-----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, O5yIFfvDhNnH3fsiz9V4uGdExWcikMdJ4HZM0Gsfo9LibUYfLQlTxwFOCtnuL3ie 5oHPCvS2yNuJKULO0oo8Tw== 0000950135-98-003710.txt : 19980610 0000950135-98-003710.hdr.sgml : 19980610 ACCESSION NUMBER: 0000950135-98-003710 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19980609 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOYLE LEASING TECHNOLOGIES INC CENTRAL INDEX KEY: 0000827230 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042962824 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-56339 FILM NUMBER: 98644228 BUSINESS ADDRESS: STREET 1: 950 WINTER STREET CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 7818900177 MAIL ADDRESS: STREET 1: 950 WINTER STREET CITY: WALTHAM STATE: MA ZIP: 02154 S-1 1 BOYLE LEASING TECHNOLOGY 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1998. REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ BOYLE LEASING TECHNOLOGIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ MASSACHUSETTS 6159 04-2962824 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
------------------------ 950 WINTER STREET WALTHAM, MASSACHUSETTS 02154 (781) 890-0177 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ PETER R. BLEYLEBEN PRESIDENT AND CHIEF EXECUTIVE OFFICER BOYLE LEASING TECHNOLOGIES, INC. 950 WINTER STREET, SUITE 41000 WALTHAM, MASSACHUSETTS 02154 (781) 890-0177 (NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: LAURA N. WILKINSON, ESQ. JOHN W. WHITE, ESQ. EDWARDS & ANGELL, LLP CRAVATH, SWAINE & MOORE ONE BANKBOSTON PLAZA WORLDWIDE PLAZA PROVIDENCE, RHODE ISLAND 02903 825 EIGHTH AVENUE (401) 274-9200 NEW YORK, NEW YORK 10019 (212) 474-1000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. ------------------------ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act"), check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
====================================================================================================================== PROPOSED MAXIMUM AMOUNT OF TITLE OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(2) - ---------------------------------------------------------------------------------------------------------------------- Common Stock, par value $.01 per share...................... $57,500,000 $16,963 ======================================================================================================================
(1) Estimated in accordance with Rule 457(o) of the Securities Act, assuming exercise of the Underwriters' over-allotment option. (2) Registration fee calculated on the basis of $295 per $1,000,000 or fraction thereof of the proposed maximum offering price. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED , 1998 PROSPECTUS SHARES [LOGO] BOYLE LEASING TECHNOLOGIES, INC. COMMON STOCK ------------------ Of the shares of Common Stock, par value $.01 per share (the "Common Stock"), of Boyle Leasing Technologies, Inc. (the "Company") being offered hereby (the "Offering"), shares are being sold by the Company and shares are being sold by the Selling Stockholders (as defined). See "Selling Stockholders." The Company will not receive any of the proceeds from the sale of shares by the Selling Stockholders. Prior to the Offering, there has not been a public market for the Common Stock. It is currently estimated that the initial public offering price will be between $ and $ per share. See "Underwriting" for information relating to the factors considered in determining the initial public offering price. Application will be made to have the Common Stock listed on The New York Stock Exchange ("NYSE") under the symbol " ." ------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================================================== UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2) - ------------------------------------------------------------------------------------------------------------------ Per Share $ $ $ $ - ------------------------------------------------------------------------------------------------------------------ Total (3) $ $ $ $ ==================================================================================================================
(1) For information regarding indemnification of the Underwriters, see "Underwriting." (2) Before deducting expenses estimated at $ payable by the Company. (3) The Selling Stockholders have granted the Underwriters a 30-day option to purchase up to additional shares of Common Stock solely to cover over-allotments, if any. See "Underwriting." If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions, and Proceeds to Selling Stockholders will be $ , $ and $ , respectively. ------------------ The shares of Common Stock are being offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them and subject to certain conditions. It is expected that certificates for the shares of Common Stock offered hereby will be available for delivery on or about , 1998 at the office of Smith Barney Inc., 333 West 34th Street, New York, New York 10001. ------------------ SALOMON SMITH BARNEY PIPER JAFFRAY INC. , 1998 3 CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 2 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this prospectus. In particular, prospective purchasers of shares of Common Stock offered hereby should carefully consider the factors set forth under "Risk Factors." Unless otherwise specified, the information in this Prospectus (i) assumes that the Underwriters do not exercise the over-allotment option described herein under "Underwriting" and (ii) gives effect to a 10-for-1 stock split (the "Stock Split") of the Common Stock effected on June 16, 1997. Unless otherwise indicated or the context requires otherwise, references in this Prospectus to the "Company" mean Boyle Leasing Technologies, Inc. and its consolidated subsidiaries. THE COMPANY The Company, which operates primarily through its wholly-owned subsidiary, Leasecomm Corporation, is a specialized commercial finance company that leases and rents "microticket" equipment and provides other financing services in amounts generally ranging from $900 to $2,500, with an average amount financed of approximately $1,400 and an average lease term of 45 months. The Company pioneered the use of proprietary software in developing a sophisticated, risk-adjusted pricing model and automating its credit approval and collection systems, including a fully-automated Internet-based application, credit scoring and approval process. This has enabled the Company to better service its dealer network, to develop economies of scale in originating and servicing over 200,000 leases, contracts and loans and to operate on a nationwide basis in a historically fragmented market. The majority of the Company's leases are currently for authorization systems for point-of-sale card-based payments, by, for example, debit, credit and charge cards ("POS authorization systems"). The Company continues to develop other product lines, including leasing other commercial products and acquiring payment streams from residential security monitoring contracts ("service contracts"). The Company targets owner-operated or other small commercial enterprises, with little business credit history and limited or poor personal credit history at the owner level. The Company provides a convenient source of financing to these lessees who may have few other sources of credit. The Company primarily leases and rents low-priced commercial equipment with limited residual value which is used by these lessees in their daily operations. The Company does not market its services directly to lessees, but sources leasing transactions through a nationwide network of over 1,100 independent sales organizations and other dealer-based origination networks ("Dealers"). The Company's ability to approve applications quickly for a wide range of credit profiles facilitates Dealer sales, thereby enhancing the Company's relationships with its Dealers. The Company commenced operations in 1986 and has been profitable every year since 1987. At March 31, 1998, the Company's gross investment in leases and loans (as defined herein) totaled $262.2 million. The Company's investment grew at a compounded annual rate of 34.5% from December 31, 1992 to March 31, 1998. The Company generated revenues and net income of $68.2 million and $7.7 million in 1997, increases of 22.7% and 50.6%, respectively, over those amounts in 1996. Revenues and net income for the first quarter of 1998 totaled $18.1 million and $3.1 million, increases of 11.7% and 70.3%, respectively, over the first quarter of 1997. The Company capitalizes on its unique understanding of its lessees, underwriting higher risk credits with a multi-dimensional credit scoring model that generates risk-adjusted pricing. Additionally, the Company maintains a disciplined and persistent approach to collections which enables the Company to collect delinquent amounts that it believes its competitors often would not pursue due to the perceived high costs of collecting relatively small monthly payments against equipment with low resale value. In each of these areas, the Company has focused on the application of technology to execute its operating strategy by designing proprietary software and systems to operate its business and achieve economies of scale. 3 5 STRATEGY The Company's goal is to continue to significantly expand its business through internal growth, diversification of product offerings and selective acquisitions of lease portfolios and leasing companies, while maintaining or improving current levels of profitability. The principal strategies to achieve this goal include: Utilizing and Enhancing its Advanced Technology and Servicing Capabilities. The Company's business is operationally intensive, due in part to the small average amount financed. Accordingly, technology and automated processes are critical in keeping origination and servicing costs to a minimum, while at the same time providing quality customer service. Management believes that its proprietary data processing system efficiently manages the high volume of information associated with originating and servicing its leases and other financing products on a nationwide basis. The Company believes this system has excess capacity which it believes will decrease the Company's servicing costs per lease, contract and loan as volumes increase. The Company intends to continue enhancing its proprietary data processing system in order to ensure that its systems can be efficiently utilized for new products as its portfolio grows. Employing Multi-Dimensional Credit Scoring. The Company has used its proprietary software to develop a multi-dimensional credit scoring model which generates pricing of its leases, contracts and loans commensurate with the risk assumed, enabling it to underwrite a broad range of credit risks. By analyzing both the quality and amount of credit history available with respect to both obligors and Dealers, the Company improves its ability to assess credit risk. Emphasizing Service to Dealers. The Company has developed value-added services that facilitate the sales of products by its Dealers and differentiate the Company from its competitors. These value-added services include fast responses to applications, consistent underwriting, quick and reliable funding following application approval and identifiable and dedicated support. Efficient Collections. The Company's technology and its disciplined and persistent approach to collections enable it to collect delinquent amounts, even several years after the account originally became delinquent. The Company believes that, as a result of the small payments associated with microticket transactions, the credit performance of its customers is driven by factors beyond merely an ability to pay. Therefore, it is the Company's policy to pursue virtually all delinquent accounts in a lawful, reasonable and timely fashion and in many instances, to recover amounts due under the Company's leases, contracts and loans through litigation. The Company maintains a highly structured, well-defined and automated system that enables a minimum number of personnel to maximize the collection of payments owed by delinquent obligors. Seeking to Develop New Products and Markets. The Company continues to seek new product lines to which it can successfully apply its operating strategy, both in the microticket market and, more recently, in the lower end of the small-ticket market. The Company originates leases for products that typically have limited distribution channels and high selling costs. The Company facilitates sales of such products by making them available to Dealers' customers for a small monthly lease payment rather than a high initial purchase price. The Company believes that it can leverage the competitive advantage it has in its current markets to products with similar characteristics. The Company intends to intensify its marketing effort, including increasing national awareness of the Leasecomm brand name, as part of its strategy to develop new product lines. Expanding its Business through Selective Acquisitions. The Company intends to pursue selective acquisitions of microticket and small-ticket leasing companies and lease portfolios where the Company believes it can gain access to an expanded Dealer base and successfully apply its operating strategy, and where such companies or portfolios can be acquired on attractive terms. In particular, the Company seeks to acquire lease portfolios which will expand product lines and ultimately provide a source of additional lease originations or lease portfolios. The Company presently is not negotiating, nor does it have any agreements or understandings to make, any such acquisitions. 4 6 SELLING STOCKHOLDERS The stockholders listed in the table set forth under "Selling Stockholders" (the "Selling Stockholders") currently own in the aggregate 3,898,467 shares of Common Stock of the Company. The Selling Stockholders intend to sell shares of Common Stock in the aggregate ( shares of Common Stock if the Underwriters' over-allotment option is exercised in full). See "Selling Stockholders." THE OFFERING Common Stock offered by the Company................ shares Common Stock offered by the Selling Stockholders... shares Total Offering..................................... shares Common Stock to be outstanding after the Offering......................................... shares(1)(2) Use of Proceeds.................................... The net proceeds of the Offering will be used to repay a portion of the Company's outstanding subordinated debt ("Subordinated Debt") and revolving credit and term loan facilities ("Credit Facilities"), for general corporate purposes and for potential acquisitions. See "Use of Proceeds." Common Stock NYSE symbol...........................
- --------------- (1) Excludes an aggregate of 88,482 shares of Common Stock reserved for issuance upon exercise of outstanding stock options at exercise prices of $1.275 and $3.90, outstanding as of March 31, 1998, 241 of which were subject to options which are exercisable within 60 days of the date of this Prospectus. See "Management -- Stock Option Plans" and "Description of Capital Stock." (2) Does not include up to shares of Common Stock to be sold by the Selling Stockholders pursuant to the Underwriters' over-allotment option. RISK FACTORS See "Risk Factors" beginning on page 8 for a discussion of certain factors that should be considered by prospective purchasers of the Common Stock offered hereby. 5 7 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA The following table presents summary consolidated financial and operating data of the Company and its subsidiaries as of and for each of the years in the five-year period ended December 31, 1997 and as of and for the three months ended March 31, 1997 and 1998. The summary consolidated financial and certain other data as of December 31, 1993, 1994, 1995, 1996 and 1997, and for each of the years in the five-year period ended December 31, 1997, have been derived from consolidated financial statements audited by Coopers & Lybrand L.L.P., independent accountants. The Company's summary consolidated financial and operating data as of March 31, 1998 and for the three months ended March 31, 1997 and 1998, are based on the Company's unaudited consolidated financial statements which include all adjustments that, in the opinion of the Company's management, are necessary for a fair presentation of the results at such dates and for such respective interim periods. The results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results expected for fiscal year 1998 or any interim period. The as adjusted balance sheet data assume that the issuance and sale of shares of Common Stock offered hereby by the Company at $ per share and the application of the net proceeds therefrom as described in "Use of Proceeds" occurred on March 31, 1998. The summary consolidated financial and operating data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company and related notes thereto included elsewhere herein.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ----------------------------------------------- ----------------- 1993 1994 1995 1996 1997 1997 1998 INCOME STATEMENT DATA: ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) REVENUES Income on financing leases and loans................ $10,840 $15,949 $27,011 $38,654 $45,634 $11,089 $11,510 Income on service contracts(1)...................... -- -- -- 6 501 4 288 Rental income....................................... 1,329 2,058 3,688 8,250 10,809 2,593 3,365 Fee income(2)....................................... 2,576 3,840 5,446 8,675 11,236 2,512 2,926 Total revenues.................................... 14,745 21,847 36,145 55,585 68,180 16,198 18,089 EXPENSES Selling, general and administrative................. 2,689 4,975 8,485 14,073 17,252 3,515 4,281 Provision for credit losses......................... 5,753 8,179 13,388 19,822(3) 21,713(3) 6,017 4,575 Depreciation and amortization....................... 602 827 1,503 2,981 3,787 863 1,177 Interest............................................ 3,598 5,009 8,560 10,163 11,890 2,709 2,820 ------- ------- ------- ------- ------- ------- ------- Total expenses.................................... 12,642 18,990 31,936 47,039 54,642 13,104 12,853 ------- ------- ------- ------- ------- ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES.............. 2,103 2,857 4,209 8,546 13,538 3,094 5,236 NET INCOME............................................ 1,326(4) 1,643 2,524 5,080 7,652 1,827 3,111 NET INCOME PER COMMON SHARE(5)........................ 0.53 0.66 0.69 1.05 1.56 0.37 0.63 DIVIDENDS PER COMMON SHARE............................ -- -- 0.12 0.19 0.23 0.05 0.06
DECEMBER 31, MARCH 31, ---------------------------------------------------- ------------------- 1998 AS 1993 1994 1995 1996 1997 1998 ADJUSTED BALANCE SHEET DATA: ---- ---- ---- ---- ---- ---- -------- (DOLLARS IN THOUSANDS) (UNAUDITED) Gross investment in leases and loans(6)........ $ 69,561 $115,286 $189,698 $247,633 $258,230 $262,245 $262,245 Unearned income................................ (19,952) (33,807) (60,265) (76,951) (73,060) (72,299) (72,299) Allowance for credit losses.................... (4,778) (7,992) (15,952) (23,826) (26,319) (27,475) (27,475) Investment in service contracts(1)............. -- -- -- -- 2,145 3,702 3,702 Total assets............................... 50,810 83,484 126,479 170,192 179,701 183,198 Notes payable.................................. 37,747 57,594 94,900 116,202 116,830 114,791 Subordinated notes payable..................... 5,394 13,436 13,170 27,006 26,382 27,391 Total liabilities.......................... 45,041 77,651 118,567 158,013 160,935 161,609 Stockholders' equity....................... 5,769 5,833 7,912 12,179 18,766 21,589
6 8
THREE MONTHS YEARS ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------------------------- ------------------- 1993 1994 1995 1996 1997 1997 1998 OTHER DATA: ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT STATISTICAL DATA) (UNAUDITED) Operating Data: Total leases and loans originated(7).................. $ 42,760 $ 81,726 $129,873 $143,855 $126,542 $ 28,697 $ 29,371 Total service contracts acquired(8).................... -- -- 4,427 2,445 2,972 208 1,846 Dealer fundings(9)............... 26,232 52,762 76,500 73,886 78,193 17,362 21,283 Average yield on leases and loans.......................... 30.4% 30.5% 32.2% 40.1% 37.1% 36.1% 41.6% Cash flows from (used in): Operating activities............. $ 17,660 $ 26,288 $ 41,959 $ 60,104 $ 77,393 $ 15,100 $ 21,300 Investing activities............. (26,182) (51,528) (76,353) (86,682) (80,127) (17,857) (21,781) Financing activities............. 9,502 27,803 36,155 33,711 (1,789) (1,918) (1,390) -------- -------- -------- -------- -------- -------- -------- Total.......................... 980 2,563 1,761 7,133 (4,523) (4,675) (1,871) Selected Ratios: Return on average assets(10)..... 2.96% 2.45% 2.40% 3.42% 4.37% 4.31% 6.86% Return on average stockholders' equity(10)..................... 29.81 28.32 36.73 50.57 49.46 55.75 61.67 Operating margin(11)............. 53.28 50.51 48.68 51.04 51.70 56.25 54.24 Credit Quality Statistics: Net charge-offs.................. $ 4,033 $ 4,961 $ 5,428 $ 11,948(12) $ 19,220(12) $ 4,805 $ 3,376 Net charge-offs as a percentage of average gross investment(10)(13)............. 6.46% 5.37% 3.56% 5.46%(12) 7.57%(12) 7.64% 5.13% Provision for credit losses as a percentage of average gross investment(10)(14)............. 9.21 8.85 8.78 9.07 8.55 9.57 6.95 Allowance for credit losses as a percentage of gross investment(15)................. 6.87 6.93 8.41 9.62 10.19 11.45 10.48
- --------------- (1) The Company began acquiring fixed term service contracts in 1995. Until December 1996, the Company treated these fixed-term contracts as leases for accounting purposes. Accordingly, income from these service contracts is included in income on financing leases and loans for all periods prior to December 1996 and investments in service contracts were recorded as receivables due in installments on the balance sheet at December 31, 1995 and 1996. Beginning in December 1996, the Company began acquiring month-to-month service contracts, the income from which is included as a separate category in the Consolidated Statements of Operations and the investment in which are recorded separately on the balance sheet. (2) Includes loss and damage waiver fees and service fees. (3) The provision for 1996 includes a $5.0 million resulting from an acceleration of the charge-off periods to better reflect the characteristics of the Company's delinquent accounts and collection effects. The provision for 1997 includes a one-time write-off of securitized receivables of $9.5 million and $5.0 million in write-offs of satellite television equipment receivables. (4) 1993 excludes a $1.3 million cumulative increase in net income as a result of the Company's adoption of Statement of Financial Accounting Standards No. 109 (Accounting for Income Taxes). Prior to 1993, the Company accounted for income taxes under the deferred method. (5) Net income per common share is calculated based on weighted average common shares outstanding of 2,498,472, 2,501,507, 3,676,094, 4,841,425, 4,896,570, 4,887,818 and 4,899,911 for the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998, respectively. (6) Consists of receivables due in installments, estimated residual value, and loans receivable. (7) Represents the amount paid to Dealers upon funding of leases and loans plus the associated unearned income. (8) Represents the amount paid to Dealers upon the acquisition of service contracts, including both non-cancelable service contracts and month-to-month service contracts. (9) Represents the amount paid to Dealers upon funding of leases, contracts and loans. (10) Quarterly amounts are annualized. (11) Represents income before provision for income taxes and provision for credit losses as a percentage of total revenues. (12) Charge-offs in 1996 and 1997 were higher due to write-offs related to satellite television equipment receivables and an acceleration of the charge-off periods to better reflect the characteristics of the Company's delinquent accounts and collection efforts. See "Business -- Exposure to Credit Losses." (13) Represents net charge-offs as a percentage of average gross investment in leases and loans and investment in service contracts. (14) Represents provision for credit losses as a percentage of average gross investment in leases and loans and investment in service contracts. (15) Represents allowance for credit losses as a percentage of gross investment in leases and loans and investment in service contracts. 7 9 RISK FACTORS In addition to the other information in this Prospectus, the following factors should be considered carefully by prospective investors in evaluating the Company and its business before purchasing shares of the Common Stock offered hereby. Except for historical information contained herein, this Prospectus contains forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. The cautionary statements made in this Prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this Prospectus. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere herein. DEPENDENCE ON POS AUTHORIZATION SYSTEMS Reduced demand for financing of POS authorization systems could adversely affect the Company's lease volume, which in turn could have a material adverse effect on the Company's business, financial condition and results of operations. The leasing of POS authorization systems currently represents the Company's largest product, at over 65% of its outstanding portfolio and approximately 61% of new lease originations during the first quarter of 1998. Technological advances may lead to a decrease in the price of POS authorization systems and a consequent decline in the need for financing of such equipment. A price decrease may result in such equipment being sold through conventional retail outlets. In addition, business and technological changes could change the manner in which POS authorization is obtained. These changes could reduce the need for outside financing sources, such as the Company, which would reduce the Company's lease financing opportunities and origination volume in such products. Technological changes and price decreases have in the past required the Company to exit its principal source of lease volume. During the late 1980s, the Company provided financing primarily to lessees of cellular phones, which at the time retailed in excess of $1,000 per unit. Consumers leased cellular phones through dealers due to the product's limited availability and high price. As the price of cellular phones decreased, the demand for financing of cellular phones diminished, and by mid-1991, the Company originated no new leases for cellular phones. In the event that demand for financing POS authorization systems declines, the Company will expand its efforts to provide lease financing for other products. There can be no assurance, however, that the Company will be able to do so successfully. The Company currently originates its leases for POS authorization systems through a network of Dealers who predominantly deal exclusively in that product. It is unlikely that the Company would be able to capitalize on these relationships in the event it shifts its business focus to originating leases of other products. Any failure by the Company to successfully enter into new relationships with dealers of other products or to extend existing relationships with such dealers in the event of reduced demand for financing of POS authorization systems would have a material adverse effect on the Company. RISKS OF EXPANSION STRATEGY The Company's principal growth strategy of expansion into new products and markets may be adversely affected by (i) its inability to cultivate new sources of originations and (ii) its inexperience with products with different characteristics from those currently offered by the Company, including the type of obligor and the amount financed. New Sources. The Company currently originates a significant majority of its leases and contracts through a network of Dealers which deal exclusively in POS authorization systems. The Company is currently unable to capitalize on these relationships in originating leases for products other than POS authorization systems. Any failure by the Company to develop additional relationships with Dealers of other products which it leases or may seek to lease would hinder the Company's growth strategy. New Products. The Company's existing portfolio primarily consists of leases to owner-operated or other small commercial enterprises with little business history and limited or poor personal credit history at the owner level. These leases are characterized by small average monthly payments for equipment with limited residual value at the end of the lease term. The Company's ability to successfully underwrite new products with different characteristics is highly dependent on the Company's ability to (i) successfully analyze the 8 10 credit risk associated with the user of such new products so as to appropriately apply its risk-adjusted pricing to such products and (ii) utilize its proprietary software to efficiently service and collect on its portfolio. The Company has recently entered into markets in which the ultimate obligor on a lease or contract is an individual rather than a commercial enterprise. The results of the Company's most significant venture into financing products for individuals, the leasing of consumer satellite television equipment, failed to meet the Company's expectations principally due to difficulty in assessing the credit risk of lessees and in effectively pricing leases. As a result, the Company significantly scaled back its origination of new leases in this area after July 1996 and no longer originates a significant number of leases for satellite television equipment. There can be no assurance that the Company will be able to successfully apply its operating strategy to provide financing services to non-commercial lessees, which could have a material adverse effect on the Company. The Company also has recently commenced underwriting leases for small-ticket items or services (having a value between $5,000 and $25,000). The Company has no significant experience with providing small-ticket leasing or financing services. Additionally, the larger monthly payments associated with leases for small-ticket items may result in different repayment patterns for lessees of small-ticket items. Accordingly, there can be no assurance that the Company's expertise in analyzing credit risk and applying its collection strategy in the microticket market will be applicable to the small-ticket market. Any failure by the Company to successfully enter this market could materially adversely affect its growth prospects. Because the successful implementation of the Company's expansion strategy will require significant time and resources to cultivate new sources and develop any specialized expertise necessary to enter into new markets, the Company intends to implement its growth strategy gradually. Rapidly diminishing demand for financing of POS authorization systems could force the Company to accelerate its expansion strategy in a less than optimal manner and have a material adverse effect on the Company's business, financial condition and results of operations. DEPENDENCE ON EXTERNAL FINANCING The Company's ability to successfully execute its business strategy and to sustain its operations is dependent on its ability to raise debt and equity capital. The Company funds the majority of its leases, contracts and loans through its Credit Facilities with banks and other institutional lenders, on-balance sheet securitizations ("Securitizations") and issuances of Subordinated Debt. The Company's failure to obtain required financing on favorable terms and on a timely basis would limit its ability to add new originations, which would have a material adverse effect on the Company's business, financial condition and results of operations. Any future debt financings or issuances of preferred stock by the Company will be senior to the rights of the holders of Common Stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Certain Indebtedness." The terms of the Company's Credit Facilities, Securitizations and Subordinated Debt programs impose operating and financial restrictions on the Company. In addition, the Credit Facilities contain, and any future Securitizations may contain, restrictions on the type of product which may be funded with the proceeds of such financings. As a result, the ability of the Company to respond to changing business and economic conditions, to implement its expansion strategy and to secure additional financing, if needed, may be significantly restricted, and the Company may be prevented from engaging in transactions that might further its growth strategy or otherwise be considered beneficial to the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Certain Indebtedness." RISK OF DEFAULTS ON LEASES The credit characteristics of the Company's lessee base correspond to a high incidence of delinquencies which in turn may lead to significant levels of defaults. At December 31, 1997, 25.5% of the Company's gross investment in leases and loans (excluding residual value) were contractually past due by 31 days or more (including, with respect to service contracts, only those amounts which have been billed but not collected). The credit profile of the Company's lessees heightens the importance to the Company of both pricing its leases, loans and contracts for risk assumed, as well as maintaining adequate reserves for losses. Significant 9 11 defaults by lessees in excess of those anticipated by the Company in setting its prices and reserve levels may adversely affect the Company's cash flow and earnings. Reduced cash flow and earnings could limit the Company's ability to repay debt, obtain financing and effect Securitizations which would have a material adverse effect on the Company's business, financial condition and results of operations. Additionally, the Company utilizes its leases, contracts and loans as collateral under its Credit Facilities and Securitizations. The Company's Credit Facilities and Securitizations provide for events of default in the event of delinquencies beyond certain levels. Actual defaults, as well as delinquencies under leases, contracts and loans above pre-determined thresholds, would reduce the amount of collateral available for financing under its Credit Facilities and future Securitizations and would have a material adverse effect on the Company's business as previously discussed. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Certain Indebtedness." ADVERSE CONSEQUENCES OF COLLECTION POLICY The Company's use of litigation as a means of collection of unpaid receivables exposes it to counterclaims on its suits for collection, to class action lawsuits and to negative publicity surrounding its leasing and collection policies. The Company has been a defendant in attempted class action suits as well as counterclaims filed by individual obligors in attempts to dispute the enforceability of the lease, contract or loan. The Company believes its collection policies and use of litigation comply fully with all applicable laws. Because of the Company's persistent enforcement of its leases, contracts and loans through the use of litigation, the Company may have created ill will toward it on the part of certain lessees and other obligors who were defendants in such lawsuits. The Company's litigation strategy has generated adverse local publicity in certain circumstances. Adverse publicity at a national level could negatively impact public perception of the Company and may materially impact the price of the Common Stock. Any such class action suit, if successful, or any such adverse publicity, if widespread, could have a material adverse effect on the Company's business, financial condition or results of operations. RISK OF INCREASED INTEREST RATES Since the Company generally funds its leases, contracts and loans through its Credit Facilities or from working capital, the Company's operating margins could be adversely affected by an increase in interest rates. The implicit yield to the Company on all of its leases, contracts and loans is fixed due to the leases, contracts and loans having scheduled payments that are fixed at the time of origination. When the Company originates or acquires leases, contracts and loans, it bases its pricing in part on the "spread" it expects to achieve between the implicit yield rate to the Company on each lease, contract and loan and the effective interest cost it will pay when it finances such leases, contracts and loans. Increases in interest rates during the term of each lease, contract and loan could narrow or eliminate the spread, or result in a negative spread, to the extent such lease, contract or loan was financed with floating-rate funding. The Company may undertake to hedge against the risk of interest rate increases, based on the size and interest rate profile of its portfolio. Such hedging activities, however, would limit the Company's ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. In addition, the Company's hedging activities may not protect it from interest rate-related risks in all interest rate environments. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." RISK OF ECONOMIC DOWNTURN An economic downturn could result in a decline in the demand for some of the types of equipment or services which the Company finances, which could lead to a decline in originations. An economic downturn may slow the development and continued operation of small commercial businesses, which are the primary market for POS authorization systems and the other commercial equipment leased by the Company. Such a downturn could also adversely affect the Company's ability to obtain capital to fund lease, contract and loan 10 12 originations or acquisitions or to complete Securitizations. In addition, such a downturn could result in an increase in delinquencies and defaults by the Company's lessees and other obligors beyond the levels forecasted by the Company, which could have an adverse effect on the Company's cash flow and earnings, as well as on its ability to securitize leases. These results could have a material adverse effect on the Company's business, financial condition and results of operations. Additionally, approximately 40% of the Company's portfolio is represented by leases, contracts and loans with lessees and other obligors operating in California, Florida, Texas and New York. Economic conditions in these states may affect the level of collections from, as well as delinquencies and defaults by, these obligors. INTENSE COMPETITION The microticket leasing and financing industry is highly competitive. The Company competes for customers with a number of national, regional and local banks and finance companies. The Company's competitors also include equipment manufacturers that lease or finance the sale of their own products. While the market for microticket financing has traditionally been fragmented, the Company could also be faced with competition from small- or large-ticket leasing companies that could use their expertise in those markets to enter and compete in the microticket financing market. The Company's competitors include larger, more established companies, some of which may possess substantially greater financial, marketing and operational resources than the Company, including lower cost of funds and access to capital markets and to other funding sources which may be unavailable to the Company. If a competitor were to lower lease rates, the Company could be forced to follow suit or lose origination volume, either of which would have a material adverse effect on the Company's business, financial condition and results of operations. In addition, competitors may seek to replicate the automated processes used by the Company to monitor dealer performance, evaluate lessee credit information, appropriately apply risk-adjusted pricing, and efficiently service a nationwide portfolio. The development of computer software similar to that developed by the Company by or for the Company's competitors may jeopardize the Company's strategic position and allow such companies to operate more efficiently than the Company. RISK OF YEAR 2000 NON-COMPLIANCE Failure by third parties with which the Company interacts to remediate any Year 2000 issues in a timely or successful manner could have a material adverse effect on the Company's business. A failure by companies which process POS transactions to remediate any Year 2000 issues in their software could result in the Company's lessees' inability to consummate POS transactions. In that event, lessees of POS authorization systems may become unwilling or unable to comply with their lease obligations. There can be no assurance that other companies on whose systems the Company's business relies will resolve any Year 2000 issues in a timely or successful manner. The Company believes that any modifications necessary to make its own computer systems and proprietary software Year 2000 compliant will not result in material costs to the Company. There can be no assurance, however, that these cost estimates are accurate, nor can there be any assurance that the Company will be able to successfully identify all relevant Year 2000 issues in its systems in a timely manner. GOVERNMENT REGULATION The Company's leasing business is not currently subject to extensive federal or state regulation. While the Company is not aware of any proposed legislation, the enactment of, or a change in the interpretation of, certain federal or state laws affecting the Company's ability to price, originate or collect on receivables (such as the application of usury laws to the Company's leases and contracts) could negatively affect the collection of income on its leases, contracts and loans, as well as the collection of fee income. Any such legislation or change in interpretation, particularly in Massachusetts, whose law governs the majority of the Company's leases, contracts and loans, could have a material adverse effect on the Company's ability to originate leases, contracts and loans at current levels of profitability, which in turn could have a material adverse effect on the Company's business, financial condition or results of operations. 11 13 RISKS OF ACQUIRING OTHER PORTFOLIOS AND COMPANIES A portion of the Company's growth strategy depends on the consummation of acquisitions of leasing companies or portfolios. An inability by the Company to identify suitable acquisition candidates or portfolios, or to complete acquisitions on favorable terms, could limit the Company's ability to grow its business. Any major acquisition would require a significant portion of the Company's resources. The timing, size and success, if at all, of the Company's acquisition efforts and any associated capital commitments cannot be readily predicted. The Company may finance future acquisitions by using shares of its Common Stock, cash or a combination of the two. Any acquisition made by the Company using Common Stock would result in dilution to existing stockholders of the Company. If the Common Stock does not maintain a sufficient market value, or if potential acquisition candidates are otherwise unwilling to accept Common Stock as part or all of the consideration for the sale of their businesses, the Company may be required to utilize more of its cash resources, if available, or to incur additional indebtedness in order to initiate and complete acquisitions. Additional debt, as well as the potential amortization expense related to goodwill and other intangible assets incurred as a result of any such acquisition, could have a material adverse effect on the Company's business, financial condition or results of operations. In addition, certain of the Company's Credit Facilities and Subordinated Debt agreements contain financial covenants that do not permit the issuance of any shares of its capital stock if, after giving effect to such issuance, certain shareholders of the Company cease to own or control specified percentages of voting capital stock of the Company. These provisions could prevent the Company from making an acquisition using shares of its Common Stock as consideration. See "Use of Proceeds," "Management's Discussion and Analysis of Results of Operations -- Liquidity and Capital Resources" and "Description of Certain Indebtedness." The Company also may experience difficulties in the assimilation of the operations, services, products and personnel of acquired companies, an inability to sustain or improve the historical revenue levels of acquired companies, the diversion of management's attention from ongoing business operations, and the potential loss of key employees of such acquired companies. Any of the foregoing could have a material adverse effect on the Company's business, financial condition or results of operations. DEPENDENCE UPON KEY PERSONNEL The Company's success depends to a large extent upon the abilities and continued efforts of Peter R. Bleyleben, President and Chief Executive Officer and Richard Latour, Executive Vice President, Chief Operating Officer and Chief Financial Officer, and its other senior management. The Company intends to enter into employment agreements with these two principal executive officers and maintains key man life insurance policies of $1.5 million on Dr. Bleyleben and $0.5 million on Mr. Latour. The loss of the services of one or more of the key members of the Company's senior management before the Company is able to attract and retain qualified replacement personnel could have a material adverse effect on the Company's financial condition and results of operations. In addition, certain of the Company's Credit Facilities and Subordinated Debt agreements contain financial covenants that do not permit the issuance of any shares of its capital stock if, after giving effect to such issuance, certain shareholders of the Company, including Dr. Bleyleben, cease to own or control specified percentages of voting capital stock of the Company. In addition, under certain of the Company's Subordinated Debt agreements, the Company has agreed that Dr. Bleyleben and Mr. Latour must remain as Chief Executive Officer and Chief Financial Officer, respectively, of the Company. The Company's failure to comply with these covenants could have a material adverse effect on the Company's business, financial condition or results of operations. See "Management" and "Description of Certain Indebtedness." CONTROL BY EXISTING SHAREHOLDERS; CERTAIN ANTI-TAKOVER PROVISIONS Upon completion of the Offering (without taking into account the exercise of the Underwriters' over-allotment option), Dr. Bleyleben, Brian E. Boyle and Torrence C. Harder and their respective affiliates will beneficially own approximately % of the outstanding Common Stock (approximately % of the outstanding Common Stock assuming full exercise of the Underwriters' over-allotment option). As a result, these stockholders, if they act as a group, will be able to control substantially all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which may have 12 14 the effect of discouraging certain types of transactions involving an actual or potential change of control of the Company. See "Management," "Principal Stockholders" and "Description of Common Stock." The Company intends to propose to its stockholders prior to consummation of the Offering certain amendments to its Restated Articles of Incorporation (the "Articles") and Bylaws ("Bylaws") that, if approved, may have the effect of discouraging, delaying or preventing a change in control of the Company or unsolicited acquisition proposals that a stockholder might consider favorable, including (i) provisions authorizing the issuance of "blank check" preferred stock, (ii) providing for a Board of Directors with staggered terms, (iii) requiring super-majority or class voting to effect certain amendments to the Articles and Bylaws and to approve certain business combinations, (iv) limiting the persons who may call special stockholders' meetings and (v) establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon at stockholders' meetings. In addition, certain provisions of Massachusetts law to which the Company is subject may have the effect of discouraging, delaying or preventing a change in control of the Company or unsolicited acquisition proposals. See "Description of Capital Stock -- Massachusetts Law and Certain Charter Provisions." EFFECT OF SALES OF SUBSTANTIAL AMOUNTS OF COMMON STOCK Sales of a substantial number of shares of Common Stock in the public market following the Offering, or the perception that such sales could occur, could adversely affect the market price for the Common Stock. Upon completion of the Offering, the Company will have shares of Common Stock outstanding. The shares of Common Stock offered hereby will be freely tradeable without restriction or further registration under the Securities Act, except for shares sold by persons deemed to be "affiliates" of the Company or acting as "underwriters," as those terms are defined in the Securities Act. Beginning 90 days after the date of this Prospectus, additional shares of Common Stock that are not subject to the 180-day lock-up period described below will be freely tradeable by holders thereof. Following the expiration of the lock-up period, all of the remaining outstanding shares of Common Stock will be freely tradeable subject to the restrictions on resale imposed upon "affiliates" by Rule 144 under the Securities Act. See "Shares Eligible for Future Sale" and "Underwriting." The Company, the Selling Stockholders and the executive officers and directors of the Company have agreed that, for a period of 180 days following the date of this Prospectus, they will neither issue nor sell any shares of Common Stock or securities convertible into, or exercisable for, such stock, held by them now or in the future, without the prior written consent of Smith Barney Inc. See "Underwriting." NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE Prior to the Offering, there has been no public trading market for the Common Stock. There can be no assurance that an active market for the Common Stock will develop upon completion of the Offering or, if developed, that such market will be sustained. The initial public offering price of the Common Stock was determined through negotiations between the Company and the Underwriters based upon several factors and may bear no relationship to the Company's assets, book value, results of operations or net worth or any other generally accepted criteria of value and should not be considered as indicative of the actual value of the Company. For information relating to the factors considered in determining the initial public offering price, see "Underwriting." The price at which the Common Stock will trade in the public market after the Offering may be less than the initial public offering price. In addition, the trading price of the Common Stock may be influenced by a number of factors, including the liquidity of the market for the Common Stock, investor perceptions of the Company and the equipment financing industry in general, variations in the Company's quarterly operating results, interest rate fluctuations, variations in financial estimates by securities analysts and general economic and other conditions. Moreover, the stock market recently has experienced significant price and value fluctuations, which have not necessarily been related to corporate operating performance. The volatility of the stock market could adversely affect the market price of the Common Stock and the ability of the Company to raise equity in the public markets. 13 15 SUBSTANTIAL DILUTION INCURRED BY INVESTORS Investors in the Common Stock offered hereby will experience immediate and substantial dilution in net tangible book value per share of $ . See "Dilution." If the Company issues additional Common Stock in the future, including shares which may be issued pursuant to option grants and future acquisitions, purchasers of Common Stock in the Offering may experience further dilution in the net tangible book value per share of the Common Stock. CHANGE IN DIVIDEND POLICY The Company has paid quarterly cash dividends on the Common Stock since the second quarter of 1995. However, there can be no assurance as to the amount and timing of payment of future dividends. The decision as to the amount and timing of future dividends paid by the Company, if any, will be made at the discretion of the Company's Board of Directors in light of the financial condition, capital requirements, earnings and prospects of the Company and any restrictions under the Company's Credit Facilities and agreements governing the Subordinated Debt, as well as other factors the Board of Directors may deem relevant. See "Dividend Policy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." FORWARD-LOOKING STATEMENTS This Prospectus includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995 (the "Reform Act")). The "safe harbor" protections of the Reform Act are not available to initial public offerings, including this Offering. Discussions containing such forward-looking statements may be found in the material set forth under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as within the Prospectus generally. In addition, when used in this Prospectus, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the Company's dependence on POS authorization systems and expansion into new markets; the Company's significant capital requirements; risks associated with economic downturns; higher interest rates; intense competition; risks associated with acquisitions; and other factors included in this Prospectus. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this Prospectus to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Prospectus will in fact transpire. 14 16 USE OF PROCEEDS The net proceeds to the Company from the sale of the shares of Common Stock offered hereby will be approximately $ million, after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company. Of these net proceeds, approximately $ million will be used to repay indebtedness outstanding under its junior subordinated notes (the "Junior Subordinated Notes") issued in private placements to a number of individual investors. The Junior Subordinated Notes have maturities ranging from July 14, 1998 to September 1, 2003 and bear interest at rates ranging from 9.5% to 12.5% per annum at May 31, 1998. The Company has incurred $2.4 million principal amount of the Junior Subordinated Notes since June 1, 1997, with proceeds thereof used for general corporate purposes, including the funding of leases, contracts and loans which were not otherwise eligible for funding under the Company's Credit Facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Description of Certain Indebtedness" and Note E to the Company's consolidated financial statements included elsewhere in this Prospectus. While the Company currently does not intend to use the net proceeds from the Offering or existing resources to consummate acquisitions, the Company intends, as part of its business strategy, to evaluate future acquisitions of leasing companies or lease portfolios, and may use a portion of the net proceeds from the Offering to make such acquisitions. The Company presently is not negotiating, nor does it have any agreements or understandings, to make any such acquisitions. See "Business -- Strategy." The Company also intends to use the net proceeds of the Offering for its general corporate purposes, including making investments in its computer systems and software. Pending such uses, the Company intends to use the remaining net proceeds of the Offering to repay additional amounts outstanding under its Credit Facilities (other than $17.5 million principal amount subject to a fixed rate swap agreement which would not be repaid with proceeds of the Offering). As of March 31, 1998, the Company had $37.4 million in revolving credit and term loans outstanding under its facility led by Fleet Bank, N.A. and, excluding the amount subject to the swap agreement, $12.6 million in revolving credit and term loans outstanding under its facility led by BankBoston, N.A. Of these amounts, $4.3 million is a term loan which bears interest at a fixed rate of 8.30% per annum and matures on November 24, 1998; $8.6 million is a term loan which bears interest at a fixed rate of 7.75% per annum and matures on August 2, 1999; and $37.1 million is a revolving credit loan which bears interest at the prime or base rate of each of the agent banks and which converts to a term loan on July 31, 1999 (the "Commitment Termination Date") that matures no later than the fourth anniversary of the Commitment Termination Date as to $24.5 million principal amount and no later than the second anniversary of the Commitment Termination Date as to $12.6 million principal amount. See "Description of Certain Indebtedness" and Note E to the Company's consolidated financial statements included elsewhere in this Prospectus. 15 17 DIVIDEND POLICY The Company has paid quarterly cash dividends on the Common Stock since the second quarter of 1995. The following table sets forth the cash dividends per share paid by the Company for the periods indicated, all as adjusted to give effect to the Stock Split:
1996 1997 1998 ---- ---- ---- (AMOUNT PER SHARE) First Quarter............................................... $0.04 $0.05 $0.06 Second Quarter.............................................. 0.05 0.06 N/A Third Quarter............................................... 0.05 0.06 N/A Fourth Quarter.............................................. 0.05 0.06 N/A
Provisions in certain of the Company's Credit Facilities and agreements governing the Subordinated Debt contain, and the terms of any indebtedness issued by the Company in the future are likely to contain, certain restrictions on the payment of dividends on the Common Stock. The decision as to the amount and timing of future dividends paid by the Company, if any, will be made at the discretion of the Company's Board of Directors in light of the financial condition, capital requirements, earnings and prospects of the Company and any restrictions under the Company's Credit Facilities or Subordinated Debt agreements, as well as other factors the Board of Directors may deem relevant, and there can be no assurance as to the amount and timing of payment of future dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources", "Description of Certain Indebtedness" and "Risk Factors -- Change in Dividend Policy." 16 18 CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1998 on an actual basis and as adjusted to give effect to the sale of the shares of Common Stock offered hereby (at an assumed offering price of $ per share) and the application of the estimated net proceeds therefrom. The table should be read in conjunction with "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and related notes thereto included elsewhere in this Prospectus.
AS OF MARCH 31, 1998 -------------------- ACTUAL AS ADJUSTED (DOLLARS IN THOUSANDS) ------ ----------- Debt: Notes payable............................................. $114,791 $ Subordinated notes........................................ 27,391 -------- -------- Total debt............................................. 142,182 -------- -------- Redeemable convertible preferred stock(1)................... -- -- Stockholders' equity: Common Stock $0.01 par value per share, 10,000,000 shares authorized; 5,007,813 shares issued and outstanding; and shares issued and outstanding, after giving effect to the Offering(1)(2)........................... 50 Additional paid-in capital................................ 1,796 Retained earnings......................................... 20,181 Treasury stock............................................ (138) Notes receivable from officers and employees.............. (300) -------- -------- Total stockholders' equity............................. 21,589 -------- -------- Total capitalization.............................. $163,771 $ ======== ========
- --------------- (1) Actual amount of redeemable convertible preferred stock is $490.00. This preferred stock will convert automatically into 9,800 shares of Common Stock upon consummation of the Offering. "As Adjusted" includes such shares of Common Stock as if such conversion had occurred on March 31, 1998. (2) Shares issued and outstanding do not include an aggregate of 88,482 shares of Common Stock reserved for issuance upon exercise of stock options at exercise prices of $1.275 and $3.90, outstanding as of March 31, 1998, 241 of which are exercisable within 60 days of the date of this Prospectus. See "Management -- Stock Option Plans" and "Description of Capital Stock". Common Stock issued and outstanding includes 71,295 shares held in the Company's treasury as of March 31, 1998. DILUTION Dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of Common Stock in the Offering and the net tangible book value per share of Common Stock offered hereby immediately after completion of the Offering. Net tangible book value per share represents the amount of the Company's stockholders' equity, less intangible assets, divided by the 4,936,518 million shares of Common Stock outstanding as of March 31, 1998 (not including treasury stock). The net tangible book value of the Company as of March 31, 1998 was approximately $21.6 million, or $4.37 per share of Common Stock. After giving effect to the sale of the Common Stock by the Company at an initial public offering price of $ per share and after deduction of the underwriting discounts and commissions and estimated expenses of the Offering payable by the Company and the application of the estimated net proceeds of the Offering, the adjusted pro forma net tangible book value, as of March 31, 1998, would have been approximately $ million or $ per share of Common Stock. This represents an 17 19 immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors purchasing the Common Stock in the Offering. The following table illustrates the pro forma per share dilution, as of March 31, 1998: Initial public offering price per share..................... Net tangible book value per share at March 31, 1998......... Increase per share attributable to new investors............ Pro forma net tangible book value per share after the Offering.................................................. Net tangible book value dilution per share to new investors.................................................
If the Underwriters exercise their over-allotment option in full, the pro forma net tangible book value per share of Common Stock after giving effect to the Offering would be $ per share, the increase in the net tangible book value per share would be $ and the dilution to persons who purchase shares of Common Stock in the Offering would be $ per share. The following table sets forth, after giving effect to the Offering, the number of shares of Common Stock purchased from the Company, the total consideration paid therefor and the average price per share paid by existing stockholders and by new investors:
SHARES PURCHASED TOTAL CONSIDERATION ---------------- ------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ------ ------- ------ ------- ------------- Existing stockholders...................... New investors.............................. Total............................
