination and (b) the Company may not implement the right to initiate a Suspension Period more than twice in any twelve month period. To the extent that the Company initiates one or more Suspension Periods hereunder, the Company shall maintain the effectiveness of the Registration Statement for an additional number of days equal to the aggregate amount of days that the Company implemented such Suspension Periods. 5. Miscellaneous. 5.1 No Waiver; Cumulative Remedies. No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other further exercise thereof or the exercise of any other right, power or remedy hereunder. 5.2 Notices. All notices and other communications from the Company to the Holders shall be mailed by recognized overnight courier first class registered or certified air mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until an address is so furnished, to and at the address of the last Holders who has so furnished an address to the Company. 5.3 Modification, Etc. This Agreement and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Holders of a majority of the Registrable Securities and the Company. This Agreement is being delivered in the Commonwealth of Massachusetts and shall be construed and enforced in accordance with and governed by the laws of such commonwealth without regard to its conflict of laws principles. All section headings herein are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 5.4 No Inconsistent Agreements. The Company will not, at any time after the effective date of this Agreement, enter into any agreement or contract (whether written or oral) with respect to any of its securities which is inconsistent in any respect with the registration rights granted by the Company to the Holders of the Warrants pursuant to this Agreement or otherwise conflicts with the provisions hereof. 5.5 Assignment. This Agreement shall inure to the benefit and be binding upon each Holder and its heirs, successors and assigns (an "Assignee"). The Company's obligations under this Agreement shall not be assigned, and its duties under this Agreement shall 9 not be delegated. Each Assignee shall execute a counterpart joinder signature page and shall become a "Holder" for all purposes of this Agreement. 5.6 Legend. Any shares issued in connection with the exercise of the Warrants shall bear the following legend: THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY), REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE COMPANY, STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT. 6. Certain Definitions. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act of the Exchange Act. "Common Stock" shall mean the Company's common stock, $0.01 par value per share. "Effective" shall mean that all requirements under the Securities Act with respect to a Registration Statement have been satisfied and that the Commission has declared the Registration Statement effective. "Effective Date" shall mean the date on which a Registration Statement has been declared Effective. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Registrable Securities" shall mean (i) all shares of Common Stock and other securities issued or issuable upon exercise of the Warrants, and (ii) all shares of Common Stock and other securities directly or indirectly issued or issuable with respect to such Common Stock or other securities by way of stock dividend, or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, or other reorganization. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when they have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (b) distributed to the public through a broker, dealer or market maker pursuant to Rule 144 under the Securities Act. 10 "Registration" shall mean registration of the Company's Common Stock pursuant to an Effective Registration Statement. "Registration Statement" shall mean any disclosure document that the Company is required to file under the Securities Act in connection with a public offering of Registrable Securities. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time or any other federal act, rule or regulation requiring Registration with any federal agency in connection with a public offering of Registrable Securities. 11 IN WITNESS WHEREOF, MICROFINANCIAL INCORPORATED has caused this Registration Rights Agreement to be duly executed as a document under seal by its duly authorized officer this 29th day of September, 2004. MICROFINANCIAL INCORPORATED By: /s/ Richard F. Latour ------------------------------------ Richard F. Latour, President THE CIT GROUP COMMERCIAL SERVICES, INC. By: /s/ Daniel B.Ciotti ----------------------------------- Daniel B. Ciotti, Vice President 12 SCHEDULE A HOLDERS The Cit Group/Commercial Services, Inc. COUNTERPART JOINDER SIGNATURE PAGE The undersigned, the owner or holder of the securities of MicroFinancial Incorporated, a Massachusetts corporation, hereby agrees to become a party to that certain Registration Rights Agreement dated as of September 29, 2004 (as amended and/or restated from time to time, the "AGREEMENT"), with respect to the securities listed next to the undersigned's name in Exhibit A, as applicable. This Counterpart Joinder Signature Page shall become a part of such Agreement. [IF INSTITUTIONAL HOLDER] _________________________________________ By (Signature): _________________________ Name (Print): _________________________ Title: _________________________ Address: _________________________ [IF INDIVIDUAL] Signature: _________________________ Name (Print): _________________________ Address: _________________________ EX-99.1 12 b51980mfexv99w1.txt EX-99.1 PRESS RELEASE DATED 9-30-2004 EXHIBIT 99.1 FOR IMMEDIATE RELEASE Contact: Richard F. Latour President and CEO Tel: 781-994-4800 MICROFINANCIAL INCORPORATED MICROFINANCIAL SECURES $30 MILLION LINE OF CREDIT FROM CIT Woburn, MA - September 30, 2004 - MicroFinancial Incorporated (NYSE:MFI) announced today that it has arranged for a three year, $30 million senior secured revolving line of credit from CIT Commercial Services, a unit of CIT Group (NYSE:CIT). This line of credit replaces the previous one year, $8 million credit facility under more favorable terms and conditions including, but not limited to, pricing at prime plus 1.5% or Libor plus 4%. In addition, it retired the existing outstanding debt with the former bank group. MicroFinancial is a financial intermediary specializing in vendor based leasing and finance programs for microticket size transactions in the $500 to $10,000 range. Richard Latour, President and Chief Executive Officer of MicroFinancial stated, "We are delighted to receive this new senior credit facility from CIT which will provide us with a greater level of flexibility in our product offerings to our customers and vendors." "We are pleased to provide this financing facility to help MicroFinancial implement its strategic plan," said John F. Daly, President of CIT Commercial Services. ABOUT MICROFINANCIAL MicroFinancial Inc. (NYSE: MFI), headquartered in Woburn, MA, is a financial intermediary specializing in leasing and financing for products in the $500 to $10,000 range. The company has been in operation since 1986. For more information, visit www.microfinancial.com ABOUT CIT CIT Group Inc. (NYSE: CIT), a leading commercial and consumer finance company, provides clients with financing and leasing products and advisory services. Founded in 1908, CIT has nearly $50 billion in assets under management and possesses the financial resources, industry expertise and product knowledge to serve the needs of clients across approximately 30 industries. CIT, a Fortune 500 company, holds leading positions in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending. CIT, with its principal offices in Livingston, New Jersey and New York City, has approximately 5,800 employees in locations throughout North America, Europe, Latin and South America, and the Pacific Rim. For more information, visit www.cit.com Statements in this release that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "anticipates," "expects," "views, " and similar expressions are intended to identify forward-looking statements. The Company cautions that a number of important factors could cause actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Readers should not place undue reliance on forward-looking statements, which reflect the management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. The Company cannot assure that it will be able to anticipate or respond timely to changes which could adversely affect its operating results in one or more fiscal quarters. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results may result in fluctuations in the price of the Company's common stock. For a more complete description of the prominent risks and uncertainties inherent in the Company's business, see the risk factors described in documents the Company files from time to time with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----