The foregoing tables assume no exercise of outstanding stock options and the conversion of the Company's outstanding Series C Preferred Stock, $1.00 par value (the "Series C Preferred Stock") upon consummation of the Offering. 18 20 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The following table presents selected consolidated financial and operating data of the Company and its subsidiaries as of and for each of the years in the five-year period ended December 31, 1997 and as of and for the three months ended March 31, 1997 and 1998. The selected consolidated financial and certain other data as of December 31, 1993, 1994, 1995, 1996 and 1997, and for each of the years in the five-year period ended December 31, 1997, have been derived from consolidated financial statements audited by Coopers & Lybrand L.L.P., independent accountants. The Company's selected consolidated financial and operating data as of March 31, 1998 and for the three months ended March 31, 1997 and 1998, are based on the Company's unaudited consolidated financial statements which include all adjustments that, in the opinion of the Company's management, are necessary for a fair presentation of the results at such dates and for such respective interim periods. The results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results expected for fiscal year 1998 or any interim period. The as adjusted balance sheet data assume that the issuance and sale of shares of Common Stock offered hereby by the Company at $ per share and the application of the net proceeds therefrom as described in "Use of Proceeds" occurred on March 31, 1998. The selected consolidated financial and operating data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company and related notes thereto included elsewhere herein.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ----------------------------------------------- ----------------- 1993 1994 1995 1996 1997 1997 1998 INCOME STATEMENT DATA: ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) REVENUES Income on financing leases and loans................ $10,840 $15,949 $27,011 $38,654 $45,634 $11,089 $11,510 Income on service contracts(1)...................... -- -- -- 6 501 4 288 Rental income....................................... 1,329 2,058 3,688 8,250 10,809 2,593 3,365 Fee income(2)....................................... 2,576 3,840 5,446 8,675 11,236 2,512 2,926 Total revenues.................................... 14,745 21,847 36,145 55,585 68,180 16,198 18,089 EXPENSES Selling, general and administrative................. 2,689 4,975 8,485 14,073 17,252 3,515 4,281 Provision for credit losses......................... 5,753 8,179 13,388 19,822(3) 21,713(3) 6,017 4,575 Depreciation and amortization....................... 602 827 1,503 2,981 3,787 863 1,177 Interest............................................ 3,598 5,009 8,560 10,163 11,890 2,709 2,820 ------- ------- ------- ------- ------- ------- ------- Total expenses.................................... 12,642 18,990 31,936 47,039 54,642 13,104 12,853 ------- ------- ------- ------- ------- ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES.............. 2,103 2,857 4,209 8,546 13,538 3,094 5,236 NET INCOME............................................ 1,326(4) 1,643 2,524 5,080 7,652 1,827 3,111 NET INCOME PER COMMON SHARE(5)........................ 0.53 0.66 0.69 1.05 1.56 0.37 0.63 DIVIDENDS PER COMMON SHARE............................ -- -- 0.12 0.19 0.23 0.05 0.06
DECEMBER 31, MARCH 31, ---------------------------------------------------- ------------------- 1998 AS 1993 1994 1995 1996 1997 1998 ADJUSTED BALANCE SHEET DATA: ---- ---- ---- ---- ---- ---- -------- (DOLLARS IN THOUSANDS) (UNAUDITED) Gross investment in leases and loans(6)........ $ 69,561 $115,286 $189,698 $247,633 $258,230 $262,245 $262,245 Unearned income................................ (19,952) (33,807) (60,265) (76,951) (73,060) (72,299) (72,299) Allowance for credit losses.................... (4,778) (7,992) (15,952) (23,826) (26,319) (27,475) (27,475) Investment in service contracts(1)............. -- -- -- -- 2,145 3,702 3,702 Total assets............................... 50,810 83,484 126,479 170,192 179,701 183,198 Notes payable.................................. 37,747 57,594 94,900 116,202 116,830 114,791 Subordinated notes payable..................... 5,394 13,436 13,170 27,006 26,382 27,391 Total liabilities.......................... 45,041 77,651 118,567 158,013 160,935 161,609 Stockholders' equity....................... 5,769 5,833 7,912 12,179 18,766 21,589
19 21 q
THREE MONTHS YEARS ENDED DECEMBER 31, ENDED MARCH 31, ----------------------------------------------------- ------------------- 1993 1994 1995 1996 1997 1997 1998 OTHER DATA: ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT STATISTICAL DATA) (UNAUDITED) Operating Data: Total leases and loans originated(7).... $ 42,760 $ 81,726 $129,873 $143,855 $126,542 $ 28,697 $ 29,371 Total service contracts acquired(8)..... -- -- 4,427 2,445 2,972 208 1,846 Dealer fundings(9)...................... 26,232 52,762 76,500 73,886 78,193 17,362 21,283 Average yield on leases and loans....... 30.4% 30.5% 32.2% 40.1% 37.1% 36.1% 41.6% Cash flows from (used in): Operating activities.................... $ 17,660 $ 26,288 $ 41,959 $ 60,104 $ 77,393 $ 15,100 $ 21,300 Investing activities.................... (26,182) (51,528) (76,353) (86,682) (80,127) (17,857) (21,781) Financing activities.................... 9,502 27,803 36,155 33,711 (1,789) (1,918) (1,390) -------- -------- -------- -------- -------- -------- -------- Total................................. 980 2,563 1,761 7,133 (4,523) (4,675) (1,871) Selected Ratios: Return on average assets(10)............ 2.96% 2.45% 2.40% 3.42% 4.37% 4.31% 6.86% Return on average stockholders' equity(10)... 29.81 28.32 36.73 50.57 49.46 55.75 61.67 Operating margin(11).................... 53.28 50.51 48.68 51.04 51.70 56.25 54.24 Credit Quality Statistics: Net charge-offs......................... $ 4,033 $ 4,961 $ 5,428 $ 11,948(12) $ 19,220(12) $ 4,805 $ 3,376 Net charge-offs as a percentage of average gross investment(10)(13).............. 6.46% 5.37% 3.56% 5.46%(12) 7.57%(12) 7.64% 5.13% Provision for credit losses as a percentage of average gross investment(10)(14)... 9.21 8.85 8.78 9.07 8.55 9.57 6.95 Allowance for credit losses as a percentage of gross investment(15)............... 6.87 6.93 8.41 9.62 10.19 11.45 10.48
- --------------- (1) The Company began acquiring fixed term service contracts in 1995. Until December 1996, the Company treated these fixed-term contracts as leases for accounting purposes. Accordingly, income from these service contracts is included in income on financing leases and loans for all periods prior to December 1996 and investments in service contracts were recorded as receivables due in installments on the balance sheet at December 31, 1995 and 1996. Beginning in December 1996, the Company began acquiring month-to-month service contracts, the income from which is included as a separate category in the Consolidated Statements of Operations and the investment in which are recorded separately on the balance sheet. (2) Includes loss and damage waiver fees and service fees. (3) The provision for 1996 includes a $5.0 million resulting from an acceleration of the charge-off periods to better reflect the characteristics of the Company's delinquent accounts and collection effects. The provision for 1997 includes a one-time write-off of securitized receivables of $9.5 million and $5.0 million in write-offs of satellite television equipment receivables. (4) 1993 excludes a $1.3 million cumulative increase in net income as a result of the Company's adoption of Statement of Financial Accounting Standards No. 109 (Accounting for Income Taxes). Prior to 1993, the Company accounted for income taxes under the deferred method. (5) Net income per common share is calculated based on weighted average common shares outstanding of 2,498,472, 2,501,507, 3,676,094, 4,841,425, 4,896,570, 4,887,818 and 4,899,911 for the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998, respectively. (6) Consists of receivables due in installments, estimated residual value, and loans receivable. (7) Represents the amount paid to Dealers upon funding of leases and loans plus the associated unearned income. (8) Represents the amount paid to Dealers upon the acquisition of service contracts, including both non-cancelable service contracts and month-to-month service contracts. (9) Represents the amount paid to Dealers upon funding of leases, contracts and loans. (10) Quarterly amounts are annualized. (11) Represents income before provision for income taxes and provision for credit losses as a percentage of total revenues. (12) Charge-offs in 1996 and 1997 were higher due to write-offs related to satellite television equipment receivables and an acceleration of the charge-off periods to better reflect the characteristics of the Company's delinquent accounts and collection efforts. See "Business -- Exposure to Credit Losses." (13) Represents net charge-offs as a percentage of average gross investment in leases and loans and investment in service contracts. (14) Represents provision for credit losses as a percentage of average gross investment in leases and loans and investment in service contracts. (15) Represents allowance for credit losses as a percentage of gross investment in leases and loans and investment in service contracts. 20 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition should be read in conjunction with the Company's consolidated financial statements and notes thereto included elsewhere in this Prospectus. Certain matters discussed below are forward-looking statements that involve substantial risks and uncertainties that could cause actual results to differ materially from targets or projected results. Factors that could cause actual results to differ materially include, among others, those factors described in "Risk Factors." Many of these factors are beyond the Company's ability to predict or control. Prospective investors are cautioned not to put undue reliance on forward-looking statements, which statements have been made as of the date of this Prospectus, after which date there may have been changes in the affairs of the Company that would warrant modification of forward-looking statements made herein. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this Prospectus to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Prospectus will in fact transpire. GENERAL The Company is a specialized commercial finance company that provides "microticket" equipment leasing and other financing services in amounts generally ranging from $900 to $2,500, with an average amount financed of approximately $1,400. The Company primarily leases POS authorization systems and other small business equipment to small commercial enterprises. For the year ended December 31, 1997, the Company had fundings to Dealers upon origination of leases, contracts and loans ("Dealer Fundings") of $78.2 million and revenues of $68.2 million. The Company derives the majority of its revenues from leases originated and held by the Company, payments on service contracts, rental payments from lessees who continue to rent the equipment beyond the original lease term, and fee income. The Company funds the majority of leases, contracts and loans through its Credit Facilities and on-balance sheet Securitizations, and to a lesser extent, its Subordinated Debt program and internally generated funds. Substantially all leases originated or acquired by the Company are non-cancelable. During the term of the lease, the Company is scheduled to receive payments sufficient, in the aggregate, to cover the Company's borrowing costs and the costs of the underlying equipment, and to provide the Company with an appropriate profit. The Company enhances the profitability of its leases, contracts and loans by charging late fees, prepayment penalties, loss and damage waiver fees and other service fees, when applicable. The initial non-cancelable term of the lease is equal to, or less than, the equipment's estimated economic life, and often provides the Company with additional revenues based on the residual value of the equipment financed at the end of the initial term of the lease. Initial terms of the leases in the Company's portfolio generally range from 12 to 48 months, with an average initial term of 45 months as of March 31, 1998. Substantially all service and rental contracts are month-to-month contracts with an expected term of seven years for service contracts and 15 months for rental contracts. CERTAIN ACCOUNTING CONSIDERATIONS The Company's lease contracts are accounted for as financing leases. At origination, the Company records the gross lease receivable, the estimated residual value of the leased equipment, initial direct costs incurred and the unearned lease income. Unearned lease income is the amount by which the gross lease receivable plus the estimated residual value exceeds the cost of the equipment. Unearned lease income and initial direct costs incurred are amortized over the related lease term using the interest method. Amortization of unearned lease income and initial direct costs is suspended if, in the opinion of management, full payment of the contractual amount due under the lease agreement is doubtful. In conjunction with the origination of 21 23 leases, the Company may retain a residual interest in the underlying equipment upon termination of the lease. The value of such interests is estimated at inception of the lease and evaluated periodically for impairment. Other revenues such as loss and damage waiver fees, service fees relating to the leases, contracts and loans and rental revenues are recognized as they are earned. The Company's investments in cancelable service contracts are recorded at cost and amortized over the expected life of the service period. Income on service contracts from monthly billings is recognized as the related services are provided. The Company periodically evaluates whether events or circumstances have occurred that may affect the estimated useful life or recoverability of the investment in service contracts. Rental equipment is recorded at estimated residual value and depreciated using the straight-line method over a period of twelve months. Loans are reported at their outstanding principal balance. Interest income on loans is recognized as it is earned. RESULTS OF OPERATIONS Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997 Total revenues for the quarter ended March 31, 1998 were $18.1 million, an increase of $1.9 million, or 11.7%, from the quarter ended March 31, 1997, due primarily to increases of 40.7% in combined rental income and income on service contracts and 16.5% in total fee income over such amounts in the previous year's quarter. The increase in combined rental income and income on service contracts was due to an increase in the number of lessees that have continued renting the equipment beyond the original lease term and the increased number of acquired service contracts. The increase in fee income was a result of the continued growth in the number of leases and contracts in the Company's portfolio. Selling, general and administrative expenses increased $766,000, or 21.8%, for the quarter ended March 31, 1998 as compared to the same period in 1997. Such increase was primarily attributable to a 14% increase in the number of employees needed to maintain and manage the Company's increased portfolio and the general expansion of the Company's operations. Management expects that salaries and employee-related expenses, marketing expenses and other selling, general and administrative expenses will continue to increase as the portfolio grows due to the nature of the maintenance of the Company's microticket portfolio and the Company's focus on collections. The Company's provision for credit losses decreased $1.4 million from the quarter ended March 31, 1997 to $4.6 million for the quarter ended March 31, 1998, primarily due to an increase in recoveries. Depreciation and amortization expense increased by $314,000, or 36.4%, due to the increased number of rental contracts and the amortization of the investment associated with service contracts. Interest expense increased by $0.1 million, or 4.1%, from $2.7 million for the three months ended March 31, 1997 to $2.8 million for the three months ended March 31, 1998 due to an increase in the average outstanding balance of the Company's Credit Facilities. As a result of these factors, net income increased by $1.3 million, or 70.3%, from $1.8 million for the quarter ended March 31, 1997 to $3.1 million for the quarter ended March 31, 1998. Dealer Fundings were $21.3 million during the three months ended March 31, 1998, an increase of $3.9 million, or 22.6%, compared to the three months ended March 31, 1997. This increase primarily resulted from continued growth in leases of equipment other than POS authorization systems, acquisitions of service contracts and loans to commercial businesses. Receivables due in installments, estimated residual values and loans receivable ("gross investment in leases and loans") also increased from $255.0 million at March 31, 1997 to $262.2 million at March 31, 1998, representing a 2.8% increase. Cash collections increased by $4.3 million to $31.3 million during the first quarter of 1998, or 15.8%, from the first quarter of 1997 due to the increase in the size of the Company's overall portfolio as well as the Company's continued emphasis on collections. Unearned income decreased $1.0 million, or 1.4%, from $73.3 million at March 31, 1997 to $72.3 million at March 31, 1998. This decrease resulted primarily from increased acquisitions of service contracts 22 24 and originations of loans which are accounted for on a cost basis and as a result do not have any unearned income associated with them. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Total revenues for the year ended December 31, 1997 were $68.2 million, an increase of $12.6 million, or 22.7%, from the year ended December 31, 1996, due to increases of 18.1% in income on leases and loans, 37.0% in combined rental income and income on service contracts and 29.5% in fee income. The increase in income on leases and loans was primarily the result of the continued growth in the Company's lease portfolio. The increase in rental income and income on service contracts is due to the increased number of lessees who continued to rent the equipment beyond the original lease term and the increased number of service contracts. The increase in fee income was a result of the increase in the overall portfolio serviced by the Company. Selling, general and administrative expenses increased $3.2 million, or 22.6%, for the year ended December 31, 1997 as compared to the year ended December 31, 1996. Such increase was primarily attributable to a 20% increase in the number of employees needed to maintain and manage the Company's increased portfolio, the general expansion of the Company's operations and the more competitive employment environment. The Company's provision for credit losses increased by $1.9 million, or 9.5%, from $19.8 million in 1996 to $21.7 million in 1997. The higher provision was due to a one-time write-off of securitized receivables of $9.5 million, $5.0 million in one-time write-offs of satellite television equipment receivables and growth in the overall size of the Company's portfolio. Depreciation and amortization expense increased by $806,000, or 27.0%, from 1996 to 1997 due to the increased number of rental contracts and the amortization of the investment costs associated with service contracts. Interest expense increased by $1.7 million, from $10.2 million for the year ended December 31, 1996 to $11.9 million in 1997. This increase was primarily due to an increase in the average outstanding balances of the Company's Credit Facilities and Subordinated Debt. As a result of these factors, net income increased by $2.6 million, or 50.6%, from $5.1 million in the year ended December 31, 1996 to $7.7 million in the year ended December 31, 1997. Dealer Fundings were $78.2 million for the fiscal year ended December 31, 1997, an increase of $4.3 million, or 5.8%, compared to $73.9 million for the fiscal year ended December 31, 1996. The Company decided in July 1996 to scale back its Dealer Fundings of consumer satellite television equipment leases, funding to Dealers only $0.8 million of such leases in 1997 compared to $4.9 million in 1996. Excluding this factor, the Company had an increase in Dealer Fundings of $8.4 million, or 12.2%, over 1996. This increase primarily resulted from continued growth in leases of equipment other than POS authorization systems, acquisitions of service contracts and loans to commercial businesses. Gross investment in leases and loans also increased from $247.6 million in 1996 to $258.2 million at December 31, 1997, representing an increase of $10.6 million, or 4.3%. Cash collections increased by $31.3 million, or 35.9%, from $87.1 million in 1996 to $118.4 million in 1997 due to the increase in the size of the Company's overall portfolio, as well as the Company's continued emphasis on collections. Unearned income decreased $3.9 million, or 5.1%, from $77.0 million at December 31, 1996 to $73.1 million at December 31, 1997. This decrease resulted primarily from increased acquisitions of service contracts and originations of loans which are accounted for on a cost basis and as a result do not have any unearned income associated with them, as well as one-time write-offs in 1997 of approximately $5.0 million in consumer satellite television equipment lease receivables and $9.5 million of securitized receivables and the corresponding unearned income associated with those leases. Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995 Total revenues for fiscal year 1996 were $55.6 million, an increase of $19.4 million, or 53.8% over fiscal year 1995, due to increases of 43.1% in income on leases and loans, 123.7% in rental income and 59.3% in total fee income. The increase in income on leases and loans was the result of the continued growth in the 23 25 Company's lease portfolio in 1996, while the increase in rental income was due to the increased number of lessees who continue to rent the equipment beyond the original lease term. Fee income increased as a result of the continued growth in the overall portfolio serviced by the Company. Selling, general and administrative expenses were $14.1 million in 1996, representing an increase of 65.9% over such expenses in 1995, due primarily to a 34% increase in the number of personnel and the significant growth in the Company's lease portfolio from 1995 to 1996. The Company's provision for credit losses increased by $6.4 million from $13.4 million in 1995 to $19.8 million in 1996. $5.0 million of this increase was due to an acceleration of the Company's charge-off periods to better reflect the characteristics of the Company's delinquent accounts and collection efforts, with the remaining increase resulting from the continued growth in the Company's portfolio and anticipated losses resulting from continued delinquencies in the Company's consumer satellite television equipment portfolio. Depreciation and amortization expense increased by $1.5 million from $1.5 million in 1995 to $3.0 million in 1996. This increase was due to the increased number of rental contracts in the Company's portfolio. Interest expense increased by $1.6 million, or 18.7%, from $8.6 million in 1995 to $10.2 million in 1996. This increase was primarily due to an increase in the average outstanding balances of the Company's Credit Facilities and Subordinated Debt. As a result of these factors, net income increased by $2.6 million, or 101.3%, from $2.5 million for the year ended December 31, 1995 to $5.1 million in the year ended December 31, 1996. Dealer Fundings were $73.9 million in 1996, a decrease of $2.6 million, or 3.4%, over the $76.5 million funded during 1995. The decrease in Dealer Fundings in 1996, excluding portfolio purchases, was primarily attributable to management's focus on maintaining higher rates of return on POS authorization systems, exiting the business of origination of consumer satellite television equipment leases and performing developmental work to reposition the Company's efforts in other commercial and residential markets, including the design of more competitive products, a product-specific sales approach, and a renewed focus on service contracts. Gross investment in leases and loans also increased from $189.7 million at December 31, 1995, to $247.6 million at December 31, 1996, representing a 30.5% increase. Cash collected was $87.1 million during 1996, an increase of $26.5 million, or 43.7%, over the $60.6 million collected in 1995. This increase was due to the increase in the size of the Company's overall portfolio, as well as the Company's continued emphasis on collections. Unearned income increased $16.7 million, or 27.7%, from $60.3 million at December 31, 1995 to $77.0 million at December 31, 1996. This increase resulted from an increase in the size of the Company's lease portfolio. LIQUIDITY AND CAPITAL RESOURCES General The Company's lease and finance business is capital-intensive and requires access to substantial short-term and long-term credit to fund new leases, contracts and loans. Since inception, the Company has funded its operations primarily through borrowings under its Credit Facilities, issuances of Subordinated Debt and its on-balance sheet Securitizations. The Company will continue to require significant additional capital to maintain and expand its volume of leases, contracts and loans funded, as well as to fund any future acquisitions of leasing companies or portfolios. The Company's uses of cash include the origination and acquisition of leases, contracts and loans, payment of interest expenses, repayment of borrowings under its Credit Facilities, Subordinated Debt and Securitizations, payment of selling, general and administrative expenses, income taxes and capital expenditures. The Company utilizes its Credit Facilities to fund the origination and acquisition of leases that satisfy the eligibility requirements established pursuant to each facility. At March 31, 1998, the Company had an aggregate maximum of $140 million available for borrowing under two Credit Facilities, of which the Company had borrowed an aggregate of approximately $67.5 million. The Company also uses its Subordinated Debt program as a source of funding for potential acquisitions of portfolios and leases which otherwise are not eligible for funding under the Credit Facilities and for potential portfolio purchases. See "Description of Certain Indebtedness" for a description of the terms of the Credit Facilities and the Subordinated Debt. To 24 26 date, cash flow from its portfolio and other fees have been sufficient to repay amounts borrowed under the Credit Facilities and Subordinated Debt. The Company believes that cash flow from its operations, the net proceeds to the Company of the Offering and amounts available under its Credit Facilities will be sufficient to fund the Company's operations for the foreseeable future. Although the Company is not currently involved in negotiations and has no current commitments or agreements with respect to any acquisitions, to the extent that the Company successfully consummates acquisitions, it may be necessary to finance such acquisitions through the issuance of additional debt or equity securities, the incurrence of indebtedness or a combination of both. See "Risk Factors -- Dependence on External Financing." Hedging Transactions The implicit yield to the Company on all of its leases, contracts and loans is on a fixed interest rate basis due to the leases, contracts and loans having scheduled payments that are fixed at the time of origination of the lease. When the Company originates or acquires leases, contracts and loans it bases its pricing in part on the "spread" it expects to achieve between the implicit yield rate to the Company on each lease and the effective interest cost it will pay when it finances such leases, contracts and loans through its Credit Facilities. Increases in interest rates during the term of each lease, contract or loan could narrow or eliminate the spread, or result in a negative spread. See "Risk Factors -- Risk of Increased Interest Rates." The Company has adopted a policy designed to protect itself against interest rate volatility during the term of each lease, contract or loan. Given the relatively short average life of the Company's leases, contracts and loans, the Company's goal is to maintain a blend of fixed and variable interest rate obligations. As of March 31, 1998, the Company's outstanding fixed rate indebtedness, including indebtedness outstanding under the Company's Securitizations and indebtedness subject to the swap described below, represented 67.5% of the Company's outstanding indebtedness. In July 1997, the Company entered into an interest rate swap arrangement with one of its banks. This arrangement, which expires in July 2000, has a notional amount of $17.5 million. The interest rate associated with the swap is capped at 6.6%. During the term of the swap, the Company has agreed to match the swap amount with 90-day LIBOR loans. If at any time the 90-day LIBOR rate exceeds the swap cap of 6.6%, the bank would pay the Company the difference. Through March 31, 1998, the Company had entered into LIBOR loans with interest rates ranging from 5.63% to 5.81%. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See Note B of the notes to the consolidated financial statements for a discussion of the impact of recently issued accounting pronouncements. YEAR 2000 The Company believes that any modifications necessary to make its own computer systems and proprietary software Year 2000 compliant will not result in material costs to the Company. There can be no assurance, however, that these cost estimates are accurate, nor can there be any assurance that the Company will be able to successfully identify all relevant Year 2000 issues in its systems in a timely manner. 25 27 BUSINESS GENERAL The Company, which operates primarily through its wholly-owned subsidiary, Leasecomm Corporation, is a specialized commercial finance company that leases and rents "microticket" equipment and provides other financing services in amounts generally ranging from $900 to $2,500, with an average amount financed of approximately $1,400 and an average lease term of 45 months. The Company pioneered the use of proprietary software in developing a sophisticated, risk-adjusted pricing model and automating its credit approval and collection systems, including a fully-automated Internet-based application, credit scoring and approval process. This has enabled the Company to better service its dealer network, to develop economies of scale in originating and servicing over 200,000 leases, contracts and loans and to operate on a nationwide basis in a historically fragmented market. The majority of the Company's leases are currently for POS authorization systems. The Company continues to develop other product lines, including leasing other commercial products and acquiring payment streams from service contracts. The Company targets owner-operated or other small commercial enterprises, with little business credit history and limited or poor personal credit history at the owner level. The Company provides a convenient source of financing to these lessees who may have few other sources of credit. The Company primarily leases and rents low-priced commercial equipment with limited residual value which is used by these lessees in their daily operations. The Company does not market its services directly to lessees, but sources leasing transactions through a nationwide network of over 1,100 Dealers. The Company's ability to approve applications quickly for a wide range of credit profiles facilitates Dealer sales, thereby enhancing the Company's relationships with its Dealers. The Company commenced operations in 1986 and has been profitable every year since 1987. At March 31, 1998, the Company's gross investment in leases and loans totaled $262.2 million. The Company's investment grew at a compounded annual rate of 34.5% from December 31, 1992 to March 31, 1998. The Company generated revenues and net income of $68.2 million and $7.7 million in 1997, increases of 22.7% and 50.6%, respectively, over those amounts in 1996. Revenues and net income for the first quarter of 1998 totaled $18.1 million and $3.1 million, increases of 11.7% and 70.3%, respectively, over the first quarter of 1997. The Company capitalizes on its unique understanding of its lessees, underwriting higher risk credits with a multi-dimensional credit scoring model that generates risk-adjusted pricing. Additionally, the Company maintains a disciplined and persistent approach to collections which enables the Company to collect delinquent amounts that it believes its competitors often would not pursue due to the perceived high costs of collecting relatively small monthly payments against equipment with low resale value. In each of these areas, the Company has focused on the application of technology to execute its operating strategy by designing proprietary software and systems to operate its business and achieve economies of scale. STRATEGY The Company's goal is to continue to significantly expand its business through internal growth, diversification of product offerings and selective acquisitions of lease portfolios and leasing companies, while maintaining or improving current levels of profitability. The principal strategies to achieve this goal include: Utilizing and Enhancing its Advanced Technology and Servicing Capabilities. The Company's business is operationally intensive, due in part to the small average amount financed. Accordingly, technology and automated processes are critical in keeping origination and servicing costs to a minimum, while at the same time providing quality customer service. Management believes that its proprietary data processing system efficiently manages the high volume of information associated with originating and servicing its leases and other financing products on a nationwide basis. The Company believes this system has excess capacity which it believes will decrease the Company's servicing costs per lease, contract and loan as volumes increase. The Company intends to continue enhancing its proprietary data processing system in order to ensure that its systems can be efficiently utilized for new products as its portfolio grows. 26 28 Employing Multi-Dimensional Credit Scoring. The Company has used its proprietary software to develop a multi-dimensional credit scoring model which generates pricing of its leases, contracts and loans commensurate with the risk assumed, enabling it to underwrite a broad range of credit risks. By analyzing both the quality and amount of credit history available with respect to both obligors and Dealers, the Company improves its ability to assess credit risk. Emphasizing Service to Dealers. The Company has developed value-added services that facilitate the sales of products by its Dealers and differentiate the Company from its competitors. These value-added services include fast responses to applications, consistent underwriting, quick and reliable funding following application approval and identifiable and dedicated support from the Company's customer service employees. Efficient Collections. The Company's technology and its disciplined and persistent approach to collections enable it to collect delinquent amounts, even several years after the account originally became delinquent. The Company believes that, as a result of the small payments associated with microticket transactions, the credit performance of its customers is driven by factors beyond merely an ability to pay. Therefore, it is the Company's policy to pursue virtually all delinquent accounts in a lawful, reasonable and timely fashion and in many instances, to recover amounts due under the Company's leases, contracts and loans through litigation. The Company maintains a highly structured, well-defined and automated system that enables a minimum number of personnel to maximize the collection of delinquent payments. Seeking to Develop New Products and Markets. The Company continues to seek new product lines to which it can successfully apply its operating strategy, both in the microticket market and, more recently, the lower end of the small-ticket market. The Company originates leases for products that typically have limited distribution channels and high selling costs. The Company facilitates sales of such products by making them available to Dealers' customers for a small monthly lease payment rather than a high initial purchase price. The Company believes that it can leverage the competitive advantage it has in its current markets to products with similar characteristics. The Company intends to intensify its marketing effort, including increasing national awareness of the Leasecomm brand name, as part of its strategy to develop new product lines. Expanding its Business through Selective Acquisitions. The Company intends to pursue selective acquisitions of microticket and small-ticket leasing companies and lease portfolios where the Company believes it can gain access to an expanded Dealer base and successfully apply its operating strategy and where such companies or portfolios can be acquired on attractive terms. In particular, the Company seeks to acquire lease portfolios which will expand product lines and ultimately provide a source of additional lease originations or lease portfolios. The Company presently is not negotiating, nor does it have any agreements or understandings to make, any such acquisitions. INDUSTRY OVERVIEW Lease Financing Industry. The equipment financing industry in the United States has grown rapidly during the last decade and includes a wide range of entities that provide funding for the purchase or lease of equipment or services. The leasing industry in the United States is a significant factor in financing capital expenditures of businesses. According to research by the Equipment Leasing Association of America ("ELA"), using United States Department of Commerce data, approximately $180 billion of the $582 billion spent on productive assets in 1997 was financed by means of leasing. The ELA estimates that 80% of all U.S. businesses lease or finance capital assets. The Company considers the microticket segment of the lease financing industry to include lease transactions of less than $5,000. It is served by a wide range of fragmented financing sources primarily on a local and regional level. The segment also includes equipment manufacturers that finance the sale or lease of their own products. The Company believes that the microticket segment is one of the most rapidly growing segments of the financing industry in part due to (i) a technology-driven trend toward instant approvals at the point of sale; (ii) the consolidation of the banking industry, which has eliminated many of the smaller community banks 27 29 that traditionally provided equipment and service financing for small businesses; and (iii) the rate of growth and ongoing viability of small businesses that represent the target market for microticket leasing products. The Company's market focus includes small businesses with limited business credit history. According to the Small Business Administration ("SBA"), small businesses (firms with fewer than 500 employees) contribute 47% of all sales nationwide, employ 53% of the private non-farm workforce and are responsible for 51% of the private gross domestic product. As of December 31, 1996, small businesses represented 99% of the 23.3 million non-farm businesses in the United States. New business formation reached a record level of over 842,000 new employer firms in 1996, a 2.8% increase over 1995. The number of small businesses in the U.S., as measured in business tax returns, has increased 57% since 1982, according to SBA estimates. Point of Sale Payment Systems. In recent years, consumers demanding fast, convenient and secure methods of payment have increasingly substituted POS card-based payments, such as debit, credit and charge cards, for traditional forms of payment, such as checks and cash. To accommodate consumer preferences for card-based payments and to facilitate the electronic delivery of such payments, automated POS authorization systems were introduced in the early 1980s. These new automated capabilities included electronic authorization, data capture, transaction transmission and settlement. These functions require the use of a POS terminal capable of reading a cardholder's account information from the card's magnetic stripe and combining this information with the amount of the sale entered via a POS terminal keypad. The terminal electronically transmits this information over a communications network to a computer data center and then displays the returned authorization or verification response on the POS terminal. According to published reports, by December 31, 1996, there were 13.2 million POS payment terminals worldwide, of which approximately 47% were located in the U.S. Published reports have projected sales of POS terminals in the U.S. to grow at a five-year compound annual rate of 24.6% to approximately 2.4 million terminals by 2000 and revenues from POS terminal sales in the U.S. to grow at a five-year compound annual rate of 21.7% for the same period. The Company believes that card-based verifications will become a part of an increasing number of commercial transactions in the future, including, for example, verification of drivers' licenses by alcohol and tobacco merchants and vendor activations of pre-paid cards. Consequently, the Company believes that as such verifications become more prevalent, demand for POS authorization systems will increase. OVERVIEW OF FINANCING PROGRAMS The Company primarily leases and rents low-priced commercial equipment with limited residual value to small merchants. Many such merchants prefer leasing such equipment for a relatively affordable monthly payment rather than purchasing such equipment outright with a large initial payment. The Company utilizes its expertise at credit analysis and collections to purchase or originate monthly payment streams without regard to the residual value of the leased product. The Company has applied this expertise to leasing a wide variety of equipment in addition to POS authorization systems, including advertising and display equipment, coffee machines, paging systems, water coolers and restaurant equipment. In addition, the Company also acquires service contracts and opportunistically seeks to enter various other financing markets. The Company has enjoyed a long history of portfolio growth, fueled by origination growth in both traditional and developing markets that the Company serves. Since 1992, the Company's Dealer Fundings have experienced a 29% compounded annual growth rate. The Company's commercial originations and financings grew 12% during 1997 compared to 1996, and relate primarily to POS authorization systems used by small merchants. Although leases for POS authorization systems continued to be the major source of the Company's revenues in 1997, leases for other commercial equipment are experiencing significant growth. The 28 30 following table outlines historical Dealer Fundings defined as the amount paid to Dealers upon origination for each type of underlying equipment or service financed:
THREE MONTHS YEARS ENDED DECEMBER 31, ENDED MARCH 31, ----------------------------- ------------------ 1995 1996 1997 1997 1998 (DOLLARS IN THOUSANDS) ---- ---- ---- ---- ---- COMMERCIAL POS authorization systems(a)........... $54,761 $56,278 $55,588 $13,618 $12,743 Other commercial....................... 9,126 10,294 18,816 3,365 6,688 ------- ------- ------- ------- ------- Total commercial.................... $63,887 $66,572 $74,404 $16,983 $19,431 RESIDENTIAL Service contracts...................... $ 4,427 $ 2,445 $ 2,972 $ 208 $ 1,846 Other residential...................... 8,186 4,869 817 171 6 ------- ------- ------- ------- ------- Total residential................... $12,613 $ 7,314 $ 3,789 $ 379 $ 1,852 Total amount funded................. $76,500 $73,886 $78,193 $17,362 $21,283
- --------------- (a) Excludes portfolio acquisitions in 1996 of approximately $9.8 million representing 16,200 separate contracts. The Company's residential financings include acquiring service contracts from Dealers that provide security monitoring services. The Company's residential portfolio also includes leases of satellite television equipment. Despite significant origination volume in this market, the Company made a strategic decision in July 1996 to de-emphasize the satellite television equipment business and has greatly reduced originations of these leases since that time. The Company originates and services leases, contracts and loans in all 50 states of the United States and its territories, taking advantage of the nationwide reach of its Dealer network. As of March 31, 1998, leases in California, Florida, Texas and New York accounted for approximately 40% of the Company's portfolio, with none of the remaining states accounting for more than 5% of such total. TERMS OF EQUIPMENT LEASES Substantially all equipment leases originated or acquired by the Company are non-cancelable. During the term of a typical lease, the Company is scheduled to receive payments sufficient, in the aggregate, to cover the Company's borrowing costs and the costs of the underlying equipment, and to provide the Company with an appropriate profit. Throughout the term of the lease, the Company charges late fees, prepayment penalties, loss and damage waiver fees and other service fees, when applicable, which enhance the profitability of the lease. The initial non-cancelable term of the lease is equal to or less than the equipment's estimated economic life. Initial terms of the leases in the Company's portfolio generally range from 12 to 48 months, with an average initial term of 45 months for leases originated in the first quarter of 1998. The terms and conditions of all of the Company's leases are substantially similar. In most cases, the contracts require lessees to: (i) maintain, service and operate the equipment in accordance with the manufacturer's and government-mandated procedures; (ii) insure the equipment against property and casualty loss; (iii) pay all taxes associated with the equipment; and (iv) make all scheduled contract payments regardless of the performance of the equipment. The Company's standard lease forms provide that in the event of a default by the lessee, the Company can require payment of liquidated damages and can seize and remove the equipment for subsequent sale, refinancing or other disposal at its discretion. Any additions, modifications or upgrades to the equipment, regardless of the source of payment, are automatically incorporated into and deemed a part of the equipment financed. 29 31 RESIDUAL INTERESTS IN UNDERLYING EQUIPMENT The Company typically owns a residual interest in the equipment covered by a lease. The Company's equipment leases outstanding as of March 31, 1998 had an aggregate residual value of approximately $16.9 million, representing 7.0% of the Company's total lease receivables at March 31, 1998. At the end of the lease term, the lease typically converts into a month-to-month rental contract. If the lease does not convert, the lessee either buys the equipment at a price quoted by the Company or returns the equipment. If the equipment is returned, the Company may place the equipment into its used equipment rental and leasing program. The Company may also sell the used equipment through equipment brokers and remarketers in order to maximize the net proceeds from such sale. ORIGINATION AND UNDERWRITING Sales and Marketing. The Company provides financing to obligors under microticket leases, contracts and loans through its Dealers. Since the Company relies primarily on its network of Dealers for its origination volume, the Company considers them its customers. The Company's nationwide Dealer network is the key to the Company's origination volume, with over 1,100 different Dealers originating 56,002 Company leases, contracts and loans in 1997. Cardservice Laguna accounted for approximately 14% of all originations in 1997. No other Dealer accounted for more than 10% of the Company's origination volume during such year. The Company seeks to maintain relationships with its Dealers in order to establish the Company as the provider of financing recommended by such Dealers to their customers. The Company does not sign exclusive agreements with its Dealers, but expects Dealers to conduct a significant portion of their business with the Company in order to ensure a productive, cost-effective relationship. Thousands of Dealers nationwide provide a wide variety of services to small merchants. Dealers interact with merchants directly, and, for example, typically market not only POS authorization systems, but also their financing through the Company and ancillary POS processing services. As such, the Dealers' sales approach appeals to the multiple needs of a small merchant and allows for sales that are driven as much by convenience as by price. The Company believes that lease financing represents a compelling alternative for any product critical to a merchant's ongoing operation whose initial cost exceeds a particular price threshold for small merchants. The Company's marketing strategy is to increase its volume of funding by (i) maintaining, expanding and supporting its network of Dealers, (ii) developing programs for specific vendor or customer groups, (iii) developing and introducing complementary lease finance products that can be marketed and sold through its existing network of Dealers and (iv) increasing national awareness of the Leasecomm brand name. The Company receives on average 7,000 to 10,000 applications per month (10,079 in May 1998) through its network of Dealers. Because of this volume, and in order to continue to expand, cultivate and nurture these relationships, the Company's 45 customer service employees in its two locations work directly with this Dealer network. Management believes that a focused marketing effort with dedicated personnel by product type will ensure the continuation of significant origination growth and profitability in the future. The Company also employs 11 individuals who are dedicated to marketing to Dealers in specific product segments to ensure that the Company adequately addresses the unique characteristics of the product. These employees are responsible for implementing marketing plans and coordinating marketing activities with the Company's Dealers, as well as attending industry conventions and trade shows on behalf of the Company. As new product initiatives are developed, the Company intends to continue to dedicate personnel in this manner. The Company provides a variety of value-added services to its Dealers, including fast responses to applications, consistent underwriting, quick and reliable funding following application approval and identifiable and dedicated support nationwide. In addition, as a further convenience to its Dealers, the Company has developed Leasecomm Direct(TM), an Internet-based application processing, credit approval and Dealer information tool. Using Leasecomm Direct(TM), a Dealer can input an application directly to the Company via the Internet and obtain almost instantaneous approval automatically over the Internet through the Company's computer system, all without any contact with any employee of the Company. The Company also offers Instalease(R), a program that allows a Dealer to submit applications by telephone, telecopy or e-mail to a Company representative, receive approval, and complete a sale from a lessee's location. By assisting the 30 32 Dealers in providing timely, convenient and competitive financing for their equipment or service contracts and offering Dealers a variety of value-added services, the Company simultaneously promotes equipment and service contract sales and the utilization of the Company as the finance provider, thus differentiating the Company from its competitors. Originations. In a typical lease transaction, the Company originates leases referred to it by the Dealer and buys the underlying equipment from the referring Dealer upon funding of an approved application. Leases are structured with limited recourse to the Dealer, with risk of loss in the event of default by the lessee residing with the Company in most cases. The Company owns the underlying equipment covered by a lease and, in substantially all cases, retains a residual interest in such underlying equipment. The Company performs all processing, billing and collection functions under its leases. In a typical transaction for the acquisition of service contracts, a homeowner will purchase a security system and simultaneously sign a contract with the Dealer for the monitoring of that system for a monthly fee. The Dealer will then sell the right to payment under that contract to the Company for a multiple of the monthly payments. The Company performs all processing, billing and collection functions under these contracts. Underwriting. The Company has developed credit underwriting policies and procedures that management believes have been effective in determining pricing which is commensurate with the creditworthiness of its obligors. The nature of the Company's business requires two levels of review, the first focused on the ultimate end-user of the equipment or service and the second focused on the Dealer. The Company's variable pricing approach, which compensates for differing risk profiles through risk-adjusted pricing, allows the Company to underwrite obligors with a broad band of credit quality and provide financing in situations where its competitors may be unwilling to provide such financing. The Company utilizes a proprietary automated computer scoring model to assess the credit of both the lessee and the Dealer along several dimensions. This software does not produce a binary, "yes or no" decision, but rather determines the price at which the lease, contract or loan can be profitably underwritten. The Company has developed its credit-scoring model internally over the past twelve years based on its specific experiences with its portfolio of leases, contracts and loans and its extensive experience with its lessees and Dealers. The Company believes that no general commercially available credit-scoring model is as effective as the Company's model in predicting the payment behavior of the Company's lessee base. The Company reviews its underwriting policies and the computer scoring model on a regular basis and makes adjustments when necessary. The approval process begins with the submission by telephone, facsimile or electronic transmission of a credit application by the Dealer. Upon submission, the Company, either manually or through Leasecomm Direct(TM) over the Internet, conducts its own independent credit investigation of the lessee through its own proprietary data base and recognized commercial credit reporting agencies such as Dun & Bradstreet, TRW, Equifax and TransUnion. The Company's software evaluates this information on a two-dimensional scale, examining both credit depth (how much information exists on an applicant) and credit quality (past payment history). The credit scoring model is complex and automatically adjusts for different transactions. For instance, depending on the size of the credit, different weight is placed on individual pieces of credit information. In situations where the amount financed is over $3,000, the Company may go beyond its own data base and recognized commercial credit reporting agencies and obtain information from less readily available sources such as banks. In certain instances, the Company will require the lessee to provide verification of employment and salary. The second aspect of the credit decision involves an assessment of the originating Dealer. This assessment reflects the Company's experience that the likelihood of lessee compliance is commensurate with Dealer quality. Dealers undergo both an initial screening process and ongoing evaluation, including an examination of Dealer portfolio performance, lessee complaints, cases of fraud or misrepresentation, aging studies, number of applications and conversion rates for applications. This ongoing assessment enables the Company to manage its Dealer relationships, including ending relationships with poor-performing Dealers. 31 33 Upon credit approval, the Company requires receipt of signed lease documentation on the Company's standard or other pre-approved lease form before funding. Once the equipment is shipped and installed, the Dealer invoices the Company, and thereafter the Company verifies that the lessee has received and accepted the equipment. Upon the lessee authorizing payment to the Dealer, the lease is forwarded to the Company's funding and documentation department for funding, transaction accounting and billing procedures. Bulk and Portfolio Acquisitions. In addition to originating leases through its Dealer relationships, the Company from time to time has purchased lease portfolios from Dealers in order to grow its portfolio and diversify the underlying equipment financed. The Company purchases leases from Dealers on an ongoing basis in packages ranging from $20,000 to $200,000. While certain of these leases initially do not meet the Company's underwriting standards, the Company will often purchase the leases once the lessee demonstrates a payment history. The Company will only acquire these smaller lease portfolios in situations where the company selling the portfolio will continue to act as a Dealer following the acquisition. The Company also completed the acquisition of two large POS authorization system lease and rental portfolios in 1996, both of which have contributed to lease yield, fee income and extended rental profits. The first acquisition, completed in May 1996, consisted of over 8,000 rental contracts with total fundings of $1.9 million. The Company acquired approximately 8,200 leases in December 1996 with fundings of $7.9 million. The Company considers portfolio acquisitions to be a lucrative source of immediate lease yield and fee income as well as future rental income, and accordingly, will continue to pursue such acquisitions. SERVICING AND COLLECTIONS The Company performs all servicing functions on its leases, contracts and loans, including its securitized leases, through its automated servicing and collection system. Servicing responsibilities generally include billing, processing payments, remitting payments to Dealers and investors in Securitizations, preparing investor reports, paying taxes and insurance and performing collection and liquidation functions. The Company's business is operationally intensive, due in part to the small average amount financed. Accordingly, technology and automated processes are critical in keeping servicing costs to a minimum while providing quality customer service. The Company's automated lease administration system handles application tracking, invoicing, payment processing, automated collection queuing, portfolio evaluation and report writing. The system is linked with bank accounts for payment processing and provides for direct withdrawal of lease, contract and loan payments. The Company combines its collection efforts with its general relations with obligors. A Lessee Relations Representative ("LRR") is assigned to each lease, contract or loan at the time of funding, giving each lessee or other obligor a specific customer relations contact throughout the term of the lease, contract or loan, including during delinquent collection efforts. The lessee relations department is organized under the Director of Lessee Relations, who manages 2 senior managers, 11 supervisors and 61 LRRs. LRRs are broadly classified as either "front-end" (43 LRRs) or "back-end" (18 LRRs), with the "back-end" LRRs servicing only very delinquent accounts. The "back-end" LRRs generally have several years of experience with delinquent accounts and are entirely dedicated to collections. The Company's collection effort is a key component of its success. The Company believes that its competitors have not energetically pursued collection of microticket delinquent accounts due to the perceived high costs of collecting relatively small monthly payments against equipment with low resale value. In contrast, the Company can cost-effectively pursue such delinquencies due to its highly automated collection process. In addition to writing collection letters, making collection calls and reporting delinquent accounts to the credit reporting agencies, the Company litigates essentially all delinquent accounts where necessary and obtains and enforces judgments through a network of over 100 law firms nationwide. The Company uses several computerized processes in its collection efforts, including the generation of daily priority call lists and scrolling for daily delinquent account servicing, generation and mailing of delinquency letters, routing of incoming calls to appropriate LRRs with instant computerized access to account details, generation of delinquent account lists eligible for litigation, generation of pleadings and litigation monitoring. Collection 32 34 efforts commence immediately, with repeated reminder letters and telephone calls upon payments becoming 10 days past due, with a lawsuit generally filed if an account is more than 85 days past due. The Company takes a team-oriented approach to collections, with supervisors directly overseeing a team of five to six LRRs. Compensation at all levels of the collection effort is linked to the success of the entire collection team. LRRs are assigned daily productivity targets based on dollars collected, phone calls placed and phone calls fielded, with scrolling call lists reprioritized nightly. If these targets are exceeded, LRRs receive a higher percentage of the amounts collected based on a tiered compensation scale. In order to be eligible for the highest scale of commissions, each team member must meet his collection target, providing an incentive to team members to assist in the servicing of each team member's accounts. EXPOSURE TO CREDIT LOSSES The Company's risk-adjusted approach to underwriting allows it to profitably originate and acquire leases, contracts and loans with a high risk of default. The Company's risk-adjusted pricing model and credit analyses are designed to take into account estimated defaults. The Company attempts to maximize the ultimate cash collected through its disciplined and persistent collection procedures. Management evaluates the collectibility of leases, contracts and loans acquired or originated based on the lessee's or other obligor's and Dealer's respective credit profiles, delinquency statistics, historical loss experience, current economic conditions and other relevant factors. The Company provides an allowance for credit losses on the entire portfolio based on historical charge-offs and funds such allowance during the period from funding through the date leases, contracts or loans mature. The Company's allowance for credit losses is based on estimates and qualitative evaluations, and ultimate losses will vary from current estimates. These estimates are reviewed periodically and, as adjustments, either positive or negative, become necessary, they are reported in the Company's results of operations for the period in which they become known. The Company seeks to protect itself from credit exposure relating to poor quality Dealers by entering into recourse agreements with its Dealers, under which the Dealer agrees to reimburse the Company for payment of defaulted amounts under certain circumstances, primarily defaults within the first month following origination and upon evidence of Dealer errors or misrepresentations in originating a lease or contract. In case of Dealer error or misrepresentation, the Company will charge-back the Dealer for both the lessee's delinquent amounts and attorney and court fees. The following table sets forth certain information as of December 31, 1995, 1996 and 1997, with respect to delinquent leases, contracts and loans. The percentages in the table below represent the aggregate in each year of actual amounts not paid on each invoice by the number of days past due (rather than the entire balance of a delinquent receivable) over the entire cumulative amount billed on all leases, contracts and loans in the Company's portfolio from the date of origination. For example, if a receivable is over 90 days past due, the portion of the receivable which is over 30 days past due will be placed in the 31-60 days past due category, the portion of the receivable which is over 60 days past due will be placed in the 61-90 days past due category and the portion of the receivable which is over 90 days past due will be placed in the over 90 days past due category. The Company historically has used this methodology of calculating its delinquencies because of its experience that lessees who miss a payment do not necessarily default on the entire lease. Accordingly, the Company includes only the amount past due rather than the entire lease receivable in each category. 33 35 In the following table, amounts in the "As Adjusted" column represent (i) contractual delinquencies (including the entire lease receivable with the exception of service contracts as to which only the amount billed and collected is included) in each category as a percentage of (ii) the sum of receivables due in installments plus investment in service contracts plus loans receivable ($243.6 million at December 31, 1997).
AS OF DECEMBER 31, -------------------------------------------- 1997, 1995 1996 1997 AS ADJUSTED ---- ---- ---- ----------- Cumulative amount billed (in thousands)... $120,947 $189,798 $260,958 -- 31-60 days past due....................... 1.0% 1.6% 1.6% 3.2% 61-90 days past due....................... 0.8 1.2 1.1 2.4 Over 90 days past due..................... 5.7 6.6 7.0 19.9 Total past due....................... 7.5 9.4 9.7 25.5
The following table sets forth the Company's allowance for credit losses as of December 31, 1994 and for the years ended December 31, 1995, 1996 and 1997 (in thousands): Balance at December 31, 1994................................ $ 7,992 Provision for credit losses................................. 13,388 Charge-offs................................................. 5,964 Recoveries.................................................. 536 Charge-offs, net of recoveries.............................. 5,428 ------- Balance at December 31, 1995................................ $15,952 Provision for credit losses................................. 19,822 Charge-offs................................................. 15,675 Recoveries.................................................. 3,727 Charge-offs, net of recoveries.............................. 11,948 ------- Balance at December 31, 1996................................ $23,826 Provision for credit losses................................. 21,713 Charge-offs................................................. 24,290 Recoveries.................................................. 5,070 Charge-offs, net of recoveries.............................. 19,220 ------- Balance at December 31, 1997................................ $26,319
The following table sets forth for the indicated period the Company's charge-offs and provision for credit losses as a percentage of the sum of average gross investment in leases and loans plus investment in service contracts:
1995 1996 1997 ---- ---- ---- Average gross investment in leases and loans and investment in service contracts (in thousands)(1).................................... $152,492 $218,665 $254,004 Net charge-offs.................................... 3.56% 5.46% 7.57% Provision for credit losses........................ 8.78% 9.07% 8.55%
- --------------- (1) Consists of receivables due in installments, estimated residual value, loans receivable and investment in service contracts. 34 36 The Company's policy is to take charge-offs against its receivables generally when the account is 360 days past due. Management believes that the length of the Company's charge-off period reflects the characteristics of its delinquent accounts and its collection efforts. Charge-offs in 1996 and 1997 were higher due to (i) acceleration of the charge-off periods in 1996 which resulted in one-time write-offs in the amount of $5.0 million to better reflect the characteristics of the Company's delinquent accounts and collection efforts; (ii) $5.0 million in write-offs related to satellite television equipment receivables in 1997; and (iii) a one-time write-off of securitized receivables of $9.5 million in 1997. Cumulative net charge-offs after recoveries from the Company's inception through December 31, 1997 were 6.78% of total cumulative originations plus total billed fees over such period. FUNDING SOURCES The Company maintains a diverse mix of funding sources which include its Credit Facilities, Subordinated Debt, and Securitizations. Historically, the Company has fulfilled its liquidity needs by utilizing each of these three sources. See "Description of Certain Indebtedness." COMPETITION The microticket leasing and financing industry is highly competitive. The Company competes for customers with a number of national, regional and local banks and finance companies. The Company's competitors also include equipment manufacturers that lease or finance the sale of their own products. While the market for microticket financing has traditionally been fragmented, the Company could also be faced with competition from small- or large-ticket leasing companies that could use their expertise in those markets to enter and compete in the microticket financing market. The Company's competitors include larger, more established companies, some of which may possess substantially greater financial, marketing and operational resources than the Company, including a lower cost of funds and access to capital markets and to other funding sources which may be unavailable to the Company. FACILITIES The Company's corporate headquarters and operations center are located in leased space of 34,851 square feet at 950 Winter Street, Waltham, Massachusetts 02154. The Company's telephone number is (781) 890-0177. The lease for this space expires on June 30, 1999. The Company also leases 2,933 square feet of office space for its West Coast office in Newark, California under a lease which expires on August 31, 2001. As of March 31, 1998, the aggregate monthly rent under these leases was approximately $77,258. EMPLOYEES As of March 31, 1998, the Company had 231 full-time employees, of which 45 were engaged in credit activities and Dealer service, 115 were engaged in servicing and collection activities, 11 were engaged in marketing activities, and 60 were engaged in general administrative activities. Management believes that its relationship with its employees is good. No employees of the Company are members of a collective bargaining unit in connection with their employment by the Company. LEGAL PROCEEDINGS The Company and its subsidiaries are frequently parties to various claims, lawsuits and administrative proceedings arising in the ordinary course of business. Although the outcome of these lawsuits cannot be predicted with certainty, the Company does not expect such matters to have a material adverse effect on the financial condition or results of operations of the Company. 35 37 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the name, age and position with the Company of each of the directors and executive officers of the Company:
NAME AGE POSITION ---- --- -------- Peter R. Bleyleben(1)........................... 45 President, Chief Executive Officer and Director Brian E. Boyle(1)(2)............................ 50 Director Torrence C. Harder(1)(2)........................ 54 Director Jeffrey Parker(2)............................... 54 Director Alan Zakon(1)(2)................................ 62 Director Richard F. Latour............................... 44 Executive Vice President, Chief Operating Officer and Chief Financial Officer J. Gregory Hines................................ 37 Vice President, Funding John Plumlee.................................... 45 Vice President, MIS Carol A. Salvo.................................. 31 Vice President, Legal
- --------------- (1) Member of Audit Committee (2) Member of Compensation Committee Set forth below is a brief description of the business experience of the directors and executive officers of the Company. PETER R. BLEYLEBEN has served as President, Chief Executive Officer and Director of the Company or its predecessor since June 1987. Before joining the Company, Dr. Bleyleben was Vice President and Director of the Boston Consulting Group, Inc. ("BCG") in Boston. During his more than eight years with BCG, Dr. Bleyleben focused his professional strategic consulting practice on the financial services and telecommunications industries. Prior to joining BCG, Dr. Bleyleben earned an M.B.A. with distinction and honors from the Harvard Business School, an M.B.A. and a Ph.D. in Business Administration and Economics, respectively, from the Vienna Business School in Vienna, Austria and a B.S. in Computer Science from the Vienna Institute of Technology. BRIAN E. BOYLE, the Chief Executive Officer of the Company from 1985 to 1987 and Chairman of the Board of Directors from 1985 to 1995, has served as a Director of the Company or its predecessor since 1985. He is currently the Vice Chairman and a Director of Boston Communications Group, Inc. ("Communications"), a Boston-based provider of switch-based call processing to the global wireless industry. Prior to joining Communications, Dr. Boyle was the Chairman and Chief Executive Officer of Credit Technologies, Inc., a Massachusetts-based provider of credit decision and customer acquisition software, from 1989 to 1993. He is also a Director of Saville Systems, a global telecommunications billing software company, with its United States headquarters in Burlington, Massachusetts, as well as of several private companies. Dr. Boyle earned his A.B. in Mathematics and Economics from Amherst College and a B.S. in Electrical Engineering and Computer Science, an M.S. in Operations Research, an E.E. in Electrical Engineering and Computer Science and a Ph.D. in Operations Research, all from the Massachusetts Institute of Technology. TORRENCE C. HARDER has served as a Director of the Company since 1986. He has been the President and Director of Harder Management Company, Inc., a registered investment advisory firm, since its establishment in 1971. He has also been the President and Director of Entrepreneurial Ventures, Inc., a venture capital investment firm, since its founding in 1986. Mr. Harder is a Director of Lightbridge, Inc., a wireless industry software services provider, Dent-A-Med, Inc., RentGrow, Inc., GWA Information Systems, Inc., Trade Credit Corporation and UpToDate in Medicine, Inc. Mr. Harder earned an M.B.A. from the Wharton School of the University of Pennsylvania, and a B.A. with honors in the Philosophy of Economic Thought from Cornell University. 36 38 JEFFREY PARKER has served as a Director of the Company since 1992. He is the founder and has served since 1997 as the Chief Executive Officer of CCBN.COM, a world wide web information services company based in Boston. He is also the founder and has served since 1991 as the managing director of Private Equity Investments, a venture capital firm focusing on start-up and early stage companies. Mr. Parker is a Director of Boston Treasury Systems, FaxNet Corporation, Pacific Sun Industries, Vintage Partners and XcelleNet, Inc. Mr. Parker earned a B.A., an M.A. in Engineering and an M.B.A. from Cornell University. ALAN ZAKON has served as a Director of the Company since 1988. Since 1995, he has been the Vice Chairman and a Director, and since November 1997, Chairman of the Executive Committee, of Autotote Corporation, a New York-based global gaming and simulcasting company. He served as Managing Director of Bankers Trust Corporation from 1989 to 1995 where he was Chairman of the Strategic Policy Committee. Dr. Zakon is a Director of Arkansas-Best Freight Corporation, a nationwide commercial transportation and trucking company. Dr. Zakon holds a B.A. from Harvard University, an M.S. in Industrial Management from the Sloane School at the Massachusetts Institute of Technology and a Ph.D. in Economics and Finance from the University of California at Los Angeles. RICHARD F. LATOUR has served as Executive Vice President, Chief Operating Officer and Chief Financial Officer of the Company since 1995. From 1986 to 1995, Mr. Latour was Vice President of Finance and Chief Financial Officer of the Company. Prior to joining the Company, Mr. Latour was Vice President, Finance for TRAK, Incorporated, an international manufacturer and distributor of consumer products, where he was responsible for all financial and related administrative functions. J. GREGORY HINES has served as Vice President, Funding since 1993. From the time he joined the Company in 1992 until 1993, Mr. Hines served as funds manager of the Company. Prior to joining the Company, Mr. Hines was an assistant vice president in the Equipment Finance Division at the Bank of New England, N.A. and Fleet National Bank. JOHN PLUMLEE has served as Vice President, MIS, of the Company since 1990. Prior to joining the Company, Mr. Plumlee was Vice President of M.M.C., Inc., a firm focusing on the delivery of software services to local governments. CAROL SALVO has served as Vice President, Legal, of the Company since 1996. From 1992 to 1995, Ms. Salvo served as Litigation Supervisor of the Company. From 1995 to 1996, Ms. Salvo served as Director of Legal Collection Services of the Company. Prior to joining the Company, Ms. Salvo was a junior accountant with InfoPlus Inc. Each of the above-named directors of the Company serves until the next annual meeting of the stockholders of the Company or until their respective earlier removal or resignation. Each of the above-named executive officers of the Company serves until his or her successor is appointed by the Board of Directors. COMPENSATION OF DIRECTORS The Board of Directors of the Company is comprised of five Directors, one of whom, Peter Bleyleben, is a salaried employee of the Company who receives no additional compensation for services rendered as a Director. The members of the Company's Board of Directors who are not employees of the Company ("Non- Employee Directors") receive compensation under the Company's Board of Directors Stock Unit Compensation Plan (the "Stock Unit Plan") for their service on the Board of Directors. Directors also are reimbursed for out-of-state travel expenses incurred in connection with attendance at meetings of the Board of Directors and committees thereof. The Company adopted the Stock Unit Plan in February 1997. Under the Stock Unit Plan, Non-Employee Directors who do not serve as committee chairpersons receive up to $30,000 per year, payable $3,750 per meeting in cash and $3,750 per meeting in stock units (the "Stock Units"). Committee chairpersons receive up to $35,000 per year, payable $4,375 per meeting in cash and $4,375 per meeting in Stock Units. In addition, the Company pays for health care insurance for each Non-Employee Director. Under the Stock Unit Plan, the Company pays the participant the cash amount currently and credits Stock Units in the appropriate amounts to a deferred fee account on the date of the Board of Directors or Committee 37 39 meeting. Each Stock Unit in the deferred fee account is valued at the time each such credit is made at the then-current value of the Common Stock, as that value is determined from time to time by the Board of Directors. The number of Stock Units credited to each Non-Employee Director's deferred fee account and the value placed on each Stock Unit is appropriately adjusted in the event of a stock dividend, stock split or other similar change affecting the Common Stock. If any person or group acquires the right to obtain beneficial ownership of 51% or more of the outstanding Common Stock, each Non-Employee Director may elect to convert his or her Stock Units into cash at the per share price to be paid by such person or group if such price is higher than the value at which the Stock Unit was granted. A participant is not entitled to payment for any Stock Unit with a value less than such per share price. If a Director dies prior to the receipt of the distribution under the Stock Unit Plan, the distributable balance thereunder shall be distributed to the Non-Employee Director's designated beneficiary. The Board of Directors may terminate the Stock Unit Plan at any time in its discretion. The Stock Unit Plan is automatically terminated upon completion of all distributions required thereunder. As of March 31, 1998, Dr. Boyle, Mr. Harder, Mr. Parker and Dr. Zakon had 1,316.17, 1,535.53, 1,316.17 and 1,535.53 Stock Units in their respective accounts. EXECUTIVE COMPENSATION The following Summary Compensation Table sets forth certain information concerning the compensation payable by the Company to its Chief Executive Officer and its other four most highly compensated executive officers for the years ended December 31, 1997 (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE(1)
LONG TERM COMPENSATION ------------ ANNUAL COMPENSATION SECURITIES NAME AND -------------------- UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(#) COMPENSATION(3) ------------------ ---- ------ -------- ---------- --------------- Peter R. Bleyleben............... 1997 $218,798 $276,736 0 $71,073(4) President, Chief Executive 1996 187,837 214,073 0 73,674 Officer and Director 1995 182,208 173,285 25,000 8,779 Richard F. Latour................ 1997 169,495 153,255(5) 0 49,680(6) Executive Vice President, 1996 141,535 36,000 0 44,381 Chief Operating Officer 1995 129,787 26,559 42,500 4,623 and Chief Financial Officer J. Gregory Hines................. 1997 87,348 26,950 0 3,206(7) Vice President, Funding 1996 79,853 10,320 0 1,986 1995 71,602 6,122 20,000 1,657 John Plumlee..................... 1997 124,624 29,769 0 20,687(8) Vice President, MIS 1996 108,657 14,346 0 17,903 1995 91,727 6,713 15,000 2,245 Carol Salvo...................... 1997 73,347 8,802 0 2,170(9) Vice President, Legal 1996 47,190 3,817 0 1,502 1995 44,182 0 15,000 988
- --------------- (1) Columns required by the Rules and regulations of the Securities and Exchange Commission that contain no entries have been omitted. (2) Bonuses are paid over a three-year period, with one-third payable each year. The remaining two-thirds is subject to discretionary review by the Company and, therefore, does not vest to the employee. The bonus amount set forth for each fiscal year thus represents the amount actually paid for such fiscal year, plus amounts relating to the prior two fiscal years. 38 40 (3) All other compensation for 1995 does not include amounts paid by the Company for split dollar life insurance premiums and executive disability insurance policy premiums because the Company paid these premiums in a lump sum and did not calculate amounts attributable to each individual. (4) Amounts for Dr. Bleyleben include: (a) contributions by the Company under the Company's 401(k) retirement/profit sharing plan in 1997 ($4,470), 1996 ($4,500) and 1995 ($4,620); (b) split dollar life insurance premiums paid by the Company in 1997 ($62,461) and 1996 ($60,515) (in the event of the death of Dr. Bleyleben, the Company is entitled to the cash value under such plan with the beneficiary receiving the life insurance portion thereof); (c) executive disability insurance policy premiums paid by the Company in 1997 ($3,546) and 1996($3,546); and (d) the benefit to the executive of interest-free loans from the Company based on the applicable federal rate in effect on the date of issuance of such loan, in 1997 ($596), 1996 ($5,113) and 1995 ($4,159). (5) Does not include $179,745 which related to bonuses awarded in prior years and deferred until 1997 at Mr. Latour's option. (6) Amounts for Mr. Latour include: (a) contributions by the Company under the Company's 401(k) retirement/profit sharing plan in 1997 ($4,500), 1996 ($4,435) and 1995 ($3,176); (b) split dollar life insurance premiums paid by the Company in 1997 ($40,501) and 1996 ($35,067) (in the event of the death of Mr. Latour, the Company is entitled to the cash value under such plan with the beneficiary receiving the life insurance portion thereof); (c) executive disability insurance policy premiums paid by the Company in 1997 ($1,586) and 1996 ($2,460); and (d) the benefit to the executive of interest-free loans from the Company based on the applicable federal rate in effect on the date of issuance of each loan, in 1997 ($3,093), 1996 ($2,419) and 1995 ($1,447). (7) Amounts for Mr. Hines include: (a) contributions by the Company under the Company's 401(k) retirement/profit sharing plan in 1997 ($2,273), 1996 ($1,693) and 1995 ($1,657); (b) term life insurance premiums paid by the Company in 1997 ($84) and 1996 ($76); (c) executive disability insurance policy premiums paid by the Company in 1997 ($434) and 1996 ($217); and (d) the benefit to the executive in 1997 of an interest-free loan from the Company based on the applicable federal rate in effect on the date of issuance of such loan ($415). (8) Amounts for Mr. Plumlee include: (a) contributions by the Company under the Company's 401(k) retirement/profit sharing plan in 1997 ($3,722), 1996 ($2,291) and 1995 ($2,245); (b) split dollar life insurance premiums paid by the Company in 1997 ($15,113) and 1996 ($15,104) (in the event of the death of Mr. Plumlee, the Company is entitled to the cash value under such plan with the beneficiary receiving the life insurance portion thereof); (c) executive disability insurance policy premiums paid by the Company in 1997 ($1,016) and 1996 ($508); and (d) the benefit to the executive in 1997 of interest-free loans from the Company based on the applicable federal rate in effect on the date of issuance of each loan ($836). (9) Amounts for Ms. Salvo include: (a) contributions by the Company under the Company's 401(k) retirement/profit sharing plan in 1997 ($1,686), 1996 ($1,447) and 1995 ($988); (b) term life insurance premiums paid by the Company in 1997 ($69) and 1996 ($55); and (c) the benefit to the executive in 1997 of an interest-free loan from the Company based on the applicable federal rate in effect on the date of issuance of such loan ($415). STOCK OPTION PLANS 1998 Equity Incentive Plan The Company intends to adopt the 1998 Equity Incentive Plan (the "1998 Plan") to attract and retain the best available talent and encourage the highest level of performance by directors, employees and other persons who perform services for the Company. The 1998 Plan permits the Compensation Committee of the Board of Directors (or such other committee designated by the Board) to make various long-term incentive awards as described below ("Awards"), generally equity-based, to eligible persons. The Board of Directors believes that by including various kinds of Awards in the 1998 Plan, the Compensation Committee will have maximum flexibility in determining what vehicle is best suited at any particular time to act as a long-term 39 41 incentive. The Company intends to reserve 1,000,000 shares of Common Stock for issuance pursuant to the 1998 Plan. The 1998 Plan is administered by the Compensation Committee. So long as it acts consistently with the express provisions of the 1998 Plan, the Compensation Committee has the authority to (a) grant Awards; (b) determine the persons to whom Awards shall be granted; (c) determine the size of Awards; (d) determine the terms and conditions applicable to Awards; (e) determine the terms and provisions of Award agreements; (f) interpret the 1998 Plan; and (g) prescribe, amend and rescind rules and regulations relating to the 1998 Plan. The 1998 Plan provides for grants of Awards including, but not limited to (a) options to purchase shares of Common Stock consisting of (i) incentive stock options at not less than the full market value on the date of grant (except in the case of a shareholder possessing more than 10% of the total combined voting power of all classes of Common Stock, in which case the exercise price shall be not less than 110% of the fair market value on the date of grant); (ii) non-qualified stock options at an exercise price determined by the Compensation Committee; (b) stock appreciation rights (either tandem or freestanding) which are rights to receive an amount equal to the increase, between the date of grant and the date of exercise, in the fair market value of the number of shares of Common Stock subject to the stock appreciation right; (c) shares of restricted stock which are shares of Common Stock granted to an eligible person but which have certain conditions attached to them which must be satisfied in order for the holder to have unencumbered rights to the restricted stock; and (d) performance Awards which are awards in shares of Common Stock or cash and which may be awarded based on the extent to which the person achieves selected performance objectives over a specified period of time. All material terms of such Awards shall be determined by the Compensation Committee. At the discretion of the Compensation Committee, in the event of a Change in Control (as hereinafter defined), certain Awards may vest immediately. The Board of Directors may suspend, terminate, modify or amend the 1998 Plan at any time without shareholder approval except to the extent that shareholder approval is required by law or by the rules of the principal stock exchange on which the Common Stock is listed. The Board of Directors may not, however, without the consent of the person to whom an Award was previously granted, adversely affect the rights of that person under the Award. 1987 Stock Option Plan The Company has adopted the 1987 Stock Option Plan (the "1987 Stock Option Plan") to align the interests of the officers, employees, directors, consultants and agents of the Company with those of its stockholders and to encourage participants therein to acquire an ownership interest in the Company through the granting of options. The Company has reserved 610,000 shares of Common Stock for issuance pursuant to the 1987 Stock Option Plan, which the Board of Directors of the Company administers. Pursuant to the terms and conditions of the 1987 Stock Option Plan, the Board of Directors (or a committee designated by the Board of Directors) shall effect the grant of options under the 1987 Stock Option Plan, determine the form of options to be granted in each case, and make any other determinations under, and interpretation of, any provision of the 1987 Stock Option Plan. The Board of Directors may amend and make such changes in and to the 1987 Stock Option Plan as it may deem proper and in the best interests of the Company. The 1987 Stock Option Plan provides for two separate forms of options to be granted: incentive stock options pursuant to Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), and non-qualified stock options. Incentive stock options may only be granted to employees of the Company. Non- qualified stock options may be granted to any officer, employee, director (except a disinterested director, as defined in the 1987 Stock Option Plan), consultant or agent of the Company. The Board of Directors of the Company, acting by a majority of its disinterested directors, determines the persons to be granted options, the number of shares subject to each option, whether the options shall be incentive stock options or non-qualified stock options, and the terms of the options, consistent with the provisions of the 1987 Stock Option Plan. The Board of Directors may appoint from its disinterested directors a committee of three or more persons who may exercise the powers of the Board of Directors in granting options under the 1987 Stock Option Plan. A 40 42 disinterested director is defined as a director who is not currently eligible, and has not been eligible at any time within one year prior to the granting of the options in question, to receive any option granted under the 1987 Stock Option Plan, or any stock, stock option or stock appreciation rights under any other plan of the Company or its affiliates. The exercise price for the shares of Common Stock which may be purchased under each incentive stock option must be at least equal to the fair market value per share of the outstanding Common Stock of the Company at the time the option is granted as determined by the Board of Directors in its discretion. The aggregate fair market value (determined as of the time the option is granted) of the Common Stock for which an individual may be granted incentive stock options in any calendar year is subject to the maximum permitted by the Code. The exercise price for the shares of Common Stock which may be purchased under each incentive stock option issued to a person who, immediately prior to the grant of such option, owns (directly or indirectly) Common Stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its parent or subsidiaries (a "Restricted Individual"), shall be at least equal to one hundred and ten percent (110%) of the fair market value of the Common Stock subject to the option. The exercise price for the shares of Common Stock which may be purchased under each non-qualified stock option shall be at least equal to fifty percent (50%) of the fair market value of the Common Stock subject to the option. Each incentive stock option is exercisable at such time or times as are set forth in the option agreement with respect to such option, but in no event after the expiration of ten years from the date such option is granted. An incentive stock option granted to a Restricted Individual shall not be exercisable after the expiration of five years from the date such option is granted. A non-qualified stock option shall be exercisable for such consideration, in such manner and at such time or times as shall be set forth in an option agreement containing such provisions as the Board of Directors shall determine in granting such an option, and may be exercisable for a period of ten years and one day from the date such option is granted, but in no event after such period. Each option granted under the 1987 Stock Option Plan is not transferable by the optionee. The terms of the options and the number of shares of Common Stock subject to the 1987 Stock Option Plan shall be equitably adjusted in such a manner as to prevent dilution or enlargement of option rights in the event of a declaration of a dividend payable to the holders of Common Stock in stock of the same class; a split or a reverse split of the Common Stock; or a recapitalization of the Company under which shares of one or more different classes are distributed in exchange for or upon the Common Stock without payment of any valuable consideration by the holders thereof. The Board of Directors shall conclusively determine the terms of any such adjustment. 41 43 There were no stock options awarded in 1997 under the 1987 Stock Option Plan. The following table indicates the aggregate option exercises in 1997 by the Named Executive Officers and fiscal year-end option values: AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING IN-THE-MONEY UNEXERCISED OPTIONS OPTIONS AT FISCAL SHARES AT FISCAL YEAR-END(#) YEAR-END(1) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE (#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------ ----------- ----------- ------------- ----------- ------------- Peter R. Bleyleben..... 4,100 $ 39,340 0 0 $ 0 $ 0 Richard F. Latour...... 18,000 150,161 10,513 29,007 142,050 386,831 J. Gregory Hines....... 4,540 35,608 3,565 10,605 47,856 142,271 John Plumlee........... 11,030 97,879 3,003 8,967 39,069 116,661 Carol Salvo............ 3,030 21,119 3,003 8,967 39,069 116,661
- --------------- (1) The amounts in these columns are calculated using the difference between the fair market value, estimated to be $10.87 at March 31, 1997 and $16.71 at December 31, 1997, of the Company's Common Stock at exercise or at the end of the Company's 1997 fiscal year, as the case may be, and the option exercise prices. The Board of Directors determines the fair market value of the Company's Common Stock in connection with the Stock Unit Plan based on a formula which values the Company at a multiple (determined by reference to an index of publicly traded companies) of the Company's most recent four quarters net income, multiplied by a discount factor to take into account the illiquidity of the Common Stock. The most recent value as so determined by the Board of Directors was used in such calculations. PROFIT SHARING PLAN AND DISCRETIONARY BOARD OF DIRECTOR BONUS PROGRAMS The Company pays annual bonuses and makes profit sharing payments as determined by the Compensation Committee of the Board of Directors. These payments are made under informal arrangements and are based on an employee's performance during the prior fiscal year. Historically, the Board of Directors has determined annual bonus and profit sharing payments for Dr. Bleyleben and Mr. Latour. The Board of Directors also establishes a pool to be allocated by Dr. Bleyleben and Mr. Latour on an annual basis among senior executives of the Company. Each employee is paid one-third of his or her bonus and profit sharing at the time such amount is determined. The remaining two-thirds is paid over the next two years in the discretion of the Board of Directors or Dr. Bleyleben and Mr. Latour based on Company and employee performance. EMPLOYMENT AGREEMENTS The Company intends to enter into Employment Agreements with Dr. Bleyleben and Mr. Latour for a three-year period commencing the date of execution, subject to automatic successive one-year renewals unless terminated pursuant to the terms thereof. In the event of a termination of the Employment Agreements by the Company without cause, or by Dr. Bleyleben or Mr. Latour for specified good reason, or by either party in connection with a Change of Control, the Employment Agreements provide for three years of severance payments to Dr. Bleyleben and Mr. Latour, respectively, on the basis of their highest base salary during the employment period. In addition, Dr. Bleyleben and Mr. Latour would also be entitled to a prorated payment of base salary and bonus to the date of termination, and the acceleration of deferred compensation and accrued but unpaid amounts under the Company's bonus and/or profit sharing plans. Dr. Bleyleben's and Mr. Latour's current base salaries, respectively, are and . The bonus for the current fiscal year will be determined by the Board of Directors. If, in connection with a Change of Control, Dr. Bleyleben or Mr. Latour shall incur any excise tax liability on the receipt of "excess parachute payments" as defined in Section 280G of the Internal Revenue Code of 1986, as amended, the Employment Agreements provide for gross-up payments to return them to the after-tax position they would have been in if no excise tax had been imposed. As used in each Employment Agreement, "Change of Control" means (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of beneficial 42 44 ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; (ii) individuals who, as of the date of the Employment Agreement constitute the Board of Directors, cease for any reason to constitute at least a majority of the Board of Directors except with respect to any director who was approved by a vote of at least a majority of the directors then comprising the Board of Directors; (iii) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, more than 60% of the then outstanding shares of Common Stock continues to be owned by the shareholders who were the beneficial holders of such stock prior to such transaction; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company. As used in each Employment Agreement, "for good reason" means the assignment to the executive of duties inconsistent with the executive's position, authority, duties or responsibilities; the failure by the Company to pay the agreed base salary and provide the executive with benefits; moving the executive to a location more than 35 miles from the executive's location immediately prior to the Change of Control; any termination other than as expressly permitted by the Employment Agreement; and the failure by the Company to require a successor to assume all obligations under the Employment Agreement. The Company has also entered into separate employment agreements with each of the remaining Named Executive Officers which are designed to provide an incentive to each executive to remain with the Company pending and following a Change of Control. Each Employment Agreement has an initial term of one year following a Change of Control, with automatic extensions upon the expiration of the initial one-year term for successive one-month periods. Pursuant to each Employment Agreement, the executive will be entitled to receive an annual base salary of not less than twelve times the highest monthly base salary paid or payable to the executive within the twelve months preceding the Change of Control. If the Agreement is terminated by the Board other than for cause, death or disability, or is terminated by the executive for specified good reason, the Company shall pay to the executive in a cash lump sum within 30 days after the date of termination, the aggregate of the following amounts: (i) the executive's annual base salary through the date of termination; (ii) a special bonus in the amount of $575,000, $600,000 and $585,000 for Messrs. Hines and Plumlee and Ms. Salvo, respectively; (iii) any other compensation previously deferred by the executive, together with any accrued interest or earnings thereon; and (iv) any accrued vacation pay. CERTAIN TRANSACTIONS During 1995, 1997 and 1998, Richard F. Latour, Executive Vice President, Chief Operating Officer and Chief Financial Officer of the Company, borrowed an aggregate of $106,300 from the Company to exercise vested options to purchase Common Stock (the "Exercised Options"). The loans are non-interest bearing unless the principal amount thereof is not paid in full when due, at which time interest accrues and is payable at a rate per annum equal to the prime rate published by The Wall Street Journal plus 4.0%. The outstanding principal balance of these loans is reduced by any dividends payable upon the stock underlying the Exercised Options. All principal amounts outstanding under such loans are due on the earlier of the end of employment or December 27, 2005. During the fiscal year ended December 31, 1997, the largest aggregate amount outstanding under this loan was $86,297, with $70,313 remaining outstanding at March 31, 1998. The Parker Family Limited Partnership, controlled by Jeffrey Parker, a director of the Company, loaned the Company an aggregate of $2.0 million in the form of Junior Subordinated Notes as follows: $500,000 on June 1, 1996 at an interest rate per annum equal to the higher of 12% or a bank prime rate plus 3% maturing June 1, 2000; $250,000 on December 2, 1996 at an interest rate per annum equal to the higher of 12% or a bank prime rate plus 3% maturing December 1, 1998; $250,000 on December 2, 1996 at an interest rate per annum equal to the higher of 12% or a bank prime rate plus 3% maturing December 1, 1999; $500,000 on December 2, 1996 at an interest rate per annum equal to the higher of 12% or a bank prime rate plus 3% maturing December 1, 2001; $250,000 on December 2, 1996 at an interest rate per annum equal to the higher of 12% or a bank prime rate plus 3% maturing December 1, 2002; $125,000 on September 1, 1997 at an 43 45 interest rate per annum equal to 11% maturing September 1, 2001; and $125,000 on September 1, 1997 at an interest rate per annum equal to 11% maturing September 1, 2003. Peter R. Bleyleben, the President and Chief Executive Officer and a Director of the Company, loaned the Company $100,000 on December 1, 1996 at 12% interest per annum in the form of a Junior Subordinated Note maturing December 1, 2001. Alan J. Zakon, a director of the Company, loaned the Company $100,000 on March 18, 1998 at 10.5% interest per annum through his IRA in the form of a Junior Subordinated Note maturing April 1, 1999. Ingrid R. Bleyleben, the mother of Peter R. Bleyleben, the President and Chief Executive Officer and a Director of the Company, loaned the Company the following amounts in the form of Junior Subordinated Notes: $120,000 on February 16, 1996 at an interest rate per annum equal to 11.5% maturing March 1, 2001; $25,000 on December 17, 1996 at an interest rate per annum equal to 11.5% maturing January 1, 2002 and $20,000 on June 4, 1997 at an interest rate per annum equal to 11.5% maturing May 1, 2002. PRINCIPAL STOCKHOLDERS The following table sets forth information as of March 31, 1998 with respect to the beneficial ownership of Common Stock of each person known by the Company to be the beneficial owner of more than 5% of the 4,936,518 outstanding shares of Common Stock, each director and executive officer of the Company and all directors and executive officers of the Company (not including treasury stock) as a group. Each person named has sole voting and investment power with respect to the shares indicated, except as otherwise stated in the notes to the table.
NUMBER OF SHARES PERCENTAGE OF OUTSTANDING NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK ------------------------------------ --------------------- ------------------------- Peter R. Bleyleben(2)............................... 842,480 17.07% Brian E. Boyle(3)................................... 1,120,000 22.7% Torrence C. Harder(4)............................... 1,091,726 22.12% Jeffrey Parker(5)................................... 170,420 3.45% Alan Zakon.......................................... 20,000 * Richard F. Latour(6)................................ 163,189 3.20% J. Gregory Hines.................................... 9,573 * John Plumlee........................................ 14,773 * Carol Salvo......................................... 6,773 * All directors and executive officers as a group (9 persons).......................................... 3,438,934 69.66%
- --------------- * Less than 1%. (1) Unless otherwise indicated in the footnotes, each of the stockholders named in this table has sole voting and investment power with respect to the shares of Common Stock shown as beneficially owned by such stockholder, except to the extent that authority is shared by spouses under applicable law. (2) Includes 9,800 shares of Common Stock owned by Dr. Bleyleben's mother for which Dr. Bleyleben disclaims beneficial ownership. (3) Includes 358,400 shares of Common Stock owned by Dr. Boyle's former spouse over which Dr. Boyle retains voting control, for which Dr. Boyle disclaims beneficial ownership. (4) Includes 50,000 shares of Common Stock held in trust for Mr. Harder's daughter, Lauren E. Harder, over which Mr. Harder retains sole voting and investment power as the sole trustee; 50,000 shares of Common Stock held in trust for Mr. Harder's daughter, Ashley J. Harder, over which Mr. Harder maintains voting and investment power as the sole trustee; 187,786 shares of Common Stock owned by Entrepreneurial Ventures, Inc. over which Mr. Harder retains shared voting and investment power through his ownership in, and positions as President and Director of, Entrepreneurial Ventures, Inc.; and 44 46 17,023 shares of Common Stock owned by Lightbridge, Inc. over which Mr. Harder retains shared voting and investment power through his ownership in, and position as Director of, Lightbridge, Inc. (5) Owned by the Parker Family Limited Partnership over which Mr. Parker retains shared voting and investment power through his ownership in, and position as Director of, the general partner of the Parker Family Limited Partnership. (6) Includes 1,381 shares of Common Stock issuable under options granted to Mr. Latour pursuant to the 1987 Stock Option Plan. SELLING STOCKHOLDERS Set forth below is information as to each Selling Stockholder, the number of shares of Common Stock of the Company beneficially owned prior to the Offering, the number of shares of Common Stock which may be offered as set forth on the cover of this Prospectus and the number and percentage (if one percent or more) of shares of Common Stock to be beneficially owned after the Offering by such Selling Stockholder assuming all offered shares are sold and assuming that in each case that the Underwriters do not exercise their over-allotment option.
SHARES BENEFICIALLY SHARES TO BE OWNED PRIOR TO BENEFICIALLY OWNED THE OFFERING(1) SHARES AFTER THE OFFERING(1) -------------------- BEING ---------------------- NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT - --------------------------- -------- -------- ------- --------- --------- Peter R. Bleyleben(2)........................ 832,680 16.87% Torrence C. Harder(3)........................ 903,940 18.31 Brian E. Boyle(4)............................ 761,600 15.43 Rosemary Boyle(5)............................ 358,400 7.26 Entrepreneurial Ventures, Inc................ 187,786 3.80 Spindle Limited Partnership.................. 184,344 3.73 Jeffrey Parker(6)............................ 170,420 3.45 Richard F. Latour(7)......................... 163,189 3.20 Rock Creek Partnership....................... 120,830 2.45 Arthur J. Epstein............................ 113,840 2.31 Maureen Curran............................... 36,773 * Alan J. Zakon(8)............................. 20,000 * John Plumlee(9).............................. 14,773 * J. Gregory Hines(10)......................... 9,573 * James Anderson............................... 6,773 * Steven Obana................................. 6,773 * Carol Salvo(11).............................. 6,773 * Stephen Constantino.......................... 3,386 * Kerry Frost.................................. 3,386 *
- --------------- * Less than 1%. (1) Unless otherwise indicated in the footnotes, each of the stockholders named in this table has sole voting and investment power with respect to the shares of Common Stock shown as beneficially owned by such stockholder, except to the extent that authority is shared by spouses under applicable law. (2) Excludes 9,800 shares of Common Stock owned by Dr. Bleyleben's mother for which Dr. Bleyleben disclaims beneficial ownership. Dr. Bleyleben has served as President, Chief Executive Officer and Director of the Company or its predecessor since June 1987. (3) Includes 50,000 shares of Common Stock held in trust for Mr. Harder's daughter, Lauren E. Harder over which Mr. Harder retains sole voting and investment power as the sole trustee; 50,000 shares of Common Stock held in trust for Mr. Harder's daughter, Ashley J. Harder over which Mr. Harder maintains voting and investment power as the sole trustee; and 17,023 shares of Common Stock owned 45 47 by Lightbridge, Inc. over which Mr. Harder retains shared voting and investment power through his ownership in, and position as Director of, Lightbridge, Inc. Excludes 187,786 shares of Common Stock owned by Entrepreneurial Ventures, Inc. over which Mr. Harder retains shared voting and investment power through his ownership in, and position as President and Director of, Entrepreneurial Ventures, Inc. Mr. Harder has served as a Director of the Company since 1986. (4) Includes 761,600 shares held in Dr. Boyle's individual retirement account ("IRA"). Excludes 358,400 shares of Common Stock owned by Rosemary Boyle, Dr. Boyle's former spouse, over which Dr. Boyle retains voting control, for which Dr. Boyle disclaims beneficial ownership. Dr. Boyle, Chairman of the Board of Directors from 1985 to 1995, has served as a Director of the Company or its predecessor since 1985. (5) Held in Ms. Boyle's IRA. (6) Owned by the Parker Family Limited Partnership over which Mr. Parker retains shared voting and investment power through his ownership in, and position as Director of, the general partner of the Parker Family Limited Partnership. (7) Includes 1,381 shares of Common Stock issuable under options granted to Mr. Latour pursuant to the 1987 Stock Option Plan. Mr. Latour has served as Executive Vice President, Chief Operating Officer and Chief Financial Officer of the Company since 1995. (8) Alan Zakon has served as a Director of the Company since 1988. (9) John Plumlee has served as Vice President, MIS, of the Company since 1990. (10) J. Gregory Hines has served as Vice President, Funding, of the Company since 1993. (11) Carol Salvo has served as Vice President, Legal, of the Company since 1996. From 1992 to 1995, Ms. Salvo served as Litigation Supervisor of the Company. From 1995 to 1996, Ms. Salvo served as Director of Legal Collection Services of the Company. DESCRIPTION OF CERTAIN INDEBTEDNESS The Company maintains a diverse mix of funding sources which include its Credit Facilities, Subordinated Debt, and an asset securitization program. Historically, the Company has used each of these three sources to fulfill its liquidity needs. Credit Facilities. Leasecomm Corporation is the borrower (the "Borrower") under agreements with two separate bank groups which provide revolving credit and term loan facilities. The Borrower draws on its facilities regularly, using them as principal sources of funds for its operations. The first facility, led by Fleet Bank, N.A., is a $105 million revolving credit and term loan facility, of which $37.4 million in revolving credit and term loans was outstanding as of March 31, 1998 (the "Fleet Facility"). The second facility, led by BankBoston, N.A., is a $35 million revolving credit and term loan facility, of which $30.1 million in revolving credit and term loans was outstanding as of March 31, 1998 (the "BankBoston Facility"). The Borrower and the lenders under these facilities have entered into an intercreditor agreement which governs the relationship among the lenders under each facility as secured creditors of the Company. The terms of the two facilities are substantially similar. Both are two-year facilities, with the Borrower retaining the option to renew for one year. All balances under the revolving lines of credit will be automatically converted to term loans ("Conversion Term Loans") on July 31, 1999 (the "Commitment Termination Date"), provided the line of credit is not renewed and no event of default exists at that date. All amounts outstanding under the Conversion Term Loans under the Fleet Facility are payable in monthly installments over the weighted average life of the underlying leases and contracts relating to such loans, but in any case no later than the fourth anniversary of the Commitment Termination Date. Amounts outstanding under the Conversion Term Loan under the BankBoston Facility are payable in monthly installments over the two-year period following the Commitment Termination Date. Both facilities provide for a maximum borrowing amount equal to specified percentages of the present value of the remaining scheduled payments due on the 46 48 leases and contracts funded with advances under such facilities or, in the case of certain eligible leases, the lesser of such specified percentage or 100% of the adjusted cost basis of the equipment underlying such lease. Prior to the Commitment Termination Date, amounts may be borrowed under the Fleet Facility as revolving credit loans or term loans ("Fleet Credit Period Term Loans"). Fleet Credit Period Term Loans are repaid in monthly installments over the weighted average life of the underlying leases or contracts funded with such loans, but in any event, no later than the fourth anniversary of the Commitment Termination Date. Under the BankBoston Facility, $2.0 million was borrowed as a term loan (the "BankBoston Credit Period Term Loans"), all of which is due on the Commitment Termination Date, and the remaining availability may be borrowed as revolving credit loans. Outstanding borrowings with respect to the revolving lines of credit bear interest at LIBOR plus 1.85% or the applicable agent's prime or base rate. Outstanding Fleet Credit Period Term Loans and Conversion Term Loans bear interest at LIBOR plus 2.50% or the applicable agent's prime or base rate plus 2.25%. $1.1 million principal amount of the BankBoston Credit Period Term Loans bears interest at 7.75%. The remaining $0.9 million principal amount bears interest at 8.3%. All loans may be prepaid at any time in whole or in part, subject to breakage fees for termination of a LIBOR loan prior to the last day of the interest period for such LIBOR loan. Borrowings are collateralized by pledged leases and service contracts and are guaranteed by the Company. Each of the facilities limits the payment of dividends in any fiscal year to no more than 50% of Consolidated Net Income (as hereinafter defined) of the Company and its subsidiaries for the immediately preceding fiscal year, determined in accordance with generally accepted accounting principles ("GAAP"). Each of the facilities is also subject to covenants, events of default and other standard terms and conditions usual in facilities of this nature, including: the Company and its subsidiaries may not (i) permit the existence of certain liens; (ii) guarantee certain obligations of other persons; (iii) merge or consolidate with any other person, acquire all or substantially all of the assets or stock of any other person or sell all or any substantial part of its assets or create new subsidiaries; (iv) make any material change in its business; (v) prepay any other indebtedness for borrowed money, including the Subordinated Debt; (vi) make capital expenditures in any year in excess of 20% of Consolidated Tangible Net Worth (as hereinafter defined) as of the end of the immediately preceding fiscal year; and (vii) enter into certain transactions with affiliates. Further, the Company may not incur additional indebtedness, other than (i) indebtedness under each Credit Facility; (ii) purchase money indebtedness; (iii) unsecured indebtedness; (iv) certain existing indebtedness, including Subordinated Debt; and (v) indebtedness under lender hedge agreements. In addition, under the Fleet Facility, the Company may not issue any shares of its capital stock or any security convertible into capital stock, if, after giving effect to such issuance, Peter R. Bleyleben, Brian E. Boyle and Torrence C. Harder own less than 45%, or own and/or control in the aggregate less than 80%, of the issued and outstanding shares of capital stock of the Company on a fully diluted basis (assuming the exercise of all outstanding stock options), having ordinary voting rights for the election of directors. The Company is also required to maintain certain financial covenants, including, among others, (i) to maintain at all times a ratio of Consolidated Indebtedness (as hereinafter defined) to Consolidated Tangible Capital Funds (as hereinafter defined) of not more than 6.5:1; (ii) to maintain at all times a Consolidated Tangible Net Worth (as hereinafter defined) of not less than the sum of (a) $5,500,000 and (b) 50% of the aggregate amount of Consolidated Net Income of the Company and its subsidiaries for each of the fiscal quarters ending after December 31, 1994 but without deducting therefrom any amount of Consolidated Net Deficit (as hereinafter defined) for any of such fiscal quarters; (iii) to maintain at all times an allowance for bad debt of the Company and its subsidiaries of at least 5% of Gross Lease Installments (as hereinafter defined); and (iv) to achieve as of the end of each fiscal quarter a Fixed Charge Ratio (as hereinafter defined) of the Company and its subsidiaries of not less than 1.25:1. As of March 31, 1998, the Company was in compliance with all covenants under these facilities. As used in each Credit Facility, the term "Consolidated Indebtedness" means the consolidated Indebtedness (excluding Subordinated Debt but including non-recourse indebtedness) of the Company and its subsidiaries determined in accordance with GAAP; "Consolidated Net Income" and "Consolidated Net Deficit" mean the consolidated net income (or deficit) of the Company and its subsidiaries, determined in accordance with GAAP; provided, however, that Consolidated Net Income and Consolidated Net Deficit shall 47 49 not include amounts added to such net income (or deficit) in respect of the write-up of any asset; the term "Consolidated Tangible Capital Funds" means the sum, with respect to the Company and its subsidiaries, on a consolidated basis, of (a) capital stock, (b) additional paid-in capital, (c) retained earnings and (d) Subordinated Debt less (x) organizational costs and good will, (y) treasury stock and (z) 25% of debt issue costs determined in accordance with GAAP; the term "Consolidated Tangible Net Worth" means the sum, with respect to the Company and its subsidiaries on a consolidated basis, of (a) capital stock, (b) additional paid-in capital and (c) retained earnings, less the sum of (x) organizational costs and goodwill, (y) treasury stock and (z) 25% of debt issue costs determined in accordance with GAAP; the term "Fixed Charge Ratio" means the ratio of Consolidated Earnings, during any fixed period consisting of the preceding four consecutive fiscal quarters, to Fixed Charges, payable during such period; and the term "Gross Lease Installments" means the aggregate receivables due to the Borrower from all leases of equipment. In addition, "Consolidated Earnings" means the sum of Consolidated Net Income plus, on a consolidated basis for the Company and its subsidiaries, (a) all provisions for any deferred federal, state or other taxes plus (b) interest on indebtedness (including payments on capitalized lease obligations in the nature of interest), all as determined in accordance with GAAP; and "Fixed Charges" means on a consolidated basis for the Company and its subsidiaries, the scheduled payments of interest on all indebtedness (including payments on capitalized lease obligations in the nature of interest). The Company expects to obtain a waiver prior to consummation of the Offering of certain covenants contained in the Credit Facilities which would be violated as a result of consummation of the Offering and the use of proceeds thereof. Set forth below is a summary of the material terms of the Company's notes payable under these facilities as of March 31, 1998.
PRINCIPAL AMOUNT BANK OUTSTANDING FIXED/FLOATING RATE MATURITY ---- ---------------- -------------- ---- -------- (DOLLARS IN MILLIONS) Fleet Bank, N.A.............. $ 4.3 Fixed 8.30% November 24, 1998 Fleet Bank, N.A./Commerzbank AG......................... 8.6 Fixed 7.75 August 2, 1999 BankBoston, N.A.............. 17.5 Floating 8.25(a) July 10, 1998 Fleet Bank, N.A./BankBoston............ 37.1 Floating Prime Revolving ----- $67.5 =====
- --------------- (a) Based on LIBOR as of March 31, 1998 plus 1.85%. The Company periodically enters into interest rate swaps to hedge its floating rate exposure. Rate shown represents swapped fixed rate. SUBORDINATED DEBT Since the Company's founding in 1986, Subordinated Debt has been an important component of its funding program for two reasons. First, the Company's Subordinated Debt is treated as equity in calculating the financial covenants under the Company's Credit Facilities, allowing the Company to leverage its common equity to a greater extent. Second, the Company uses its Subordinated Debt program as a source of funding for leases, contracts and loans of certain products which otherwise are not eligible for funding under the Credit Facilities and for potential portfolio purchases. Over the last decade, the Company has expanded its Subordinated Debt program by extending maturities, increasing issuance frequency, and expanding its investor 48 50 universe to include banks, insurance companies, and individual investors. The table below sets forth selected information as of March 31, 1998 with respect to the Company's current outstanding issuances:
DATE OF PRINCIPAL AMOUNT ------------------------------------ OUTSTANDING RATE ISSUE MATURITY ---------------- ---- ----- -------- (DOLLARS IN MILLIONS) Massachusetts Mutual Life Insurance Co.............. $ 6.0 12.0% August 1, 1994 July 15, 2001(a) Rothschild Inc.............. 5.0 12.5 October 17, 1996 October 1, 2001(b) Aegon Insurance Group....... 5.0 12.6 October 15, 1996 October 15, 2003(c) ----- 16.0 Others(d)................... 11.4 ----- $27.4 =====
- --------------- (a) Repayment schedule requires annual principal payments of $1.5 million, commencing July 15, 1997, until the note matures. (b) Repayment schedule requires monthly principal payments of $125,000 for the period from November 1, 1998 through October 1, 2000, after which time principal payments increase to $167,000 per month from November 1, 2000 until maturity. (c) Repayment schedule requires quarterly payments of $250,000 commencing March 15, 1999 until maturity. (d) Issued in private placements to various individual investors at interest rates ranging from 9.5% to 14.0% at May 31, 1998, with maturities ranging from July 14, 1998 to September 1, 2003. Other than as set forth above, the terms of the Note Agreements covering the Massachusetts Mutual Life Insurance Co. subordinated notes (the "MassMutual Agreement"), the Rothschild Inc. subordinated notes (the "Rothschild Agreement") and the Aegon Insurance Group subordinated notes (the "Aegon Agreement", and together with the MassMutual Agreement and the Rothschild Agreement, collectively, the "Subordinated Note Agreements") are substantially similar. All amounts outstanding under the Subordinated Note Agreements may be prepaid, subject to the payment of a "Make-Whole Amount" equal to the excess of (i) the present value of the remaining principal payments due and owing under each agreement plus the amount of interest that would have been payable in respect of such dollar amount, determined by discounting amounts at the Reinvestment Rate from the respective dates on which they would have been payable over (ii) 100% of the principal amount of the outstanding notes being prepaid. The "Reinvestment Rate" is 2.00% plus the arithmetic mean of the treasury constant maturity yields corresponding to the weighted average life to maturity of the principal being repaid. In the case of the Aegon Note Agreement and the MassMutual Agreement, if the Reinvestment Rate is equal to or higher than the interest rate on the applicable note, the Make-Whole Amount would be zero. In addition, principal amounts outstanding under the Aegon Agreement may not be prepaid until after October 15, 1998. Each Subordinated Note Agreement permits the payment of dividends on the Common Stock so long as the aggregate amount paid during the period from January 1, 1994 (January 1, 1996 in the case of the Aegon Agreement) to and including the date of the dividend payment would not exceed the sum of (A) 35% of consolidated net income for such period, computed on a cumulative basis for the entire period (or if such consolidated net income is a deficit figure, then minus 100% of such deficit) plus (B) the net cash proceeds from the sale after January 1, 1994 (January 1, 1996 in the case of the Aegon Agreement) of capital stock of the Company plus (C) the aggregate principal amount of any debt of the Company which has been converted after January 1, 1994 (January 1, 1996 in the case of the Aegon Agreement) into capital stock of the Company minus (D) since January 1, 1994 (January 1, 1996 in the case of the Aegon Agreement), the aggregate amount of dividends paid on the Preferred Stock, prepayments of principal under the subordinated notes listed under "Others" in the above table ("Junior Subordinated Notes") and amounts paid to purchase, redeem or retire any shares of its capital stock. In addition, the Company is required to make an offer of prepayment to holders of the notes outstanding under the Subordinated Note Agreements upon a change of 49 51 control, defined as any issue, sale or other disposition of shares of capital stock of the Company which results in any person or group of persons acting in concert (other than Dr. Bleyleben, Dr. Boyle and Mr. Harder and their affiliates) owning more than 50% of the voting stock of the Company. Each of the Subordinated Note Agreements is also subject to covenants, events of default and other standard terms and conditions usual in agreements of this nature, including the following: the Company and its subsidiaries may not (i) permit the existence of certain liens; (ii) guarantee certain obligations of other persons; (iii) merge or consolidate with any other person, acquire all or substantially all of the assets or stock of any other person or sell all or any substantial part of its assets or create new subsidiaries; (iv) make any material change in its business; (v) prepay the Junior Subordinated Notes, except for limited principal amounts in any 12-month period; (vi) enter into certain transactions with affiliates; and (vii) incur additional indebtedness, other than certain permitted indebtedness. In addition, at all time while the notes are outstanding under the Subordinated Note Agreements, the Company must maintain a $1,500,000 key man life insurance policy on Dr. Bleyleben, and under the Rothschild Agreement, Dr. Bleyleben must continue to serve as Chief Executive Officer and hold at least 12% of the voting stock of the Company on a fully diluted basis. The Company expects to obtain a waiver prior to consummation of the Offering of the prohibition on prepayment of the Junior Subordinated Notes and the requirement that Dr. Bleyleben hold at least 12% of the Common Stock. The Company is also required under the Subordinated Note Agreements to maintain certain financial covenants, including, among others, (i) to maintain at all times an allowance for bad debts reserve in an amount not less than 100% of Delinquent Billed Lease Receivables (as hereinafter defined) (150% in the Aegon Agreement for any period during which the Adjusted Interest Coverage Ratio (as hereinafter defined) is less than 1.10 to 1.00); (ii) maintain at all times consolidated net worth at least equal to the greater of (a) $9,000,000 and (b) the sum of stockholders' equity plus an amount equal to 65% of consolidated net income for the period from January 1, 1994 to the date of any determination thereof, computed on a consolidated basis for the entire period; and (iii) maintain for each period of four consecutive quarters a ratio of Net Income Available for Interest Charges (as hereinafter defined) to interest charges of 1.25 to 1.00. In addition, the Rothschild Agreement requires the Company to maintain the following financial covenants, (i) to ensure at all times that consolidated senior debt does not exceed 700% of Adjusted Consolidated Net Worth (as hereinafter defined); (ii) to ensure at all times that consolidated Subordinated Debt other than Junior Subordinated Notes does not exceed 150% of Consolidated Net Worth (as hereinafter defined); and (iii) to maintain at all time a ratio of senior debt plus consolidated Subordinated Debt other than Junior Subordinated Notes to stockholders' equity of not more than 18 to 1. As used herein, "Adjusted Consolidated Net Worth" means an amount equal to the sum of (i) Consolidated Net Worth plus (ii) Senior Subordinated Debt; "Adjusted Interest Coverage Ratio" means the ratio of Adjusted Net Income Available for Interest Charges to interest charges; "Adjusted Net Income Available for Interest Charges" means Net Income Available for Interest Charges less the Bad Debts Reserve Deficiency; "Bad Debts Reserve Deficiency" means 150% of Delinquent Billed Lease Receivables less the bad debts reserve; "Consolidated Net Worth" means, as of the date of any determination thereof, the sum of (a) stockholders' equity plus (b) the aggregate principal amount of the Junior Subordinated Notes outstanding; "Delinquent Billed Lease Receivables" shall mean receivables due in respect of leases of equipment which remain unpaid 90 or more days after the due date thereof; and "Net Income Available for Interest Charges" means, for any period, the sum of (i) consolidated net income during such period plus (to the extent deducted in determining consolidated net income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its subsidiaries during such period and (iii) interest charges of the Company and its subsidiaries during such period. SECURITIZATION PROGRAM The Company has completed five private Securitizations since its inception for an aggregate amount of $101 million. The securitized receivables remain on the Company's balance sheet. As a result, the Company does not use gain-on-sale accounting. MBIA, Inc. has provided credit enhancement for all Securitizations 50 52 except the first offering. Each Securitization except the first offering was rated 'AAA' by Standard and Poor's and 'Aaa' by Moody's Investor Services, Inc. The first securitization was rated 'AA' by Duff & Phelps. Pricing has improved on each successive transaction, most recently culminating in pricing of 51 basis points over the 2-year US Treasury on its $44.8 million Securitization dated August 12, 1997. The table below sets forth selected information as of March 31, 1998 with respect to the Company's five Securitizations:
PRINCIPAL AMOUNT --------------------- EXPECTED SERIES ORIGINAL REMAINING COUPON(A) MATURITY ------ -------- --------- --------- -------- (DOLLARS IN MILLIONS) 1992-1............................. $ 7.9 -- 7.23% (b) 1993-1............................. 6.1 -- 5.17 (b) 1994-A............................. 18.9 -- 7.33 (b) 1996-A............................. 23.4 $11.2 6.69 May 6, 2000 1997-A............................. 44.8 35.6 6.42 January 16, 2003 ------ ----- $101.0 $46.8 ====== =====
- --------------- (a) Monthly equivalent. (b) Repaid. The Company intends to use securitizations and other similar structured finance transactions as vehicles for minimizing the Company's cost of funds associated with financing its leases. DESCRIPTION OF CAPITAL STOCK GENERAL The authorized capital stock of the Company consists of 10,000,000 shares of common stock, par value $.01 per share ("Common Stock"), 58,823 shares of Series A Preferred Stock, par value $1.00 per share ("Series A Preferred Stock"), 19,608 shares of Series B Preferred Stock, par value $1.00 per share ("Series B Preferred Stock") and 9,800 shares of Series C Preferred Stock, par value $1.00 per share (the "Series C Preferred Stock," and together with the Series A Preferred Stock and the Series B Preferred Stock, the "Preferred Stock"). The following summary does not purport to be complete and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Company's Restated Articles of Incorporation, as amended (the "Articles") and By-Laws, copies of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part, and to the applicable provisions of the Massachusetts Business Corporations Act. COMMON STOCK As of March 31, 1998, 4,936,518 shares of Common Stock were outstanding and held of record by 85 persons. Upon completion of the Offering, shares of Common Stock will be outstanding, excluding 88,482 shares of Common Stock issuable upon exercise of options granted under the 1987 Stock Option Plan. The holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of holders of Common Stock. The Common Stock does not have cumulative voting rights, which means that the holders of a majority of the voting power of shares of Common Stock outstanding are able to elect all the directors and the holders of the remaining shares are not able to elect any directors. Each share of Common Stock is entitled to participate equally in dividends, if, as and when declared by the Company's Board of Directors, and in the distribution of assets in the event of liquidation, subject in all cases to any prior rights of outstanding shares of Preferred Stock. The Company has paid cash dividends quarterly on its Common Stock since August 1995. See "Risk Factors -- Change in Dividend Policy" and "Dividend Policy." The shares of Common Stock have no preemptive rights, redemption rights, or sinking fund provisions. The 51 53 outstanding shares of Common Stock are, and the shares of Common Stock offered hereby upon issuance and sale will be, duly authorized, validly issued, fully paid and nonassessable. PREFERRED STOCK As of March 31, 1998, the Company's authorized Preferred Stock consisted of 58,823 shares of Series A Preferred Stock, none of which is outstanding, 19,608 shares of Series B Preferred Stock, none of which is outstanding, and 9,800 shares of Series C Preferred Stock, 490 shares of which were outstanding. All of the shares of the Series A Preferred Stock and Series B Preferred Stock were converted previously to Common Stock. Under the terms of the Articles, the Series A Preferred Stock and the Series B Preferred Stock were permanently retired and cancelled upon their conversion to Common Stock, and may not be reissued. The Articles also provide that the Series C Preferred Stock will convert automatically into 9,800 shares of Common Stock upon consummation of this Offering. Upon such conversion, the Articles require that all such shares of Series C Preferred Stock will be permanently retired and cancelled and may not be reissued. MASSACHUSETTS LAW AND CERTAIN CHARTER PROVISIONS Following the Offering, the Company expects that it will have more than 200 stockholders, thus making it subject to Chapter 110F of the Massachusetts General Laws, an anti-takeover law. This statute generally prohibits a publicly-held Massachusetts corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless (i) the interested stockholder obtains the approval of the Board of Directors prior to becoming an interested stockholder, (ii) the interested stockholder acquires 90% of the outstanding voting stock of the corporation (excluding shares held by certain affiliates of the corporation) at the time it becomes an interested stockholder, or (iii) the business combination is approved by both the Board of Directors and the holders of two-thirds of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder). An "interested stockholder" is a person who, together with affiliates and associates, owns (or at any time within the prior three years did own) 5% or more of the outstanding voting stock of the corporation. A "business combination" includes a merger, a stock or asset sale, and certain other transactions resulting in a financial benefit to the interested stockholder. By a vote of a majority of its stockholders, the Company may elect not to be governed by Chapter 110F, but such an amendment would not be effective for 12 months and would not apply to a business combination with any person who became an interested stockholder prior to the adoption of the amendment. The Company has not elected to opt out of this coverage. Chapter 156B, Section 50A of the Massachusetts General Laws generally requires that publicly-held Massachusetts corporations have a classified board of directors consisting of three classes as nearly equal in size as possible, unless the corporation elects to opt out of the statute's coverage. While the Board of Directors currently has opted out of the statute's coverage, it intends to opt into the statute's coverage prior to the consummation of the Offering. The Company is subject to Chapter 110D of the Massachusetts General Laws which governs "control share acquisitions," which are certain acquisitions of beneficial ownership of shares which raise the voting power of the acquiring person (which can be a group of persons or entities sharing beneficial ownership) above any one of three thresholds: one-fifth, one-third or one-half of the total voting power. All shares acquired by the person making the control share acquisition within the period beginning 90 days before and ending 90 days after each threshold is crossed ("Affected Shares") obtain voting rights only (i) upon authorization by a majority of the stockholders other than the holder of the Affected Shares, officers of the Company and directors of the Company who also are employees of the Company or (ii) when disposed of in non-control share acquisitions. The Company's stockholders, at a duly constituted meeting, may, by amendment to the By-Laws or the Articles of Incorporation, provide that the provisions of Chapter 110D shall not apply to future control share acquisitions of the Company. Management currently has no plans to propose such an amendment. Chapter 110D may have the effect of delaying or preventing a change of control of the Company at a premium price. In addition, because the number of shares of Common Stock entitled to vote is substantially less than the total number of outstanding shares of Common Stock, holders of shares of Common 52 54 Stock purchased in transactions which are not control share acquisitions, and which occur at a time when there are Affected Shares outstanding, will obtain voting rights which are disproportionate to the number of shares held as a percentage of all outstanding shares (including Affected Shares), which may facilitate the acquisition of shareholdings which may permit the exercise of a controlling influence on the management or policies of the Company. In certain circumstances in connection with a control share acquisition, stockholders of the Company will be entitled to appraisal of their shares in accordance with the provisions of Section 86 to 98, inclusive, of Chapter 156B of the Massachusetts General Laws. The Company intends to propose to its stockholders prior to consummation of the Offering, certain amendments to its Articles and Bylaws that, if approved, may have the effect of discouraging, delaying or preventing a change in control of the Company or unsolicited acquisition proposals that a stockholder might consider favorable, including provisions authorizing the issuance of "blank check" preferred stock, providing for a Board of Directors with staggered terms, requiring super-majority or class voting to effect certain amendments to the Articles and Bylaws and to approve certain business combinations, limiting the persons who may call special stockholders' meetings, and establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon at stockholders' meetings. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is . 53 55 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offering, the Company will have shares of Common Stock outstanding without taking into account any outstanding options or options which may be granted following consummation of the Offering. All of the shares of Common Stock offered hereby will be freely tradeable without restriction or further registration under the Securities Act, except for shares sold by persons deemed to be "affiliates" of the Company ("Affiliates") or acting as "underwriters," as those terms are defined in the Securities Act. All of the Common Stock held by existing stockholders of the Company were issued and sold by the Company in reliance on exemptions from the registration requirements of the Securities Act ("Restricted Shares"). These shares may be sold in the public market only if registered or pursuant to an exemption from registration such as those afforded by Rules 144 and 701 under the Securities Act. Subject to the lock-up period described below (See "Underwriting"), all of the remaining outstanding shares of Common Stock and the shares of Common Stock issuable upon conversion of the Series C Preferred Stock will be freely tradeable at the end of the 90-day period after the date of this Prospectus under Rules 144 and 701, subject to the restrictions on resale imposed upon Affiliates by Rule 144 under the Securities Act. In general, under Rule 144 as currently in effect, beginning 90 days after the date of this Prospectus, an Affiliate of the Company or other person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least one year, will be entitled to sell in any three-month period a number of shares that does not exceed the greater of (i) 1% of the then outstanding Common Stock or (ii) the average weekly trading volume of the Common Stock on the NYSE during the four calendar weeks immediately preceding such sale. Sales pursuant to Rule 144 are also subject to certain requirements relating to manner of sale, notice and availability of current public information about the Company. A person (or persons whose shares are aggregated) who is not deemed to have been an Affiliate of the Company at any time during the 90 days immediately preceding the sale and who has beneficially owned Restricted Shares for at least two years is entitled to sell such shares pursuant to Rule 144(k) without regard to the limitations described above. Under Rule 701, an employee of the Company who purchased shares of Common Stock or was awarded options to purchase shares pursuant to a written compensation plan or contract meeting the requirements of Rule 701 under the Securities Act is entitled to rely on the resale provisions of Rule 701, which permits Affiliates and non-Affiliates to sell their Rule 701 shares without having to comply with the holding period restrictions of Rule 144, in each case commencing 90 days after the date of this Prospectus. In addition, non- Affiliates may sell Rule 701 shares without complying with the public information, volume and notice provisions of Rule 144. Subject to the lock-up period described below and the restrictions imposed on Affiliates of the Company under Rule 144, all of the Restricted Shares will be eligible for sale at the end of the 90-day period after the date of this Prospectus pursuant to Rules 144 and 701 under the Securities Act, without any restrictions imposed under those Rules. An aggregate of shares of Common Stock are reserved for issuance to directors, executives, consultants and employees of the Company pursuant to the Stock Option Plans. The Company intends to file a registration statement on Form S-8 covering the issuance of shares of Common Stock pursuant to the Stock Option Plans. Accordingly, shares issued pursuant to the Stock Option Plans will be freely tradeable, subject to the restrictions on resale imposed on Affiliates by Rule 144 under the Securities Act. Prior to the Offering, there has been no public market for the Common Stock. Trading of the Common Stock is expected to commence following the completion of the Offering. There can be no assurance that an active trading market will develop or continue after the completion of the Offering or that the market price of the Common Stock will not decline below the initial public offering price. No predictions can be made as to the effect, if any, that future sales of shares of Common Stock, or the availability of such shares for sale, will have on the market price prevailing from time to time. Sales of substantial amounts of Common Stock in the public market, or the perception that such sales could occur, could adversely affect the prevailing market price of the Common Stock, or the ability of the Company to raise capital through the issuance of additional equity securities. 54 56 CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS A general discussion of certain United States federal income and estate tax consequences of the acquisition, ownership and disposition of Common Stock applicable to Non-U.S. Holders (as defined) of Common Stock is set forth below. In general, a "Non U.S. Holder" is a person other than: (i) a citizen or resident (as defined for United States federal income or estate tax purposes, as the case may be) of the United States; (ii) a corporation or partnership organized in or under the laws of the United States or a political subdivision thereof; (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or (iv) a trust if and only if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and (B) one or more United States trustees have the authority to control all substantial decisions of the trust. The discussion is based on current law and is provided for general information only. The discussion does not address aspects of United States federal taxation other than income and estate taxation and does not address all aspects of federal income and estate taxation. The discussion does not consider any specific facts or circumstances that may apply to a particular Non-U.S. Holder and does not address all aspects of United States federal income estate tax laws that may be relevant to Non-U.S. Holders that may be subject to special treatment under such laws (for example, insurance companies, tax-exempt organizations, financial institutions or broker-dealers). This discussion is based on the Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change, possibly with retroactive effect. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK. DIVIDENDS In general, the gross amount of dividends paid to a Non-U.S. Holder will be subject to United States withholding tax at a 30% rate (or any lower rate prescribed by an applicable tax treaty) unless the dividends are (i) effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States and a Form 4224 is filed with the withholding agent or (ii) if a tax treaty applies, are attributable to a United States permanent establishment of the Non-U.S. Holder. If either exception applies, the dividend will be taxed at ordinary U.S. federal income tax rates. A Non-U.S. Holder may be required to satisfy certain certification requirements in order to claim the benefit of an applicable treaty rate or otherwise claim a reduction of, or exemption from, the withholding obligation pursuant to the above described rules. In the case of a Non-U.S. Holder that is a corporation, effectively connected income may also be subject to the branch profits tax, except to the extent that an applicable tax treaty provides otherwise. SALE OF COMMON STOCK Generally, a Non-U.S. Holder will not be subject to United States federal income tax on any gain realized upon the disposition of his Common Stock unless: (i) the Company has been, is, or becomes a "U.S. real property holding corporation" for federal income tax purposes and certain other requirements are met; (ii) the gain is effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States; (iii) the Common Stock is disposed of by an individual Non-U.S. Holder who holds the Common Stock as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition or (iv) the Non-U.S. Holder is an individual who lost his U.S. citizenship within the last 10 years and such loss had, as one of its principle purposes, the avoidance of taxes, and the gains are considered derived from sources within the United States. The Company believes that it has not been, is not currently and, based upon its current business plans, is not likely to become a U.S. real property holding corporation. Non-U.S. Holders should consult applicable treaties, which may exempt from United States taxation gains realized upon the disposition of Common Stock in certain cases. 55 57 ESTATE TAX Common Stock owned or treated as owned by an individual Non-U.S. Holder at the time of his death will be includible in the individual's gross estate for United States federal estate tax purposes, unless an applicable treaty provides otherwise, and may be subject to United States federal estate tax. BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS On October 14, 1997, the IRS issued final regulations relating to withholding, information reporting and backup withholding that unify current certification procedures and forms and clarify reliance standards (the "Final Regulations"). The Final Regulations generally will be effective with respect to payments made after December 31, 1998. Except as provided below, this section describes rules applicable to payments made on or before December 31, 1998. Backup withholding (which generally is a withholding tax imposed at the rate of 31% on certain payments to persons that fail to furnish the information required under the United States information reporting and backup withholding rules) generally will not apply to (i) dividends paid to Non-U.S. Holders that are subject to the 30% withholding discussed above (or that are not so subject because a tax treaty applies that reduces or eliminates such 30% withholding) or (ii) dividends paid on the Common Stock to a Non-U.S. Holder at an address outside the United States. The Company will be required to report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to, and the tax withheld with respect to, such holder, regardless of whether any tax was actually withheld. This information may also be made available to the tax authorities in the Non-U.S. Holder's country of residence. In the case of a Non-U.S. Holder that sells Common Stock to or though a United States office of a broker, the broker must backup withhold at a rate of 31% and report the sale to the IRS, unless the holder certifies its Non-U.S. status under penalties of perjury or otherwise establishes an exemption. In the case of a Non-U.S. Holder that sells Common Stock to or though the foreign office of a United States broker, or a foreign broker with certain types of relationships to the United States, the broker must report the sale to the IRS (but not backup withhold) unless the broker has documentary evidence in its files that the seller is a Non-U.S. Holder or certain other conditions are met, or the holder otherwise establishes an exemption. A Non-U.S. Holder will generally not be subject to information reporting or backup withholding if such Non-U.S. Holder sells the Common Stock to or through a foreign office of a Non-United States broker. Any amount withheld under the backup withholding rules from a payment to a holder is allowable as a credit against the holder's U.S. federal income tax, which may entitle the holder to a refund, provided that the holder furnishes the required information to the IRS. In addition, certain penalties may be imposed by the IRS on a holder who is required to supply information but does not do so in the proper manner. The Final Regulations eliminate the general current law presumption that dividends paid to an address in a foreign country are paid to a resident of that country. In addition, the Final Regulations impose certain certification and documentation requirements on Non-U.S. Holders claiming the benefit of a reduced withholding rate with respect to dividends under a tax treaty. Prospective purchasers of Common Stock are urged to consult their own tax advisors as to the application of the current rules regarding backup withholding and information reporting and as to the effect, if any, of the Final Regulations on their purchase, ownership and disposition of the Common Stock. 56 58 UNDERWRITING Upon the terms and subject to the conditions stated in the Underwriting Agreement dated , 1998, each Underwriter named below has severally agreed to purchase, and the Company and the Selling Stockholders have agreed to sell to such Underwriter, the number of shares of Common Stock set forth opposite the name of such Underwriter.
UNDERWRITERS NUMBER OF SHARES ------------ ---------------- Smith Barney Inc. .......................................... Piper Jaffray Inc........................................... --------- Total.................................................. =========
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares are subject to approval of certain legal matters by counsel and to certain other conditions. The Underwriters are obligated to take and pay for all shares of Common Stock offered hereby (other than those covered by the over-allotment option described below) if any such shares are taken. The Underwriters, for whom Smith Barney Inc. and Piper Jaffray Inc. are acting as the Representatives, propose to offer part of the shares directly to the public at the public offering price set forth on the cover page of this Prospectus and part of the shares to certain Dealers at a price which represents a concession not in excess of $ per share under the public offering price. The Underwriters may allow, and such Dealers may reallow, a concession not in excess of $ per share to certain other Dealers. After the initial offering of the shares to the public, the public offering price and such concessions may be changed by the Representatives. The Representatives of the Underwriters have advised the Company and the Selling Stockholders that the Underwriters do not intend to confirm any shares to any accounts over which they exercise discretionary authority. The Selling Stockholders have granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to additional shares of Common Stock at the price to public set forth on the cover page of this Prospectus minus the underwriting discounts and commissions. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, in connection with the Offering of the shares offered hereby. To the extent such option is exercised, each Underwriter will be obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number of shares set forth opposite each Underwriter's name in the preceding table bears to the total number of shares listed in such table. The Company and the Selling Stockholders have agreed that, without the prior written consent of Smith Barney Inc., they will not, directly or indirectly, offer to sell, contract to sell, sell or otherwise dispose of, or announce the offering of, any shares of Common Stock or securities convertible into or exchangeable for Common Stock (except the shares sold to the Underwriters in connection with the Offering or pursuant to the Underwriters' over-allotment option or issuances by the Company pursuant to certain stock-based employment arrangements or agreements or shares issued pursuant to acquisitions) for a period of 180 days after the date of the Underwriting Agreement. Each executive officer, director and Selling Stockholder of the Company has agreed that, without the prior written consent of Smith Barney Inc., he or she will not, directly or indirectly, offer to sell, contract to sell, sell or otherwise dispose of any Common Stock, or securities convertible into or exchangeable for Common Stock (except Common Stock disposed of as bona fide gifts by such executive officers or directors, transferred upon exercise of existing warrants or options granted by them or transferred to a trust, partnership, corporation or other entity the beneficial ownership of which is solely owned by such person) for a period of 180 days after the date of the Underwriting Agreement. Smith Barney Inc. currently does not intend to release any securities subject to such lock-up agreements, but may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to such lock-up agreements. 57 59 At the request of the Company, the Underwriters have reserved up to shares of Common Stock for sale at the public offering price to directors, officers and employees of the Company. The number of shares of Common Stock available for sale to the general public will be reduced to the extent such persons purchase the reserved shares. Any reserved shares not so purchased will be offered by the Underwriters on the same basis as all other shares offered hereby. In connection with this Offering and in compliance with applicable law, the Underwriters may over-allot (i.e., sell more Common Stock than the total amount shown on the list of Underwriters and participations which appears above) and may effect transactions which stabilize, maintain or otherwise affect the market price of the Common Stock at levels above those which might otherwise prevail in the open market. Such transactions may include placing bids for the Common Stock or effecting purchases of the Common Stock for the purpose of pegging, fixing or maintaining the price of the Common Stock or for the purpose of reducing a syndicate short position created in connection with the Offering. A syndicate short position may be covered by exercise of the option described above in lieu of or in addition to open market purchases. In addition, the contractual arrangements among the Underwriters include a provision whereby if the Representatives purchase Common Stock in the open market for the account of the underwriting syndicate and the securities purchased can be traced to a particular Underwriter or member of the selling group, the underwriting syndicate may require the Underwriter or selling group member in question to purchase the Common Stock in question at the cost price to the syndicate or may recover from (or decline to pay to) the Underwriter or selling group member in question the selling concession applicable to the securities in question. The Underwriters are not required to engage in any of these activities and any such activities, if commenced, may be discontinued at any time. Prior to this Offering, there has not been any public market for the Common Stock of the Company. Consequently, the initial public offering price for the Shares of Common Stock included in this Offering has been determined by negotiations among the Company, the Selling Stockholders and the Representatives. Among the factors considered in determining such price were the history of and prospects for the Company's business and the industry in which it competes, an assessment of the Company's management and the present state of the Company's development, the past and present revenues and earnings, the current state of the economy in the United States and the current level of economic activity in the industry in which the Company competes and in related or comparable industries, and currently prevailing conditions in the securities markets, including current market valuations of publicly traded companies which are comparable to the Company. The Underwriting Agreement provides that the Company and the Selling Stockholders will indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act, or contribute to payments the Underwriters may be required to make in respect thereof. LEGAL MATTERS The validity of the issuance of the shares of Common Stock offered hereby will be passed upon for the Company by Edwards & Angell, LLP, Boston, Massachusetts. The Underwriters have been represented by Cravath, Swaine & Moore, New York, New York. EXPERTS The consolidated balance sheets as of December 31, 1996 and 1997 and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended December 31, 1997, included in this Prospectus and elsewhere in the registration statement, have been included herein in reliance upon the report of Coopers & Lybrand L.L.P., independent accountants, given upon the authority of said firm as experts in accounting and auditing. 58 60 AVAILABLE INFORMATION The Company has not previously been subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act") with respect to the Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information pertaining to the Company and the Common Stock offered by this Prospectus, reference is made to the Registration Statement and to the exhibits filed as a part thereof. Statements contained in this Prospectus concerning the contents of any contract, agreement or other document filed as an exhibit to the Registration Statement are summaries of the terms of such contracts, agreements or documents and are not necessarily complete. Reference is made to each such exhibit for a more complete description of the matters involved and such statements shall be deemed qualified in their entirety by such reference. The Registration Statement and the exhibits and schedules thereto may be inspected, without charge, and copies may be obtained at prescribed rates, at the public reference facility maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, Suite 300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1300, Chicago, Illinois 60661-2511. The Registration Statement and other information filed by the Company with the Commission are also available at the web site maintained by the Commission on the World Wide Web at http://www.sec.gov. The Company intends to furnish its stockholders with annual reports containing audited financial statements certified by independent auditors and quarterly reports for the first three quarters of each fiscal year containing unaudited financial statements. 59 61 BOYLE LEASING TECHNOLOGIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants........................... F-2 Financial Statements: Consolidated Balance Sheets as of December 31, 1996 and 1997, and March 31, 1998 (unaudited)...................... F-3 Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and 1997, and for the three months ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)............................................... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1996 and 1997, and the three months ended March 31, 1998 (unaudited)............. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997, and for the three months ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)............................................... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 62 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Boyle Leasing Technologies, Inc.: We have audited the accompanying consolidated balance sheets of Boyle Leasing Technologies, Inc. as of December 31, 1996 and 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 1995, 1996 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Boyle Leasing Technologies, Inc. as of December 31, 1996 and 1997, and the consolidated results of its operations and its cash flows for the years ended December 31, 1995, 1996 and 1997, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand LLP Boston, Massachusetts February 27, 1998 F-2 63 BOYLE LEASING TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
DECEMBER 31, ------------------- MARCH 31, 1996 1997 1998 -------- -------- ------------ (UNAUDITED) ASSETS Assets: Net investment in financing leases and loans: Receivables due in installments........................ $232,693 $238,979 $241,103 Estimated residual value............................... 14,702 16,784 16,907 Initial direct costs................................... 2,692 2,777 2,939 Loans receivable....................................... 238 2,467 4,235 Less: Advance lease payments and deposits.................. (186) (334) (428) Unearned income...................................... (76,951) (73,060) (72,299) Allowance for credit losses.......................... (23,826) (26,319) (27,475) -------- -------- -------- Net investment in financing leases and loans.............. 149,362 161,294 164,982 Investment in service contracts........................... -- 2,145 3,702 Cash and cash equivalents................................. 13,775 9,252 7,381 Property and equipment, net............................... 5,143 4,265 4,455 Other assets.............................................. 1,912 2,745 2,678 -------- -------- -------- Total assets...................................... $170,192 $179,701 $183,198 ======== ======== ======== LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Notes payable............................................... 116,202 116,830 114,791 Subordinated notes payable.................................. 27,006 26,382 27,391 Capitalized lease obligations............................... 1,523 1,071 1,069 Accounts payable............................................ 561 89 242 Dividends payable........................................... 242 294 296 Other liabilities........................................... 5,801 5,300 4,743 Income taxes payable........................................ 606 -- -- Deferred income taxes....................................... 6,072 10,969 13,077 -------- -------- -------- Total liabilities................................. 158,013 160,935 161,609 -------- -------- -------- Commitments and contingencies (Note J)...................... -- -- -- Redeemable convertible preferred stock (liquidation preference $12, at December 31, 1996 and 1997, and March 31, 1998)................................................. -- -- -- Stockholders' equity: Common stock.............................................. 49 50 50 Additional paid-in capital................................ 1,490 1,652 1,796 Retained earnings......................................... 10,841 17,366 20,181 Treasury stock, at cost................................... (100) (138) (138) Notes receivable from officers and employees.............. (101) (164) (300) -------- -------- -------- Total stockholders' equity........................ 12,179 18,766 21,589 -------- -------- -------- Total liabilities and stockholders' equity........ $170,192 $179,701 $183,198 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-3 64 BOYLE LEASING TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
FOR THE THREE FOR THE YEARS ENDED MONTHS ENDED DECEMBER 31, MARCH 31, ----------------------------- ------------------ 1995 1996 1997 1997 1998 ------- ------- ------- ------- ------- (UNAUDITED) Revenues: Income on financing leases and loans... $27,011 $38,654 $45,634 $11,089 $11,510 Income on service contracts............ -- 6 501 4 288 Rental income.......................... 3,688 8,250 10,809 2,593 3,365 Loss and damage waiver fees............ 2,648 4,188 5,448 1,241 1,395 Service fees........................... 2,798 4,487 5,788 1,271 1,531 ------- ------- ------- ------- ------- Total revenues................. 36,145 55,585 68,180 16,198 18,089 ------- ------- ------- ------- ------- Expenses: Selling, general and administrative.... 8,485 14,073 17,252 3,515 4,281 Provision for credit losses............ 13,388 19,822 21,713 6,017 4,575 Depreciation and amortization.......... 1,503 2,981 3,787 863 1,177 Interest............................... 8,560 10,163 11,890 2,709 2,820 ------- ------- ------- ------- ------- Total expenses................. 31,936 47,039 54,642 13,104 12,853 Income before provision for income taxes.................................. 4,209 8,546 13,538 3,094 5,236 Provision for income taxes............... 1,685 3,466 5,886 1,267 2,125 ------- ------- ------- ------- ------- Net income............................... $ 2,524 $ 5,080 $ 7,652 $ 1,827 $ 3,111 ======= ======= ======= ======= ======= Net income per common share -- basic..... $ 0.69 $ 1.05 $ 1.56 $ 0.37 $ 0.63 ======= ======= ======= ======= ======= Net income per common share -- diluted... $ 0.53 $ 1.04 $ 1.54 $ 0.37 $ 0.63 ======= ======= ======= ======= ======= Dividends per common share............... $ 0.12 $ 0.19 $ 0.23 $ 0.05 $ 0.06 ======= ======= ======= ======= =======
F-4 65 BOYLE LEASING TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY for the years ended December 31, 1995, 1996 and 1997, and the three months ended March 31, 1998 (unaudited) (in thousands, except share data)
NOTES COMMON STOCK ADDITIONAL RECEIVABLE TOTAL ------------------ PAID-IN RETAINED TREASURY FROM STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS STOCK OFFICERS EQUITY --------- ------ ---------- -------- -------- ---------- ------------- Balance at December 31, 1994...... 2,501,940 $26 $1,087 $ 4,737 $(100) $ 5,750 Exercise of stock options......... 699,700 7 333 340 Common stock dividends............ (580) (580) Conversion of preferred stock to common stock.................... 1,637,220 16 66 82 Notes receivable from officers.... $(205) (205) Net income........................ 2,524 2,524 --------- --- ------ ------- ----- ----- ------- Balance at December 31, 1995...... 4,838,860 49 1,486 6,681 (100) (205) 7,911 Exercise of options............... 2,810 4 4 Common stock dividends............ (920) (920) Notes receivable from officers.... 104 104 Net income........................ 5,080 5,080 --------- --- ------ ------- ----- ----- ------- Balance at December 31, 1996...... 4,841,670 49 1,490 10,841 (100) (101) 12,179 Exercise of stock options......... 60,455 1 162 163 Common stock dividends............ (1,127) (1,127) Purchase of treasury stock........ (2,625) (38) (38) Notes receivable from officers and employees....................... (63) (63) Net income........................ 7,652 7,652 --------- --- ------ ------- ----- ----- ------- Balance at December 31, 1997...... 4,899,500 50 1,652 17,366 (138) (164) 18,766 Exercise of options............... 37,018 144 144 Common stock dividends............ (296) (296) Notes receivable from officers and employees....................... (136) (136) Net income........................ -- 3,111 3,111 --------- --- ------ ------- ----- ----- ------- Balance at March 31, 1998 (unaudited)..................... 4,936,518 $50 $1,796 $20,181 $(138) $(300) $21,589 ========= === ====== ======= ===== ===== =======
The accompanying notes are an integral part of the consolidated financial statements. F-5 66 BOYLE LEASING TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, MARCH 31, --------------------------------- ----------------- 1995 1996 1997 1997 1998 -------- ---------- --------- ------- ------- (UNAUDITED) Cash flows from operating activities: Cash received from customers.............................. $60,632 $ 87,130 $118,444 $27,000 $31,259 Cash paid to suppliers and employees...................... (10,710) (16,708) (29,113) (8,937) (7,185) Interest paid............................................. (8,248) (10,724) (12,334) (3,082) (2,984) Interest received......................................... 285 406 396 119 210 ------- --------- -------- ------- ------- Net cash provided by operating activities........... 41,959 60,104 77,393 15,100 21,300 ------- --------- -------- ------- ------- Cash flows from investing activities: Investment in leased equipment............................ (74,133) (83,734) (72,347) (17,310) (17,227) Investment in direct costs................................ (1,992) (2,186) (2,354) (547) (757) Investment in service contracts........................... -- -- (2,568) -- (1,773) Investment in loans....................................... -- -- (2,538) -- (1,768) Purchase of property and equipment........................ (274) (628) (288) (56) (120) Proceeds from notes receivable from officers and employees............................................... -- -- (150) -- (144) Repayment of notes receivable from officers and employees............................................... 46 104 87 12 8 Investment in notes receivable............................ -- (349) (160) -- -- Repayment of notes receivable............................. -- 111 191 44 -- ------- --------- -------- ------- ------- Net cash used in investing activities............... (76,353) (86,682) (80,127) (17,857) (21,781) ------- --------- -------- ------- ------- Cash flows from financing activities: Proceeds from secured debt................................ 87,881 181,006 56,639 9,641 18,174 Repayment of secured debt................................. (17,023) (29,946) (56,194) (12,097) (20,211) Proceeds from refinancing of secured debt................. -- -- 203,580 40,000 49,500 Prepayment of secured debt................................ (33,390) (129,049) (203,580) (40,000) (49,500) Proceeds from notes payable............................... 548 123 497 110 -- Repayment of notes receivable from officers and employees............................................... (710) (833) (315) (54) -- Proceeds from issuance of subordinated debt............... 187 15,410 2,123 903 1,000 Repayment of subordinated debt............................ (619) (1,740) (2,891) (36) (20) Proceeds from exercise of common stock options............ 90 4 162 19 144 Repayment of capital leases............................... (159) (393) (697) (162) (186) Purchase of treasury stock................................ -- -- (38) -- -- Payment of dividends...................................... (650) (871) (1,075) (242) (291) ------- --------- -------- ------- ------- Net cash provided by (used in) financing activities........................................ 36,155 33,711 (1,789) (1,918) (1,390) ------- --------- -------- ------- ------- Net increase (decrease) in cash and cash equivalents........ 1,761 7,133 (4,523) (4,675) (1,871) Cash and cash equivalents, beginning of period.............. 4,881 6,642 13,775 13,775 9,252 ------- --------- -------- ------- ------- Cash and cash equivalents, end of period.................... $ 6,642 $ 13,775 $ 9,252 $ 9,100 $ 7,381 ======= ========= ======== ======= ======= Reconciliation of net income to net cash provided by operating activities: Net income................................................ $ 2,524 $ 5,080 $ 7,652 $ 1,827 $ 3,111 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................... 1,503 2,981 3,787 863 1,177 Provision for credit losses............................. 13,388 19,822 21,713 6,017 4,575 Recovery of equipment cost and residual value, net of revenue recognized.................................... 20,972 29,378 41,334 7,109 10,666 Increase (decrease) in current taxes.................... 985 (379) (1,266) (601) -- Increase in deferred income taxes....................... 701 1,892 4,897 995 2,108 Change in assets and liabilities: Decrease (increase) in other assets..................... 317 (603) (173) (587) 67 (Decrease) increase in accounts payable................. (11) 711 65 385 153 Increase (decrease) in accrued liabilities.............. 1,580 1,222 (616) (908) (557) ------- --------- -------- ------- ------- Net cash provided by operating activities........... $41,959 $ 60,104 $ 77,393 $15,100 $21,300 ======= ========= ======== ======= ======= Cash paid for income taxes.................................. $ 34 -- $ 2,254 ======= ========= ======== Supplemental disclosure of noncash activities: Property acquired under capital leases.................... $ 849 $ 985 $ 246 $ 109 $ 183 Accrual of common stock dividends......................... $ 194 $ 242 $ 294 $ 267 $ 296 Conversion of preferred stock to common stock............. $ 82 -- -- -- --
The accompanying notes are an integral part of the consolidated financial statements. F-6 67 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (tables in thousands, except per share data) A. NATURE OF BUSINESS: Boyle Leasing Technologies, Inc. (the "Company") which operates primarily through its wholly-owned subsidiary, Leasecomm Corporation, is a specialized commercial finance company that leases and rents "microticket" equipment and provides other financing services in amounts generally ranging from $900 to $2,500, with an average amount financed of approximately $1,400 and an average lease term of 45 months. The Company does not market its services directly to lessees but sources leasing transactions through a network of independent sales organizations and other dealer-based origination networks nationwide. The Company funds its operations primarily through borrowings under its credit facilities, issuances of subordinated debt and securitizations. One dealer accounted for 14% of originations in the year ended December 31, 1997. In December 1992, May 1993 and November 1994, Leasecomm Corporation created wholly-owned subsidiaries, BLT Finance Corporation I ("BLT I"), BLT Finance Corporation II ("BLT II") and BLT Finance Corporation III ("BLT III"), respectively, which are special purpose corporations for the securitization and financing of lease receivables. In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS No. 125"). SFAS No. 125 is effective for transactions entered into after December 31, 1996. Under SFAS No. 125, an entity will recognize the financial and servicing assets it controls and the liabilities it has incurred, derecognize financial assets when control has been surrendered and derecognize liabilities when extinguished. Effective January 1997, the Company adopted SFAS No. 125. While the Company generally does not sell its interests in leases, service contracts or loans to third parties after origination, the Company does, however, from time to time, contribute certain leases to special purpose corporations for purposes of obtaining financing in connection with its lease receivables. As these transfers do not result in a change in control over the lease receivables, sale treatment and related gain recognition under SFAS No. 125 does not occur. Accordingly, the lease receivable and related liability remain on the balance sheet. If SFAS No. 125 were effective for transactions prior to 1997, there would have been no change in the accounting for these financing transactions. During 1997 and 1996, the credit facilities related to the securitization on BLT I and BLT II were paid off, respectively. Both of these subsidiaries were dissolved on December 31, 1997. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Unaudited Interim Financial Statements The interim financial data as of March 31, 1998, and for the three months ended March 31, 1997 and 1998, is unaudited; however, in the opinion of the Company, all adjustments necessary for a fair presentation of interim results of operations (consisting only of normal recurring accruals and adjustments) have been made to the interim consolidated financial statements. The consolidated results of operations for interim periods are not necessarily indicative of results of operations for the respective full year. F-7 68 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid instruments purchased with initial maturities of less than three months to be cash equivalents. Cash equivalents consist principally of overnight investments. Leases and Loans The Company's lease contracts are accounted for as financing leases. At origination, the Company records the gross lease receivable, the estimated residual value of the leased equipment, initial direct costs incurred and the unearned lease income. Unearned lease income is the amount by which the gross lease receivable plus the estimated residual value exceeds the cost of the equipment. Unearned lease income and initial direct costs incurred are amortized over the related lease term using the interest method which results in a level rate of return on the net investment in leases. Amortization of unearned lease income and initial direct costs is suspended if, in the opinion of management, full payment of the contractual amount due under the lease agreement is doubtful. In conjunction with the origination of leases, the Company may retain a residual interest in the underlying equipment upon termination of the lease. The value of such interests is estimated at inception of the lease and evaluated periodically for impairment. Other revenues such as loss and damage waiver and service fees relating to the leases, contracts and loans and rental revenues are recognized as they are earned. Loans are reported at their outstanding principal balance. Interest income on loans is recognized as it is earned. Investment in Service Contracts The Company's investments in cancelable service contracts are recorded at cost and amortized over the expected life of the service period. Income on service contracts from monthly billings is recognized as the related services are provided. The Company periodically evaluates whether events or circumstances have occurred that may affect the estimated useful life or recoverability of the investment in service contracts. Property and Equipment Rental equipment is recorded at estimated residual value and depreciated using the straight-line method over a period of twelve months. Office furniture, equipment and capital leases are recorded at cost and depreciated using the straight-line method over a period of three to five years. Leasehold improvements are amortized over the shorter of the life of the lease or the asset. Upon retirement or other disposition, the cost and related accumulated depreciation of the assets are removed from the accounts and the resulting gain or loss is reflected in income. Fair Value of Financial Instruments For financial instruments including cash and cash equivalents, investments in financing leases and loans, accounts payable, and accrued expenses, it is assumed that the carrying amount approximates fair value due to their short maturity. F-8 69 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) Interest-Rate Hedging Agreements The Company enters into interest-rate hedging agreements to hedge against potential increases in interest rates on the Company's outstanding borrowings. The Company's policy is to accrue amounts receivable or payable under such agreements as reductions or increases in interest expense, respectively. Debt Issuance Costs Debt issuance costs incurred in securing credit facility financing are capitalized and subsequently amortized over the term of the credit facility. Income Taxes Deferred income taxes are determined under the liability method. Differences between the financial statement and tax bases of assets and liabilities are measured using the currently enacted tax rates expected to be in effect when these differences reverse. Deferred tax expense is the result of changes in the liability for deferred taxes. The principal differences between assets and liabilities for financial statement and tax return purposes are the treatment of leased assets, accumulated depreciation and provisions for doubtful accounts. The deferred tax liability is reduced by loss carryforwards and alternative minimum tax credits available to reduce future income taxes. Net Income Per Common Share The Company has adopted Statement of Financial Accounting Standard No. 128, "Earnings Per Share," ("SFAS No. 128") which specifies the computation, presentation and disclosure requirements for net income per common share. Basic net income per common share is computed based on the weighted average number of common shares outstanding during the period, adjusted for a 10-to-1 stock split as described in Note H. Diluted net income per common share gives effect to all dilutive potential common shares outstanding during the period. Under SFAS No. 128, the computation of diluted earnings per share does not assume the issuance of common shares that have an antidilutive effect on net income per common share.
FOR THE THREE MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------------ ----------------------- 1995 1996 1997 1997 1998 ---------- ---------- ---------- ---------- ---------- (UNAUDITED) Net income........................... $ 2,524 $ 5,080 $ 7,652 $ 1,827 $ 3,111 Shares used in computation: Weighted average common shares outstanding used in computation of net income per common share.................. 3,676,094 4,841,425 4,896,570 4,887,818 4,899,911 Dilutive effect of redeemable convertible preferred stock... 838,210 19,600 9,800 9,800 9,800 Dilutive effect of common stock options....................... 209,799 24,281 56,294 56,294 22,874 ---------- ---------- ---------- ---------- ---------- Shares used in computation of net income per common share -- assuming dilution........................... 4,724,103 4,885,306 4,962,664 4,953,912 4,932,585 ========== ========== ========== ========== ========== Net income per common share.......... $ 0.69 $ 1.05 $ 1.56 $ 0.37 $ 0.63 ========== ========== ========== ========== ========== Net income per common share -- assuming dilution.................. $ 0.53 $ 1.04 $ 1.54 $ 0.37 $ 0.63 ========== ========== ========== ========== ==========
F-9 70 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) Options to purchase 2,123 shares of common stock were outstanding during the year ended December 31, 1995, but were not included in the calculation of diluted net income per common share because the option price was greater than the average market price of the common shares during the period. New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. The statement is effective for fiscal years beginning after December 15, 1997 and the Company has adopted its provisions in 1998. The Company has evaluated the impact this statement will have on its financial statements and determined that no additional disclosure is required. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Internal Use Software," ("SOP 98-1") which provides guidance on the accounting for the costs of software developed or obtained for internal use. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The Company does not expect the statement to have a material impact on its financial position or results of operations. On June 1, 1998, the Financial Accounting Standards Board voted to issue a final standard on derivatives and hedging. The standard is expected to be published in June 1998 and will be effective for companies with fiscal years beginning after June 15, 1999. The Company has not yet evaluated the impact this statement may have on its financial position or results of operations. Reclassification of Prior Year Balances Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current presentation. C. LEASES AND LOANS At December 31, 1997, future minimum payments on the Company's lease receivables are as follows:
FOR THE YEAR ENDED DECEMBER 31, - ------------------------------------------------------------ 1998................................................... $110,801 1999................................................... 73,752 2000................................................... 42,500 2001................................................... 11,105 2002................................................... 669 Thereafter............................................. 152 -------- Total.................................................. $238,979 ========
At December 31, 1997, the weighted average remaining life of leases in the Company's lease portfolio is approximately 28 months and the implicit rate of interest is approximately 35%. The Company's business is characterized by a high incidence of delinquencies which in turn may lead to significant levels of defaults. The Company evaluates the collectibility of leases originated and loans based on the level of recourse provided, if any, delinquency statistics, historical lease experience, current economic conditions and other relevant factors. The Company provides an allowance for credit losses for leases which are considered impaired. F-10 71 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) A summary of activity in the Company's allowance for credit losses is as follows:
FOR THE YEARS ENDED DECEMBER 31, ----------------------------- 1995 1996 1997 ------- ------- ------- Balance, beginning of year........................... $ 7,992 $15,952 $23,826 Provision for credit losses.......................... 13,388 19,822 21,713 Charge-offs, net of recoveries....................... (5,428) (11,948) (19,220) ------- ------- ------- Balance, end of year................................. $15,952 $23,826 $26,319 ======= ======= =======
D. PROPERTY AND EQUIPMENT: At December 31, 1996 and 1997, property and equipment consisted of the following:
DECEMBER 31, ---------------- 1996 1997 ------ ------ Rental equipment............................................ $4,845 $5,588 Computer equipment.......................................... 2,628 2,998 Office equipment............................................ 571 634 Leasehold improvements...................................... 224 224 ------ ------ 8,268 9,444 Less accumulated depreciation and amortization.............. 3,125 5,179 ------ ------ Total....................................................... $5,143 $4,265 ====== ======
Depreciation and amortization expense totaled $1,503,000, $2,981,000, and $3,787,000 for the years ended December 31, 1995, 1996 and 1997, respectively. At December 31, 1996 and 1997, computer equipment includes $2,092,287 and $2,339,000, respectively, under capital leases. Accumulated amortization related to capital leases amounted to $611,000 and $1,306,000 at December 31, 1996 and 1997, respectively. At December 31, 1997, accumulated depreciation related to rental equipment amounted to $3,060,000. E. NOTES PAYABLE: The Company has a revolving line of credit and term loan facility with a group of financial institutions whereby it may borrow a maximum of $105,000,000 based upon qualified lease receivables. Outstanding borrowings with respect to the revolving line of credit bear interest based either at prime for prime rate loans or London Interbank Offered Rate (LIBOR) plus 1.85% for LIBOR loans. If the LIBOR loans are not renewed upon their maturity then they automatically convert into prime rate loans. The prime rates at December 31, 1997 and 1996 were 8.5% and 8.25%, respectively. The 90-day LIBOR at December 31, 1997 and 1996 was 5.91% and 5.78%, respectively. F-11 72 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) At December 31, 1997, the Company had borrowings outstanding under the agreement with the following terms:
TYPE EXPIRATION RATE AMOUNT ---- ---------- ------ ------- Prime...................................... Revolving 8.5000% $ 6,634 LIBOR...................................... 2/10/98 7.7250% 12,000 Fixed...................................... 11/24/98 8.3000% 5,798 Fixed...................................... 8/2/99 7.7500% 9,273 ------- Total $33,705 =======
At December 31, 1996, the Company had borrowings outstanding under the agreement with the following terms:
TYPE EXPIRATION RATE AMOUNT ---- ---------- ------ ------- Prime...................................... Revolving 8.2500% $ 6,966 LIBOR...................................... 1/13/97 8.0976% 5,000 LIBOR...................................... 2/10/97 8.0000% 25,000 Fixed...................................... 1/1/97 8.0000% 5 Fixed...................................... 11/24/98 8.3000% 12,030 Fixed...................................... 8/2/99 7.7500% 15,054 ------- Total $64,055 =======
Outstanding borrowings are collateralized by leases and service contracts pledged specifically to the financial institutions. All balances under the revolving line of credit will be automatically converted to a term loan on July 31, 1999 provided the line of credit is not renewed and no event of default exists at that date. All converted term loans are repayable over the term of the underlying leases, but not in any event to exceed 48 monthly installments. The most restrictive covenants of the agreement have minimum net worth and income requirements and limit payment of dividends to no more than 50% of consolidated net income, as defined, for the immediately preceding fiscal year. The Company has an additional revolving credit agreement and term loan with a group of financial institutions whereby it may borrow up to a maximum of $35,000,000 based on qualified lease receivables. Outstanding borrowings with respect to the revolving line of credit bear interest based either at prime for prime rate loans or LIBOR plus 1.85% for LIBOR loans. If the LIBOR loans are not renewed upon their maturity then they automatically convert into prime rate loans. At December 31, 1997, the Company had borrowings outstanding under the agreement with the following terms:
TYPE EXPIRATION RATE AMOUNT ---- ---------- ------- ------- Variable Revolving 8.5000% $ 2,816 LIBOR 1/6/98 7.5688% 17,500 LIBOR 3/10/98 8.4375% 5,000 LIBOR 2/10/98 7.6273% 3,000 Fixed 11/24/98 8.3000% 68 Fixed 8/2/99 7.7500% 797 ------- Total $29,181 =======
F-12 73 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) At December 31, 1996, the Company had borrowings outstanding under the agreement with the following terms:
TYPE EXPIRATION RATE AMOUNT ---- ---------- ------- ------- Prime Revolving 8.2500% $ 3,123 LIBOR 1/10/97 8.9770% 5,000 LIBOR 3/12/97 8.0313% 10,000 Fixed 11/24/98 8.3000% 605 Fixed 8/2/99 7.7500% 1,091 ------- Total $19,819 =======
Outstanding borrowings are collateralized by leases and service contracts pledged specifically to the financial institutions. All balances under the revolving line of credit will be automatically converted to a term loan on July 31, 1999 provided the line of credit is not renewed and no event of default exists at that date. All converted term loans are repayable over the term of the underlying leases, but not in any event to exceed 24 monthly installments. The most restrictive covenants of the agreement have minimum net worth and income requirements and limit payment of dividends to no more than 50% of consolidated net income, as defined, for the immediately preceding fiscal year. BLT I has one term facility with a group of financial institutions whereby it borrowed $7,870,000 based upon qualified lease receivables. At December 31, 1996, the outstanding balance on this term facility was $614,000. The outstanding borrowings bear interest at a fixed rate of 7.23%. At December 31, 1997, no amounts were outstanding on this term facility. BLT III has four series of notes, the 1994-A Notes, the 1996-A Notes, the 1997-A Notes and the Warehouse Notes. In November 1994, BLT III issued the 1994-A Notes in aggregate principal amount of $18,885,000. In May 1996, BLT III issued the 1996-A Notes in aggregate principal amount of $23,407,000, and in August 1997, BLT III issued the 1997-A Notes in aggregate principal amount of $44,763,000. Pursuant to a Master Financing Indenture, the Company may issue one additional series of Term Notes, the warehouse notes, with a maximum principal amount of $20,000,000. At December 31, 1996, the Company had an outstanding balance on the warehouse notes of $5,809,000. The warehouse notes expired in August of 1997, at which time they were converted to BLT III 1997-A Notes. At December 31, 1996 and 1997, BLT III had borrowings outstanding under the three series of notes with the following terms:
NOTE SERIES EXPIRATION RATE 1996 1997 ----------- ---------- ----------- ------- ------- 1994-A Notes....................... 12/16/98 7.3300% $ 6,619 $ 721 1996-A Notes....................... 5/16/00 6.6900% 19,081 13,214 1997-A Notes....................... 1/16/03 6.4200% -- 39,620 Warehouse Notes.................... LIBOR + .45% 5,809 -- ------- ------- Total $31,509 $53,555 ======= =======
Outstanding borrowings are collateralized by a specific pool of lease receivables. At December 31, 1996 and 1997, the Company also has other notes payable which totaled $205,000 and $389,000, respectively. The notes are due on demand and bear interest at a rate of prime less 1.00%. Other notes payable include amounts due to stockholders of the Company at December 31, 1996 and 1997, of $197,000 and $337,000, respectively. Interest paid to stockholders under such notes was not material for the years ended December 31, 1995, 1996 and 1997. F-13 74 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) Subordinated Notes Payable At December 31, 1996 and 1997, the Company also has senior subordinated and subordinated debt outstanding amounting to $27,006,000 and $26,382,000 respectively, net of unamortized discounts of $357,000 and $213,000, respectively. This debt is subordinated in the rights to the Company's notes payable to the primary lenders as described above. Outstanding borrowings bear interest ranging from 9.5% to 14% for fixed rate financing and prime plus 3% to 4% for variable rate financing. These notes have maturity dates ranging from January 1998 to October 2003. The Company has three senior subordinated notes. The first was issued in August 1994 at 12% to a financial institution with an aggregate principal amount of $7,500,000. Cash proceeds from this note were $6,743,000 net of a discount of $757,000 which is being amortized over the life of the note. This senior note requires annual payments of $1,500,000 commencing on July 15, 1997 until the note matures in July 2001. The second senior subordinated note was issued in October 1996 at 12.25% to a financial institution with an aggregate principal amount of $5,000,000. This senior note requires monthly payments of (i) $125,000 for the period November 1, 1998 through October 1, 2000 and (ii) $166,667 for the period November 1, 2000 until the note matures in October 1, 2001. The third senior subordinated note was issued in October 1996 at 12.60% to a financial institution with an aggregate principal amount of $5,000,000. This senior note requires quarterly payments of $250,000 commencing on March 15, 1999 until the note matures in October 2003. The most restrictive covenants of the senior subordinated note agreements consist of minimum net worth and interest coverage ratio requirements and restrictions on payment of dividends. Subordinated notes payable include $2,712,000 due to stockholders. Interest paid to stockholders under such notes, at rates ranging between 8% and 14%, amounted to $207,000, $183,000 and $472,000 for the years ended December 31, 1995, 1996, and 1997, respectively. At December 31, 1997, the repayment schedule, assuming conversion of the revolving line of credit to a term loan, for outstanding notes and subordinated notes is as follows:
FOR THE YEAR ENDED DECEMBER 31, ------------------ 1998 $ 62,512 1999........................................................ 52,576 2000........................................................ 17,269 2001........................................................ 7,372 2002........................................................ 2,345 Thereafter.................................................. 1,351 -------- 143,425 Unamortized discount on senior subordinated debt............ (213) -------- Total....................................................... $143,212 ========
It is estimated that the carrying amounts of the Company's borrowings under its variable rate revolving credit agreements approximate their fair value. The fair value of the Company's short-term and long-term fixed rate borrowings is estimated using discounted cash flow analysis, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. At December 31, 1996 and 1997, the aggregate carrying value of the Company's fixed rate borrowings was approximately $82,500,000 and $96,900,000, respectively, with an estimated fair value of approximately $75,700,000 and $92,900,000, respectively. F. NOTES RECEIVABLE FROM OFFICERS AND EMPLOYEES: During 1995 and 1997, the Company issued notes to certain officers and employees in connection with the exercise of common stock options amounting to $251,000 and $63,000, respectively, in exchange for recourse loans with fixed maturity dates prior to the expiration date of the original grant. The notes are non- F-14 75 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) interest bearing unless the principal amount thereof is not paid in full when due, at which time interest accrues and is payable at a rate per annum equal to the prime rate plus 4.0%. The notes can be repaid from the application of dividends paid on the common stock but in all cases are to be paid in full at the maturity date or upon the employee leaving the Company. At December 31, 1996 and 1997, notes receivable outstanding from officers and employees were $101,000 and $164,000, respectively. G. REDEEMABLE PREFERRED STOCK: At December 31, 1996 and 1997, the Company had authorized 88,231 shares of convertible preferred stock ("preferred stock") with a par value of $1.00, of which 490 shares of the Series C Convertible Preferred Stock were issued and outstanding, respectively, at December 31, 1996 and 1997. Shares of preferred stock are convertible into shares of common stock at the option of the holder according to a conversion formula (which would currently result in a one-for-twenty exchange) with mandatory conversion upon the completion of a public offering meeting certain minimum proceeds, as defined. Holders of the preferred stock are entitled to an annual cumulative dividend of $.765 per share, if and when declared. The holder of the preferred stock has a liquidation preference of $25.50 for preferred stock, plus earned and unpaid dividends. In addition, the preferred shareholder is entitled to vote as a class, proportional to the number of common shares into which his preferred shares are convertible. H. STOCKHOLDERS' EQUITY: Common Stock The Company had 1,200,000 and 10,000,000 authorized shares of common stock with a par value of $.01 per share of which 4,841,670 and 4,899,500 shares were issued and outstanding at December 31, 1996 and 1997, respectively. Treasury Stock The Company had 68,670 and 71,295 shares of common stock in treasury at December 31, 1996 and 1997, respectively, and 490 shares of preferred stock in treasury at December 31, 1996 and 1997. Stock Split On June 16, 1997, the Company's Board of Directors authorized a ten-for-one stock split. This resulted in the issuance of 4,471,353 additional shares of common stock. All share and per share amounts have been restated to reflect the stock split. Stock Options In 1987, the Company adopted its 1987 Stock Option Plan (the "Plan") which provides for the issuance of qualified or nonqualified options to purchase shares of the Company's common stock. In 1997, the Company's Board of Directors approved an amendment to the Plan, as a result of the stock split. The aggregate number of shares issued shall not exceed 610,000 and the exercise price of any outstanding options issued pursuant to the Plan shall be reduced by a factor of ten and the number of outstanding options issued pursuant to the Plan shall be increased by a factor of ten. Qualified stock options, which are intended to qualify as "incentive stock options" under the Internal Revenue Code, may be issued to employees at an exercise price per share not less than the fair value of the common stock at the date granted as determined by the Board of Directors. Nonqualified stock options may be issued to officers, employees and directors of the Company as well as consultants and agents of the Company at an exercise price per share not less than fifty percent of the fair value of the common stock at the date of grant as determined by the Board. The vesting F-15 76 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) periods and expiration dates of the grants are determined by the Board of Directors. The option period may not exceed ten years. The following summarizes the stock option activity:
WEIGHTED AVERAGE SHARES PRICE PER SHARE EXERCISE PRICE ------ --------------- -------------- Outstanding at December 31, 1994............. 733,340 $.2125 to $1.275 $ .55 Exercised.................................... (699,700) $.2125 to $1.275 $ .52 Granted...................................... 160,000 $1.275 to $ 3.90 $ 3.82 --------- Outstanding at December 31, 1995............. 193,640 $1.275 to $ 3.90 $ 3.38 Exercised.................................... (2,810) $1.275 $1.275 --------- Outstanding at December 31, 1996............. 190,830 $1.275 to $ 3.90 $ 3.41 Exercised.................................... (60,455) $1.275 to $ 3.90 $ 1.95 Canceled..................................... (4,875) $3.90 $ 3.90 --------- Outstanding at December 31, 1997............. 125,500 $1.275 to $ 3.90 $ 3.74 =========
The options vest over five years and are exercisable only after they become fully vested. At December 31, 1996 and 1997, 57,110 and 32,994 of the outstanding options were fully vested. At December 31, 1996 and 1997, 200,630 and 135,300 shares of common stock were reserved for conversion of redeemable convertible preferred stock and common stock option exercises. Information relating to stock options at December 31, 1997, summarized by exercise price is as follows:
OUTSTANDING EXERCISABLE --------------------------------------- ------------------------- WEIGHTED AVERAGE WEIGHTED AVERAGE EXERCISE PRICE SHARES LIFE (YEARS) EXERCISE PRICE SHARES --------------- ------- ------------ ---------------- ------ $1.275 7,810 3.6 $1.275 2,572 $3.90 117,690 5.0 $ 3.90 30,422 ------- ------ $1.275 to $3.90 125,000 4.9 $ 3.70 32,994 ======= ======
All stock options issued to employees have an exercise price not less than the fair market value of the Company's common stock on the date of grant. In accordance with accounting for such options utilizing the intrinsic value method there is no related compensation expense recorded in the Company's financial statements. Effective for fiscal 1996, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 123"). SFAS No. 123 requires that compensation under a fair value method be determined using a Black-Scholes option pricing model and disclosed in a pro forma effect on earnings and earnings per share. Had compensation cost for stock based compensation been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123, the Company's pro forma net income applicable to common stock for the years ended December 31, 1995, 1996 and 1997 would have been $2,516,000, $5,072,000 and $7,644,000, respectively. Pro forma net income per common share would not have been different than net income per common share as reported. The fair value of option grants is estimated on the date of grant utilizing the Black-Scholes option-pricing model with the following weighted average assumptions for grants in 1995: an expected life of the options of seven years, a risk-free interest rate of approximately 5.5%, a dividend yield of 4%, and no volatility. The weighted average fair value at date of grant for options granted during 1995 approximated $.27 per option. There were no options granted in 1996 or 1997. F-16 77 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) I. INCOME TAXES: The provision for income taxes consists of the following:
FOR THE YEARS ENDED DECEMBER 31, --------------------------------- 1995 1996 1997 ---- ---- ---- Current: Federal............................................... $ 985 $1,556 $ 898 State................................................. -- 18 91 ------ ------ ------ 985 1,574 989 ------ ------ ------ Deferred: Federal............................................... 299 1,100 3,703 State................................................. 401 792 1,194 ------ ------ ------ 700 1,892 4,897 ------ ------ ------ Total............................................ $1,685 $3,466 $5,886 ====== ====== ======
At December 31, 1996 and 1997, the components of the net deferred tax liability were as follows:
1996 1997 ---- ---- Investment in leases, other than allowance.................. $ 61,832 $ 64,405 Allowance for credit losses................................. (9,478) (108) Operating lease depreciation................................ (44,892) (45,001) Debt issue costs............................................ 648 455 Other....................................................... 1,257 1,947 Alternative minimum tax..................................... (2,536) (3,983) Loss carryforwards.......................................... (759) (6,746) --------- -------- Total............................................. $ 6,072 $ 10,969 ========= ========
The following is a reconciliation between the effective income tax rate and the applicable statutory federal income tax rate:
FOR THE YEARS ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ---- ---- ---- Federal statutory rate...................................... 34.0% 34.0% 34.0% State income taxes, net of federal benefit.................. 6.3 6.3 6.7 Nondeductible expenses and other............................ 1.0 0.3 2.8 ---- ---- ---- Effective income tax rate................................... 41.3% 40.6% 43.5% ==== ==== ====
At December 31, 1997, the Company had passive loss carryforwards of approximately $16,752,000 which may be used to offset future passive income. These loss carryforwards are available indefinitely for use against future passive income. F-17 78 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) J. COMMITMENTS AND CONTINGENCIES: The Company's lease for its facility in Waltham, Massachusetts expires in 1999. This lease contains one five-year renewal option with escalation clauses for increases in the lessor's operating costs. The Company's lease for its facilities in Newark, California expires in 2001. The Company has entered into various operating lease agreements ranging from three to four years for additional office equipment. At December 31, 1997, future minimum lease payments under noncancelable operating leases with remaining terms in excess of one year are as follows:
FOR THE YEAR ENDED DECEMBER 31: ------------------------------- 1998........................................................ $ 930 1999........................................................ 570 2000........................................................ 55 2001........................................................ 38 ------ Total............................................. $1,593 ======
Rental expense under operating leases totaled $793,000, $788,000 and $991,000 for the years ended December 31, 1995, 1996 and 1997, respectively. The Company has entered into various capital lease agreements ranging from three to four years for office equipment, computer equipment and telecommunication systems. At December 31, 1997, future minimum lease payments under capital leases were as follows:
FOR THE YEAR ENDED DECEMBER 31: ------------------------------- 1998........................................................ $ 682 1999........................................................ 383 2000........................................................ 42 ------ Total minimum lease payments................................ 1,107 Less amounts representing interest.......................... (36) ------ Total....................................................... $1,071 ======
The Company and its subsidiaries are frequently parties to various claims, lawsuits and administrative proceedings arising in the ordinary course of business. Although the outcome of these lawsuits cannot be predicted with certainty, the Company does not expect such matters to have a material adverse effect on the financial condition or results of operations of the Company. K. EMPLOYEE BENEFIT PLAN: The Company has a defined contribution plan under Section 401(k) of the Internal Revenue Code to provide retirement and profit sharing benefits covering substantially all full-time employees. Employees are eligible to contribute up to 15% of their gross salary. The Company will contribute $.50 for every $1.00 contributed by an employee up to 3% of the employee's salary. Vesting in the Company contributions is over a five-year period based upon 20% per year. The Company's contribution to the defined contribution plan were $52,000, $72,000 and $106,000 for the years ended December 31, 1995, 1996 and 1997, respectively. L. INTEREST RATE SWAP: Interest rate swap contracts involve the exchange by the Company with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. The Company has entered into this contract to reduce the impact of changes in interest rates on its floating rate debt. F-18 79 BOYLE LEASING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (tables in thousands, except per share data) The Company has entered into this interest rate swap agreement only on a net basis, which means that the two payment streams are netted out, with the Company receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of payments that the Company is contractually entitled to receive, if any. Interest rate swaps entered into by the Company may not be readily marketable. At December 31, 1997, the Company had outstanding one interest rate swap agreement with one of its banks, having a total notional principal amount of $17,500,000. The agreement effectively changes the Company's interest rate exposure on $17,500,000 of its floating rate $35,000,000 revolving line of credit due July 31, 1999 to a fixed 9.10%. The interest rate swap matures on July 10, 2000. The interest differential paid or received on the swap agreement is recognized as an adjustment to interest expense. Interest expense related to the swap was $78,000 for the year ended December 31, 1997. At December 31, 1997, the fair value of this interest rate swap, which represents the amount the Company would receive or pay to terminate the agreement, is a net payable of $333,000, based on dealer quotes. The market risk exposure from the interest rate swap is assessed in light of the underlying interest rate exposures. Credit risk exposure from the swap is minimized as the agreement is with a major financial institution. The Company monitors the creditworthiness of this financial institution and full performance is anticipated. M. CONCENTRATION OF CREDIT RISK: The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of lease and loan receivables and cash and cash equivalent balances. To reduce the risk to the Company, stringent credit policies are followed in approving leases and loans, and lease pools are closely monitored by management. In addition, the cash and cash equivalents are maintained with several high quality financial institutions. F-19 80 ====================================================== NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 3 Risk Factors.......................... 8 Use of Proceeds....................... 15 Dividend Policy....................... 16 Capitalization........................ 17 Dilution.............................. 17 Selected Consolidated Financial and Operating Data...................... 19 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 21 Business.............................. 26 Management............................ 36 Certain Transactions.................. 43 Principal Stockholders................ 44 Selling Stockholders.................. 45 Description of Certain Indebtedness... 46 Description of Capital Stock.......... 51 Shares Eligible for Future Sale....... 54 Certain United States Tax Consequences to Non-United States Holders........ 55 Underwriting.......................... 57 Legal Matters......................... 58 Experts............................... 58 Available Information................. 59 Index to Financial Statements......... F-1
Until , 1998 (25 days after the commencement of the Offering), all Dealers effecting transactions in the Common Stock, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of Dealers to deliver a Prospectus when acting as Underwriters and with respect to their unsold allotments or subscriptions. ====================================================== ====================================================== SHARES BOYLE LEASING TECHNOLOGIES, INC. COMMON STOCK SALOMON SMITH BARNEY PIPER JAFFRAY INC. ====================================================== 81 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the various expenses expected to be incurred by the Registrant in connection with the sale and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee, the NYSE filing fee and the NYSE listing fee. SEC registration fee........................................ $16,963 NYSE filing fee............................................. * NYSE listing fee............................................ * Transfer Agent fees and expenses............................ * Printing expenses........................................... * Legal fees and expenses..................................... * Blue Sky fees and expenses.................................. * Accounting fees and expenses................................ * Appraisal fee............................................... * Directors and Officers insurance premiums................... * Federal taxes............................................... * State taxes................................................. * Trustees' and Transfer Agent fees........................... * Miscellaneous............................................... * ------- Total....................................................... $ * =======
- --------------- * To be filed by amendment ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 67 of Chapter 156B of the Massachusetts General Laws ("Section 67") provides that a corporation may indemnify its directors and officers to the extent specified in or authorized by (i) the articles of organization, (ii) a by-law adopted by the stockholders, or (iii) a vote adopted by the holders of a majority of the shares of stock entitled to vote on the election of directors. In all instances, the extent to which a corporation provides indemnification to its directors and officers under Section 67 is optional. The Company's by-laws provide that the Company shall, to the extent legally permissible, indemnify any person serving or who has served as a director or officer of the corporation against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, reasonably incurred by the director or officer in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he or she may be involved or with which he or she may be threatened, while serving or thereafter, by reason of being or having been such a director or officer, except with respect to any matter as to which he or she shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company; provided, however, that as to any matter disposed of by a compromise payment by such director or officer, no indemnification for said payment or expenses shall be provided unless such compromise is approved as in the best interests of the Company. Expenses reasonably incurred by any such director or officer in connection with the defense or disposition of any such action, suit or other proceeding may be paid from time to time by the Company in advance of final disposition. II-1 82 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Except as set forth below, the Registrant did not sell any securities which were not registered under the Securities Act during the three-year period ended May 19, 1998. COMMON STOCK
NO. OF SHARES OF AGGREGATE EXEMPTION PURCHASER ISSUANCE DATE COMMON STOCK CONSIDERATION CLAIMED --------- ------------- ---------------- ------------- --------- Richard F. Latour..................... June, 1995 6,620 $ 8,440.50 Rule 701 Michael Lannon........................ June, 1995 5,690 7,254.75 Rule 701 J. Gregory Hines...................... June, 1995 290 369.75 Rule 701 Eliot Vestner......................... July, 1995 6,000 7,650.00 Rule 701 Jeffrey Parker........................ July, 1995 10,000 12,750.00 Rule 701 Thomas Layton......................... July, 1995 10,000 12,750.00 Rule 701 Alan Zakon............................ July, 1995 20,000 25,500.00 Rule 701 J. Gregory Hines...................... July, 1995 290 369.75 Rule 701 Maureen Curran........................ July, 1995 25,000 5,375.00 Rule 701 Brian Boyle........................... July, 1995 6,800 8,670.00 Rule 701 Torrence Harder....................... July, 1995 6,800 8,670.00 Rule 701 Michael Lannon........................ September, 1995 5,690 7,254.75 Rule 701 Peter R. Bleyleben.................... December, 1995 15,900 20,272.50 Rule 701 Richard F. Latour..................... December, 1995 6,360 8,109.00 Rule 701 J. Gregory Hines...................... December, 1995 500 637.50 Rule 701 Michael Lannon........................ January, 1996 2,310 2,945.25 Rule 701 J. Gregory Hines...................... June, 1996 500 637.50 Rule 701 J. Gregory Hines...................... January, 1997 3,030 11,817.00 Rule 701 John Plumlee.......................... January, 1997 8,000 10,200.00 Rule 701 John Plumlee.......................... January, 1997 3,030 11,817.00 Rule 701 Maureen Curran........................ January, 1997 5,000 6,375.00 Rule 701 Maureen Curran........................ January, 1997 3,030 11,817.00 Rule 701 Stephen Obana......................... January, 1997 3,030 11,817.00 Rule 701 James Anderson........................ January, 1997 3,030 11,817.00 Rule 701 Stephen Constantino................... January, 1997 1,520 5,928.00 Rule 701 Carol Salvo........................... January, 1997 3,030 11,817.00 Rule 701 Kerry Frost........................... January, 1997 1,520 5,928.00 Rule 701 Richard F. Latour..................... January, 1997 8,590 33,501.00 Rule 701 J. Gregory Hines...................... March, 1997 1,510 1,925.25 Rule 701 Peter R. Bleyleben.................... March, 1997 4,100 5,227.50 Rule 701 Richard F. Latour..................... March, 1997 7,770 9,906.75 Rule 701 Richard F. Latour..................... March, 1997 1,640 2,091.00 Rule 701 Sabrina Abruzzese..................... October, 1997 7,500 29,250.00 Rule 701 Sabrina Abruzzese..................... October, 1997 2,625 10,237.50 Rule 701 Richard F. Latour..................... March, 1998 229 291.98 Rule 701 Richard F. Latour..................... March, 1998 10,599 41,336.10 Rule 701 Maureen Curran........................ March, 1998 3,743 14,597.70 Rule 701 John Plumlee.......................... March, 1998 3,743 14,597.70 Rule 701 J. Gregory Hines...................... March, 1998 3,743 14,597.70 Rule 701 Stephen Obana......................... March, 1998 3,743 14,597.70 Rule 701
II-2 83
NO. OF SHARES OF AGGREGATE EXEMPTION PURCHASER ISSUANCE DATE COMMON STOCK CONSIDERATION CLAIMED --------- ------------- ---------------- ------------- --------- James Andersen........................ March, 1998 3,743 $14,597.70 Rule 701 Stephen Constantino................... March, 1998 1,866 7,277.40 Rule 701 Carol Salvo........................... March, 1998 3,743 14,597.70 Rule 701 Kerry Frost........................... March, 1998 1,866 7,277.40 Rule 701
SUBORDINATED DEBT
ISSUE AGGREGATE EXEMPTION PURCHASER DATE PRINCIPAL AMOUNT CLAIMED --------- ----- ---------------- --------- Parker Family Ltd. Partnership.......... May 1, 1995 $ 200,000 Section 4(2) Bay Resource Corporation MPP/........... June 1, 1995 38,000 Section 4(2) Bay Resource Corporation................ December 1, 1995 104,000 Section 4(2) Ingrid R. Bleyleben..................... February 16, 1996 120,000 Section 4(2) Dorothy B. Watkins...................... March 12, 1996 50,000 Section 4(2) Parker Family Ltd. Partnership.......... June 1, 1996 500,000 Section 4(2) Joan S. Cushman......................... July 1, 1996 50,000 Section 4(2) Maud P. Barton.......................... July 1, 1996 100,000 Section 4(2) Richard M. Barton 1992 Trust............ July 1, 1996 100,000 Section 4(2) Sally Mann.............................. July 1, 1996 100,000 Section 4(2) DKFM Fritz Froehlich.................... September 1, 1996 25,000 Section 4(2) Laura Hentschel......................... September 1, 1996 20,000 Section 4(2) Aegon Insurance Group................... October 15, 1996 5,000,000 Section 4(2) Rothschild Inc.......................... October 17, 1996 5,000,000 Section 4(2) A. Harold Howell........................ November 1, 1996 260,000 Section 4(2) Phyllis Pace............................ November 18, 1996 50,000 Section 4(2) Wakefield Management Inc................ November 18, 1996 500,000 Section 4(2) Alan & Virginia Jones................... November 21, 1996 90,000 Section 4(2) Carolyn G. Harder....................... November 21, 1996 50,000 Section 4(2) Charles Everett MDPA.................... November 25, 1996 45,000 Section 4(2) David D. Williams....................... November 26, 1996 45,000 Section 4(2) The Planetary Trust..................... November 26, 1996 45,000 Section 4(2) Peter R. Bleyleben...................... December 1, 1996 100,000 Section 4(2) Parker Family Ltd. Partnership.......... December 2, 1996 1,250,000 Section 4(2) Ken & Jill Duckman 1992 Char............ December 3, 1996 45,000 Section 4(2) Glimer Enterprises Ltd.................. December 5, 1996 45,000 Section 4(2) Rosemary Broton Boyle................... December 5, 1996 45,000 Section 4(2) Harold P. Weintraub..................... December 6, 1996 22,500 Section 4(2) Mary H. Thomsen......................... December 6, 1996 22,500 Section 4(2) Webjake Partnership Ltd................. December 6, 1996 45,000 Section 4(2) Virginia A. Santonelli.................. December 9, 1996 22,500 Section 4(2) Bender Living Trust 12/3/96............. December 13, 1996 45,000 Section 4(2) Meredith Dickinson...................... December 13, 1996 22,500 Section 4(2) Dean R. Wasserman Essex................. December 16, 1996 45,000 Section 4(2) Dorothy R. Johns Living Trust........... December 16, 1996 45,000 Section 4(2) Charles E. Johns........................ December 17, 1996 67,500 Section 4(2) Ingrid R. Bleyleben..................... December 17, 1996 25,000 Section 4(2) Elaine F. Shimberg...................... December 18, 1996 90,000 Section 4(2) U/W/O Edward C. Mack 1973 Trust......... December 18, 1996 45,000 Section 4(2)
II-3 84
ISSUE AGGREGATE EXEMPTION PURCHASER DATE CONSIDERATION CLAIMED --------- ----- ------------- --------- Barnet Fain................................ December 19, 1996 $ 45,000 Section 4(2) Judith Harper IRA 230-96X28................ December 20, 1996 45,000 Section 4(2) Mandell Shimberg IRA MLPFS................. December 20, 1996 90,000 Section 4(2) Marjorie & Mark Steinberg.................. December 20, 1996 45,000 Section 4(2) MLPFS IRA BANK 23075R16.................... December 20, 1996 45,000 Section 4(2) MLPFS Sherwood IRA 23096W47................ December 20, 1996 45,000 Section 4(2) Barry W. Fain.............................. December 23, 1996 45,000 Section 4(2) Elaine B. Fain............................. December 23, 1996 45,000 Section 4(2) Max & Diane Weissberg...................... December 23, 1996 45,000 Section 4(2) Sadelle Bernstein, TTE..................... December 23, 1996 54,000 Section 4(2) SEFF Living Trust 2/1/89................... December 23, 1996 45,000 Section 4(2) Barnet Fain IRA............................ December 24, 1996 45,000 Section 4(2) David & Janet Handelman.................... December 24, 1996 45,000 Section 4(2) MLPFS Patricia B. McCord IRA............... December 24, 1996 90,000 Section 4(2) Foresight Foundation....................... December 27, 1996 45,000 Section 4(2) Gretchen Ingram............................ December 27, 1996 45,000 Section 4(2) Richard C. Warmer.......................... December 27, 1996 90,000 Section 4(2) Ann A. Groves.............................. January 2, 1997 50,000 Section 4(2) Bishop Living Trust........................ January 2, 1997 36,000 Section 4(2) Edith Bishop............................... January 2, 1997 18,000 Section 4(2) Elizabeth B. Alvord Trust U/W.............. January 2, 1997 200,000 Section 4(2) Harvey S. Stein............................ January 2, 1997 45,000 Section 4(2) Sheng Ren Trust............................ January 2, 1997 45,000 Section 4(2) John B. Power.............................. February 1, 1997 22,500 Section 4(2) Ted L. Carelock............................ February 26, 1997 90,000 Section 4(2) The Riddle Foundation...................... March 20, 1997 90,000 Section 4(2) Joanne T. Witt............................. March 27, 1997 22,500 Section 4(2) Ted L. Carelock............................ March 27, 1997 100,000 Section 4(2) Ms. Ann Elkins............................. April 4, 1997 90,000 Section 4(2) CPC Defined Benefit Trust.................. April 15, 1997 90,000 Section 4(2) Charles T. Zwicker TTEE.................... May 27, 1997 100,000 Section 4(2) Ingrid R. Bleyleben........................ June 4, 1997 20,000 Section 4(2) Alan Goldfine Irrevocable Trust............ July 1, 1997 300,000 Section 4(2) Elie Rivollier Jr. IRA Rollover............ July 1, 1997 100,000 Section 4(2) Mary Rivollier JR IRA Rollover............. July 1, 1997 150,000 Section 4(2) Mr. & Mrs. J. Bryan Mims................... July 1, 1997 300,000 Section 4(2) Steven Puskar.............................. August 18, 1997 30,000 Section 4(2) Parker Family Ltd. Partnership............. September 1, 1997 250,000 Section 4(2) George E. & Joanna Copoulos................ September 9, 1997 20,000 Section 4(2) Andrew Mills............................... December 1, 1997 100,000 Section 4(2) Gary L. Roubos & Terie A. Roubos........... January 23, 1998 1,000,000 Section 4(2) Alan J. Zakon IRA Rollover................. March 18, 1998 100,000 Section 4(2)
II-4 85 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1 Form of Underwriting Agreement(1). 3.1 Restated Articles of Incorporation, as amended(1). 3.2 Bylaws(1). 4.1 Specimen of Common Stock Certificate(1). 5.1 Opinion of Edwards & Angell, LLP(1). 10.1 Amended and Restated Revolving Credit Agreement among The First National Bank of Boston, Commerzbank Bank AG, New York Branch, and Leasecomm Corporation dated August 6, 1996. 10.2 Agreement and Amendment No. 1 to Amended and Restated Revolving Credit Agreement among The First National Bank of Boston, Commerzbank Bank AG, New York Branch, and Leasecomm Corporation dated September 23, 1997. 10.3 Amended and Restated Loan Agreement between Leasecomm Corporation and NatWest Bank N.A. dated July 28, 1995. 10.4 First Amendment to Amended and Restated Loan Agreement between Leasecomm Corporation and NatWest Bank N.A. dated October 30, 1995. 10.5 Second Amendment to Amended and Restated Loan Agreement between Leasecomm Corporation and Fleet Bank, N.A. (formerly NatWest Bank N.A.) dated August 6, 1996. 10.6 Third Amendment to Amended and Restated Loan Agreement between Leasecomm Corporation and Fleet Bank, N.A. dated August 11, 1997. 10.7 Office Lease Agreement by and between AJ Partners Limited Partnership and Leasecomm Corporation dated July 12, 1993 for facilities in Newark, California. 10.8 Office Lease Agreement by and between Boyle Leasing Technologies, Inc. and Desmond Taljaard and Howard Friedman, Trustees of London and Leeds Bay Colony I Realty Trust, dated April 14, 1994 for facilities in Waltham, Massachusetts. 10.9 1987 Stock Option Plan. 10.10 Forms of Grant under 1987 Stock Option Plan. 10.11 Board of Directors Stock Unit Compensation Plan. 10.12 1998 Equity Incentive Plan(1). 10.13 Employment Agreement between the Company and Peter R. Bleyleben(1). 10.14 Employment Agreement between the Company and Richard F. Latour(1). 10.15 Employment Agreement between the Company and J. Gregory Hines. 10.16 Employment Agreement between the Company and John Plumlee. 10.17 Employment Agreement between the Company and Carol Salvo. 11.1 Statement regarding computation of per share earnings. 21.1 Subsidiaries of Registrant. 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Edwards & Angell, LLP (see Exhibit 5.1). 24.1 Powers of Attorney (included on signature pages hereto). 27 Financial Data Schedule.
- --------------- (1) To be filed by amendment II-5 86 (b) FINANCIAL STATEMENT SCHEDULES Not applicable ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as are required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to any arrangement, provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than that payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (i) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (ii) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement for the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 87 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of Massachusetts, on the 8th day of June, 1998. BOYLE LEASING TECHNOLOGIES, INC. BY: /s/ PETER R. BLEYLEBEN -------------------------------------- Peter R. Bleyleben President, Chief Executive Officer and Director Each person whose signature appears below hereby constitute and appoint the President and Executive Vice President, or either of them, acting alone, as his true and lawful attorney-in-fact, with full power and authority to execute in the name, place and stead of each such person in any and all capacities and to file, an amendment or amendments to the Registration Statement (and all exhibits thereto) and any documents relating thereto, which amendments may make such changes in the Registration Statement as said officer or officers so acting deem(s) advisable. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ PETER R. BLEYLEBEN President, Chief Executive June 8, 1998 - --------------------------------------------------- Officer and Director Peter R. Bleyleben /s/ RICHARD F. LATOUR Executive Vice President, Chief June 8, 1998 - --------------------------------------------------- Operating Officer and Chief Richard F. Latour Financial Officer /s/ BRIAN E. BOYLE Director June 8, 1998 - --------------------------------------------------- Brian E. Boyle /s/ TORRENCE C. HARDER Director June 8, 1998 - --------------------------------------------------- Torrence C. Harder /s/ JEFFREY PARKER Director June 8, 1998 - --------------------------------------------------- Jeffrey Parker /s/ ALAN ZAKON Director June 8, 1998 - --------------------------------------------------- Alan Zakon
II-7 88 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1 Form of Underwriting Agreement(1). 3.1 Restated Articles of Incorporation, as amended(1). 3.2 Bylaws(1). 4.1 Specimen of Common Stock Certificate(1). 5.1 Opinion of Edwards & Angell, LLP(1). 10.1 Amended and Restated Revolving Credit Agreement among The First National Bank of Boston, Commerzbank Bank AG, New York Branch, and Leasecomm Corporation dated August 6, 1996. 10.2 Agreement and Amendment No. 1 to Amended and Restated Revolving Credit Agreement among The First National Bank of Boston, Commerzbank Bank AG, New York Branch, and Leasecomm Corporation dated September 23, 1997. 10.3 Amended and Restated Loan Agreement between Leasecomm Corporation and NatWest Bank N.A. dated July 28, 1995. 10.4 First Amendment to Amended and Restated Loan Agreement between Leasecomm Corporation and NatWest Bank N.A. dated October 30, 1995. 10.5 Second Amendment to Amended and Restated Loan Agreement between Leasecomm Corporation and Fleet Bank, N.A. (formerly NatWest Bank N.A.) dated August 6, 1996. 10.6 Third Amendment to Amended and Restated Loan Agreement between Leasecomm Corporation and Fleet Bank, N.A. dated August 11, 1997. 10.7 Office Lease Agreement by and between AJ Partners Limited Partnership and Leasecomm Corporation dated July 12, 1993 for facilities in Newark, California. 10.8 Office Lease Agreement by and between Boyle Leasing Technologies, Inc. and Desmond Taljaard and Howard Friedman, Trustees of London and Leeds Bay Colony I Realty Trust, dated April 14, 1994 for facilities in Waltham, Massachusetts. 10.9 1987 Stock Option Plan. 10.10 Forms of Grant under 1987 Stock Option Plan. 10.11 Board of Directors Stock Unit Compensation Plan. 10.12 1998 Equity Incentive Option Plan(1). 10.13 Employment Agreement between the Company and Peter R. Bleyleben(1). 10.14 Employment Agreement between the Company and Richard F. Latour(1). 10.15 Employment Agreement between the Company and J. Gregory Hines. 10.16 Employment Agreement between the Company and John Plumlee. 10.17 Employment Agreement between the Company and Carol Salvo. 11.1 Statement regarding computation of per share earnings. 21.1 Subsidiaries of Registrant. 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Edwards & Angell, LLP (see Exhibit 5.1). 24.1 Powers of Attorney (included on signature pages hereto). 27 Financial Data Schedule.
- --------------- (1) To be filed by amendment EX-10.1 2 AMENDED & RESTATED REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.1 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AMONG THE FIRST NATIONAL BANK OF BOSTON COMMERZBANK AG, NEW YORK BRANCH AND LEASECOMM CORPORATION Dated: August 6, 1996 2 TABLE OF CONTENTS SECTION I DEFINITIONS 1 1.1 DEFINITIONS 1 1.2 RULES OF INTERPRETATION 17 SECTION II DESCRIPTION OF CREDIT 17 2.1 REVOLVING CREDIT LOANS 17 2.2 THE CB TERM LOANS 19 2.3 THE NOTES 19 2.4 NOTICE AND MANNER OF BORROWING OR CONVERSION OF LOANS 20 2.5 DURATION OF FIXED RATE PERIODS 22 2.6 FUNDING OF LOANS 22 2.7 INTEREST RATES AND PAYMENTS OF INTEREST 23 2.8 FEES 24 2.11 PAYMENTS NOT AT END OF FIXED RATE PERIOD 28 2.12 EURODOLLAR INDEMNITY 28 2.13 COMPUTATION OF INTEREST AND FEES 29 2.14 CHANGED CIRCUMSTANCES; ILLEGALITY 29 2.16 CAPITAL REQUIREMENTS 30 SECTION III CONDITIONS OF LOANS 31 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS 31 3.2 CONDITIONS PRECEDENT TO ALL LOANS 32 SECTION IV REPRESENTATIONS AND WARRANTIES 33 4.1 ORGANIZATION; QUALIFICATION; BUSINESS 33 4.2 CORPORATE AUTHORITY 33 4.3 VALID OBLIGATIONS 34 3 4.4 CONSENTS OR APPROVALS 34 4.5 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES 34 4.6 FINANCIAL STATEMENTS 34 4.7 CHANGES 35 4.8 SOLVENCY 35 4.9 DEFAULTS 35 4.10 TAXES 35 4.11 LITIGATION 35 4.12 SUBSIDIARIES 36 4.13 INVESTMENT COMPANY ACT 36 4.14 COMPLIANCE 36 4.15 ERISA 36 4.16 ENVIRONMENTAL MATTERS 37 4.17 RESTRICTIONS ON THE BORROWER 37 4.18 LABOR RELATIONS 38 4.19 MARGIN RULES 38 4.20 DISCLOSURE 38 SECTION V AFFIRMATIVE COVENANTS 38 5.1 FINANCIAL STATEMENTS 38 5.2 CONDUCT OF BUSINESS 40 5.3 MAINTENANCE AND INSURANCE 40 5.4 TAXES 40 5.5 INSPECTION 40 5.6 MAINTENANCE OF BOOKS AND RECORDS 41 5.7 USE OF PROCEEDS 41 5.8 FURTHER ASSURANCES 41 5.9 NOTIFICATION REQUIREMENTS 41 4 5.10 ERISA REPORTS 42 5.11 ENVIRONMENTAL COMPLIANCE 42 SECTION VI FINANCIAL COVENANTS 43 6.1 DEBT TO WORTH RATIO 43 6.2 CONSOLIDATED TANGIBLE NET WORTH 43 6.3 BAD DEBT ALLOWANCE 43 6.4 FIXED CHARGE RATIO 44 SECTION VII NEGATIVE COVENANTS 44 7.1 INDEBTEDNESS 44 7.2 CONTINGENT LIABILITIES 45 7.3 ENCUMBRANCES 45 7.4 MERGER; CONSOLIDATION; SALE OR LEASE OF ASSETS 46 7.5 SUBSIDIARY STOCK 46 7.6 RESTRICTED PAYMENTS 46 7.7 PAYMENTS ON SUBORDINATED DEBT 47 7.8 INVESTMENTS; PURCHASES OF ASSETS 47 7.9 ERISA COMPLIANCE 48 7.10 TRANSACTIONS WITH AFFILIATES 48 7.11 FISCAL YEAR 48 SECTION VIII DEFAULTS 49 8.1 EVENTS OF DEFAULT 49 8.2 REMEDIES 51 SECTION IX ASSIGNMENT AND PARTICIPATION 52 9.1 ASSIGNMENT 52 9.2 PARTICIPATIONS 53 5 SECTION X THE AGENT 54 10.1 APPOINTMENT OF AGENT; POWERS AND IMMUNITIES 54 10.2 ACTIONS BY AGENT 55 10.3 INDEMNIFICATION 55 10.4 REIMBURSEMENT 55 10.6 RESIGNATION OR REMOVAL OF AGENT 56 SECTION XI MISCELLANEOUS 57 11.2 EXPENSES 58 11.3 INDEMNIFICATION 58 11.4 SURVIVAL OF COVENANTS, ETC. 59 11.5 SET-OFF 59 11.6 NO WAIVERS 59 11.7 AMENDMENTS, WAIVERS, ETC. 59 11.8 BINDING EFFECT OF AGREEMENT 60 11.9 CAPTIONS; COUNTERPARTS 60 11.10 ENTIRE AGREEMENT, ETC. 61 11.11 WAIVER OF JURY TRIAL 61 11.12 GOVERNING LAW 61 11.13 SEVERABILITY 62 11.14 CONFIDENTIALITY 62 EXHIBITS EXHIBIT A-1 - Form of Revolving Credit Note EXHIBIT A-2 - Form of CB Tranche A Term Note EXHIBIT A-3 - Form of CB Tranche B Term Note, EXHIBIT B - Form of Notice of Borrowing or Conversion EXHIBIT C - Disclosure EXHIBIT D - Form of Report of Chief Financial Officer EXHIBIT E - Assignment and Joinder Agreement EXHIBIT F-1 - Form of Dealer Agreement . 6 EXHIBIT F-2 - Form of Security Equipment Lease and/or Monitoring Agreement 7 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of August 6, 1996 by and among LEASECOMM CORPORATION, a Massachusetts corporation having its chief executive office at 950 Winter Street, Waltham, Massachusetts 02154 (the "BORROWER"), THE FIRST NATIONAL BANK OF BOSTON, a national bank having its head office at 100 Federal Street, Boston, Massachusetts 02110 ("FNBB"), COMMERZBANK AG, NEW YORK BRANCH, a New York State licensed branch of a German banking corporation having an office at World Financial Center, New York, New York 10281 ("COMMERZBANK"), the other financial institutions from time to time party hereto (together with FNBB and Commerzbank, the ("LENDERS"), and THE FIRST NATIONAL BANK OF BOSTON, as agent for the Lenders (in such capacity, the "AGENT"). WHEREAS, the Borrower and FNBB entered in to a Revolving Credit Agreement dated as of October 27, 1995 (the "EXISTING AGREEMENT"). WHEREAS, Commerzbank wishes to become a party to the Existing Agreement, as amended and restated hereby. WHEREAS, the parties hereto wish to amend the Existing Agreement and to restate the Existing Agreement as so amended. 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 that the Existing Agreement is hereby amended and restated in its entirety to read 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: 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 LOANS. See Section 2.14(a). 8 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 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 and (iv) any other Person 5% or more of any class of whole capital stock or other equity interests (including options, warrants, convertible securities and similar rights) is held directly or indirectly by that Person. For purposes of Sections 4.15, 5.10 and 7.9 hereof, "Affiliate" shall mean, within the meaning of Section 414(b), (c), (m) or (o) of the Code (i) any member of a controlled group of corporations which includes the Borrower, (ii) any trade or business, whether or not incorporated, under common control with the Borrower, (iii) any member of an affiliated service group which includes the Borrower, and (iv) any member of a group treated as a single employer by regulation. AGENT. See Preamble. AGREEMENT. This Amended and Restated Revolving Credit Agreement, including the Exhibits and Schedules hereto, as the same may be supplemented or amended from time to time. ASSIGNEE. See Section 9.1. BASE RATE. The greater of (i) the rate of interest announced from time to time by the Agent at its head office as its Base Rate, and (ii) the Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if necessary, to the next 1/8 of 1%). BASE RATE LOAN. Any Loan (other than the CB Term Loans) bearing interest determined with reference to the Base Rate. BORROWER. See Preamble. BORROWER'S ACCOUNTANTS. Coopers & Lybrand 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 (i) in the case of eligible Leases which are Finance Leases or Eligible Security Equipment Leases and/or Monitoring Agreements, 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 applicable Borrowing Rate (which calculation shall not take into account rental payments due or payable under such Eligible Leases beyond 48 months after the commencement date of such Eligible Leases), (ii) in the case of Eligible Leases which are Operating Leases (other than Rental Contracts or Eligible Security Equipment Lease and/or Monitoring Agreements), the lesser of (x) 60% of the aggregate Net Book Value of the Eligible 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 applicable Borrowing Rate (which calculation shall not take into account rental 2 9 payments due or payable under such Eligible Leases beyond 48 months after the commencement date of such Eligible Leases) and (iii) in the case of Eligible Rental Contracts (other than Eligible Security Equipment Lease and/or Monitoring Agreements), an amount equal to 50% of the aggregate Net Book Value of all Eligible Equipment subject to such Eligible Rental Contracts. For purposes hereof, determination of the calculation shall be made on a lease by lease basis but the Borrowing Base shall include the aggregate of all such calculations. BORROWING BASE MATURITY DATE. October 27, 1998. BORROWING BASE REPORT. A report of a Borrowing Computation in form satisfactory to the Agent and signed by any Responsible Officer. BORROWING COMPUTATION. See Section 2.4(d). 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 Boston, Massachusetts are 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, Eurodollar 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. CAPITALIZED LEASE OBLIGATIONS. As to any Person, the obligations of such Person to pay rent or other amounts under 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. CB TERM LOANS. The CB Tranche A Term Loan and the CB Tranche B Term Loan. CB TERM LOAN 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 CB Term Loan Security Documents. CB TERM LOAN OBLIGATIONS. Excluding the Revolving Credit Obligations, any and all obligations of the Borrower to Commerzbank of every kind and description pursuant to or in connection with the CB Term Loans, direct or indirect, absolute or contingent, primary or 3 10 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. CB TERM LOAN OUTSTANDING. At any time, the aggregate outstanding principal balance of the CB Term Loans at the time. CB TERM NOTES. The CB Tranche A Term Note and the CB Tranche B Term Note. CB TERM LOAN SECURITY DOCUMENTS. A security agreement dated the Closing Date, between the Borrower and Commerzbank, as amended, supplemented and in effect from time to time (the "TERM LOAN SECURITY AGREEMENT"), an assignment of leases dated the Closing Date, by the Borrower in favor of Commerzbank, as amended, supplemented and in effect from time to time, and any additional documents evidencing or perfecting Commerzbank's lien on the CB Term Loan Collateral. 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. The Revolving-Credit Collateral and the CB Term Loan Collateral. COMMITMENT FEE. See Section 2.8(a). CONSOLIDATED EARNINGS. The sum of Consolidated Net Income on a consolidated basis for the Parent and its subsidiaries, including the Borrower, (a) all provisions for any deferred federal, state or other taxes PLUS (b) interest on Indebtedness (including payments on Capitalized Lease Obligations in the nature of interest), all as determined-in accordance with GAAP. CONSOLIDATED INDEBTEDNESS. The consolidated Indebtedness (excluding Subordinated Debt but including Non-Recourse Indebtedness) of the Parent and its Subsidiaries, including the Borrower, determined in accordance with GAAP. CONSOLIDATED NET INCOME (DEFICIT). The consolidated net income (or deficit) of the Parent and its Subsidiaries, including the Borrower, determined in accordance with GAAP; PROVIDED, HOWEVER, that Consolidated Net Income shall not include amounts added to such net income (or deficit) in respect of the write-up of any asset. 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) organizational costs and good will, (y) treasury stock and (z) 25% of Debt Issue Costs. 4 11 CONSOLIDATED TANGIBLE NET WORTH. The sum, with respect to the Parent and its Subsidiaries, including the Borrower, on a consolidated basis, of (a) capital stock, (b) additional paid-in capital and (c) retained earnings, LESS the sum of (x) organizational costs and good will, (y) treasury stock and (z) 25% of Debt Issue Costs. 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. CONVERSION TERM LOAN. See Section 2.9(a). CONVERSION TERM LOAN MATURITY DATE. If the Revolving Credit Loans are converted into the Conversion Term Loan, as provided in Section 2.9(a), the date which is the second anniversary of the Borrowing Base Maturity Date. DEALER. A Person who is engaged in the business of selling, servicing and installing security/alarm monitoring and related equipment. 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 a Security Equipment Lease and/or Monitoring Agreement which has been assigned by such Dealer to the Borrower. 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. DERIVATIVE EXPOSURE. The aggregate potential exposure. of FNBB under all outstanding Eligible Interest Rate Contracts as determined. by FNBB in its reasonable discretion. FNBB shall determine its potential exposure under each Eligible Interest Rate Contract and notify the Borrower of such determination at the time the Borrower enters into such Eligible Interest Rate Contract and such determination shall not be changed so long as such Eligible Interest Rate Contract remains in effect. DISCOUNT-RATE. The Base Rate plus 0.50%, which rate shall change contemporaneously with any change in the Base Rate. DRAWDOWN DATE. The Business Day on which any Loan is made or is to be made. ELIGIBLE EQUIPMENT. Equipment: 5 12 (a) To which the Borrower has good and marketable title; (b) Which is not subject to any Encumbrance other than that in favor of the Agent for the benefit of the Lenders and in which (other than with respect to security systems subject to a Security Equipment Lease and/or Monitoring Agreement) the Agent has a duly perfected first priority security interest under the UCC or other similar law; (c) Which is to be used primarily for personal, family or household purposes or in the ordinary course of business by the Borrower's lessees; (d) Which is subject to an Eligible Lease or Eligible Rental Contract; (e) Which is insured by either the Borrower in accordance with current practice or the lessee thereof in accordance with industry standards; and (f) Which, if such Equipment consists of electronic signs leased to any one lessee, the Original Cost of such Equipment shall not exceed $5,000. 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 FNBB with respect to Loans. 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 treat 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 has not been determined by the Agent to be unacceptable; 6 13 (h) Which is in a form approved by the Agent; (i) Under which no payment is more than 90 days past due; (j) Under which no default has occurred other than to the extent permissible under clause (i) immediately above; (k) Which covers Eligible Equipment; and (1) 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 70% of the Original Cost of the Equipment leased thereunder; or which is an Eligible Security Equipment Lease and/or Monitoring Agreement. ELIGIBLE LEASE RECEIVABLES. As at the date of determination thereof, Receivables then due and unpaid with respect to an Eligible Lease. ELIGIBLE RENTAL CONTRACT. A Rental Contract: (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 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) The lessee under which has not been determined by the Agent to be unacceptable; (g) Which is in a form approved by 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 under clause (h) immediately above; and 7 14 (j) Which covers Eligible Equipment. ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENT. A Security Equipment Lease and/or Monitoring Agreement: (a) Which is in full force and effect; (b) Which is assignable by thee Dealer thereunder; (c) Which provides that the customer's obligations thereunder (solely as to any equipment covered thereby) 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; (d) Which is not subject to any Encumbrance other than that in favor of the Agent on behalf of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; (e) Under which no payment is more than 90 days past due; (f) Under which no default has occurred other than to the extent permissible under clause (e) immediately above; (g) Which is the subject of a Dealer Agreement which is in full force and effect, under which no default shall have occurred by either party thereto and which is not subject to any Encumbrance other than in favor of the Agent on behalf of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; and (h) With respect to which the monitoring services are being provided by the Dealer under the applicable Dealer Agreement or by a Service which is acceptable to the Agent, which acceptance shall not be unreasonable withheld. 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 judgments and orders 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 8 15 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. Bank credit card authorization terminals, electronic signs, satellite communication equipment, satellite dishes, security systems and monitoring services, water cooler systems, office equipment, other miscellaneous equipment (provided such miscellaneous equipment (including the Eligible Leases and Eligible Lease Receivables relating thereto) does not, in the reasonable judgment of the Agent, comprise at any time a material portion in value of the Borrowing Base ("Other Equipment") ) and other equipment reasonably acceptable to the Agent, whether now or hereafter owned and leased to third party users by the Borrower; provided, however, that in no event shall Equipment include cellular telephones, software or fixtures (other than electronic signs or security systems subject to a Security Equipment Lease and/or Monitoring Agreement). 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. EURODOLLAR LOAN. Any Loan (other than the CB Term Loans) bearing interest at a rate determined with reference to the Eurodollar Rate. EURODOLLAR RATE. With respect to any Eurodollar Loan for any interest Period, the rate of interest determined by the Agent to be the prevailing rate per annum at which deposits in U.S. Dollars are offered to the Agent by first-class banks in the interbank Eurodollar market in which it regularly participates on or about 12:00 noon (Boston time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Eurodollar Loan to which such Interest Period is to apply for a period of time approximately equal to such Interest Period. EURODOLLAR 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 Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any such reserve percentage. EVENT OF DEFAULT. Any event described in Section 8.1. EXISTING AGREEMENT. See Preamble. FEDERAL FUNDS EFFECTIVE RATE. For any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of 9 16 New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. FINANCE LEASE. A Lease Characterized as a "finance lease" in accordance with GAAP. FIXED CHARGE RATIO. The ratio of Consolidated Earnings, during any period consisting of the preceding four consecutive fiscal quarters, to Fixed Charges, payable during such period. FIXED CHARGES. On a consolidated basis for the Parent and its Subsidiaries, including the Borrower, the scheduled payments of interest on all Indebtedness (including payments on capitalized lease obligations in the nature of interest). FIXED RATE. With respect to any Fixed Rate Loan for the related Fixed Rate Period, an interest rate per annum based upon the Lenders' cost of funds as determined by the Agent in its sole and absolute discretion with reference to the Lenders' funding sources plus three percent (3.00%), which rate shall be quoted to the Borrower by the Agent upon request by the Borrower received by the Agent no later than 12:00 noon, Boston time, on the Business Day that the Borrower submits its Notice of Borrowing or Conversion with respect to such Fixed Rate Loan, PROVIDED that the Agent shall not be obligated to quote such rate to the Borrower more than once in any Business Day. FIXED RATE LOAN. Any Revolving Credit Loan or any portion of the Conversion Term Loan (in each case, which is not less than $1,000,000 or an integral multiple of $1,000,000) which the Borrower shall have elected to have bear interest at the Fixed Rate for the related Fixed Rate Period, in accordance with the terms and conditions hereof. FIXED RATE PERIOD. With respect to each Fixed Rate Loan, the period (in months) commencing on the date of the making or continuation of or conversion to such Fixed Rate Loan and ending at least six (6) months and not more than two (2) years thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Conversion; PROVIDED that: (i) the period elected by the Borrower shall be identical to the period for which the Agent has quoted a Fixed Rate at the Borrower's request; (ii) any Fixed Rate Period (other than an Fixed Rate 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; (iii) no Fixed Rate Period shall have a duration of less than six months or more than two years, and if any Fixed Rate Period applicable to a Loan would be for a shorter period than six months or a longer period than two years, such Fixed Rate Period shall not be available hereunder. 10 17 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. GAAP. Generally accepted accounting principles, consistently applied. GROSS LEASE INSTALLMENTS. The aggregate Receivable 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 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. 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 Unite 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. 11 18 INTERCREDITOR AGREEMENT. The Amended and Restated Credit Agreement dated as of the Closing Date among the Agent, Commerzbank and Fleet Bank N.A. (successor by merger to NatWest Bank N.A.), as Agent. INTEREST PERIOD. With respect to each Eurodollar Loan, the period commencing on the date of the making or continuation of or conversion to such Eurodollar Loan and ending one (1), two (2), three (3), six (6) or twelve (12) months thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Borrower PROVIDED that: (i) any Interest Period (other than an Interest Period to clause (iii) below) that would determined pursuant otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period 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 that would otherwise end after the Maturity Date shall end on the Maturity Date; and (iv) notwithstanding clause (iii) above, no Interest Period shall have a duration of less than one month, and if any Interest Period applicable to a Loan would be for a shorter period, such Interest Period shall not be available hereunder. 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 city of, any other Person (including any Subsidiary), any real estate held for sale or investment, 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 (including any and all schedules, supplements and amendments thereon and modifications hereof) entered into by the Borrower as lessor with respect to Equipment. LENDER. FNBB, Commerzbank and each other Person that may after the date hereof become a party to this Agreement as a "Lender" hereunder. 12 19 LOAN DOCUMENTS. This Agreement, the Notes, the Revolving Credit Security Documents, the CB Term Loan Security Documents, the Parent Guarantee and the Intercreditor Agreement, together with any agreements, instruments or documents executed and delivered pursuant to or in connection with any of the foregoing. LOANS. The Loans made or to be made by the Lenders to the Borrower pursuant to Section II of this Agreement. MAJORITY LENDERS. As of any date, the holders of sixty percent (60%) of the Total Revolving Credit Commitment. NATWEST FACILITY. That certain revolving credit facility established pursuant to that certain Loan Agreement dated as of July 29, 1993, as amended and restated as of July 28, 1995 and as subsequently amended as of August 6, 1996, by and among the Borrower, Fleet Bank, N.A.(successor by merger to NatWest Bank, N.A.) and the other banks named therein, as the same may be further amended, supplemented and in effect from time to time. NET BOOK VALUE. At a particular date, as to Any Eligible Equipment, the Original Cost of such Eligible Equipment 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, 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 and the CB Term Notes. NOTICE OF BORROWING OR CONVERSION. See Section 2.4. OBLIGATIONS. The Revolving Credit Obligations and the CB Term Loan Obligations. OPERATING LEASE. A Lease characterized as an "operating lease" in accordance with GAAP. ORIGINAL COST. The purchase price for any Equipment as invoiced by the supplier thereof. PARENT. Boyle Leasing Technologies, Inc., a Massachusetts corporation, and the sole stockholder of the Borrower. 13 20 PARENT GUARANTEE. The amended and restated unlimited guarantee made by the Parent in favor of the Agent for the benefit of the Lenders, dated the Closing Date and guaranteeing all Obligations. PARTICIPANT. See Section 9.2. PENSION PLAN. Any Plan which is an "employee pension benefit plan" (as defined in ERISA). PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under 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 Borrower or Subsidiary. PROHIBITED TRANSACTION. Any "prohibited transaction" as defined in ERISA and the Code. QUALIFIED INVESTMENTS. As applied to the Borrower and its Subsidiaries, investments in (i) notes, bonds or other obligations of the United States of American 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 Corporation, respectively, or their successors, (iv) any repurchase agreement secured by any one or more of the foregoing, and (v) advances to employees 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 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 by it or for services rendered by it, 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 rite thereto, including rights to reclamation and stoppage in transit and any rights of an unpaid seller 14 21 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. RENTAL CONTRACT. An Operating Lease which is month-to-month and which is cancelable. RESPONSIBLE OFFICER. The chief financial officer of the Borrower, the vice president of funding operations 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, 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 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 COLLATERAL. All of the property, rights and interest of the Borrower and its Subsidiaries that are or are intended to be subject to the security interests and liens created by the Revolving Credit Security Documents. REVOLVING CREDIT COMMITMENT. With respect to any Lender, the maximum dollar amount which such Lender has agreed to loan to the Borrower as Revolving Credit Loans upon the terms and subject to the conditions of this Agreement. Initially, (i) FNBB's Revolving Credit Commitment shall be $20,000,000 and (ii) Commerzbank's Revolving Credit Commitment shall be an amount equal to (x) $15,000,000 MINUS (y) the CB Term Loan Outstanding from time to time. Each Lender's Revolving Credit Commitment may be modified from time to time as provided in this Agreement, including termination or reduction of such Revolving Credit Commitment in accordance with Sections 2.1 and 8.2 hereof. REVOLVING CREDIT LOAN. See Section 2.1(a) hereof. REVOLVING CREDIT NOTES. See Section 2.3(a). REVOLVING CREDIT OBLIGATIONS. Excluding the CB Term Loan 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 and the Conversion Term Loan) and Eligible Interest Rate Contracts, 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. REVOLVING CREDIT OUTSTANDINGS. At any time, the aggregate outstanding principal balance of the Revolving Credit Loans at the time. 15 22 REVOLVING CREDIT SECURITY DOCUMENTS. An amended and restated security agreement dated the Closing Date, between the Borrower and the Agent, as amended, supplemented and in effect from time to time (the "REVOLVING CREDIT SECURITY AGREEMENT"), any supplement to the Revolving Credit Security Agreement in the form of Exhibit A to the Revolving Credit Security Agreement as executed and delivered by the Borrower and the Agent from time to time, an amended and restated 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 (the "REVOLVING CREDIT ASSIGNMENT OF LEASES"), any supplement to the Revolving Credit Assignment of Lease 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, and any additional documents evidencing or perfecting the Agent's lien on the Revolving Credit Collateral. SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENT. An agreement between a Dealer and a customer, substantially in the form of EXHIBIT F-2 hereto, 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. SERVICER. A Person engaged in the business of providing monitoring services for central alarm systems. SUBORDINATED DEBT. Indebtedness of the Parent or 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) on terms and conditions Satisfactory to the Agent. 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. TOTAL REVOLVING CREDIT COMMITMENT. The sum of the Revolving Credit Commitments of the Lenders as in effect from time to time. TYPE. A Base Rate Loan or a Eurodollar Loan. 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 Encumbrance on Collateral. 16 23 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. (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. (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 Commonwealth of Massachusetts, 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 Revolving Credit 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 Revolving Credit 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 (A) such Lender's Revolving Credit Commitment, (B) in the case of such Loans based upon Operating Leases, 10% of such Lender's Revolving Credit Commitment, and (C) in the case of such Loans based upon Eligible Security Equipment Lease and/or Monitoring Agreements, 25% of such Lender's Revolving Credit Commitment. Subject 17 24 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 constitutes 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. (b) The amount of each Revolving Credit Loan shall be determined as follows, based-upon the Eligible Leases or Eligible Rental Contracts to which each such Loan relates: (i) With respect to Loans based upon Eligible Leases (other than Operating Leases or Eligible Security Equipment Lease and/or Monitoring Agreements), the amount of each such Loan shall not exceed an amount equal to the lesser of (x) 100% of the Adjusted Cost of the Eligible Equipment subject to such Eligible Leases or (y) 75% of the amount of the Eligible Lease Receivables relating to such Eligible Leases, discounted to present value (which calculation shall not taken into account rental payments due and payable under such Eligible Leases beyond 48 months after the commencement date of such Eligible Leases) by a percentage equal to the Discount Rate; (ii) with respect to Loans based upon Eligible Leases consisting of Operating Leases which are not Rental Contracts or Eligible Security Equipment Lease and/or Monitoring Agreements, the amount of each such Loan shall not exceed an amount equal to the lesser of (x) 60; of the Net Book Value of the Eligible Equipment subject to such Eligible Leases or (y) 75% of the Eligible Lease Receivables relating to such Eligible Leases, discounted to present value (which calculation shall not take into account rental payments due and payable under such Eligible Leases beyond 48 months after the commencement date of such Eligible Leases) by a percentage equal to the Discount Rate; (iii) With respect to Loans based upon Eligible Rental Contracts other than Eligible Security Equipment Lease and/or Monitoring Agreements, the amount of each such Loan shall not exceed an amount equal to 50% of the Net Book Value of the Eligible Equipment subject to such Eligible Rental Contracts. (iv) With respect to Loans based upon Eligible Security Equipment Lease and/or Monitoring Agreements, the amount of each such Loan shall be an amount equal to the lesser of (x) 100% of the Adjusted Cost of the security system (including any monitoring services relating thereto) subject to such Eligible Security Equipment Lease and/or Monitoring Agreement or (y) 75% of the amount of Eligible Lease Receivables relating to such Eligible Security Equipment Lease and/or Monitoring Agreements, discounted to present value (which calculation shall not take into account payments due and payable under 18 25 such Eligible Security Equipment Lease and/or Monitoring Agreements beyond 48 months after the commencement date of such Eligible Security Equipment Lease and/or Monitoring Agreements) by a percentage equal to the Discount Rate. (c) No Eurodollar 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 15 Eurodollar Loans may be outstanding at any time. (d) 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 (other than the CB Term Loans) into a Loan of another type on any Business Day (which, in the case of a conversion of an Outstanding Eurodollar Loan shall be the last day of the Interest Period applicable to such Eurodollar 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. (e) All Revolving Credit Commitments shall automatically terminate at 2:30 p.m. Boston time on the Borrowing Base Maturity Date. Subject to the provisions of Section 2.9 regarding mandatory payments, the Borrower shall have the right at any time and from time to time upon five (5) Business Days' prior written notice to the Agent to reduce by $1,000,000, and in integral multiples of $1,000,000 if in excess thereof, the Total Revolving Credit Commitment or to terminate entirely the Lenders' Revolving Credit Commitments to make Revolving Credit Loans hereunder, whereupon the Revolving Credit Commitments of the Lenders shall be reduced) PRO RATA in accordance with their respective Revolving Credit Commitments by the aggregate amount specified in such notice or shall, as the case may be, be terminate entirely. No such reduction or termination of any Revolving Credit Commitment may be reinstated. 2.2 THE CB TERM 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, Commerzbank agrees to make a term loan (the "CB TRANCHE A TERM LOAN") to the Borrower on the Closing Date in the principal amount of $909,090.94. The CB Tranche A Term Loan shall mature and be due and payable in full on the Borrowing Base Maturity Date. (b) 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, Commerzbank agrees to make a term loan (the "CB TRANCHE B TERM LOAN") to the Borrower on the Closing Date in the principal amount of $1,090,909.09 Term Loan shall mature and be due and payable in full on the Borrowing Base Maturity Date. 2.3 THE NOTES. (a) The Revolving Credit Loans shall be evidenced by separate promissory notes for each Lender, each such note to be substantially the form of EXHIBIT A-1 hereto, dated as 19 26 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 Revolving Credit 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. (b) The CB Tranche A Term Loan shall be evidenced by a promissory note of the Borrower, in substantially the form of EXHIBIT A-2 hereto, dated as of the Closing Date (the "CB TRANCHE A TERM NOTE"). (c) The CB Tranche B Term Loan shall be evidenced by a promissory note of the Borrower, in substantially the form-of EXHIBIT A-3 hereto, dated as-of the Closing Date (the "CB TRANCHE B TERM NOTE"). 20 27 2.4 NOTICE AND MANNER OF BORROWING OR CONVERSION OF LOANS. (a) Whenever the Borrower desires to obtain or continue a Revolving Credit Loan hereunder, convert an outstanding Revolving Credit Loan or the Conversion Term Loan of one Type into a Loan of another Type or convert an outstanding Base Rate Loan into a Fixed Rate Loan pursuant to Section 2.4(c), the Borrower shall notify the Agent by notice (which notice shall be irrevocable) received no later than 2:00 p.m. Boston time on the date (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 or a Fixed 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 Eurodollar 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 Section 2.1, (B) the interest rate option requested to be applicable thereto, as provided in Section 2.7, and (c) the duration of the applicable Interest Period or Fixed Rate Period, if any (subject to the provisions of the definitions of the terms "Interest Period" and "Fixed Rate Period" and Section 2.5). If such notice fails to specify the interest rate option to be applicable to the requested Loan, than the Borrower shall be deemed to have requested a Base Rate Loan. Each such notification (a "NOTICE OF BORROWING OR CONVERSION") shall be immediately followed by a written confirmation thereof by the Borrower in substantially the form of EXHIBIT B hereto, PROVIDED that if such written confirmation differs 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. (b) Subject to the provisions of the definition of the term "Interest Period" herein, the duration of each Interest Period for a Eurodollar 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 Eurodollar Loan, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. If the Agent receives a Notice of Borrowing or Conversion after the time specified in subsection (a) above, such Notice shall not be effective. If the Agent does not receive an effective Notice of Borrowing or Conversion with respect to an outstanding Eurodollar 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 Loan in whole into a Base Rate Loan on the last day of the then current Interest Period with respect thereto. (c) From time to time from and after the Closing Date and prior to the Conversion Term Loan Maturity Date, if any, or, if none, the Borrowing Base Maturity Date, the Borrower may convert all or any part (in integral multiples of $1,000,000) of any outstanding Base Rate Loan into a Fixed Rate Loan, PROVIDED that as of the date of the Notice of Borrowing or Conversion requesting a Fixed Rate Loan and as of the first day of the Fixed Rate Period, no material Default shall have occurred and be continuing. 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(a). 21 28 (d) 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 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, (vi) the calculation of the projected amounts referred to in Section 2.1(b) and (vii) such other information with respect to such Equipment and Leases as is 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. 2.5 DURATION OF FIXED RATE PERIODS. (a) Subject to the provisions of the definition of the term "Fixed Rate Period" herein, the duration of each Fixed Rate Period applicable to a Fixed Rate Loan shall be as specified in the applicable Notice of Borrowing or Conversion. The Borrower shall have the option to elect a subsequent Fixed Rate Period to be applicable to such Fixed Rate Loan by giving notice of such election to FNBB received no later than 12:00 noon Boston time on the date one Business Day before the end of the then applicable Fixed Rate Period if such. Loan is to be continued as or converted to a Fixed Rate Loan. (b) If the Agent does not receive a notice of election of duration of a Fixed Rate Period for a Fixed Rate Loan pursuant to subsection (a) above the applicable time limits specified therein, or when such notice must be given, a material Default exists, the Borrower shall be deemed to have elected to convert such Loan in whole into a Base Rate Loan on the last day of the then current Fixed Rate Period with respect thereto until paid in full or until a Fixed Rate Loan with respect thereto is selected by the Borrower in accordance with the terms of Section 2.4. 2.6 FUNDING OF LOANS. (a) Revolving Credit Loans shall be made by the Lenders PRO RATA in accordance with their respective Revolving Credit 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). 22 29 (b) 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 requested Loan. Not later than 1:00 p.m. (Boston 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 satisfaction of the other conditions set forth therein (to the extent applicable) the Agent will make available to the Borrower the aggregate amount 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) 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. 2.7 INTEREST RATES AND PAYMENTS OF INTEREST. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof the Base Rate plus 0.50%, which rate contemporaneously with and change in if a material Event of Default shall the Agent the unpaid balance of Base interest, to the extent permitted by interest rate equal to the Base Rate at a rate per annum equal to shall change the Base Rate; PROVIDED that occur, then at the option of Rate Loans shall bear law, compounded daily at an plus 4%, until such Event of Default is cured or waived. Such interest shall be payable monthly in arrears on the first Business Day of each month, commencing October 1, 1995, and when such Loan is due (whether at maturity, by reason of acceleration or otherwise). 23 30 (b) Each Fixed Rate Loan shall bear interest on the outstanding principal amount thereof, for each Fixed Rate Period applicable thereto, at the Fixed Rate applicable thereto; PROVIDED that if a material Event of Default shall occur, then at the option of the Agent the unpaid balance of Fixed Rate Loans shall bear interest, to the extent permitted by law, compounded daily at an interest rate equal to the Base Rate plus 4%, until such Event of Default is cured or waived. Such interest shall be payable for such Fixed Rate Period monthly in arrears on the first Business Day of each month during such Fixed Rate period, on the last date thereof and when such Fixed Rate Loan is due (whether maturity, by reason of acceleration or otherwise). (c) Each Eurodollar Loan shall bear interest on. The outstanding principal amount thereof, for each Interest Period applicable thereto, at a rate per annum equal to the Eurodollar Rate plus 2.50%; PROVIDED that if a material Event of Default shall occur, then at the option of the Agent the unpaid balance of the Eurodollar Loans shall bear interest, to the extent permitted by law, compounded daily at an interest rate equal to the Eurodollar Rate plus 4.50%. 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. (d) 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 Eurodollar 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 upwards, if necessary, to the next higher 1/8 of 1%) obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Eurodollar Loan from (ii) the rate obtained by dividing such Eurodollar 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 Eurodollar Loan. (e) The CB Term Tranche A Term Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to 8.3%; provided that if a material Event of Default shall occur, then at the option of Commerzbank the unpaid balance of the CB Term Tranche A Term Loan shall bear interest, to the extent permitted by law, compounded daily at an interest rate equal to the Base Rate plus 4%, until such Event of Default is cured or waived. Such interest shall be payable monthly in arrears on the first Business Day of each month, commencing September 1, 1996, and when the CB Tranche B Term Loan is due (whether at maturity, by reason of acceleration or otherwise) (f) The CB Term Tranche B Term Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to 7.75%; provided that if a material Event of Default shall occur, then at the option of Commerzbank the unpaid balance of the CB Term 24 31 Tranche B Term Loan shall bear interest, to the extent permitted by law, compounded daily at an interest rate equal to the Base Rate plus 4%, until such Event of Default is cured or waived. Such interest shall be payable monthly in arrears on the first Business Day of each month, commencing September 1, 1996, and when the CB Tranche B Term Loan is due (whether at maturity, by reason of acceleration or otherwise). 2.8 FEES. (a) The Borrower shall pay to the Agent for the benefit of the Lenders a commitment fee (the "COMMITMENT FEE"), computed on a daily basis and payable quarterly in arrears on the first Business Day of each quarter, equal to one-quarter of one percent (1/4%) per annum of the excess of (i) the Total Revolving Credit Commitment at the time over (ii) the Revolving Credit outstandings from time to time. (b) Without limiting any of the Lender's other rights hereunder or by law, if any Loan or any portion thereof or any interest thereon is not paid within fifteen (15) days after its due date, the Borrower shall pay to the Agent for the benefit of the Lenders on demand a late payment charge equal to 5% of the amount of the total payment due. (c) The Borrower shall pay to the Lenders such other standard charges imposed by the Lenders Au. The Borrower as are customarily imposed by the Lenders in the ordinary course of business on borrowers generally (e.g., charges for returned cashier's checks, wire transfers, letters of credit, foreign exchange transactions, and other operational services). (d) The Borrower shall pay to the Agent, solely for the account of the Agent, such other fees as the Borrower and the Agent shall agree. (e) The Borrower authorizes the Agent and the Lenders to charge to their Note Records or to any deposit account which, the Borrower may maintain with any of them-the interest, fees, charges, taxes and expenses provided for in this Agreement, the Father Loan Documents or any other document executed or delivered in connection herewith or therewith. 2.9 PAYMENTS AND PREPAYMENTS OF THE LOANS; CONVERSION LOAN. (a) On the Borrowing Base Maturity Date, if the Lenders shall not have offered to extend such date and if no material Default shall have occurred and be continuing, then at the option of the Borrower the unpaid principal balance of the Revolving Credit Loans shall be converted into a term loan (the "CONVERSION TERM LOAN") which shall be payable in twenty-four (24) equal consecutive monthly installments on the first day of each month, commencing with the first day of the month following the Borrowing Base Maturity Date, with the unpaid principal balance of the Conversion Term Loan, together with all unpaid interest thereon and all fees and other amounts due with respect thereto, due and payable in full on the Conversion Term Loan Maturity Date. If the Lenders shall have offered to extend the Borrowing Base Maturity Date but the Borrower shall not have agreed to such extension or if any material Default shall have occurred and be continuing on such date, then notwithstanding the existence of any Fixed Rate 25 32 Loan and notwithstanding any other provision of the Loan Documents, the Borrower shall pay in full on such date the unpaid principal balance of the Revolving Credit Loans, together with all unpaid interest thereon and all fees and other amounts due with respect thereto (including, without limitation, any amounts due pursuant to Section 2.11 hereof). (b) The Borrower shall repay the CB Tranche A Term Loan in twenty-six (26) equal consecutive monthly installments of $33,670.03 each, payable on the first day of each month, commencing September 1, 1996. On the Borrowing Base Maturity Date, the Borrower shall pay in full the unpaid principal balance of the CB Tranche B Term Loan, together with all unpaid interest thereon and all other amounts due with respect thereto. (c) The Borrower shall repay the CB Tranche B Term Loan in twenty-six (26) equal consecutive monthly installments of $30,303.03 each, payable on the first day of each month, commencing September 1, 1996. On the Borrowing Base Maturity Date, the Borrower shall pay in full the unpaid principal balance of the CB Tranche B Term Loan, together with all unpaid interest thereon and all other amounts due with respect thereto. (d) Eurodollar Loans may be paid, without premium or penalty, on the last day of any Interest Period applicable thereto, upon three Business Days' notice. Fixed Rate Loans may be paid, without premium or penalty, on the last day of any Fixed Rate Period applicable thereto, upon one Business Day's notice. 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 in conjunction with any such prepayment of the Revolving Credit Loan, the Agent shall, simultaneously with receipt of such prepayment, release the Eligible Equipment, Eligible Leases and Eligible Rental Contracts to which such prepaid Loan relates from the Agent's Encumbrance on such items of Revolving Credit Collateral granted to the Agent pursuant to the Revolving Credit 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 Revolving Credit 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. (e) If at any time the Revolving Credit Outstandings exceed the lesser of (i) the Borrowing Base and (ii) the Total Revolving Credit Commitment, then the Borrower shall immediately pay the amount of any such excess to the Agent for application to the Revolving Credit Loans. 2.10 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 without set-off or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, 26 33 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 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 Lender 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. (b) All payments of principal of and interest IN respect of Revolving Credit Loans, the Conversion Term Loan and the Commitment Fee shall be made to the Agent, for the benefit of the Lenders, PRO RATA in accordance with their respective Revolving Credit 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 payments of principal of and interest in respect of the CB Term Loans shall be made to the Agent for the benefit of Commerzbank. 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 Revolving Credit Commitments shall have been terminated or the Revolving Credit 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 Revolving Credit Collateral) by any Lender in respect of Revolving Credit Obligations (except funds received by any Lender as a result of a purchase of a participant interest pursuant to Section 2.10(e) below) shall be remitted to the Agent, and all such funds, together with all other funds received by the Agent from or on behalf of the Borrower (including proceeds of Revolving Credit Collateral) in respect of Revolving Credit 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 the Commitment Fee and any other fees payable hereunder; (iii) third, to the payment of interest due on the Revolving Credit Loans and the Conversion Term Loan; (iv) fourth, to the payment of the outstanding principal balance of the Revolving Credit Loans and the Conversion Term Loan; (v) fifth, to the payment of any other Revolving Credit Obligations payable by the Borrower; and (vi) any remaining funds shall be paid to whoever shall be entitled thereto or as a court of competent jurisdiction shall direct. (d) If the CB Term Loan 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 CB Term Loan Collateral) by the Agent or any Lender in respect of CB Term Loan Obligations shall be remitted to Commerzbank, and all such funds, together with all 27 34 other funds received by Commerzbank from or on behalf of the Borrower (including proceeds of CB Term Loan Collateral) in respect of CB Term Loan Obligations, shall be applied by Commerzbank in the following manner and order: (i) first, to reimburse the Agent and Commerzbank for any amounts payable to the Agent and Commerzbank pursuant to Sections 11.2 and 11.3 hereof; (ii) second, to the payment of any fees payable hereunder with respect to the CB Term Loans; (iii) third, to the payment of interest due on the CB Term Loans; (iv) fourth, to the payment of the outstanding principal balance of the CB Term Loan Obligations payable by the Borrower; and (vi) any remaining funds shall be paid to whoever shall be entitled thereto or as a court of competent jurisdiction shall direct. (e) 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 the Conversion Term Loan or any fees which are to be shared PRO RATA 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 Revolving Credit 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. 2.11 PAYMENTS NOT AT END OF FIXED RATE PERIOD. If the Borrower for any reason (including, without limitation, the due date for payment pursuant to Section 2.9(a) or acceleration Pursuant to Section 8.2 hereof) makes any payment of principal with respect to any Fixed Rate Loan on any day other than the last day of the Fixed Rate Period applicable to such Fixed Rate Loan, or fails to borrow or continue or convert to a Fixed Rate Loan after giving a Notice of Borrowing or Conversion thereof pursuant to Section 2.4, the Borrower shall pay to the Agent for the benefit of the Lenders such amount or amounts as shall compensate the Lenders for the loss, costs or expense incurred by the Lenders as a result of such payment or failure, such compensation to include, without limitation, an amount equal to the present value of the excess of (x) the amount of interest which would have accrued on the amount so paid or not borrowed, continued or converted for the period from the date of such payment or failure to the last day of the then current Fixed Rate Period (or, in the case of a failure to borrow, continue or convert, the Fixed Rate Period which would have commenced on the date of such failure) at the applicable rate of interest for such Fixed Rate Loan over (y) the total amount of interest which accrue during such period at an interest rate equivalent to the yield on any readily marketable bond or other obligation of the United States, designated by the Agent in its sole discretion, in an amount equal (as nearly as may be) to the total amount of principal paid or not borrowed, continued or converted and having a maturity comparable to such Fixed Rate Period. The Agent shall 28 35 compute the present value of the amount determined pursuant to the preceding sentence by discounting such amount at the interest rate equivalent to the yield referred to in clause (y) of the preceding sentence, and the result determined by such present value computation shall be the amount of compensation payable to the Agent for the benefit of the Lenders hereunder. The Borrower shall pay such amount of compensation upon presentation by the Agent of a statement setting forth the amount and the Agent's calculation thereof pursuant hereto. 2.12 EURODOLLAR INDEMNITY. If the Borrower for any reason (including, without limitation, pursuant to Sections 2.14, 2.9(d) and 8.2 hereof) makes any payment of principal with respect to any Eurodollar Loan on any day other than the last day of an Interest Period applicable to such Eurodollar Loan, or fails to borrow or continue or convert to a Eurodollar Loan after giving a Notice of Borrowing or Conversion thereof pursuant to Section 2.4, or fails to prepay a Eurodollar 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 Eurodollar Loan. 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. 2.13 COMPUTATION OF INTEREST AND FEES. 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. 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 each definition of the terms "Interest Rate Period" and "Fixed Rate Period"), and such extension shall be included in computing interest in connection with such payment. 2.14 CHANGED CIRCUMSTANCES; ILLEGALITY. (a) Notwithstanding any other provision of this Agreement, in the event that: (i) on any date on which the Eurodollar 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 Eurodollar 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: 29 36 (A) the making or continuation of or conversion of any Loan to a Eurodollar 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 Eurodollar 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 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 2.12, 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. 2.15 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 30 37 in or for the account of, or loans by, any Lender (other than such requirements as are already included in the determination of the Eurodollar 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 receivables 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 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 assumption upon which such calculation was based, which statement shall be deemed true and correct absent manifest error. 2.16 CAPITAL REQUIREMENTS. If after the date hereof and 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 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. SECTION III CONDITIONS OF LOANS ------------------- 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of the Lenders to make additional Revolving Credit Loans and of Commerzbank to make the CB Term Loans is subject to the satisfaction, or prior to the Closing Date, on the condition that 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: 31 38 (i) This Agreement; (ii) The Revolving Credit Notes and the CB Term Notes; (iii) The Revolving Credit Security Documents; (iv) The CB Term Loan Security Documents; (v) The Parent Guarantee; (vi) The Intercreditor Agreement; (vii) UCC-1 Financing Statements and UCC-3-Financing Statement Amendments; (viii) Borrowing Base Report as of a date within five (5) Business Days of the Closing Date; (ix) Notice of Borrowing or Conversion as of the Closing Date; (x) A certificate of the Clerk or an Assistant Clerk of the Borrower with respect to resolutions of the Board of Directors 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 has been amended since the date the same were delivered to FNBB pursuant to the Existing Credit Agreement; (xi) A certification of the Secretary of State of the Borrower's jurisdiction of incorporation as to legal existence and good standing of the Borrower in such state; (xii) An opinion addressed to the Lenders from Edwards & Angell, Counsel to the Borrower; and (xiii) Such other documents, instruments, opinions and certificates and completion of such other matters, as the Agent may reasonably deem necessary or appropriate. 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 to Fixed Rate Loans or Loans of another Type is further subject to the following conditions: 32 39 (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 or Conversion 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); (c) no Default shall have occurred and be continuing, or would result from the making of such requested Loan; (d) in the case of a requested Fixed Rate Loan, the Agent shall not have determined in good faith that it is unable to quote a Fixed Rate in respect of the requested Fixed Rate Period; (e) the resolutions referred to in Section 3.1 shall remain in full force and effect; and (f) 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. 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 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 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 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 33 40 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 power and authority of the Borrower and have been authorized by all necessary corporate proceedings, and do not and will not (a) contravene any provision of the charter documents or by-laws of the 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 the Borrower, or (c) result in or require the imposition of any Encumbrance on any of the properties, assets or rights of the 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 Revolving Credit Security Documents have effectively created in favor of the Agent and the Lenders legal, valid and enforceable security interests in the Revolving Credit Collateral and such security interests are fully perfected first priority security interests. The CB Term Loan Collateral and such security interests are fully perfected first priority security interests. 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 Revolving Credit Security Documents and the CB Term Loan Security Documents. 4.5 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES. Each of the Borrower and its Subsidiaries has good and marketable 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 adverse 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. 34 41 4.6 FINANCIAL STATEMENTS. The Borrower has furnished to the Lenders the Parent's consolidated and consolidating balance sheets as of December 31, 1995 and its consolidated and consolidating statements of income, changes in stockholders' equity and cash flow for the fiscal year then ended (the "INITIAL FINANCIAL STATEMENTS"), 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, 1996 and consolidated statement of income for the six months ended June 30, 1996, 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 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 Statement or on EXHIBIT C hereto. 4.7 CHANGES. Since the date of the Initial Financial Statements, there have been no changes in the assets, liabilities, financial condition, business or prospects of the Parent or any of its Subsidiaries other than changes in the ordinary course of business, the effect of which has not, in the aggregate, been materially adverse to the Parent and its Subsidiaries taken as a whole. 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 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. 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 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. The Borrower 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 Borrower and each Subsidiary have been audited or otherwise examined by any federal or state taxing authority. The Borrower and each Subsidiary have established on the books reserves adequate for the payment of all federal, state and other tax liabilities. 35 42 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 Borrower or any Subsidiary that, if adversely determined, may reasonably be expected to result in a material judgment not fully covered by insurance, 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 on the assets, business or prospects of the Borrower and its Subsidiaries taken as a whole. 4.12 SUBSIDIARIES. As of the date of this Agreement, all the Subsidiaries of the Borrower 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. 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 on the business, financial condition or operation of the Borrower and its Subsidiaries taken as a whole; and the Borrower and each Subsidiary are duly authorized, qualified and licensed under and in compliance with all applicable laws, 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 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 violations none of which, either individually or in the aggregate, would have any material adverse effect on the business, condition (financial or otherwise) or assets of the Borrower and its Subsidiaries taken as a whole. 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 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 Plan to a material tax or penalty imposed on a Prohibited Transaction; no 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 Plans which are single-employer plans is at least equal to the aggregate present value of all accrued benefits under such Plans, both as determined in the most recent actuarial reports for such Plans using the actuarial assumptions used for funding purposes therein; neither the 36 43 Borrower nor any of its Affiliates has incurred any liability to the Pension Benefit Guaranty Corporation over and above premiums requested by law; and neither the Borrower nor any of its Affiliates has terminated any 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 on the business, financial condition or operations of the Borrower or any of its Subsidiaries. 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 on the business, financial condition or operations of the borrower and its Subsidiaries. (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 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) To the best of the Borrower's knowledge 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 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 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, materially and adversely affect the business, property, assets, operations or conditions, financial or otherwise of the Borrower or any of its Subsidiaries. 37 44 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, excepts for such complaints, grievances and arbitration Proceedings which, if adversely decided, would not have a material and adverse e effect on the condition (financial or otherwise), properties, business or results of operations of the Borrower or any of its Subsidiaries, 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 and adverse effect on the condition (financial or otherwise), properties, business or results of operations of the Borrower or any of its Subsidiaries 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 and adverse effect on the condition (financial or otherwise), properties, business or results of operations the Borrower or any of its Subsidiaries. 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 not misleading in light of the circumstances in which they are made. 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 and consolidated balance sheets as of the end of and related consolidated and consolidating statements of income and retained earnings and consolidated 38 45 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 Accountant 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; (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 within 15 days after the end of each month, a Borrowing Base Report, together with such other information regarding Eligible Lease Receivables as the Agent may require; (d) at least 30 days prior to the first day of each fiscal year, the Parent'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 Borrower, copies of any reports (including any so-called management letters) submitted to the Borrower by independent public accountants in connection with any annual or interim review of the accounts of the Borrower made by such accountants; (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 Borrower shall send to its stockholders or as the Borrower may file with the Securities and Exchange Commission or any governmental authority at any time having jurisdiction over the Borrower or its Subsidiaries; (h) at least 30 days prior to the date any amendments or modifications are made to the agreements and other instruments evidencing Indebtedness for borrowed money of the Borrower (other than Obligations) which is not Subordinated Debt, notification setting forth in detail the proposed amendments or modifications; and 39 46 (i) 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; PROVIDED, that the Borrower may continue to self-insure Equipment in the manner in which it is currently conducting its business until the Agent notifies the borrower otherwise; and PROVIDED, FURTHER, that the Borrower shall (x) not materially change the manner in which it self-insured Equipment without the prior written consent of the Agent; (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; and (z) within 45 days after notice in writing from the Agent, obtain such additional insurance as the Agent may reasonable request. 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 if 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 40 47 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 such reviews shall not be conducted more than two times per year; and the Agent may, in its sole discretion, in lieu of such reviews by its own commercial finance examiners, 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 expenses. 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 Eligible Lease and Eligible Rental Contracts. (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. 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 material 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 on the assets, business or prospects of the Borrower alone or the Borrower and its Subsidiaries on a consolidated basis, written notice thereof and the action being or proposed to be taken with respect thereto; 41 48 (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 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 might constitute a material adverse change in or which might have a material adverse effect on the business, properties or condition (financial or otherwise) of the Borrower alone or the Borrower and its Subsidiaries, taken as a whole, written notice thereof. 5.10 ERISA REPORTS. With respect to any Plan, the Borrower shall, or shall cause its Affiliates to furnish to the Agent promptly (i) written notice of the occurrence of a "reportable event" (as defined in Section 4043 of ERISA), excluding any such event notice of which has been waived by regulation, (ii) a copy of any request for a waiver of the funding standards or an extension of the amortization periods required under Section 412 of the Code and Section 302 of ERISA, (iii) a copy of any notice of intent to terminate any Pension Plan, (iv) notice that the Borrower or any Affiliate will or may incur any liability to or on account of a Plan under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA, and (v) a copy of the annual report of each Pension Plan (Form 5500 or comparable form) required to be filed with the Internal Revenue Service and/or the Department of Labor. Any notice to be provided to the Agent under this Section shall include a certificate of the chief financial officer of the Borrower setting forth details as to such occurrence and the action, if any, which the Borrower or the Affiliate is required or proposes to take, together with any notices required or proposed to be filed with or by the Borrower, any Affiliate, the PBGC, the Internal Revenue Service, the trustee or the plan administrator with respect thereto. Promptly after the adoption Of any Pension Plan, the Borrower shall notify the Agent of such adoption. 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 subsidiaries 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 by the Borrower 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 42 49 Subsidiary to take any action in connection with the release of Hazardous Materials into the environment or 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 change in the condition, financial or otherwise, of the Borrower or any Subsidiary, the Borrower or such Subsidiary shall provide the Agent with notice thereof. 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 DEBT TO WORTH RATIO. The ratio of Consolidated Indebtedness to Consolidated Tangible Capital Funds shall not exceed six (6) to one (1) at any time; PROVIDED, HOWEVER, that in the event the Borrower shall amend Section 5.10(a)(4)(i) of the Note Agreement dated as of July 1, 1994 with respect to the Parent's 12% Senior Subordinated Notes solely to increase the Percentage set forth therein to 650% or greater, then the ratio in this Section 6.1 shall, effective as of the date of such amendment, but provided no Default or Event of Default shall have Occurred and be continuing, increase to six and one-half (6.5) to one (1). 6.2 CONSOLIDATED TANGIBLE NET WORTH. The Borrower shall at all times maintain a Consolidated Net Worth of not less than the sum of (i) $5,500,000 and (ii) 50% of the aggregate amount of Consolidated Net Income of the Parent and its Subsidiaries, including the Borrower, for each of the fiscal quarters ended after December 31, 1994 but without deducting therefrom any amount of Consolidated Net Deficit for any of such fiscal quarters; 6.3 BAD DEBT ALLOWANCE. The Borrower shall at all times maintain an allowance for bad debt of the Parent and its Subsidiaries, including the Borrower, of at lease 5% of Gross Lease Installments. 6.4 FIXED CHARGE RATIO. The Borrower shall have as of the end of each fiscal quarter a Fixed Charge Ratio of the Parent and its Subsidiaries, including the Borrower, of not less than 1.25:1.00. SECTION VII NEGATIVE COVENANTS ------------------ 43 50 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 (other than pursuant to the NatWest Facility) existing as of the date of this Agreement and disclosed on EXHIBIT C hereto and renewals and refinancings thereof, but not any increase in the principal amounts thereof; (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 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) Indebtedness pursuant to the NatWest Facility not exceeding $125,000,000 in principal amount outstanding at any time; and (h) Indebtedness of a Subsidiary of the Borrower secured by Leases, Equipment and Receivables relating to such Leases and Equipment, none of which constitutes any part of the Collateral. 7.2 CONTINGENT LIABILITIES. Neither the 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. 44 51 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 (other than Encumbrances arising under the NatWest Facility) existing as of the date of this Agreement and disclosed in EXHIBIT C hereto; (c) liens for taxes, fees, assessments and 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; liens securing the performance of bids, tenders, contracts (other than for the payment of money); and 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 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 that (i) are not fully covered by insurance, and (ii) 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; (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 the Borrower' business; (h) any Encumbrance on any Eligible Lease, Eligible Rental Contract and Eligible Equipment created by the sale, transfer, assignment or disposition of such Eligible Lease, Eligible Rental Contract or Eligible Equipment in compliance with Section 7.4(ii) hereof; 45 52 (i) liens constituting a renewal, extension or replacement of any Permitted Encumbrance; (j) Encumbrances arising under the NatWest Facility, that no such Encumbrance attaches to any part of the Collateral; and (k) Encumbrances granted with respect to any Indebtedness permitted under Section 7.1(h), PROVIDED that no such Encumbrance attaches to any part of the Collateral. 7.4 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 (i) the disposition of scrap, waste and obsolete or unusable items and Qualified Investments, in each case in the ordinary course of business; and (ii) the sale, transfer, assignment or disposition of any Eligible Leases, Eligible Rental Contracts and Eligible Equipment, PROVIDED that the net proceeds thereof are sufficient to prepay and are applied simultaneously to prepay any related Revolving 7.5 SUBSIDIARY STOCK. 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. 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. 7.6 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; (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 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. 46 53 7.7 PAYMENTS ON SUBORDINATED DEBT. The Borrower shall not make any payment or prepayment of principal of or interest on or make any payment any other payment in respect of Subordinated Debt, except (i) regularly scheduled payments of principal and interest thereon at the rates and times specified in the instruments evidencing the Subordinated Debt as delivered to the Agent along with the agreements pursuant to which such indebtedness is subordinated to the Obligations (but not any amendments thereof without the Agent) and (ii) prepayments of principal of and accrued and unpaid interest on, any Subordinated Debt, provided that in the aggregate principal amount of all Subordinated Debt so prepaid by the Borrower during any fiscal year of the Borrower to exceed $100,000; PROVIDED that in the case of both clause (i) and clause (ii), both immediately prior to making any such payment and after giving effect thereto there shall not have occurred and be continuing any Default. 7.8 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; (b) Qualified Investments; (c) Capital Expenditures; (d) purchases of inventory in the ordinary course of business; (e) normal trade credit extended in the ordinary course of business and consistent with prudent business practice. (f) any other Investments, PROVIDED that (x) all Investments permitted pursuant to this Section 7.8(f), including all Investments made since January 1, 1995, in the aggregate and on a cumulative basis, do not exceed, at the end of any fiscal quarter, an amount equal to 50% of Consolidated Tangible Net Worth, without the prior written consent of the Agent, such consent not to be unreasonably withheld, (y) no Default or Event of Default exists at the time of, or would result from any such Investment, and (z) such Person is an entity engaged in related business activities to that of the Borrower. With respect to Investments permitted pursuant to this Section 7.8(f), the Borrower shall (x) not less than five (5) Business Days prior to making any such Investment, deliver to the Agent a certificate signed by the president, chief financial officer, vice president-funding operations or chief operating officer of the Borrower described in detail the nature of such Investment and (y) upon request of the Agent from time to time, deliver to the Agent a current schedule of all such Investments, each of such certificates and schedules to be in form and substance satisfactory to the Agent. 47 54 7.9 ERISA COMPLIANCE. Neither the Borrower nor any of its 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" (as defined in Section 412(a) of the Code and Section 302 of ERISA) whether or not waived which would have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole, (iii) fail to satisfy any additional funding requirements set forth in Section 412 of the Code and Section 302 of ERISA which would have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole, or (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. Each Plan shall comply in all material respects with ERISA, 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. 7.10 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. 7.11 FISCAL YEAR. The Borrower and its Subsidiaries shall not change their fiscal years without the prior written consent of the Agent. 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 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 shall fail to perform or comply with any term, covenant or agreement applicable to it contained in Sections 5.1, 5.2(b), 5.5, 5.6, 5.7, 5.9, 5.11, 5.12, 6 and 7 of this Agreement; or 48 55 (c) the Borrower 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 representations or warranty of the Borrower 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) the Borrower or any of its Subsidiaries shall fail to pay when due (after any applicable period of grace) any amount payable under Indebtedness exceeding $100,000 in principal amount or under any agreement for the use of real or personal property requiring aggregate payments in excess of $100,000 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 (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, liquidate 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 or 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 or 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, liquidate 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 undisguised, or unseated 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 49 56 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 unseated 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 in value, the payment of which is not fully covered by insurance in excess any deductibles not exceeding $500,000 in the aggregate, and such judgment, order, warrant or process shall continue undercharged or unseated 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 the PBGC or to a Plan under Title IV of ERISA, unless liability is being contested in good faith by appropriate proceedings, the Borrower or the Affiliate, as the case may be, 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 Plan or Plans; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or (j) any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise then in accordance with the express terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at 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) the occurrence of any material change in the Condition or affairs (financial or otherwise) of the Borrower or any of its Subsidiaries or of any endorser, guarantor or surety for any Obligation which causes the Lenders to deem themselves insecure. 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 upon the Agent's declaration: 50 57 (a) the obligation of the Lenders to make any further Loans shall terminate; (b) the unpaid principal amount of the Loans together 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 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 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 or by statute or by any provision of law. Without limiting the generality of the foregoing or of any of the terms. and provisions of any of the Revolving Credit Security Documents or the CB Term Loan Security Documents, (i) if and when the Agent exercises remedies under the Revolving Credit Security Documents with respect to the Revolving Credit Collateral, the Agent may, in its sole discretion, determines which items and types of Revolving Credit Collateral to dispose of and in what order and may dispose of Revolving Credit 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 Revolving Credit Collateral, and (ii) if and when Commerzbank exercises its remedies under the CB Term Loan Security Documents with respect to the CB Term Loan Collateral, Commerzbank may, in its sole discretion, determine which items and types of CB Term Loan Collateral to dispose of and in what order and may dispose of CB Term Loan Collateral in any order Commerzbank shall select in its sole discretion, and the Borrower consents to the foregoing and waives all rights of marshalling with respect to all CB Term Loan Collateral. SECTION IX ASSIGNMENT AND PARTICIPATION ---------------------------- 9.1 ASSIGNMENT. (a) Each Lender shall have the right to assign at any time any portion of its Revolving Credit Commitment hereunder and its interests in the risk relating to any Revolving Credit Loans the Conversion Term Loan Participations in an amount equal to greater than $5,000,000 to other Lenders or to banks or financial institutions acceptable to the Agent (each as provided that any Lender which proposes to assign its total Revolving Credit Commitment must retain a commitment of at least $5,000,000, and provided, further, that if 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 51 58 Borrower (such approval not to be unreasonably withheld or delayed). Each such Assignee shall execute and deliver to the Agent and the Borrower a counterpart hereunder in the form of EXHIBIT E hereto and shall pay to the Agent, solely for the account of the Agent, an assignment fee of $5,000. Upon the execution and delivery of such counterpart under, (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 (other than the CB Term Loan Security Documents) for all purposes of this Agreement and such other Loan Documents and shall have all rights and legations of a "Lender" with a Revolving Credit Commitment as set forth in such counterpart joinder, and the transferor Lender shall, on the date and to the extent provided in such counterpart hereunder, 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 Revolving Credit 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 Revolving Credit Commitment; (c) the Borrower shall issue to such Assignee a Revolving Credit Note in the amount of such Assignee's Revolving Credit Commitment dated the Closing Date or such other date as may be 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. (b) Commerzbank shall have the right to assign at any time any portion of its interests in the risks relating to either of the CB Term Loans to any Assignee acceptable to the Agent, provided that if no Default or Event of Default shall have occurred and be continuing, each such Assignee which is not a Lender shall be subject to prior approval by the Borrower (such approval not to be unreasonably withheld or delayed). (c) 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 52 59 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. 9.2 PARTICIPATIONS. Each Lender shall have the right 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 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 Revolving Credit 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 hereof, 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 (other than the CB Term Loan Security 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 half of each of the Lenders and to exercise all such powers as re 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 or omitted to be taken by any of them hereunder or in connection herewith, except for their own gross negligence or willful misconduct. Without 53 60 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 Subsidiaries or any other Person to perform its obligations under any of the Loan Documents; (iv) the satisfaction of any conditions specified in Section 3 hereof, other than receipt of documents, certificates and opinions specified in Section 3.1 hereof; (v) the existence, value, collectibility or adequacy of 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, refiling, continuing or re-recording of any financing statement or other document or instrument evidencing or relating 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 taken, omitted to be taken or suffered n good faith by it in accordance with the advice of such agents, attorneys and other experts. FNBB, 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 FNBB 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 (other than the CB Term Loan Security Documents) as it determines may be necessary or desirable to protect the Revolving Credit 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 Revolving Credit Collateral valued by the Agent, in its sole discretion, of not more than $1,000,000 in any fiscal year. 54 61 (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 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 Tenders agree to indemnify the Agent ratably in accordance with their respective Revolving Credit Commitments, for any and all abilities, 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 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 aid 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 resents that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and formation 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 55 62 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 11.7(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 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 a 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 30 days after the retiring Agent's giving 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 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. After any retiring Agent's resignation, 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, at Leasecomm Corporation 950 Winter Street Waltham, Massachusetts 02154 Attention: J.Gregory Hines, Vice President of Funding Operations 56 63 with a copy to: Robert Silberman, Esq. Edwards & Angell 101 Federal Street Boston, MA 02110 Facsimile: (617) 439-4170 to Agent or FNBB at 100 Federal Street Boston, Massachusetts 02110 Attention: Jeffrey G. Millman, Vice President, or Division Executive (Boston Middle Market) Facsimile: (617) 434-8102 with a copy to: William A. Levine, Esq. Sullivan & Worcester LLP One Post Office Square Boston, MA 02109 Facsimile: (617) 338-2880 If to Commerzbank, at 2 World Financial Center New York, NY 10281 Attention: Robert Donohue, Vice President Facsimile: (212) 266-7595 with a copy to: Steven Troyer, Counsel (U.S.) Commerzbank, AG, New York Branch 2 World Financial Center New York, NY 10281 Facsimile: (212) 266-7317 Or at: any other address specified by such party in writing. 11.2 EXPENSES. Whether or not the transactions contemplated herein shall be consummated, the Borrower hereby promises to reimburse the Agent and the Lenders for all reasonable out-of-pocket fees and disbursements (including all reasonable attorneys' fees and 57 64 collateral evaluation costs) incurred or expended in connection with the preparation, filing or recording, or interpretation of this Agreement and the other Loan Documents, or any amendment, modification, approval, consent or waiver hereof or thereof, or with the enforcement of any Obligations or the satisfaction of any indebtedness of the Borrower hereunder or thereunder, or in connection with any litigation, proceeding or dispute in any way related to the credit hereunder. The Borrower will pay any taxes (including any interest and penalties in respect thereof) other than the Lenders' federal and state income taxes, payable on or with respect to the transactions contemplated by the Loan Documents (the Borrower hereby agreeing to indemnify the Agent and the Lenders with respect thereto). 11.3 INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Lenders, as well as their respective shareholders, directors, agents, officers, subsidiaries and affiliates, from and against all damages, losses, settlement payments, obligations, liabilities, claims, suits, penalties, assessments, citations, directives, demands, 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 may 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 11.3 shall survive payment or satisfaction of payment of all amounts owing with respect to the Notes or any other Loan Document. 11.4 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 warranties by the Borrower hereunder. 11.5 SET-OFF. Regardless of the adequacy of any collateral, 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 reliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are by expressly waived) be set off, appropriated, and 58 65 applied by any and all Obligations of the Borrower to 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. 11.6 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 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 of law. 11.7 AMENDMENTS, WAIVERS, ETC. (a) Neither this Agreement nor the Revolving Credit Notes nor any other Loan Documents (other than the CB Term Loan Security 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. Neither the CB Term Notes nor any CB Term Loan Security Document nor any provision thereof may be amended, waived, discharged or terminated except by a written instrument signed by Commerzbank and, in the case of amendments, by the Borrower. If requested by the Agent, this Agreement shall be amended to make changes conforming to changes proposed to be made to agreements or other instruments evidencing Indebtedness for borrowed money of the Borrower to other senior creditors (as referred to in Section 5.1(h) hereof). (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. 7(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 (other than the CB Term Loan Security Documents) to be given by the Lenders may be given, and any term of this Agreement, any other Loan Document (other than the CB Term Loan Security Documents 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 59 66 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 Revolving Credit Commitment (or subject the Lenders to any additional 0 legations) (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 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 1.1, amend Section 2.1(a) or waive the limitations set forth in Section 2.1(a); (vi) amend this Section 11.7(b); (vii) change the Revolving Credit Commitment of any Lender, except as permitted under Section IX hereof; (viii) except as permitted by Section 10.2(b) hereunder, release any Revolving Credit Collateral; or (ix) amend Sections 2.7 or 2.8 hereof. 11.8 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 assigns; PROVIDED that the Borrower may not assign or transfer its rights or obligations hereunder. 11.9 CAPTIONS; COUNTERPARTS. The captions in this Agreement are for convenience of reference only and shall not fine 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. 11.10 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, 11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO 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 60 67 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. 11.12 GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). BORROWER CONSENTS TO THE JURISDICTION OF ANY OF THE FEDERAL OR STATE COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN CONNECTION WITH ANY SUIT TO ENFORCE THE RIGHTS OF THE LENDERS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN 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. 11.13 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, 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 jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. 11.14 CONFIDENTIALITY. The Agent and the Lenders shall 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 and in any event may make disclosure to such of its 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 11.14. [Remainder of Page Intentionally Blank] 61 68 IN WITNESS WHEREOF, the undersigned have duly executed this instrument under seal as of the date first set above. LEASECOMM CORPORATION By: /s/ Peter Bleyleben ______________________________ Title: THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent By: /s/ [Signature Illegible] ______________________________ Title: COMMERZBANK AG, NEW YORK BRANCH By: /s/ [Signature Illegible] ______________________________ Title: By: ______________________________ Title: 62 EX-10.2 3 AGREEMENT & AMEND. NO. 1 TO REVOLVING CREDIT AGMNT 1 EXHIBIT 10.2 AGREEMENT AND AMENDMENT NO. 1 THIS AGREEMENT AND AMENDMENT NO. 1 is made as of September 23, 1997, by and among LEASECOMM CORPORATION, BANKBOSTON, N.A., (f/k/a The First National Bank of Boston), as Agent and the LENDERS whose signatures appear at the end of this Agreement and Amendment No. 1. WHEREAS, the parties hereto are parties to a certain Amended and Restated Revolving Credit Agreement dated as of August 6, 1996 (the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings; WHEREAS, the Borrower has requested certain changes to the Credit Agreement. 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: 1. AMENDMENTS TO SECTION 1.1. Section 1.1 of the Credit Agreement is hereby amended as follows: (a) Clauses (i) and (ii) of the definition of "Borrowing Base" are hereby amended to delete the phrase "48 months" and to substitute therefor the phrase "60 months". (b) The definition of "Borrowing Base Maturity Date" is hereby amended to delete the phrase "October 27, 1998", and to substitute therefor the phrase "July 31, 1999". (c) The definition of "Discount Rate" is hereby amended to delete the phrase "plus 0.50%". (d) The definition of "Eligible Equipment" is hereby amended to delete the word "and" at the end of subparagraph (e) thereof, to change the semicolon to a period at the end of subparagraph (e) thereof and to delete in its entirety subparagraph (f) thereof. (e) The definition of "Equipment" is hereby amended to add the phrase "stand-alone automated teller machines, non-fixture food preparation machines for use by restaurants," in the fourth line of such definition before the phrase "other miscellaneous equipment". 2. AMENDMENTS TO SECTION 2.1. Section 2.1 of the Credit Agreement is hereby amended as follows: (a) The first sentence of Section 2.1(a) is hereby amended to insert the following immediately after the last word of said sentence: 2 ", 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 48 months shall not at any time (after giving effect to all requested Revolving Credit Loans) exceed 10% of the aggregate principal amount of all outstanding Revolving Credit Loans." (b) Clauses (i), (ii) and (iv) of Section 2.1(b) of the Credit Agreement are hereby amended to delete the phrase "48 months" and to substitute therefor the phrase "60 months". 3. AMENDMENTS TO SECTION 2.7. Section 2.7 of the Credit Agreement is hereby amended as follows: (a) Section 2.7(a) is hereby amended to delete the phrase "plus 0.50%" from the third line thereof and to change the figure "4%" to "3.5%" in the eighth line thereof. (b) Section 2.7(c) is hereby amended to change the figure "2.50%" to "1.85%" in the fourth line thereof and to change the figure "4.50%" to "3.85%" in the eighth line thereof. 4. REPRESENTATIONS. The Borrower represents and warrants to the Agent and the Lenders as follows: (a) The representations and warranties contained in Section IV of the Credit Agreement are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date); (b) After giving effect to the amendment to the Credit Agreement set forth above, no Default has occurred and is continuing or would result from the making of any requested Revolving Credit Loan on the date hereof; and (c) The resolutions referred to in Section 3.1 of the Credit Agreement remain in full force and effect. 5. GENERAL. The Credit Agreement is ratified and confirmed and shall continue in full force and effect as amended hereby. This Agreement and Amendment No. 1 may be executed in any number of counterparts with the same effect as if the signatures hereto and thereto were upon the same instrument. -2- 3 Executed as a sealed instrument as of the date first set forth above. LEASECOMM CORPORATION By: /s/ Peter Bleyleben _________________________________ Title: BANKBOSTON, N.A., individually and as Agent By: /s/ [Signature Illegible] _________________________________ Title: COMMERZBANK AG, NEW YORK BRANCH By: /s/ Robert J. Donohue _________________________________ Title: By: /s/ Peter J. Doyle _________________________________ Title: -3- EX-10.3 4 AMENDED & RESTATED LOAN AGREEMENT 1 EXHIBIT 10.3 AMENDED AND RESTATED LOAN AGREEMENT BETWEEN LEASECOMM CORPORATION, AS BORROWER THE LENDERS NAMED THEREIN AND NATWEST BANK N.A., AS AGENT JULY 28, 1995 2 LOAN AGREEMENT -------------- LOAN AGREEMENT, dated as of July 29, 1993, as amended by the First Amendment thereto dated as of July 26, 1994 (the "Original Loan Agreement"), as amended and restated as of July 28, 1995 (the "Amended Agreement"), by and among LEASECOMM CORPORATION, a Massachusetts corporation, having an office at 950 Winter Street, Waltham, Massachusetts 02154 (the "BORROWER"), NATWEST BANK N.A., a national banking association having an office at 175 Water Street, New York, New York 10038, in its individual corporate capacity (the "BANK"), FLEET BANK OF MASSACHUSETTS, N.A., a national banking association having an office at 75 State Street, Boston, Massachusetts 02109, SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation having an office at One South Wacker Drive, Chicago, Illinois 60606, CORESTATES BANK, N.A., a national banking association having an office at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101, PNC BANK, NATIONAL ASSOCIATION, a national banking association having an office at 100 South Broad Street, Philadelphia, Pennsylvania 19110, COMMERZBANK AG, NEW YORK BRANCH, a New York State licensed branch of a German banking corporation having an office at 2 World Financial Center, New York, New York 10281, and such other banks or financial institutions which may hereafter become parties to this Amended Agreement from time to time (individually, a "LENDER" and, collectively with the Bank, the "LENDERS"), and NATWEST BANK N.A., as agent for the Lenders (the "AGENT"). W I T N E S S E T H : WHEREAS, the Borrower, the Lenders (other than PNC Bank, National Association) and the Agent are parties to the Original Loan Agreement, pursuant to which, INTER ALIA, the Lenders agreed to make available to the Borrower a revolving credit and term loan facility; and WHEREAS, PNC Bank, National Association wishes to become a party to the Original Loan Agreement and to be bound by all the terms, covenants and agreements applicable to a Lender contained therein; and WHEREAS, the Borrower has requested, INTER ALIA, that (i) the aggregate principal amount under the Original Loan Agreement be increased, (ii) the Credit Period (as hereinafter defined) be increased and (iii) certain other terms and conditions thereunder be amended, as hereinafter provided; and WHEREAS, the Lenders and the Agent are willing to amend the Original Loan Agreement to reflect the foregoing, subject to the terms and conditions hereinafter provided. NOW, THEREFORE, in consideration of the foregoing recitals and the covenants contained therein, the parties agree that the Original Loan Agreement is hereby amended and restated to read in its entirety as follows: 3 ARTICLE I --------- DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "ADDITIONAL COSTS" - as defined in Section 2.15. "ADJUSTED COST" - the Original Cost less any dealer reserve, holdbacks and discounts to the Borrower, sales taxes, insurance, shipping, delivery, handling and other similar charges applicable to any Equipment. "AFFILIATE" - as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by land "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); PROVIDED that (i) any Person which owns directly or indirectly 5% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 5% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person and (ii) each stockholder, director and officer of the Guarantor or the Borrower shall be deemed to be an Affiliate of the Borrower. "AGREEMENT" - this Agreement, as the same may, from time to time, be amended, supplemented or modified. "AMENDED AGREEMENT" - this Agreement, as amended and restated as of July 28, 1995. "ASSIGNMENT" - as defined in Section 10.1. "ASSIGNMENT OF LEASES" - as defined in Section 2.22. "BANK OF BOSTON FACILITY" - that certain revolving credit facility between the Borrower and The First National Bank of Boston establishing a revolving credit facility in favor of the Borrower on terms and conditions satisfactory to the Majority Lenders, as evidenced by the written consent of the Majority Lenders. "BORROWING BASE" - as at the date of any determination thereof, an amount equal to (i) in the case of Eligible Leases that are Finance Leases, 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 applicable Borrowing Rate (which calculation shall not take into account rental payments due or payable under such Eligible Leases beyond 48 months after the -2- 4 commencement date of such Eligible Leases), (ii) in the case of Eligible Leases that are Operating Leases (other than Rental Contracts), the lesser of (x) 60% of the aggregate Net Book Value of the Eligible 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 applicable Borrowing Rate (which calculation shall not take into account rental payments due or payable under such Eligible Leases beyond 48 months after the commencement date of such Eligible Leases) and (iii) in the case of Eligible Rental Contracts, an amount equal to 50% of the aggregate Net Book Value of all Eligible Equipment subject to such Eligible Rental Contracts. For purposes hereof, (a) the applicable Borrowing Rate shall mean (i) with respect to Eligible Lease Receivables relating to Prime Rate Loans, the Borrowing Rate applicable to Prime Rate Loans of the type of such Loan as of such date or (ii) with respect to Eligible Lease Receivables relating to Libor Term Loans, the Borrowing Rate applicable to each such Libor Term Loan as of the applicable Borrowing Date and (b) determination of the calculation shall be made on a lease by lease basis but the Borrowing Base shall be comprised of the aggregate of all such calculations. "BORROWING BASE REPORT" - as defined in Section 5.10. "BORROWING COMPUTATION" - as defined in Section 2.3. "BORROWING DATE" - the Business Day specified in a Notice delivered pursuant to Section 2.2 hereof as the date on which the Borrower requests the Agent to make a Loan. "BORROWING RATE" - the interest rate relating to any Loan as determined in accordance with Section 2.9 hereof. "BUSINESS DAY" - any day other than Saturday, Sunday or other day on which commercial banks in New York City are authorized or required to close under the laws of the State of New York. "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. "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. -3- 5 "CODE" - the Internal Revenue Code of 1986, as it may be amended from time to time, and any successor statute. "COLLATERAL" - as defined in the Security Documents. "COMMERCIAL FINANCE LEASE" - a Finance Lease which is not a Consumer Finance Lease. "COMMITMENT" - with respect to all of the Lenders, the sum of the commitments of each Lender hereunder and, with respect to each Lender, such Lender's commitment to participate in the loan facility provided under this Agreement by making the Loans upon the terms and subject to the conditions of this Agreement up to and including the amount set opposite its name below, which commitment shall, subject to the terms of Sections 2.1(d) and 2.14, terminate on the Commitment Termination Date: NatWest Bank N.A. $20,000,000 Fleet Bank of Massachusetts, N.A. 19,000,000 Sanwa Business Credit Corporation 17,500,000 CoreStates Bank, N.A. 13,500,000 PNC Bank, National Association 7,500,000 Commerzbank AG, New York Branch 5,000,000 ----------- Total: $82,500,000 "COMMITMENT FEE" - as defined in Section 2.5 "COMMITMENT PERCENTAGE" - the percentage of each Lender's Commitment of the aggregate Commitment of all the Lenders. "COMMITMENT TERMINATION DATE" - the second anniversary of the date of this Amended Agreement, unless extended pursuant to Section 2.14 hereof. "COMPLIANCE CERTIFICATE" - as defined in Section 4.1. "CONSOLIDATED ASSETS" - the consolidated assets of the Guarantor and its Subsidiaries, including the Borrower, determined in accordance with GAAP. "CONSOLIDATED EARNINGS" - the sum of Consolidated Net Income PLUS, on a consolidated basis for the Guarantor and its Subsidiaries, including the Borrower, (a) all provisions for any deferred federal, state or other taxes PLUS (b) interest on Indebtedness (including payments on -4- 6 Capitalized Lease Obligations in the nature of interest), all as determined in accordance with GAAP. "CONSOLIDATED INDEBTEDNESS" - the consolidated Indebtedness (excluding Subordinated Debt but including Non-Recourse Indebtedness) of the Guarantor and its Subsidiaries, including the Borrower, determined in accordance with GAAP. "CONSOLIDATED NET INCOME (DEFICIT)" - the consolidated net income (or deficit) of the Guarantor and its Subsidiaries, including the borrower, determined in accordance with GAAP; PROVIDED, HOWEVER, that Consolidated Net Income shall not include amounts added to such net income (or deficit) in respect of the write-up of any asset. "CONSOLIDATED TANGIBLE CAPITAL FUNDS" - the sum, with respect to the Guarantor and its Subsidiaries, including the Borrower, on a consolidated basis, of (a) capital stock, (b) additional paid-in capital, (c) retained earnings and (d) Subordinated Debt LESS (x) organizational costs and good will (y) treasury stock and (z) 25% of Debt Issue Costs. "CONSOLIDATED TANGIBLE NET WORTH" - the sum, with respect to the Guarantor and its Subsidiaries, including the Borrower, on a consolidated basis, of (a) capital stock, (b) additional paid-in capital and (c) retained earnings, LESS the sum of (x) organizational costs and good will, (y) treasury stock and (z) 25% of Debt Issue Costs. "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. "CONTROL" - as to any Person, the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "CONTROLLED GROUP" - all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b), 414(c) or 414(m) of the Internal Revenue Code of 1954, as amended, and Section 4001(a)(2) of ERISA. "CONVERSION TERM LOANS" - term loans made to the Borrower by the Lenders on the Commitment Termination Date in the principal amount of the outstanding Revolving Credit Loans converted on the Commitment Termination Date to Term Loans pursuant to Section 2.1(d). "CONVERSION TERM NOTES" - as defined in section 2. 10 (b) "CREDIT PERIOD" - as defined in Section 2.1. -5- 7 "CREDIT PERIOD TERM LOANS" - term loans made to the Borrower by the Lenders during the Credit Period. "CREDIT PERIOD TERM NOTES" - as defined in Section 2.10(b). "DEBT INSTRUMENT" - as defined in Section 8.4. "DEBT ISSUE COSTS" - those amounts characterized as "debt issue costs" in accordance with GAAP on the Financial Statements of the Guarantor and its Subsidiaries. "DEFAULT" - an event which with notice or lapse of time or both would constitute an Event of Default. "DOLLARS" - and "$" lawful money of the United States of America. "ELIGIBLE EQUIPMENT" - Equipment: (a) To which the Borrower has good and marketable title; (b) Which is not subject to any Lien other than that in favor of the Agent on behalf of the Lenders and in which the Agent has a duly perfected (subject to section 4.2(e) hereof) first priority security interest under the UCC or other similar law; (c) Which is to be used primarily for personal, family or household purposes or in the ordinary course of business by the Borrower's lessees; (d) Which is subject to an Eligible Lease or Eligible Rental Contract; (e) Which is insured by either the Borrower in accordance with current practice or the lessee thereof in accordance with industry standards; and (f) Which, if such Equipment consists of electronic signs leased to any one lessee, the Original Cost of such Equipment shall not exceed $5,000. "ELIGIBLE LEASE" - a lease contract: (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 -6- 8 and as to which no defenses, set-offs, claims or counterclaims exist or have been asserted; (e) Which is not subject to any Lien other than that in favor of the Agent on behalf 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 has not been determined by the Agent to be unacceptable; (h) Which is in a form approved by the Agent; (i) Under which no payment is more than 90 days past due; (j) Under which no default has occurred other than to the extent permissible under clause (i) immediately above; (k) Which covers Eligible Equipment; and (1) 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 70% of the Original Cost of the Equipment leased thereunder. "ELIGIBLE LEASE RECEIVABLES" - as at the date of determination thereof, receivables then due and unpaid with respect to an Eligible Lease. "ELIGIBLE RENTAL CONTRACT" - a Rental Contract: (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 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 Lien other than that in favor of the Agent on behalf of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; (f) The lessee under which has not been determined by the Agent to be unacceptable; -7- 9 (g) Which is in a form approved by 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 under clause (h) immediately above; and (j) Which covers Eligible Equipment. "ELIGIBLE RENTAL CONTRACT RECEIVABLES" - as at the date of determination thereof, receivables then due and unpaid with respect to an Eligible Rental Contract. "EQUIPMENT" - bank credit card authorization terminals, electronic signs, satellite communication equipment, security systems, water cooler systems, office equipment, other miscellaneous equipment (provided such miscellaneous equipment (including the Eligible Leases and Eligible Lease Receivables relating thereto) does not, in the judgment of the Agent, comprise at any time a material portion in value of the Borrowing Base ("Other Equipment") and such other equipment acceptable to the Agent and the Lenders, whether now or hereafter owned and leased to third party users by the Borrower; provided, however, that in no event shall Equipment include cellular telephones, software or fixtures (other than electronic signs). "ERISA" - the Employee Retirement Income Security Act of 1974, as it may be amended from time to time, and the regulations thereunder. "EVENT(S) OF DEFAULT" - as defined in Article 8. "EXPENSES" - as defined in Section 9.8. "FEDERAL FUNDS RATE" - for any day, the weighted average of the rates on overnight federal funds transactions with member banks of the Federal Reserve System arranged by federal funds brokers as published by the Federal Reserve Bank of New York for such day, or if such day is not a Business Day, for the next preceding Business Day (or, if such rate is not so published for any such day, the average rate charged to the Agent on such day on such transactions as reasonably determined by the Agent). "FINANCE LEASE" - a Lease characterized as a "finance lease,, in accordance with GAAP. "FINANCIAL STATEMENTS" - (a) the audited consolidated balance sheet and consolidated statements of income and retained earnings and of cash flows of the Guarantor and its Subsidiaries, including the Borrower, for fiscal year ended December 31, 1992 the unaudited consolidated balance sheet and consolidated statements of income and retained earnings and of cash flows of the Guarantor and its Subsidiaries, including the Borrower, for the six months ended June 30, 1993, or (b) the most recent financial statements delivered by the Borrower to the Agent pursuant to Sections 5.1, 5.2 and 5.3. -8- 10 "FIXED CHARGE RATIO" - the ratio of Consolidated Earnings, during any period consisting of the preceding four consecutive fiscal quarters, to Fixed Charges, payable during such period. "FIXED CHARGES" - on a consolidated basis for the Guarantor and its Subsidiaries, including the Borrower, the scheduled payments of interest on all Indebtedness (including payments on capitalized lease obligations in the nature of interest). "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. "GAAP" - Generally accepted accounting principles, in effect from time to time in the United States. "GROSS LEASE INSTALLMENTS" - the aggregate receivables due to the Borrower from all leases of equipment. "GUARANTOR" - Boyle Leasing Technologies, Inc., a Massachusetts corporation and the owner of all of the issued and outstanding shares of the Borrower's capital stock. "GUARANTY" - as defined in Section 2.22. "INDEBTEDNESS" - with respect to any Person, all (i) liabilities or obligations, direct and contingent, which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet 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) noncancellable liabilities under all Operating Leases. "INTEREST PERIOD" - with respect to any Libor Term Loan and as determined at the Borrowing Date of such Libor Term Loan, each period commencing on the date such Loan is made or converted from a Loan or Loans of another type and ending with the final month in a term of months equal to the weighted average remaining number of months in respect of which installments are payable under the Eligible Leases or Eligible Rental Contracts relating to such Loan (without giving effect to any payments due and payable more than 48 months after the commencement date of such Eligible Leases) , as specified in the Borrowing Computations with respect thereto, which period shall end on the day in such month which is the same day of the month in which such Loan was made. Notwithstanding the foregoing, (i) no Interest Period shall end after the Maturity Date of the Notes; and (ii) if the Interest Period would otherwise end on a day that is not a Libor Business Day, such Interest Period shall end on the next succeeding Libor -9- 11 Business Day, unless such next succeeding Libor Business Day is after the Maturity Date of a Loan, in which event such Interest Period shall end on the next preceding Libor Business Day. "INVESTMENT" - any investment in any Person by means of purchase of shares of stock or Indebtedness, capital contribution, loan, advance or guarantee, or any acquisition of all or the part of the business or assets of any Person, or any commitment or option to make any Investment. "IRS" - Internal Revenue Service. "LATEST BALANCE SHEET" - as defined in section 3.9. "LEASE" - any lease agreement (including any and all schedules, supplements and amendments thereon and modifications thereof) entered into by the Borrower as lessor with respect to Equipment. "LENDERS" - NatWest Bank N.A., Fleet Bank of Massachusetts, N.A., Sanwa Business Credit Corporation, CoreStates Bank, N.A., PNC Bank, National Association, Commerzbank AG, New York Branch, and any of their permitted successors and assigns pursuant to Section 10.1 hereof. "LIBOR BUSINESS DAY" - any Business Day on which transactions in Dollar deposits are carried out in the London Interbank Eurocurrency Market. "LIBOR" - for any Interest Period, the rate per annum (rounded upwards, if necessary to the nearest 1/16 of 1%) quoted by the Agent at approximately 10:00 a.m. New York time (or as soon thereafter as practicable) two Libor Business Days prior to the first day of such Interest Period for the offering by the Agent to the lending banks in the London Interbank Eurocurrency Market of Dollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of the Libor Term Loan made by the Lenders to which such Interest Period relates. "LIBOR TERM LOAN" - a Term Loan the interest on which is determined on the basis of Libor. "LIEN" - any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature of a grant of a security interest or lien), and the filing of or agreement to give any financing statement under the UCC or similar law of any jurisdiction. "LOAN" and "LOANS" individually a Revolving Credit Loan or a Term Loan and collectively Revolving Credit Loan(s) and Term Loan(s). -10- 12 "LOAN DOCUMENTS" - this Agreement, the Notes, the Security Documents, and all other documents executed and delivered in connection herewith or therewith, including all amendments, modifications and supplements of or to all such documents. "LOAN PARTIES" - the Borrower and the Guarantor. "MAJORITY LENDERS" - (i) at any time on or prior to the Commitment Termination Date, Lenders whose Commitment Percentages aggregate more than sixty-six and two-thirds (66 2/3%) and (ii) at any time after the Commitment Termination Date, Lenders whose Loans outstanding to the Borrower aggregate more than sixty-six and two thirds (66 2/3%) of the total Loans outstanding. "MATURITY DATE" - (i) with respect to Credit Period Term Loans, the Maturity Date shall be determined in accordance with Section 2. 1 (c) , (ii) with respect to Revolving Credit Loans, the Maturity Date shall be the Commitment Termination Date and (iii) with respect to Conversion Term Loans, the Maturity Date shall be determined in accordance with Section 2.1(d). "NET BOOK VALUE" - at a particular date, as to any Eligible Equipment, the Original Cost of such Eligible Equipment 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, with salvage value determined by the Borrower in accordance with such practices. "NON-RECOURSE INDEBTEDNESS" Indebtedness of the Borrower or the Guarantor, 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 Guarantor is subject to any personal liability. "NOTE (S)" collectively, the Revolving Credit Notes, the Credit Period Term Notes and the Conversion Term Notes, each of them and any note (s) issued in substitution or replacement thereof. "NOTICE" - as defined in Section 2.2. "OBLIGATIONS" - as defined in Section 2.22. "OPERATING LEASE" a Lease characterized as an "operating lease" in accordance with GAAP. "ORIGINAL COST" - the purchase price for any Equipment as invoiced by the supplier thereof. "ORIGINAL LOAN AGREEMENT" - as defined in the preamble to this Agreement. -11- 13 "PARTICIPANT" - as defined in Section 10.2. "PARTICIPATION" - as defined in Section 10.2. "PBGC" - as defined in Section 3.16. "PERMITTED LIENS" - (i) liens or charges for current taxes, assessments or other governmental charges other than those arising from income taxes (A) which are not yet -due and payable or (B) the validity of which is being contested in good faith by appropriate proceedings upon stay of execution of the enforcement thereof and which are in respect of claims for current taxes, assessments, or other governmental charges not exceeding an aggregate of $25,000; (ii) Liens or charges not exceeding an aggregate amount of $50,000, incurred in the ordinary course of business of the Guarantor or the Borrower in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (iii) Liens of attachment and judgment respecting claims, the validity of which is being contested in good faith by appropriate proceedings upon stay of execution of the enforcement thereof (A) in an aggregate amount not exceeding $25,000, or (B) which shall be vacated within 30 days after the creation thereof; and (iv) mechanic's, materialmen's, warehousemen's or other similar liens arising in the ordinary course of Borrower's business which either (A) are inchoate and relate to an obligation which is not yet due and payable, or (B) are being contested in good faith and which are in respect of mechanics', materialmen's, or other similar charges not exceeding an aggregate of $10,000. "PERSON" - an individual, a corporation, a partnership, a joint venture, a trust or unincorporated organization, a joint stock company or other similar organization, a government or any political subdivision thereof, a court, or any other legal entity, whether acting in an individual, fiduciary or other capacity. "PLAN" - an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by the Borrower or any member of the Controlled Group for employees of the Borrower, or by the Borrower for any other member of such Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Borrower or any member of the Controlled Group is then making or accruing obligations to make contributions or has within the preceding five plan years made contributions. "POST-DEFAULT RATE" - (i) in respect of any Loans not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period commencing on the due date until such Loans are paid in full equal to 2% above the applicable rate of interest in effect and (ii) in respect of other amounts payable by the Borrower hereunder not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period -12- 14 commencing on the due date-until such other amounts are paid in full equal to 2% above the Prime Rate as in effect from time to time in each such case, to the extent permitted by applicable law. "PRIME RATE" - the interest rate which the Agent announces from time to time at the Principal Office as its prime commercial lending rate. Each change in any interest rate provided for herein based upon the Prime Rate resulting from a change in the Prime Rate shall take effect at the time of such change in the Prime Rate. The Prime Rate is established from time to time by the Agent as an index or base rate and at any time may or may not be the best or lowest rate charged by the Agent on any loan. "PRIME RATE LOANS" - a Loan the interest on which is determined on the basis of the Prime Rate. "PRIME RATE TERM LOANS" - a Term Loan the interest on which is determined on the basis of the Prime Rate. "PRINCIPAL OFFICE" - the principal office of the Agent presently located at 175 Water Street, New York, New York 10038. "PRINCIPALS" - Peter R. V. Bleyleben, Brian E. Boyle and Torrence C. Harder. "PURCHASE MONEY SECURITY INTEREST" - as defined in Section 7.2. "REGULATION D" - Regulation D of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time. "REGULATORY CHANGE" - any change after the date of this Agreement in foreign or United States federal, state or local laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including any of the Lenders of or under any foreign or United States federal, state, or local laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "RENTAL CONTRACT" - an Operating Lease which is month-to-month and which is cancelable. "REVOLVING CREDIT LOANS" - revolving credit loans made pursuant to Section 2.1(a). "REVOLVING CREDIT NOTES" - as defined in Section 2.10(a). "SECURITY AGREEMENT" - as defined in Section 2.22. "SECURITY AGREEMENT SUPPLEMENTS" - as defined in Section 2.22. -13- 15 "SECURITY DOCUMENTS" - as defined in Section 2.22. "SECURITIZATION DOCUMENTS" - all of the documents evidencing and relating to the private placement of (i) 7.23% Lease-Backed Notes, Series 1992-1 of BLT Finance Corp. I, a wholly-owned Subsidiary of the Borrower and (ii) 5.17% Lease-Backed Certificates of BLT Finance Corp. II, a wholly-owned Subsidiary of the Borrower, in each case, as in effect on the date of the Original Loan Agreement. "SOLVENT" - with respect to any Person, means that (i) the fair value of all of such Person's properties and assets is in excess of the total amount of its Indebtedness; (ii) it is able to pay its debts as they mature; (iii) it does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage; and (iv) it is not "insolvent" as such term is defined in Section 101(31) of Title 11 of the United States Code, 11 U.S.C. Section 101, ET SEQ. "SUB-LIMIT" - 5% of the aggregate Commitment outstanding from time to time. "SUBORDINATED DEBT" - the existing Indebtedness of the Guarantor listed on Schedule 3.20, and any other Indebtedness of the Guarantor and any of its Subsidiaries, including the Borrower, subordinated to the obligations and the Guaranteed Obligations (as defined in the Guaranty), the terms and conditions of which Indebtedness are satisfactory to the Majority Lenders, as evidenced by the written consent of the Majority Lenders thereto. "SUBSIDIARY" with respect to any Person, any corporation, partnership or joint venture whether now existing or hereafter organized or acquired: (i) in the case of a corporation, of which a majority of the securities having ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) are at the time owned by such Person and/or one or more Subsidiaries of such Person or (ii) in the case of a partnership or joint venture in which such Person is a general partner or joint venturer or of which a majority of the partnership or other ownership interests are at the time owned by such Person and/or one or more of its Subsidiaries. "TERM LOANS" - Credit Period Term Loans and Conversion Term Loans. "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 Liens on Collateral. "UNUSED COMMITMENT" - as defined in Section 2.5. -14- 16 SECTION 1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given thereto in accordance with GAAP, consistently applied. SECTION 1.3 OTHER TERMS. Any references herein to exhibits, schedules, sections or articles are references to exhibits, schedules, sections or articles of this Agreement, unless otherwise specified. Any references herein to the Security Documents are references to such Security Documents as the same may be amended, modified, supplemented or restated from time to time. Wherever appropriate in the context, terms used herein in the singular also include the plural, and vice versa, and each masculine, feminine or neuter pronoun shall also include the other genders. ARTICLE 2 --------- COMMITMENT, LOANS AND COLLATERAL SECTION 2.1 LOANS. (a) Subject to the terms and conditions of this Agreement, each Lender, severally but not jointly, hereby agrees, on the terms and subject to the conditions of this Agreement, to make Revolving Credit Loans and Credit Period Term Loans to the Borrower on any Business Day during the period (the "CREDIT PERIOD") from the date of the Original Loan Agreement to and including the Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding such Lender's Commitment. Such Loans shall be made by the Lenders on a PRO RATA basis, calculated for each Lender based on its Commitment Percentage; PROVIDED, HOWEVER, that no Loan will be made hereunder if, after giving effect thereto and to all other Loans being made concurrently therewith, the aggregate outstanding principal amount of all Loans would exceed the Commitment and in the case of such Loans based upon Operating Leases or Eligible Rental Contracts, the Sub-limit. (b) Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow amounts in respect of the Revolving Credit Loans available under the Commitment during the Credit Period by means of Prime Rate Loans. Amounts repaid on or after the Commitment Termination Date may not be reborrowed. Subject to the terms and conditions hereof, the Borrower may borrow amounts in respect of Term Loans by means of Prime Rate Loans and Libor Term Loans and repay amounts in respect of such Loans. (c) The Borrower shall pay to the Agent for the benefit of the Lenders the principal amount outstanding of each Credit Period Term Loan in consecutive equal monthly installments equal in number to the weighted average remaining number of monthly payments due under the Eligible Leases or Eligible Rental Contracts relating to such Loan without giving effect to amounts due and payable more than 48 months after the commencement date of such Eligible -15- 17 Leases and Eligible Rental Contracts, as specified in the Borrowing Computations with respect thereto, with a payment being due on the first Business Day of each calendar month following the applicable Borrowing Date; provided, however, that all principal and interest on all credit Period Term Loans shall be paid in full on the fourth anniversary of the Commitment Termination Date. (d) On the Commitment Termination Date (which date shall also be referred to as the "TERM PERIOD COMMENCEMENT Date"), each of the Revolving Credit Loans shall either be paid or, provided (i) no Event of Default or Default shall have occurred and be continuing and (ii) the Borrower shall have delivered to each Lender a duly completed and executed Conversion Term Note, in form and substance satisfactory to the Agent, be converted to Conversion Term Loans the principal amount of which shall be payable by the Borrower to the Agent in consecutive monthly installments, (provided that the last installment shall be in an amount sufficient to pay the entire outstanding amount of such Loan) equal in number to the weighted average remaining number of monthly payments under the Eligible Leases or Eligible Rental Contracts relating to such Loans without giving effect to amounts due and payable more than 48 months after the commencement date of such Eligible Leases and Eligible Rental Contracts, as specified in the Borrowing Computations with respect thereto, with a payment being due on the first Business Day of each calendar month following the Commitment Termination Date; PROVIDED, HOWEVER, that on the fourth anniversary of the Commitment Termination Date the then outstanding principal and interest of all Conversion Term Loans shall be paid in full. (e) The Borrower shall be permitted, at any time prior to the Commitment Termination Date, to reduce the amount of the Commitment to an amount not less than the aggregate principal amount of the Loans then outstanding upon not less than five (5) Business Days' prior written notice to the Agent, provided that such reduction shall be in integral increments of one million dollars ($1,000,000) and that any such notice shall be accompanied by payment of all accrued and unpaid fees through the effective date of such reduction. SECTION 2.2 NOTICES. The Borrower shall give the Agent written notice in the form of EXHIBIT A to the original Loan Agreement (a "NOTICE") of each borrowing of a Loan, each conversion and prepayment of a Loan and, in the case of the borrowing or prepayment of, or conversion of a Prime Rate Term Loan into, a Libor Term Loan, the duration of each Interest Period applicable thereto. Each Notice shall be irrevocable and shall be effective only if received by the Agent no later than 1:00 P.M. New York City time, on the date which is, in the case of the borrowing of a Libor Term Loan, at least three (3) Business Days or, in the case of the borrowing of a Prime Rate Loan, at least two (2) Business Days, prior to the date of such borrowing designated in the Notice and, in the case of the prepayment or conversion of a Loan, at least three (3) Business Days prior to the date of such prepayment or conversion designated in the Notice. Each such Notice of a borrowing, conversion or prepayment shall specify (a) the amount and type of Loan to be borrowed, converted or prepaid and (b) the date of such borrowing, conversion or prepayment (which shall be a Business Day). Each such Notice of the duration of an Interest Period shall specify the Libor Term Loans to which such Interest Period is to relate. Promptly upon its -16- 18 receipt thereof, the Agent shall send to each of the Lenders copies of all Notices received pursuant to this Section 2.2. SECTION 2.3 BORROWING COMPUTATION. (a) Each Notice requesting borrowing of a Loan shall be accompanied by a computation of the Borrower substantially in the form of Exhibit B annexed to this Amended Agreement (hereinafter referred to as a "BORROWING COMPUTATION") certified by the president, chief financial officer, vice president-funding operations or chief operating officer of the Borrower, setting forth (i) a complete description of the Equipment to be acquired or financed with respect to which such 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 and Eligible Leases or Eligible Rental Contracts, respectively, (vi) the calculation of the projected amounts referred to in Section 2.3(b) and (vii) such other information with respect to such Equipment and Leases as is 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, on behalf of itself and the Lenders, 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. (b) (i) With respect to Loans based upon Eligible Leases (other than Operating Leases), the amount of each such Loan shall be an amount equal to the lesser of (x) 100% of the Adjusted Cost of the Eligible Equipment subject to such Eligible Leases or (y) 75% of the amount of the Eligible Lease Receivables relating to such Eligible Leases, discounted to present value (which calculation shall not take into account rental payments due and payable under such Eligible Leases beyond 48 months after the commencement date of such Eligible Leases) by a percentage equal to the Borrowing Rate applicable to such Loan as of the applicable Borrowing Date. (ii) with respect to Loans based upon Eligible Leases consisting of Operating Leases which are not Rental Contracts, the amount of each such Loan shall be an amount equal to the lesser of (x) 60% of the Net Book Value of the Eligible Equipment subject to such Eligible Leases or (y) 75% of the Eligible Lease Receivables relating to such Eligible Leases, discounted to present value (which calculation shall not take into account rental payments due and payable under such Eligible Leases beyond 48 months after the commencement. date of such Eligible Leases) by a percentage equal to the Borrowing Rate applicable to such Loan as of the applicable Borrowing Date. -17- 19 (iii) With respect to Loans based upon Eligible Rental Contracts, the amount of each such Loan shall be an amount equal to 50% of the Net Book Value of the Eligible Equipment subject to such Eligible Rental Contracts. SECTION 2.4 BORROWINGS. (a) Upon the satisfaction by the Borrower of the applicable conditions set forth in Article 4 hereof and Sections 2.2 and 2.3 above, and provided that the Lease or the Equipment covered by such Lease relating to a requested Loan shall be "Eligible" within the parameters of the eligibility definition set forth in this Agreement with respect thereto, on each Borrowing Date, the Lenders shall make the Loans requested by the Borrower on the applicable Borrowing Date. (b) on each Borrowing Date, each Lender shall make available the respective amount of the Loan to be made by it no later than 11:00 A.M. New York City time, on such date by depositing the proceeds thereof, in immediately available funds, with the Agent at its Principal Office and the Agent shall pay over such funds, upon the Agent's receipt of the documents and satisfaction of the conditions required under Article 4 with respect to such Loans prior to the Borrowing Date and as soon as practicable after delivery of the Notice, (i) to an account designated by the Borrower or (ii) on instructions from the Borrower to the Agent in the Notice related to such Loan, transmitting such amount to the Borrower or such Person or entity as the Borrower shall have designated in such Notice. The making by any Lender of any Loan on the requested Borrowing Date does not and shall not imply such Lender's acceptance of such or any other Lease or Equipment whether or not the same lessee is the lessee under such other Lease or the same type of Equipment has been financed by the Lenders in connection with another Loan. SECTION 2.5 FEES. (a) COMMITMENT FEE. The Borrower shall pay to the Agent, for the account of each of the Lenders, a commitment fee (the "COMMITMENT FEE") on the daily average amount of the Unused Commitment (as defined below) at a rate equal to .425% per annum. As used herein, "Unused Commitment" shall mean the amount, determined as of the end of each day, by which the Commitment exceeds the aggregate principal amount of Loans outstanding. Such fee shall be payable quarterly in arrears on the date of the original Agreement, on the last Business Day of each December, March, June and September thereafter, and on the earlier to occur of the Commitment Termination Date and the date the Commitment is terminated pursuant to Article 8 hereof. (b) FEE AGREEMENT. The Borrower shall pay to the Agent the fee set forth in the letter agreement dated July 26, 1994 between the Borrower and the Agent. SECTION 2.6 BORROWING BASE; PREPAYMENTS. (a) The aggregate principal amount of the Loans outstanding shall not as of the date of any Borrowing Base Report exceed the amount of the Borrowing Base as of such date. In the -18- 20 event that for any reason the aggregate outstanding principal amount of the Loans exceeds the Borrowing Base, the Borrower shall immediately, but in any event, not later than the next due date for the Borrowing Base Report required to be delivered to the Agent pursuant to Section 5.10 hereof (i) prepay the Loans in an amount sufficient to reduce the sum of the aggregate principal amount of the Loans to an amount not greater than the Borrowing Base or (ii) increase the amount of the Borrowing Base by granting the Agent, as agent for the Lenders pursuant to the Security Agreement, a Lien pursuant to and as contemplated by Section 2.22 hereof and the Security Documents on additional Eligible Leases and Eligible Rental Contracts and Eligible Equipment or other security acceptable to the Lenders, in their sole discretion, such that, after giving effect to the grant of such Lien, the Borrowing Base equals or exceeds the aggregate principal amount of the Loans outstanding. (b) Subject to the delivery of a Notice pursuant to Section 2.2 and to the indemnity agreement set forth in Section 2.19 hereof, but otherwise without premium or penalty, the Borrower shall have the right to prepay any Loan at any time and from time to time in whole or in part; PROVIDED, HOWEVER, that (x) any such prepayment (other than a prepayment pursuant to Section 2.6 (a)) shall be in an amount not less than such amounts as provided in Section 2.13 (a) hereof; (y) prepayment of Libor Term Loans shall be subject to the provisions of Section 2.19 hereof; and (z) any such prepayment shall be made with interest accrued to the date of prepayment. Any prepayments under this Section 2.6(b) shall be applied by the Agent first to the payment of interest accrued with respect to the Loans prepaid, and the balance to prepay the principal amount thereof; PROVIDED, THAT with respect to the Term Loans such prepayment shall be applied in inverse order of the maturity of the installments thereof. Upon the making of a prepayment of the entire outstanding principal balance of a Loan in accordance with the provisions of this Section 2.6(b) and provided that no Default or Event of Default shall then have occurred and be continuing or would occur as a result thereof, the Agent shall release the Eligible Equipment and Eligible Leases and Eligible Rental Contracts to which such prepayment relates from the security interest granted to the Agent on behalf of the Lenders hereunder upon the receipt by the Agent of a Compliance Certificate and a Borrowing Base Report indicating that upon such release the Borrower shall be in compliance with the terms of Section 2.6(a) hereof. SECTION 2.7 CONVERSION OF LOANS. Subject to Section 2.19 hereof, the Borrower shall have the option to convert a Prime Rate Term Loan into a Libor Term Loan; PROVIDED, HOWEVER, that in the case of the conversion of such Loan, (a) the Borrower shall give to the Agent notice of each such conversion as provided in Section 2.2; and (b) no Loan may be converted if on the proposed date of conversion an Event of Default or Default has occurred and is continuing. SECTION 2.8 USE OF PROCEEDS OF LOANS. The proceeds of each Loan hereunder may be used by the Borrower solely to finance or refinance Eligible Equipment covered by Eligible Leases and Eligible Rental Contracts referred to in the Borrowing Computation relating to such Loan, and for no other purpose whatsoever. -19- 21 SECTION 2.9 INTEREST. (a) Subject to subsection (b) below, the Borrower shall pay to the Agent for the account, of each Lender interest on the unpaid principal amount of each Loan for the period commencing on the date of such Loan until such Loan shall be paid in full, or converted from a Revolving Credit Loan into a Term Loan or converted from a Term Loan of one type into a Term Loan of another type, as the case may be, at the following rates per annum: (i) with respect to any Revolving Credit Loan, during the period that such Loan (or any portion thereof) is outstanding, the Prime Rate plus .75%; and (ii) with respect to any Term Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime Rate Term Loan, the Prime Rate plus 2.50% and (y) during such periods that such Loan (or any portion thereof) is a Libor Term Loan, Libor plus 2.75%. (b) Notwithstanding the foregoing, the Borrower shall pay interest at the applicable Post-Default Rate on any Loan or any installment of principal thereof, and on any other amount payable by the Borrower hereunder and under any other Loan Document (including interest to the extent permitted by law) which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof to and including the date on which the same is paid in full. (c) Except as provided in the following sentence, accrued interest on each Loan shall be payable monthly in arrears on the first Business Day of each month, commencing on the first month immediately following the date of the making of such Loan and continuing on the first Business Day of each month thereafter until the maturity of such Loan or the payment or prepayment thereof in full. Interest which is payable at a Post-Default Rate shall be payable from time to time on demand of the Agent. (d) Subject to Section 2.7 hereof, the Borrower shall be permitted to convert a Prime Rate Term Loan, or any portion thereof in an amount equal to or exceeding $500,000, to a Libor Term Loan. (e) References in this Section 2.9 to each Loan shall be deemed to refer, as applicable, to portions of such Loan. (f) Promptly after the establishment of any interest rate provided for herein or any change therein, the Agent will notify the Borrower thereof; PROVIDED, HOWEVER, that the failure of the Agent to so notify the Borrower shall not affect the obligations of the Borrower hereunder or under the Notes in any respect. (g) Anything in this Agreement or the Notes to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Agent for the account of any Lender -20- 22 to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to such Lender limiting rates of interest which may be charged or collected by such Lender. Any such payments of interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrower to the Agent for the account of such Lender, if at all, on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to such Lender limiting rates of interest which may be charged or collected by such Lender. SECTION 2.10 NOTES. (a) The Revolving Credit Loans made by each Lender shall be evidenced by a single promissory note made by the Borrower and payable to the order of such Lender in a principal amount equal to such Lender's Commitment and otherwise duly completed, in substantially the form of EXHIBIT C-1 to the Original Loan Agreement (individually, a "REVOLVING CREDIT NOTE" and collectively, the "REVOLVING CREDIT NOTES"). (b) The Credit Period Term Loans made by each Lender shall be evidenced by a single promissory note made by the Borrower and payable to the order of such Lender in a principal amount equal to such Lender's Commitment and otherwise duly completed, in substantially the form of EXHIBIT C-2 to the Original Loan Agreement (individually, a "CREDIT PERIOD TERM NOTE" and collectively, the "CREDIT PERIOD TERM NOTES"). The Conversion Term Loans made by each Lender shall be evidenced by a single promissory note made by the Borrower and payable to the order of such Lender in a principal amount equal to such Lender's pro rata share of the Revolving Credit Loans that are converted into Conversion Term Loans on the Commitment Termination Date and otherwise duly completed, in substantially the form of EXHIBIT C-3 to the Original Loan Agreement (individually, a "CONVERSION TERM NOTE" and collectively, the "CONVERSION TERM NOTES"). Upon payment in full of the Revolving Credit Loans or conversion of such Revolving Credit Loans into Conversion Term Loans and receipt of a duly completed Conversion Term Note by each Lender, all Revolving Credit Notes theretofore outstanding will be returned to the Borrower. Upon payment in full of the Credit Period Term Loans, all Credit Period Term Notes will be returned to the Borrower. (c) All Revolving Credit Loans and Credit Period Term Loans and all payments and prepayments made on account of the principal of such Loans shall be recorded by each Lender on the schedule attached to the applicable Note. The Borrower hereby authorizes the Lenders to make all notations on such schedules to record such matters and such notations shall, in the absence of manifest error, be conclusive as to the outstanding balance thereunder; PROVIDED, HOWEVER, that any failure by any Lender to make any such notation shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Notes in respect of the Loans. SECTION 2.11 PAYMENTS. (a) All payments of principal, interest, fees and other amounts payable by the Borrower hereunder shall be made in Dollars, in immediately available funds, to the Agent for the account of the Lenders, PRO RATA at the Principal Office of the Agent no later than 11:00 A.M. -21- 23 New York City time, on the dates on which such payments shall become due. Except as provided in clause (ii) to the definition of "Interest Period" set forth in Section 1.1 hereof, payments which are due on a day which is not a Business Day shall be payable on the first Business Day thereafter and interest shall continue to accrue, or shall be payable for any principal so extended, in each case for the period of such extension. Each such payment made after such time on such dates shall be deemed to have been made on the next succeeding Business Day and interest shall accrue thereon accordingly. All payments received by the Agent for the account of the Lenders hereunder shall be applied first, to pay all fees and expenses then due and payable hereunder, second, to pay accrued and unpaid interest on the Loans and third, to repay the outstanding principal balance of the Loans. The Agent shall, once it has received such payment from the Borrower, remit in immediately available funds to each Lender its PRO RATA share of all such payments received by the Agent hereunder for the account of such Lender within one Business Day after its receipt or deemed receipt thereof. (b) If any Lender or other holder of a Note shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of or interest on any Note by any means in excess of its PRO RATA share of payments and other recoveries obtained by all Lenders or other holders on account of principal of and interest on any Loans and any other obligation, such Lender or other holder shall promptly purchase from the other Lenders or holders of a participation (or direct interest) in the Notes held by the other Lenders (or in interest due thereon, as the case may be), as shall be necessary to cause such purchasing Lender or other holder to share the excess payment or other recovery PRO RATA with each of them; PROVIDED, HOWEVER, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. To such end, all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrower agrees that any Lender so purchasing a participation (or direct interest) in the Loans made by other Lenders (or in interest due thereon, as the case may be) may exercise any and all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans in the amount of such participation. Nothing in this Agreement shall require any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or Obligation of the Borrower. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 2.11 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.11 to share in the benefits of any recovery on such secured claim. SECTION 2.12 COMPUTATIONS. Interest on all Loans, fees and any other amounts payable hereunder or under the Notes or in connection herewith or therewith shall be computed on the basis of a 360-day year and actual days elapsed. -22- 24 SECTION 2.13 MINIMUM AMOUNTS OF BORROWINGS AND PREPAYMENTS; MAXIMUM AMOUNT OF LIBOR TERM LOANS. (a) Except for borrowings and prepayments which exhaust the full remaining amount of the Commitment (in the case of borrowings) or result in the prepayment of all Loans of a particular type: (i) each borrowing of a Prime Rate Loan (other than a Conversion Term Loan) and each prepayment of principal of the Prime Rate Loan hereunder shall be in an amount at least equal to $500,000 or some greater integral multiple of $100,000; and (ii) each borrowing of a Libor Term Loan (other than a Conversion Term Loan) and each prepayment of Libor Term Loan shall be in an amount at least equal to $500,000 or some greater integral multiple of $100,000. (b) Anything in this Agreement to the contrary notwithstanding, during the Credit Period, the aggregate principal amount of all Libor Term Loans outstanding at any time shall not exceed an amount equal to 85% of the aggregate principal amount of all Loans outstanding at such time. SECTION 2.14 RENEWAL OF COMMITMENT; EXTENSION OF COMMITMENT TERMINATION DATE. Upon (i) the written request of the Company to the Agent given at least ninety (90) days prior to each anniversary date of the date of this Agreement and (ii) the unanimous written consent of all the Lenders (such consent to be given at the sole discretion of each Lender), the Commitment shall be renewed and the Commitment Termination Date shall be extended for successive one-year periods, provided no Default or Event of Default exists hereunder. Promptly after the Agent's receipt of any such request, the Agent shall notify the Lenders of the submission thereof by the Company and each Lender shall within forty-five (45) business days after receipt of such notice, deliver written notice to the Agent of its decision whether or not to renew its Commitment and extend the Commitment Termination Date. In the event any Lender has not given such notice within such forty-five (45) day period, such Lender shall be deemed to have elected not to renew its Commitment and not to extend the Commitment Termination Date. SECTION 2.15 ADDITIONAL COSTS. (a) In the event that any law or regulation or guideline or interpretation (whether now in effect or hereafter adopted) thereof by any court or administrative or governmental authority charged with the administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority or any Regulatory Change shall (i) change the basis of taxation of any amounts payable to such Lender under this Agreement or the Notes in respect of any Loans (other than taxes imposed on the overall net income of such Lender for any such Loans by the United States or the jurisdiction in which such Lender has its principal office); (ii) impose or modify any reserve, Federal Deposit Insurance Corporation premium or assessment, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender; (iii) impose, modify or deem applicable or result in the application of, any reserve, special -23- 25 deposit, capital maintenance, capital ratio or similar requirement against loan commitments made by any Lender or against any other extensions of credit (other than direct loans) or commitments to extend credit or other assets of or any deposits or other liabilities taken or entered into by any Lender; or (iv) impose. any other conditions affecting this Agreement or the Notes in respect of the Loans (or any of such extensions of credit, assets, deposits or liabilities) ; and the result of any event referred to in clause (i), (ii), (iii) or (iv) above shall be to increase such Lender's costs of making or maintaining any Loans or its Commitment, or to reduce any amount receivable by such Lender hereunder in respect of any Loans or its Commitment or to impose upon any Lender or increase any capital requirement applicable as a result of the making or maintenance of such Lender's Commitment or the obligation of the Borrower hereunder with respect to such Commitment or to reduce the amounts receivable by any Lender or any Lender's return on equity with respect to its Commitment hereunder as a result of any change, modification or increase set forth in this Section 2.15(a) with respect to such Commitment (which increases in costs or increases in (or imposition of) capital requirements or reductions in amounts receivable or return on equity may be determined by each Lender's reasonable allocation of the aggregate of such cost increases, capital increases or impositions or reductions in amounts receivable or return on equity resulting from such events are hereinafter referred to as "ADDITIONAL COSTS"), then, upon demand made by such Lender the Borrower shall pay to the Agent, and the Agent shall pay to such Lender from time to time as specified by such Lender, such other amounts which shall be sufficient to compensate such Lender for such Additional Costs, together with interest on each such amount which is not paid within three (3) days after demand by such Lender, payable at the Post Default Rate. (b) Determinations by any Lender for purposes of this Section 2.15 of its costs of making or maintaining the Loans or on amounts receivable by it in respect of the Loans, or imposing upon or increasing capital requirements or reductions in amounts receivable or return on equity, and of the additional amounts required to compensate such Lender in respect of any Additional Costs, shall be set forth in writing in reasonable detail and shall be conclusive, absent manifest error. SECTION 2.16 LIMITATION ON TYPES OF LOANS. Anything herein contained to the contrary notwithstanding, if, on or prior to the determination of an interest rate for any Libor Term Loans for any Interest Period therefor: (a) the Agent reasonably determines (which determination shall be conclusive) that, by reason of any event affecting the money markets in the United States of America or the London interbank market, quotations of interest rates for the relevant deposits are not being provided in such markets in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans under this Agreement; or (b) the agent reasonably determines (which determination shall be conclusive) that by reason of any event affecting money or financial markets in the United States of America or the London interbank market, rates of interest or the cost of making or maintaining loans, the rate of interest referred to in the definition of "Libor" in Article 1 hereof upon the basis of which the rate -24- 26 of interest of any Libor Term Loans for such period is determined does not accurately reflect the cost to any Lender of making or maintaining such Loans for such period, then the Agent shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, such Lender shall be under no obligation to make Libor Term, Loans and the Borrower shall either prepay such Libor Term Loans in accordance with Section 2.6(b) hereof or convert such Libor Term Loans into Prime Rate Term Loans in accordance with Section 2.7 hereof. SECTION 2.17 ILLEGALITY; UNAVAILABILITY. Notwithstanding any other provision in this Agreement, in the event that it becomes unlawful for any Lender to (i) honor its obligations to make Libor Term Loans hereunder or (ii) maintain Libor Term Loans hereunder, then the Agent shall promptly notify the Borrower thereof, and the Lenders, obligation to make Libor Term Loans hereunder shall, upon written notice given by the Agent to the Borrower, be suspended until such time as all of the Lenders may again make and maintain Libor Term Loans and the Lenders, outstanding Libor Term Loans shall be converted into Prime Rate Term Loans (as shall be designated in a Notice from the Borrower to the Agent pursuant to Section 2.2 hereof; PROVIDED, HOWEVER, that the Borrower's failure to give such notice shall not prevent such conversion) in accordance with Sections 2.7 and 2.18 hereof. SECTION 2.18 CERTAIN CONVERSIONS PURSUANT TO SECTIONS 2.16 AND 2.17. If the Libor Term Loans are to be converted to Prime Rate Term Loans pursuant to Section 2.16 or 2.17 hereof, such Libor Term Loans shall be converted into Prime Rate Term Loans on the date as may be required by law or as the Agent may specify to the Borrower and, until the Agent gives notice as provided below that the circumstances specified in Section 2.16 or 2.17 hereof which gave rise to such conversion no longer exist: (a) to the extent that such Libor Term Loans have been so converted, all payments and prepayments of principal which would otherwise be applied to such Libor Term Loans shall be applied instead to Prime Rate Term Loans; and (b) all Loans which would otherwise be made as Libor Term Loans shall be made instead as Prime Rate Term Loans and all Prime Rate Term Loans which would otherwise be converted into Libor term Loans shall remain as Prime Rate Term Loans or be prepaid by the Borrower. SECTION 2.19 INDEMNIFICATION. The Borrower hereby indemnities the Lenders against any loss or expense which any Lender may sustain or incur as a consequence of (a) any default in payment of interest accrued on any Loan outstanding hereunder, (b) any prepayment or conversion of a Libor Term Loan on a date other than the last day of the Interest period for such Libor Term Loan, (c) any failure by the Borrower to prepay or convert a Loan on the date for such prepayment or conversion as specified in the relevant Notice, (d) the occurrence of any default hereunder with respect to the -25- 27 Loan, (e) the receipt or recovery by any Lender of all or any part of the Loan (whether by voluntary prepayment, acceleration or otherwise) other than on the final maturity thereof, or (f) any failure of the Borrower to borrow once the Borrower has given Notice to the Agent of a borrowing. Such losses and expenses shall include, but shall not be limited to, any loss or expense sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain any Loan or any part thereof and any loss of margin on reemployment of the funds so received or recovered. For the purpose of this Section 2.19, the determination by the Lenders of such losses and reasonable expenses shall be conclusive if made reasonably and in good faith absent manifest error. SECTION 2.20 PROPORTIONATE TREATMENT. (a) Each borrowing hereunder shall be made from the Lenders, and each payment of fees under Sections 2.5 hereof shall be made for the account of the Lenders, in each case in proportion to their respective Commitment Percentages. (b) Each payment and prepayment by the Borrower of principal of or interest on the Loans shall be made to the Agent for account of the Lenders in proportion to the respective unpaid principal amounts thereof. (c) The Commitment and other obligations of the Lenders under this Agreement are several and not joint nor joint and several. SECTION 2.21 AGENT'S OBLIGATION TO EXPEND FUNDS; NON-RECEIPT OF FUNDS BY AGENT. The Agent shall not be required to expend any of its own money to make up the full amount of any Loan requested by the Borrower hereunder, or otherwise incur any expense as a consequence of the failure of any Lender to make available to the Agent amounts in respect of its Commitment which the Lenders have become obliged to make available hereunder. Should such a failure occur and the Agent shall nevertheless have advanced money of its own or incurred expense in order to make up the full amount of any such Loan, it shall be deemed to have done so at the request of any Lender which is in default of its obligations to make amounts available to the Agent, unless such Lender shall have previously notified the Agent that it would not make such an advance or incur such an expense to make good such failure, and in the absence of such prior notice, such Lender shall be in default hereunder and shall be obligated to pay to the Agent on demand the amount expended by the Agent out of its own funds plus any costs incurred by the Agent to carry such funds while such Lender is in default to the Agent hereunder, all of which shall constitute a loan by the Agent to such Lender which shall bear interest from the date of the advance by the Agent at the Federal Funds Rate from day to day on the Loan with respect to which the advance or expenditure was made. During the continuance of any such default as between the Agent and such Lender, and notwithstanding anything elsewhere herein to the contrary expressed or implied, (a) the principal amount of Indebtedness in respect of Loans made by such Lender in default shall be deemed to be reduced, so long as the default continues, by the amount not remitted by it to the Agent as described in the preceding sentence and such principal amount and interest thereon shall be deemed assigned to and collectible by the Agent for its own -26- 28 account for application against the amount of its claim under the preceding sentence and (b) such Lender shall not be entitled to vote on any matters related to this Agreement and the other Loan Documents, such Lender's Commitment and Commitment Percentage shall be deemed to be zero for purposes of determining the "Majority Lenders" and the obligations of the Borrower to such Lender shall be paid after payment in full of all Obligations of the Borrower to the other Lenders. Notwithstanding the foregoing, in the event the Agent shall have made an advance on behalf of a Lender without prior notice not to do so, the Borrower shall, on demand from the Agent, repay to the Agent the amount so made available with interest thereon, in respect of each day during the period commencing on and including the date such advance was so made by the Agent until the date the Agent recovers such amount at a rate per annum equal to (i) the Prime Rate plus .75% if such advance was made by the Agent to the Borrower as a Revolving Credit Loan, (ii) the Prime Rate plus 2.50%, if such advance was made by the Agent to the Borrower as a Prime Rate Term Loan, or (iii) Libor plus 2.75%, if such advance was made by the Agent to the Borrower as a Libor Term Loan. If a Lender remits funds to the Agent in respect of a requested Loan and, pursuant to the provisions of this Agreement, such Loan is not made, the Agent shall promptly remit to such Lender an amount equal to the funds so remitted together with any interest received by the Agent from the Borrower with respect. thereto pursuant to Section 2.9(a) hereof, but if the Agent does not receive any interest from the Borrower pursuant to Section 2.9(a) hereof, the Agent shall pay to such Lender interest calculated using the Federal Funds Rate on the amount of funds so remitted by such Lender from the date following the date on which the Agent received such funds until the date the Agent remits the funds to such Lender. SECTION 2.22 SECURITY-AND GUARANTIES. (a) In order to secure the due payment and performance by the Loan Parties of all of the Indebtedness, liabilities and Obligations of the Borrower to the Agent and the Lenders, whether now existing or hereafter arising under this Agreement, the Notes or any of the other Loan Documents (all such Indebtedness, liabilities and obligations are hereinafter referred to, collectively, as the "OBLIGATIONS") including, without limitation, the due and punctual payment of the principal of and the interest on the Notes according to their terms and effect: (i) the Borrower shall grant to the Agent, as agent for the Lenders, subject to Section 4.2(e) hereof, a duly perfected first priority Lien on all of Borrower's right, title and interest in the Collateral subject to no other Liens other than Liens permitted under Section 7.2(b) hereof, as applicable, by the execution and delivery to the Agent, of a security agreement in the form of EXHIBIT D-1 to the original Loan Agreement (the "SECURITY AGREEMENT") and an assignment of leases, in the form of EXHIBIT E-1 to the Original Loan Agreement (the "ASSIGNMENT OF LEASES"), and by the execution and delivery from time to time of supplements to the Security Agreement, in the form of EXHIBIT D-2 to the Original Loan Agreement (the "Security Agreement Supplements"), and supplements to the Assignment of Leases, in the form of EXHIBIT E-2 to the Original Loan Agreement (the "ASSIGNMENT OF LEASES SUPPLEMENTS"); -27- 29 (ii) the Borrower shall deliver to the Agent all executed copies of the Leases in connection with the perfection of the Agent's first priority Lien in such Leases in accordance with Section 4.2(f) hereof; (iii) in accordance with Section 4.2(e) hereof, the Borrower shall execute and deliver to the Agent all UCC financing statements or such other documentation, including copies of such documents acknowledging the filings of such documentation with the appropriate governmental authorities, as may be reasonably required by the Agent to perfect the interest of the Borrower and the Agent in the Collateral; and (iv) execute and deliver or cause to be executed and delivered such other agreements, instruments and documents as the Agent may reasonably require in order to effect the purposes of the Security Agreement, the Assignment of Leases, the Security Agreement Supplements, the Assignment of Leases Supplements and this Agreement (the Security Agreement, the Assignment of Leases, the Security Agreement Supplements, the Assignment of Leases Supplements and such other agreements, instruments and documents are referred to collectively as the "SECURITY DOCUMENTS"). (b) The Guarantor shall execute and deliver to the Agent a guaranty in the form of EXHIBIT F to the Original Loan Agreement (the "GUARANTY"), pursuant to which the Guarantor shall guarantee the payment and performance of the Loans, all interest thereon, all fees hereunder and all other obligations to the extent provided therein. ARTICLE 3 --------- REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to the Agent and each Lender that: SECTION 3.1 ORGANIZATION. (a) Each of the Borrower and Guarantor (collectively the "LOAN PARTIES") is duly organized and validly existing under the laws of the state of its incorporation and has the power to own its assets and to transact the business in which it is presently engaged and in which it proposes to be engaged. Schedule 3.1 annexed to the Original Loan Agreement accurately and completely lists the state of incorporation of each of the Loan Parties, the authorized and outstanding shares of capital stock of the Loan Parties and the ownership of such stock. All of the shares of the Borrower owned by the Guarantor are validly outstanding and fully paid and nonassessable, and are owned free and clear of any Lien. Except as set forth on Schedule 3.1 with respect to the Guarantor, there are not outstanding any warrants, options, contracts or commitments of any kind entitling any Person to purchase or otherwise acquire any shares of capital stock of either of the Loan Parties nor are there outstanding any securities which are convertible into or exchangeable for any shares of capital stock of either of the Loan Parties. -28- 30 Except as set forth on Schedule 3.1, the Borrower has no Subsidiaries and the Guarantor has no Subsidiaries other than the Borrower. (b) Each Loan Party is in good standing in its state of incorporation and in each state in which it is qualified to do business. There are no jurisdictions other than as set forth on Schedule 3.1 to the Original Loan Agreement in which the character of the properties owned or proposed to be owned by any Loan Party or in which the transaction of its business as now conducted or as proposed to be conducted requires or will require such Loan Party to qualify to do business and as to which failure to so qualify could have a material adverse effect on its business, operations, financial condition or properties. SECTION 3.2 POWER, AUTHORITY, CONSENTS. Each of the Loan Parties has the power to execute, deliver and perform the Loan Documents to be executed by it, the Borrower has taken all necessary action (corporate or otherwise) to authorize the borrowing hereunder on the terms and conditions of this Agreement and each of the Loan Parties has taken all necessary action (corporate or otherwise) to authorize the execution, delivery and performance of the Loan Documents. No consent or approval of any Person (including, without limitation, any stockholder of either of the Loan Parties), no consent or approval of any landlord or mortgagee, no waiver of any Lien or right of distraint or other similar right and no consent, license, approval, authorization or declaration of any governmental authority, bureau or agency, is or will be required in connection with the execution, delivery or performance by either of the Loan Parties, or the validity, enforcement or priority, of the Loan Documents (or any Lien created and granted thereunder), except as set forth on Schedule 3.2 annexed to the Original Loan Agreement each of which either has been duly and validly obtained on or prior to the date of the original Loan Agreement and is now in full force and effect, or is designated on Schedule 3.2 as waived by the Lender. SECTION 3.3 NO VIOLATION OF LAW OR AGREEMENTS. The execution and delivery by the Loan Parties of each Loan Document to be executed and delivered by it will not (i) violate or conflict with any provision of law or any rule or regulation, (ii) violate or conflict with any provision of the respective Certificates of Incorporation or by-laws of the Loan Parties, (iii) violate or conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, bond, note or indenture to which either Loan Party is a party, or by which it is bound or any of its properties or assets is affected, or (iv) result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of the Borrower, except for the Liens created and granted pursuant to the Security Documents. -29- 31 SECTION 3.4 DUE EXECUTION, VALIDITY, ENFORCEABILITY. This Agreement and each of the other Loan Documents has been duly executed and delivered by each of the Loan Parties, as applicable, and each constitutes a valid and legally binding obligation of such Loan Party, enforceable against it in accordance with its terms. SECTION 3.5 PROPERTIES, PRIORITY OF LIENS. All of the properties and assets owned by the Borrower are owned by it free and clear of any Lien of any nature whatsoever, except as provided for in the Security Documents to be executed and delivered pursuant hereto, the Liens listed on Schedule 3.5 to the Original Loan Agreement and Permitted Liens. The Liens which have, simultaneously with the execution and delivery of this Agreement and the consummation of the initial Loans, been created and granted by the Security Documents constitute valid perfected first priority Liens on the properties and assets covered by the Security Documents, subject to no prior or equal Lien except as permitted by Section 7.2 hereof and except as provided in section 4.2(e) hereof. SECTION 3.6 JUDGMENTS, ACTIONS, PROCEEDS. There are no outstanding judgments, actions or proceedings pending before any court or governmental authority, bureau or agency, with respect to or, to the best of the Borrower's knowledge, threatened against or affecting the Loan Parties involving, in the case of any judgment, action or proceeding, an amount in excess of $100,000 individually, and, in the case of all judgments, actions or proceedings, amounts in excess of $300,000 in the aggregate nor, to the best of the Borrower's knowledge, is there any reasonable basis for the institution of any such action or proceeding which is probable of assertion, nor are there any such actions or proceedings in which any Loan Party is a plaintiff or complainant. SECTION 3.7 NO DEFAULTS, COMPLIANCE WITH LAWS. Neither Loan Party is in material default under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it or used in the conduct of its business is affected and each Loan Party has complied and is in compliance in all respects with all applicable laws, ordinances and regulations, including, without limitation, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, Federal Reserve Board Regulations B, M and Z and any applicable state consumer protection statutes, non-compliance with which could have a material adverse effect on the business, operations, financial condition or properties of either of the Loan Parties or on the ability of the Loan Parties to perform their respective obligations under the Loan Documents. -30- 32 SECTION 3.8 BURDENSOME DOCUMENTS. Neither Loan Party is a party to or bound by, nor are any of the properties or assets owned by any Loan Party or used in the conduct of its business affected by any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment which materially and adversely affects its business, assets or condition, financial or otherwise. SECTION 3.9 FINANCIAL STATEMENTS. Each of the Financial Statements is correct and complete and presents fairly the consolidated financial position of the Loan Parties as at its date, and has been prepared in accordance with GAAP. The Loan Parties have no material obligations, liabilities or commitments, direct or contingent, which are not reflected in the Financial Statements. There has been no material adverse change in the financial position or operations of the Loan Parties since the date of the latest balance sheet included in the Financial Statements (the "LATEST BALANCE SHEET"). The fiscal year of the Loan Parties is the twelve-month period ending on December 31 of each year. SECTION 3.10 TAX RETURNS. The Loan Parties have filed all federal, state and local tax returns required to be filed by them and have not failed to pay any taxes, or interest and penalties relating thereto, on or before the due dates thereof. Except to the extent that reserves therefor are reflected in the Financial Statements, (a) there are no material federal, state or local tax liabilities of the Loan Parties due or to become due for any tax year ended on or prior to the date of the Latest Balance Sheet, whether incurred in respect of or measured by income, which are not properly reflected in the Latest Balance Sheet, and (b) there are no material claims pending or, to the knowledge of the Borrower, proposed or threatened against the Loan Parties for past federal, state or local taxes, except those, if any, as to which proper reserves are reflected in the Financial Statements. SECTION 3.11 INTELLECTUAL PROPERTY. The Borrower possesses all necessary patents, trademarks, trademark rights, service marks, service mark rights, trade names, trade name rights and copyrights to conduct its business as now conducted and as proposed to be conducted, without any conflict with the patents, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights of others. SECTION 3.12 REGULATIONS G AND U. No part of the proceeds received by the Borrower from the Loans will be used directly or indirectly for the purpose of purchasing or carrying, or for payment in full or in part of Indebtedness which was incurred for the purposes of purchasing or carrying, any margin stock as such term is defined in Regulation G of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time, or Regulation U of the Board -31- 33 of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time. SECTION 3.13 NAME CHANGES. The Borrower has never changed its name, been the surviving entity of a merger or consolidation, or acquired all or substantially all of the assets of any Person, except that the Borrower was the surviving entity of the merger of LeaseComm Corporation, a Delaware corporation, with the Borrower pursuant to an Agreement of Merger dated December 22, 1989. SECTION 3.14 FULL DISCLOSURE. None of the Financial Statements nor any certificate, opinion, or any other statement made or furnished in writing to the Lenders by or on behalf of any of the Loan Parties in connection with this Agreement or the transactions contemplated herein, contains any untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading. There is no fact known to any Loan Party which has, or would in the now foreseeable future have, a material adverse effect on the business, prospects or condition, financial or otherwise, of any Loan Party which fact has not been set forth herein, in the Financial Statements, or any certificate, opinion, or other written statement so made or furnished to the Lenders. SECTION 3.15 CONDITION OF ASSETS. All of the assets and properties of the Borrower which are reasonably necessary for the operation of its business are in good working condition, ordinary wear and tear excepted, and are able to serve the function for which they are currently being used. SECTION 3.16 ERISA. (a) Except as set forth on Schedule 3.16 to the Original Loan Agreement, the Loan Parties do not have and have never had any Plan in connection with which there could arise a direct or contingent liability of the Loan Parties to the Pension Benefit Guaranty Corporation ("PGBC"), the Department of Labor or the IRS. The Loan Parties are not participating employers (i) in any Plan under which more than one employer makes contributions as described in Sections 4063 and 4064 of ERISA, or (ii) in a multiemployer plan as defined in Section 4001(a)(3) of ERISA. (b) All references to the Loan Parties in this Section 3.16 or in any other Section of this Agreement relating to ERISA, shall be deemed to refer to the Borrower and all other entities which are, together with the Borrower, part of a Controlled Group. -32- 34 SECTION 3.17 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Borrower and the records relating to the Leases covering the Equipment, invoices, claims, accounts receivable and contract rights of the Borrower are located at the address indicated for the Borrower in the introduction to this Agreement. SECTION 3.18 ABSENCE OF DEFAULT. No Default or Event of Default exists. SECTION 3.19 REGULATED COMPANY. Neither the Guarantor nor any of its Subsidiaries, including the Borrower, is (i) an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a "Subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "Subsidiary company" of a "holding company, within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other law which purports to regulate or restrict its ability to borrow money or to consummate the transactions contemplated by this Agreement or the other Loan Documents or to perform its obligations hereunder or thereunder. The Borrower represents to the Agent and each Lender that it has not, either directly or through any agent, offered any interest in the Notes for sale to, or solicited any offers to buy an interest therein from, or otherwise approached or negotiated in respect of any interest therein with, any person or person other than the Lenders. The Borrower agrees that it will not, directly or indirectly, sell or offer, or attempt to offer to dispose of, any interest in the Notes or any substantially similar instruments of the Borrower, or solicit any offers to buy any interest therein from, or otherwise approach or negotiate with respect thereto with, any person whatsoever so as to bring the execution and delivery of this Agreement or the Notes within the provisions of Section 5 of the Federal Securities Act of 1933, as now in effect or as later amended. SECTION 3.20 SUBORDINATED DEBT. Schedule 3.20 annexed to the Original Loan Agreement is a true and complete list of all existing Indebtedness of the Guarantor and its Subsidiaries, including, without limitation, the Borrower, which is subordinate in payment to the Obligations and the Guaranteed Obligations (as defined in the Guaranty). Except as set forth on Schedule 3.20 to the Original Loan Agreement and except with respect to the amount of principal, the rate of interest payable thereon, the required amortization thereof and the maturity date thereof, all of such Indebtedness is evidenced by notes that are on terms and conditions identical to the terms and conditions of either (a) the $34,000 11% Capital Note, Subordinated, Due July 14, 1997, of the Guarantor to Bay Resource Corp. Money Purchase Pension Plan F.B.O. P.G.R. Lloyd IRA R.0, (b) the $50,000 13.25% Amortizing Capital Note, Subordinated, Due March 1, 1994, of the Guarantor to Leonora Howe Booth Trust, (c) the $50,000 Capital Note, Subordinated, Due September 1, 1996, -33- 35 of the Guarantor to John M. Haley, or (d) the $7,500,000 12% Senior Subordinated Notes of the Guarantor due 2001. SECTION 3.21 SOLVENCY. Each Loan Party is Solvent prior to and will be Solvent after giving effect to the transactions contemplated by this Agreement and the other Loan Documents and the making of the Loans to be made hereunder. ARTICLE 4 --------- THE CLOSING; CONDITIONS TO THE LOANS SECTION 4.1 CONDITIONS TO EFFECTIVENESS OF AMENDED AGREEMENT. As a condition precedent to the effectiveness of this Amended Agreement: (a) (i) The Borrower shall have executed and delivered to the Agent, with sufficient original counterparts for each Lender, this Amended Agreement, the Confirmation of Guaranty (the "Confirmation") of the Guarantor in form and substance satisfactory to the Agent and (ii) the Borrower shall have executed and delivered to the Agent a Revolving Credit Note and Credit Period Term Note payable to the order of the Bank and each Lender, which in the case of each Lender (other than PNC Bank, National Association) shall be in substitution for the Revolving Credit Notes and Credit Period Term Notes heretofore executed and delivered by the Borrower to the Bank and each such Lender. Upon receipt by the Agent from each of the Lenders of the Revolving Credit Notes and Credit Period Term Notes of such Lenders referred to in clause (ii) of the next preceding sentence, the Agent shall return to the Borrower the Revolving Credit Notes and Credit Period Term Notes heretofore issued by the Borrower to the Bank and each such Lender with the notation "Replaced by Substitution" thereon. (b) The Borrower and the Guarantor shall have executed and delivered to the Agent, with sufficient original counterparts for each Lender, amendments to the Security Agreement and the Assignment of Leases in the form attached hereto as Exhibit D-3, and to such other Security Documents as the Agent shall in its discretion reasonably require. (c) The Borrower shall have executed and delivered to the Agent amendments to all such UCC-1 financing statements as the Agent shall require to continue to perfect and preserve its security interest created under the Security Documents and shall have delivered to the Agent, and the Agent shall deliver to each Lender upon request by such Lender, copies of acknowledgment stamped copies of all such UCC-1 financing statements evidencing the filing thereof. (d) The Agent shall have received an officer's certificate in form and substance satisfactory to the Agent from each of the Borrower and the Guarantor, with sufficient original counterparts for the Bank and each Lender, confirming the following: -34- 36 (i) All corporate action required to be taken by the Borrower or Guarantor to authorize the execution, delivery and performance of this Amended Agreement, the agreements, documents and instruments referred to herein and the transactions contemplated hereby and thereby; (ii) None of its organizational documents have been amended since the date(s) as of which copies of said organizational documents were certified to the Agent; (iii) Specimen signature(s) of the person(s) authorized to execute this Amended Agreement, the Confirmation and any of the Loan Documents to which it is a party (including any amendments thereto); (iv) The execution, delivery and performance of this Amended Agreement, the Confirmation and the Loan Documents to which it is a party (including any amendments thereto) have been authorized by resolutions of the Board of Directors of the Borrower and the Guarantor, copies of which shall be attached to such officer's certificate; and; (v) Each of the Borrower and the Guarantor remains in good standing in its respective jurisdiction of incorporation and in each jurisdiction in which it is qualified to do business. (e) An opinion of counsel to each of the Loan Parties addressed to the Agent and the Lenders. (f) The Agent shall have received for itself and for the accounts of each of the Lenders, all fees, costs and expenses payable by the Borrower, including, without limitation, the fees and expenses of Rogers & Wells, counsel to the Agent, to the extent payable on or prior to the date of this Amended Agreement. (g) All proceedings in connection with the transactions contemplated by this Amended Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to the Agent, and the Agent and each Lender upon its request, shall have received all information and such counterpart originals or certified or other copies of such documents as it may reasonably request prior to the date of this Amended Agreement. (h) The Borrower shall have complied and shall then be in compliance with all of the terms, covenants and conditions of this Amended Agreement and the Security Documents. (i) The representations and warranties contained in Article 3 hereof shall be true and correct on the date of this Amended Agreement. -35- 37 (j) No Default or Event of Default shall have occurred, and the Agent and each Lender shall have received a compliance certificate (a "COMPLIANCE CERTIFICATE") in the form of EXHIBIT G hereto dated the date of the Amended Agreement certifying, INTER ALIA, that the conditions set forth in Sections 4.1(h), (i) and (j) hereof are satisfied on such date. (k) The Agent shall have received any and all further information and documents which the Agent, the Lenders or their respective counsel may reasonably request. (1) All legal matters incident to the effectiveness of this Amended Agreement shall be satisfactory to counsel to the Agent. SECTION 4.2 CONDITIONS TO LOANS. The obligation of the Lenders to make each Loan shall be subject to the fulfillment (to the reasonable satisfaction of the Agent) of the following conditions precedent which, in the case of the initial Loans shall be in addition to the other conditions set forth in Section 4.1: (a) The Agent shall have received a Notice relating to such Loan, together with the Borrowing Computation certified by the president, chief financial officer or vice president-finance of the Borrower, which shall establish to the reasonable satisfaction of the Agent that the Borrowing Base is equal to or greater than the outstanding principal amount of the Loans after giving effect to the Loan proposed to be made. (b) If the requested Loan is a Conversion Term Loan, each Lender shall have received an executed Conversion Term Note. (c) Upon request of the Agent or when the Original Cost of Eligible Equipment for each Eligible Lease or Eligible Rental Contract relating thereto on the basis of which such Loan is being made exceeds $10,000, the Agent shall have received the original bills of sale issued by the seller or the manufacturer of the Eligible Equipment to which such Loan pertains showing the initial invoiced cost of all such Eligible Equipment and the Eligible Leases and Eligible Rental Contracts with respect thereto. (d) The Borrower shall have executed and delivered to the Agent and the Agent shall forward to each Lender a Security Agreement Supplement and Assignment of Leases Supplement in form and substance satisfactory to the Agent and the Lenders covering the Equipment and Leases to which such Loan pertains. (e) The Borrower shall have perfected its interest in the Equipment against each lessee of Equipment in each case where such lessee is leasing Equipment with an aggregate Original Cost of $10,000 or more by the filing of a precautionary UCC financing statement naming the Borrower as secured party/lessor and the lessee of such Equipment as debtor/lessee and shall have delivered to the Agent acknowledgment stamped copies of all such UCC financing statements, assignment of all such UCC financing statements naming the Agent as assignee of the Borrower and acknowledgment stamped copies of all such UCC-1 financing statements evidencing the filing thereof in such jurisdictions. The Borrower shall have executed and delivered to the Agent all such UCC-1 financing -36- 38 statements for filing in such jurisdictions as the Agent shall require to perfect its security interest in the Collateral and acknowledgment stamped copies of all such UCC-1 financing statements evidencing the filing thereof in such jurisdictions and the payment of all applicable recordation taxes. Upon the occurrence of a Default or Event of Default, the Agent shall, pursuant to the power of attorney granted to it pursuant to the Security Agreement, be entitled to execute all such UCC-1 financing statements, on behalf of the Borrower, as the Agent deems necessary to perfect its security interest in the Collateral in all jurisdictions in which any Collateral is located and the Borrower shall reimburse the Agent for all costs and expenses, including recordation taxes, if any, incurred by the Agent in connection therewith. (f) The Borrower shall have delivered to the Agent all executed original counterparts of each Lease (s) included in the Collateral for such Loan, certified as such by the Borrower. (g) The Borrower shall have fully complied with all the terms and conditions of the Security Documents including but not limited to, delivering to the Agent all executed copies of the Eligible Leases and Eligible Rental Contracts included in the Collateral for such Loan, certified as such by the Borrower. (h) The Borrower shall have complied and shall then be in compliance with all of the terms, covenants and conditions of this Agreement. (i) The representations and warranties contained in Article 3 hereof shall be true and correct on the date thereof. (j) No Default or Event of Default shall have occurred, and the Agent and each Lender shall have received a Compliance Certificate dated the date such Loan is made certifying, INTER ALIA, that the conditions set forth in Sections 4.2(g), (h), (i) and (j) hereof are satisfied on such date. (k) All legal matters incident to the Loan shall be satisfactory to counsel for Agent and the Lenders. (1) All proceedings in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to the Agent and the Agent, and each Lender upon request by such Lender, shall have received all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request prior to the making of such Loan. (m) The Agent shall have received any and all further information and documents which the Agent, the Lenders and their special counsel may reasonably request in connection with making such Loan. -37- 39 ARTICLE 5 --------- DELIVERY OF FINANCIAL REPORTS, DOCUMENTS AND OTHER INFORMATION While the Commitment is outstanding, and, in the event any Loan remains outstanding, so long as the Borrower is indebted to the Agent or any Lender and until payment in full of the Notes and full and complete performance of all of its other obligations arising hereunder, the Borrower shall deliver to the Agent: SECTION 5.1 ANNUAL FINANCIAL STATEMENTS. Annually, as soon as available, but in any event within 90 days after the last day of each of its fiscal years, (a) a consolidated balance sheet of the Guarantor and its Subsidiaries, including the Borrower, as at such last day of the fiscal year and consolidated statements of income and retained earnings and of cash flows for such fiscal year, each prepared in accordance with GAAP consistently applied, in reasonable detail, and certified without qualification by a recognized firm of independent certified public accountants reasonably acceptable to the Agent as fairly presenting the financial position and the results of operations of the Guarantor and its Subsidiaries, including the Borrower, as at and for the year ending on its date and as having been prepared in accordance with GAAP and (b) consolidating balance sheets, statements of income and retained earnings and of cash flows for the Guarantor and each of its Subsidiaries, including the Borrower, certified by the president or chief financial officer of the Borrower as fairly presenting the financial position and the results of operations of the Guarantor and its Subsidiaries, including the Borrower, as at its date and for such month and as having been prepared in accordance with GAAP consistently applied. SECTION 5.2 QUARTERLY FINANCIAL STATEMENTS. As soon as available, but in any event within 45 days after the end of each fiscal quarter, unaudited consolidated and consolidating balance sheets of each of the Guarantor and its Subsidiaries, including the Borrower, as of the last day of such quarter and consolidated and consolidating statements of income and retained earnings and of cash flows for such quarter, each such statement to be certified by the president or chief financial officer of the Borrower as fairly presenting the financial position and the results of operations of the Guarantor and its Subsidiaries, including the Borrower, as at its date and for such quarter and as having been prepared in accordance with GAAP consistently applied (subject to year-end audit adjustments). SECTION 5.3 MONTHLY FINANCIAL STATEMENTS. As soon as available, but in any event within 30 days after the end of its first eleven fiscal monthly periods, a consolidated balance sheet of the Guarantor and its Subsidiaries, including the Borrower, as of the last day of each such month and consolidated statements of income and retained earnings and of cash flows for such month, each such statement to be certified by the president or chief financial officer of the Borrower as fairly presenting the financial position and -38- 40 the results of operations of the Guarantor and its Subsidiaries, including the Borrower, as at its date and for such month and as having been prepared in accordance with GAAP consistently applied (subject to year-end audit adjustments). SECTION 5.4 OTHER INFORMATION. Promptly after a written request therefor, such other financial data or information evidencing compliance with the requirements of this Agreement, the Notes and the other Loan Documents, and such other data and information of any nature as the Lenders may reasonably request from time to time, including, without limitation, Updated Experience Tables tracking aging and delinquencies for all types of invoices on an invoice-by-invoice basis, how such invoices have been paid and the collection rates with respect thereto, prepared in conjunction with the annual audit of the Borrower. SECTION 5.5 NO DEFAULT CERTIFICATE. At the same time as it delivers the financial statements required under the provisions of Sections 5.1, 5.2 and 5.3, a certificate of the president or chief financial officer of each of the Loan Parties, in the form of Schedule 5.5 hereto, to the effect that no Event of Default hereunder and that no default under any other agreement to which either of the Loan Parties is a party or by which it is bound, or by which, to the best of the knowledge of the Borrower, any of its properties or assets, taken as a whole, may be materially affected, and no Default or Event of Default exists or, if such cannot be so certified, specifying in reasonable detail the exceptions, if any, to such statement. Such certificate shall be accompanied by a detailed calculation indicating compliance with the covenants contained in Section 6.9 hereof. SECTION 5.6 CERTIFICATE OF ACCOUNTANTS. At the same time as it delivers the financial statements required under the provisions of Section 5.1, a certificate of a recognized firm of independent certified public accountants reasonably acceptable to the Agent addressed to the Guarantor to the effect that (i) during the course of their audit of the operations of the Loan Parties and their condition as of the end of the fiscal year, nothing has come to their attention which would indicate that there was any violation of the covenants contained in Section 6.9 or Article 7 of this Agreement, or, if such cannot be so certified, specifying in reasonable detail the exceptions, if any, to such statement and (ii) that the Borrower is in compliance with the Borrowing Base limitation hereunder. SECTION 5.7 COPIES OF DOCUMENTS. Promptly upon their becoming available, copies of any (a) correspondence or notices received by the Borrower from any federal, state or local governmental authority which regulates the operations of the Borrower, including as to environmental matters and hazardous waste, relating to an actual or threatened change or development which would be materially adverse to the Borrower; (b) written reports submitted by either of the Loan Parties by its independent accountants in connection with any annual or interim audit of the books of the Loan Parties made -39- 41 by such accountants; and (c) any appraisals received by either of the Loan Parties with respect to the properties or assets of the Borrower. SECTION 5.8 NOTICES OF DEFAULTS. Promptly, notice of the occurrence of any Default or an Event of Default hereunder, or event which would constitute or cause a materially adverse change in the condition, financial or otherwise, or the operations of the Borrower. SECTION 5.9 ERISA NOTICES. (a) Concurrently with such filing, a copy of each form 5500 which is filed with respect to each plan with the IRS; and (b) Promptly, upon their becoming available, copies of (i) all correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Plan, relating to an actual or threatened change or development which would be materially adverse to the Loan Parties (ii) copies of all actuarial valuations received by either of the Loan Parties with respect to any Plan; and (iii) copies of any notices of Plan termination filed by any Plan Administrator (as those terms are used in ERISA) with the PBGC and of any notices from PBGC to either of the Loan Parties with respect to the intent of the PBGC to institute involuntary termination proceedings. SECTION 5.10 BORROWING BASE REPORT AND COMPLIANCE REPORT. Monthly, as soon as available, but it any event within 15 days after the end of the immediately preceding month, a report evidencing the compliance by the Borrower with the Borrowing Base limitation set forth in Section 2.1(a) hereunder in the form of EXHIBIT H annexed hereto (the "BORROWING BASE REPORT"), dated as at the end of such month, certified by the president, chief financial officer, vice president-funding operations or chief operating officer of the Borrower. The Borrower shall also deliver a copy of such Borrowing Base Report to each of the Lenders contemporaneously with the delivery of such report to the Agent. SECTION 5.11 ACCOUNTS RECEIVABLE AGING SUMMARY. (a) Monthly, as soon as available, but in any event within 30 days after the end of the immediately preceding month, an accounts receivable aging summary of the Guarantor and its Subsidiaries, including the Borrower, as of the last day of each such month, each such summary to include separately Finance Leases, Operating Leases which are not Rental Contracts, Rental Contracts and Other Miscellaneous Equipment (as defined in the definition of Equipment hereto), and shall be certified by the president, chief financial officer, vice president-funding operations or chief operating officer of the Borrower as true and correct and as having been prepared in accordance with GAAP consistently applied (subject to year-end audit adjustments). Such summary shall reconcile on a monthly basis with the corresponding general ledger reports delivered under Section 5.3 hereof for such month. -40- 42 (b) Semi-annually, as soon as available, but in any event within 30 days after the end of (i) the first six fiscal monthly periods and (ii) the second six fiscal monthly periods, an accounts receivable aging summary of the Guarantor and its Subsidiaries, including the Borrower, as of the end of each such period, each such summary to include separately Finance Leases, Operating Leases which are not Rental Contracts, Rental Contracts and Other Miscellaneous Equipment, and shall be certified by the president, chief financial officer, vice president-funding operations or chief operating officer of the Borrower as true and correct and as having been prepared on a contractual basis in accordance with GAAP consistently applied. SECTION 5.12 CONCENTRATION OF EQUIPMENT. Semi-annually, as soon as available, but in any event within 30 days after the end of (i) the first six fiscal monthly periods and (ii) the second six fiscal monthly periods, a report detailing the aggregate value of all Eligible Equipment located in each state of the United States. SECTION 5.13 BAD DEBT REPORTS. Quarterly, as soon as available, but in any event within 30 days after the end of each of its fiscal quarters, reports concerning a formula provision for bad debt and reserve for bad debt rollforward, and shall be in the respective forms as provided in Schedule 5.13 hereto. SECTION 5.14 RESIDUAL REALIZATION REPORTS. Quarterly, as soon as available, but in any event within 30 days after the end of each of its fiscal quarters, residual realization reports pertaining to Operating Leases in form and substance satisfactory to the Agent. ARTICLE 6 --------- AFFIRMATIVE COVENANTS While the Commitment is outstanding, and, until payment in full and performance of all Obligations, the Borrower shall, and shall cause Guarantor to: SECTION 6.1 BOOKS AND RECORDS. Keep proper books of record and account in a manner reasonably satisfactory to the Agent in which full, true and correct entries shall be made of all dealings or transactions in relation to its business and activities and not change its principal place of business without the consent of the Majority Lenders. -41- 43 SECTION 6.2 INSPECTIONS AND AUDITS. Permit the Agent and the Lenders to make or cause to be made inspections and audits of any books, records and papers of the Borrower and to make extracts therefrom and copies thereof, or to make inspections and examinations of any properties and facilities of the Borrower, on reasonable notice, at all such reasonable times and as often as the Agent or any Lender may reasonably require, in order to assure that the Borrower is and will be in compliance with its obligations under the Loan Documents or to evaluate such Lender's investment in the Notes. SECTION 6.3 MAINTENANCE AND REPAIRS. Maintain in good repair, working order and condition, subject to normal wear and tear, all material properties and assets from time to time owned by it and used in or necessary for the operation of its business, and make all reasonable repairs, replacements, additions and improvements thereto. SECTION 6.4 CONTINUANCE OF BUSINESS. Do, or cause to be done, all things reasonably necessary to preserve and keep in full force and effect its corporate existence and all permits, rights and privileges necessary for the proper conduct of its business and continue to engage in the same line of business. SECTION 6.5 COPIES OF CORPORATE DOCUMENTS. Subject to the prohibitions set forth in Section 7.12 hereof, promptly deliver to the Agent and the Lenders copies of any amendments or modifications to its Certificate of Incorporation and by-laws, certified with respect to the Certificate of Incorporation by the Secretary of State of its state of incorporation and, with respect to the by-laws, by the secretary of such Loan Party. SECTION 6.6 PERFORM OBLIGATIONS. (a) Pay and discharge all of its obligations and liabilities, including, without limitation, all taxes, assessments and governmental charges upon its income and properties, when due, unless and to the extent only that such obligations, liabilities, taxes, assessments and governmental charges shall be contested in good faith and by appropriate proceedings and that, to the extent required by GAAP then in effect, proper and adequate book reserves relating thereto are established by the Borrower, and then only to the extent that a bond is filed in cases where the filing of a bond is necessary to avoid the creation of a Lien against any of its properties. (b) Solely with respect to the Borrower, perform all its obligations under each of the Leases. -42- 44 SECTION 6.7 NOTICE OF LITIGATION. Promptly notify the Agent and the Lenders in writing of any litigation, legal proceeding or dispute, other than disputes in the ordinary course of business or, whether or not in the ordinary course of business, involving amounts in excess of $250,000 per occurrence and $500,000 in the aggregate, affecting the Borrower whether or not fully covered by insurance, And regardless of the subject matter thereof (excluding, however, any actions relating to worker's compensation claims or negligence claims relating to use of motor vehicles, if fully covered by insurance, subject to deductibles). SECTION 6.8 INSURANCE. (a) (i) Solely with respect to the Borrower, 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 is customarily maintained by similar businesses; PROVIDED, that the Borrower may continue to self-insure Equipment in the manner in which it is currently conducting its business until the Agent notifies the Borrower otherwise; 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 Majority Lenders; (y) file with the Agent and the Lenders 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 (z) within 10 days after notice in writing from the Agent, obtain such additional insurance as the Agent may reasonably request. (b) any private insurance companies covering its obligations to the PBGC. SECTION 6.9 FINANCIAL COVENANTS. (a) Maintain at all times: (i) a ratio of Consolidated Indebtedness to Consolidated Tangible Capital Funds of not more than 6:1; (ii) a Consolidated Tangible Net Worth of not less than the sum of (i) $5,500,000 and (ii) 50% of the aggregate amount of Consolidated Net Income of the Guarantor and its Subsidiaries, including the Borrower, for each of the fiscal quarters ending after December 31, 1994 but without deducting therefrom any amount of Consolidated Net Deficit for any of such fiscal quarters; (iii) an allowance for bad debt of the Guarantor and its Subsidiaries, including the Borrower, of at least 5% of Gross Lease Installments; (b) Have as of the end of each fiscal quarter a Fixed Charge Ratio of the Guarantor and its Subsidiaries, including the Borrower, of not less than 1.25:1. -43- 45 SECTION 6.10 REPORTABLE EVENTS. Promptly notify the Agent and the Lenders in writing of the occurrence of any "Reportable Event" as defined in Section 4043 of ERISA, if a notice of such Reportable Event is required under ERISA to be delivered to the PBGC within 30 days after the occurrence thereof, together with a description of such Reportable Event and a statement of the action the Borrower intends to take with respect thereto, together with a copy of the notice thereof given to the PBGC. SECTION 6.11 COMPLIANCE WITH LAWS, ETC. Comply with all applicable laws, rules, regulations and orders, including, without limitation, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, Federal Reserve Board Regulations B, M and Z and any applicable state consumer protection statutes, and duly observe all valid requirements of governmental authorities, and all applicable statutes, rules, regulations, and orders relating to environmental protection and to public and employee health and safety, except where the failure to do so would not have a materially adverse effect on the operations, properties taken as a whole, business or financial condition of the Loan Parties. SECTION 6.12 BORROWING BASE. Make such prepayments or pledge such additional security, from time to time, as required by Section 2.6 hereof so that the outstanding principal amount of all Loans hereunder shall, at no time, exceed the Borrowing Base. SECTION 6.13 EXISTING INDEBTEDNESS. (a) On or before September 30, 1993, (i) pay in full all of the Indebtedness of the Borrower to Commerzbank, and terminate the commitments and agreements pursuant to which such Indebtedness was incurred and provide evidence thereof to the Agent in form and substance satisfactory to the Agent or (ii) enter into, and cause Commerzbank to enter into an intercreditor agreement with the Agent and the Lenders, on terms and conditions satisfactory to the Agent and the Lenders. (b) From and after the date of the Original Loan Agreement arrange all of the Indebtedness of the Borrower to American Commercial Credit Corp., Raybar Credit Corporation, Manufacturer's Lease Company and Maytag Financial Services Corp. (the "Other Existing Secured Creditors") to be strictly on a term basis, not borrow or obtain an advance of any amounts from any of the Other Existing Secured Creditors and not grant, assign or pledge any collateral to any of the Other Existing Secured Creditors other than the specific collateral which has been heretofore granted, assigned or pledged to the Other Existing Secured Creditors. -44- 46 SECTION 6.14 NOTICES CONCERNING SUBORDINATED DEBT. Deliver to the Agent, concurrently with the earlier of the delivery thereof or the required date of delivery thereof pursuant to any document evidencing or relating to any Subordinated Debt, the issuance of which for any single class exceeds $500,000, a copy of each notice, demand, request, waiver, authorization, consent, opinion, certificate and other communication delivered or required to be delivered by the Borrower or Guarantor or received by the Borrower or Guarantor under or in connection with such Subordinated Debt, including, without limitation, a copy of any notice of redemption or offer to purchase, whether optional or mandatory, whole or partial, any board resolutions, any notice of acceleration or rescission of acceleration and any reports and other information required to be delivered under any such document. ARTICLE 7 --------- NEGATIVE COVENANTS While the Commitment is outstanding, and, until payment in full and performance of all of the obligations, the Borrower shall not, and shall cause the Guarantor not to, do, agree to do, or permit to be done, any of the following: SECTION 7.1 INDEBTEDNESS. Create, incur, permit to exist or have outstanding any Indebtedness, except: (a) Indebtedness of the Borrower and the Guarantor to the Lenders under this Agreement and the Notes; (b) Taxes, assessments and governmental charges, non-interest bearing accounts payable and accrued liabilities, in any case not more than 90 days past due from the original due date thereof, and non-interest bearing deferred liabilities other than for borrowed money (e.g. deferred compensation and deferred taxes) in each case incurred and continuing in the ordinary course of business; (c) Indebtedness secured by the security interests referred to in subsection 7.2(c) hereof; (d) Subordinated Debt; (e) Indebtedness for borrowed money which is secured by Liens on specific assets (other than the Collateral) as to which the lenders are to be repaid out of such assets or proceeds thereof; provided, however, that if the aggregate of such Indebtedness incurred or proposed to be incurred to any lender exceeds $500,000, the Borrower and such lender shall, prior to the incurrence of such Indebtedness, enter into an intercreditor agreement with the Agent and the Lenders in form and substance satisfactory to the Agent and the Lenders; -45- 47 (f) Indebtedness of the Borrower to The First National Bank of Boston pursuant to the Bank of Boston Facility; and (g) unsecured Indebtedness. SECTION 7.2 LIENS. Create, or assume or permit to exist, any Lien on any of the properties or assets of the Borrower, whether now owned or hereafter acquired, except: (a) Those created and granted by the Security Documents; (b) Permitted Liens; (c) Purchase money mortgages or security interests, conditional sale arrangements and other similar security interests, on motor vehicles and equipment acquired by the Borrower (hereinafter referred to individually as a "PURCHASE MONEY SECURITY INTEREST") with the proceeds of the Indebtedness referred to in subsection 7.1(c) hereof; PROVIDED, HOWEVER, that: (i) The transaction in which any Purchase Money Security Interest is proposed to be created is not then prohibited by this Agreement; (ii) Any Purchase Money Security Interest shall attach only to the property or asset acquired in such transaction and shall not extend to or cover any other assets or properties of the Borrower; and (iii) The Indebtedness secured or covered by any Purchase Money Security Interest shall not exceed the lesser of the cost or fair market value of the property or asset acquired and shall not be renewed, extended or prepaid from the proceeds of any borrowing by the Borrower; and (d) Liens arising under the Bank of Boston Facility, provided such Liens shall attach solely to Equipment held for sale or lease in the ordinary course of business and the Leases relating thereto which are financed or refinanced with the proceeds of borrowings under such facility. SECTION 7.3 GUARANTIES. Assume, endorse, be or become liable for, or guarantee, the obligations of any person, except (i) the Guaranty, (ii) by the endorsement of negotiable instruments for deposit or collection in the ordinary course of business and (iii) for other guaranties given in the ordinary course of business, consistent with past practice, PROVIDED the Majority Lenders have consented -46- 48 thereto, which consent shall not be unreasonably withheld. For the purposes hereof, the term guarantee shall include any agreement, whether such agreement is on a contingency or otherwise, to purchase, repurchase or otherwise acquire Indebtedness of any other Person, or to purchase, sell or lease, as lessee or lessor, property or services, in any such case primarily for the purpose of enabling another person to make payment of Indebtedness, or to make any payment (whether as an advance, capital contribution, purchase of an equity interest or otherwise) to assure a minimum equity, asset base, working capital or other balance sheet or financial condition, in connection with the Indebtedness of another person, or to supply funds to or in any manner invest in another Person in connection with such Person's Indebtedness. SECTION 7.4 MERGERS, ACQUISITIONS. Merge or consolidate with any Person (whether or not the Borrower is the surviving entity) or acquire all or substantially all of the assets or any of the capital stock of any Person or sell all or any substantial part of its assets or create any Subsidiaries, whether wholly or partially owned. SECTION 7.5 DIVIDENDS. Declare or pay any cash dividends or make any cash distribution of any kind on the outstanding stock of any Loan Party in excess of 50% of Consolidated Net Income for the immediately preceding fiscal year, or set aside any sum for any such purpose except upon the express prior written consent of the Majority Lenders, which consent shall not be unreasonably withheld. SECTION 7.6 STOCK ISSUANCE. Issue any additional shares or any right or option to acquire any shares, or any security convertible into any shares, of the capital stock of the Borrower or the Guarantor if, after giving effect thereto, the Guarantor owns less than 100% in the aggregate of all the issued and outstanding shares of capital stock of the Borrower or the Principals own in the aggregate less than 45%, or own and/or Control in the aggregate less than 80%, of the issued and outstanding shares of capital stock, on a fully diluted basis (assuming the exercise of all outstanding stock options), of the Guarantor having ordinary voting rights for the election of directors. SECTION 7.7 CHANGES IN BUSINESS; SALE OF ASSETS. (a) Make any material change in its business, or in the nature of its operation, or liquidate or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of any of its property, assets or business except in the ordinary course of business and for a fair consideration or dispose of any shares of stock or any Indebtedness, whether now owned or hereafter acquired, or discount, sell, pledge, hypothecate or otherwise dispose of accounts receivable. -47- 49 (b) Sell, transfer, assign or dispose of any Eligible Leases, or Eligible Rental Contracts or Eligible Equipment with respect to which a Loan has been made unless the net proceeds thereof are sufficient to prepay the related Loan in accordance with Section 2.6. SECTION 7.8 PREPAYMENTS. Make any voluntary or optional prepayment of any Indebtedness for borrowed money incurred or permitted to exist under the terms of this Agreement, other than Indebtedness evidenced by the Notes; PROVIDED, HOWEVER, that so long as no Default or Event of Default hereunder has occurred and is continuing or may result from such prepayment, the Loan Parties shall be entitled to make such prepayments with respect to any Indebtedness other than Subordinated Debt. SECTION 7.9 INVESTMENTS. Make, or suffer to exist, any Investment in any Person, except Investments in: (A) (i) obligations issued or guaranteed by the United States of America; (ii) certificates of deposit, bankers acceptances and other "money market instruments" issued by any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000; (iii) open market commercial paper bearing the highest credit rating issued by Standard & Poor's Corp. or by another nationally recognized credit rating firm; (iv) repurchase agreements entered into with any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000 relating to United States of America government obligations; (v) shares of "money market funds", each having net assets of not less than $100,000,000; in each case of (i) through (v) above, maturing or being due or payable in full not more than 180 days after the Borrower's acquisition thereof. (B) any other Investments, provided that (x) all Investments permitted pursuant to this Section 7.9(B), including all Investments made since January 1, 1995, in the aggregate and on a cumulative basis, do not exceed, at the end of any fiscal quarter, an amount equal to 50% of Consolidated Tangible Net Worth, without the prior written consent of the Majority Lenders, such consent not to be unreasonably withheld, (y) no Default or Event of Default exists at the -48- 50 time of, or would result from, any such Investment, and (z) such Person is an entity engaged in related business activities to that of the Borrower; With respect to Investments permitted pursuant to subsection (B) of this Section 7.9, the Borrower shall (x) not less than five (5) Business Days prior to making any such Investment, deliver to the Agent a certificate signed by the president, chief financial officer, vice president-funding operations or chief operating officer of the Borrower describing in detail the nature of such Investment and (y) upon request of the Agent from time to time, deliver to the Agent a current schedule of all such Investments, each of such certificates and schedules to be in form and substance satisfactory to the Majority Lenders. SECTION 7.10 FISCAL YEAR. Change its fiscal year. SECTION 7.11 ERISA OBLIGATIONS. (a) Be or become obligated to the PBGC other than in respect of annual premium payments not in excess of $50,000. (b) Be or become obligated to the IRS with respect to excise or other penalty taxes provided for in those provisions of Section 4975 the Code, as in effect or hereafter amended or supplemented, in excess of $50,000. SECTION 7.12 AMENDMENT OF DOCUMENTS. (a) Modify, amend, supplement or terminate, or agree to modify, amend, supplement or terminate its Certificate of Incorporation or by-laws without the express prior written consent of the Majority Lenders, which consent shall not be unreasonably withheld PROVIDED, that such amendment does not adversely affect the Lenders' rights hereunder or under any of the other Loan Documents; PROVIDED, FURTHER, that if any Lender does not notify the applicable Loan Party of its decision with respect to such consent within fifteen (15) Business Days of such Lender's actual receipt of a notice of request for consent, such consent shall be deemed to have been given by such Lender for purposes of this Agreement. (b) Modify, amend or supplement, agree to modify, amend or supplement, or consent to the modification, amendment or supplement of any of the Securitization Documents or any documents evidencing or relating to any Subordinated Debt, without the express prior written consent of the Majority Lenders, which consent shall not be unreasonably withheld, provided that such modification, amendment or supplement does not adversely affect the Lenders' rights thereunder, hereunder or under any of the other Loan Documents. -49- 51 SECTION 7.13 CAPITAL EXPENDITURES. Make or be or become obligated to make Capital Expenditures in any year in excess of 20% of Consolidated Tangible Net Worth as of the end of the immediately preceding fiscal year. SECTION 7.14 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this Agreement, directly or indirectly: (i) make any Investment in an Affiliate; (ii) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate; (iii) merge into or consolidate with or purchase or acquire assets from an Affiliate; or (iv) enter into any other transaction directly or indirectly with or for the benefit of any Affiliate (including, without limitation, guarantees and assumptions of obligations of an Affiliate); PROVIDED, HOWEVER, that (x) any Affiliate who is an individual may serve as an employee or director of a Loan Party and receive reasonable compensation for his or her services in such capacity, and (y) a Loan Party may enter into any transaction with an Affiliate providing for the leasing of property, the rendering or receipt of services, the purchase or sale of product, inventory and other assets or the incurrence of Indebtedness permitted under Section 7.1 in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to such Loan Party as the monetary or business consideration which would obtain in a comparable arm's length transaction with a Person not an Affiliate. ARTICLE 8 --------- EVENTS OF DEFAULT If any one or more of the following events (an "EVENT OF DEFAULT", individually or "EVENTS OF DEFAULT", if more than one) shall occur and be continuing, the Majority Lenders in their sole discretion may terminate the Commitment, or the Agent, at the written direction of the Majority Lenders, shall terminate the Commitment and the entire unpaid balance of the principal of and interest on the Notes outstanding and all other obligations and Indebtedness of the Borrower to the Lenders arising hereunder and under the other Loan Documents shall immediately become due and payable upon written notice to that effect from the Agent, at the direction of the Majority Lenders, to the Borrower (except that in the case of the occurrence of any Event of Default described in Section 8.6 no such notice shall be required), without presentment or demand for payment, notice of nonpayment, protest or further notice or demand of any kind, all of which are expressly waived by the Borrower, and the Agent may, it its discretion, and shall, at the direction of the Majority Lenders, exercise such other rights and remedies that shall be available to it, including, without limitation, the rights of a secured party under the UCC: SECTION 8.1 PAYMENTS. Failure to make any payment or mandatory prepayment of principal or interest upon any Note or make any payment of any fee when due. -50- 52 SECTION 8.2 COVENANTS. Failure to perform or observe any of the agreements and covenants of the Borrower contained in Section 6.13 or 6.14 hereof or Article 7 hereof. SECTION 8.3 OTHER COVENANTS. (a) Failure to be in compliance with the covenants contained in Section 6.9 hereof. (b) Failure by any Loan Party to perform or observe any other term, condition or covenant of this Agreement or of any of the other Loan Documents to which such party is a party, including, without limitation, the Notes or Security Documents, which shall remain unremedied for a period of 30 days after such Loan Party had knowledge or, in the exercise of reasonable due diligence, should have had knowledge thereof, or notice thereof shall have been given to the Borrower by the Agent. SECTION 8.4 OTHER DEFAULTS. (a) Failure of any Loan Party to perform or observe any term, condition or covenant of any bond, note, debenture, loan agreement, indenture, guaranty, trust agreement, mortgage or similar instrument to which it is a party or by which it is bound, or by which any of its properties or assets may be affected (a "DEBT INSTRUMENT"), so that, as a result of any such failure to perform, the Indebtedness included therein or secured or covered thereby may be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable. (b) Any event or condition referred to in any Debt Instrument shall occur or fail to occur, so that, as a result thereof, the Indebtedness included therein or secured or covered thereby may be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable. (c) Failure to pay any Indebtedness for borrowed money due at final maturity or pursuant to demand under any Debt Instrument. SECTION 8.5 REPRESENTATIONS AND WARRANTIES. Any representation or warranty made in writing to the Lenders in any of the Loan Documents or in connection with the making of the Loans, or any certificate, statement or report made or delivered in compliance with this Agreement, shall have been false or misleading in any material respect when made or delivered or deemed made or delivered. SECTION 8.6 BANKRUPTCY. (a) The Borrower or the Guarantor shall make an assignment for the benefit of creditors, file a petition in bankruptcy, be adjudicated insolvent, petition or apply to any tribunal -51- 53 for the appointment of a receiver, custodian, or any trustee for it or a substantial part of its assets, or shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction whether now or hereafter in effect, or the Borrower or the Guarantor shall take any corporate action to authorize any of the foregoing actions; or there shall have been filed any such petition or application, or any such proceeding shall have been commenced against it, which remains undismissed for a period of 30 days or more; or any order for relief shall be entered in any such proceeding; or the Borrower or the Guarantor by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or the appointment of a custodian, receiver or any trustee for it or any substantial part of any of its properties, or shall suffer any custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more. (b) The Borrower or the Guarantor shall generally not pay its debts as such debts become due. (c) The Borrower or the Guarantor shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint which is not vacated within 30 days from the date thereof. SECTION 8.7 JUDGMENTS. Any judgment against the Borrower or Guarantor or any attachment, levy or execution against any of its properties for any amount in excess of $100,000 shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 60 days or more. SECTION 8.8 ERISA. (a) The termination of any Plan or the institution by the PBGC of proceedings for the involuntary termination of any Plan, in either case, by reason of, or which results or could result in, a "material accumulated funding deficiency" under Section 412 of the Code. (b) Failure by the Borrower or Guarantor to make required contributions, in accordance with the applicable provisions Of ERISA, to each of the Plans hereafter established or assumed by it. SECTION 8.9 OWNERSHIP OF STOCK AND CONTROL OF BORROWER. The Guarantor shall at any time own, beneficially and of record, less than 100% in the aggregate of all of the issued and outstanding shares of capital stock of the Borrower, or the -52- 54 Principals shall own in the aggregate less than 45%, or own and/or Control in the aggregate less than 80%, of the issued and outstanding shares of capital stock, on a fully diluted basis (assuming the exercise of all outstanding stock options), of the Guarantor having ordinary voting rights for the election of directors. SECTION 8.10 LIENS. Any of the Liens created and granted to the Agent under the Security Documents shall fail to be valid, first, perfected Liens, subject to no prior or equal Lien, except as permitted by Section 7.2 hereof. ARTICLE 9 --------- CONCERNING THE AGENT SECTION 9.1 APPOINTMENT AND AUTHORITY OF THE AGENT. Each Lender hereby appoints NatWest Bank N.A. to serve as the Agent for such Person under this Agreement and the Security Documents, and hereby irrevocably authorizes such Person, as Agent, to take such action on its behalf under this Agreement and the Security Documents and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof or thereof, together with such other powers as are reasonably incidental thereto, including, without limitation, the right to release Collateral in accordance with Section 2.6(b) hereof. SECTION 9.2 DELEGATION OF DUTIES. The Agent may exercise its powers and execute its duties by or through employees or agents. SECTION 9.3 STANDARD OF CARE. In performing its duties and functions hereunder, the Agent will endeavor to exercise the same degree of care which it normally exercises in making and handling loans in which it alone is interested, but it does not assume further responsibility. Any Lender will have the right, upon reasonable notice and during customary banking hours, to visit the Agent, review and make abstracts from the Agent's statements of account with respect to the Loans, all at the sole expense of such Lender. SECTION 9.4 INDEPENDENT CREDIT EVALUATIONS. (a) Each Lender expressly acknowledges to the Agent that the Agent has not made any representations or warranties to it regarding this Agreement, the Security Documents, any of the other documents mentioned herein or therein or the transactions contemplated hereby or thereby or regarding the Guarantor or any of its Subsidiaries, including the Borrower. -53- 55 (b) Each Lender acknowledges to the Agent and to each other Person that it has independently and without reliance on the Agent or any other Person, and based upon such documents and inquiries as it has deemed appropriate, made its own credit analyses of the Guarantor and its Subsidiaries, including the Borrower, and its own decision to enter into this Agreement and the Security Documents. (c) Each Lender agrees that it will, independently and without reliance on the Agent or any other Person, and based upon such documents and inquiries as it shall deem appropriate at the time, continue to make its own credit analyses and decisions in taking or not taking actions under this Agreement and the Security Documents and to make such investigations as it deems necessary to keep current its information relating to the affairs, financial position and credit-worthiness of the Guarantor and its Subsidiaries, including the Borrower. SECTION 9.5 LIMITED SCOPE OF DUTIES. (a) Nothing in this Agreement, expressed or implied, is intended to, or shall be construed as to, impose upon the Agent any duties or responsibilities in respect of this Agreement except as expressly set forth herein. The relationship between the Agent and each of the Lenders is that of agent and principal only and the duties and obligations of the Agent are of an administrative and mechanical nature only. Nothing in this Agreement shall be construed so as to constitute the Agent as a trustee for any Lender or to impose upon the Agent any duties or responsibilities other than those for which express provision is made herein. Except where otherwise expressed or implied, the Agent, in performing its duties and functions hereunder and under the Security Documents, does not assume, and shall not be deemed to have assumed, any obligations toward, or relationship of agency or trust with or for, the Borrower, the Guarantor or any of their Subsidiaries. (b) The Agent agrees to provide to each Lender upon request a copy of each notice, report and other document received by the Agent from the Borrower hereunder. Except as provided in the immediately preceding sentence and except for any other notices or documents expressly required to be furnished to the Lenders by the Agent pursuant to the provisions of this Agreement or the Security Documents, the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information concerning the business or financial condition of the Guarantor or any of its Subsidiaries, including the Borrower, which may come into the possession of the Agent or any of its Affiliates, whether before or after the making of any Loan hereunder, nor shall the Agent have any duty to inspect the properties or books of the Borrower, the Guarantor or any of their Subsidiaries. (c) The Agent shall be entitled to assume that no Event of Default or Default has occurred and is continuing, unless the Agent has actual knowledge of such fact or has received notice from a Lender or the Borrower, as the case may be, that such Lender or the Borrower, as the case may be, considers that an Event of Default or Default has occurred and is continuing and specifying the nature thereof. The Agent shall promptly notify the Lenders of any Event of -54- 56 Default or Default of which it has actual knowledge or which it receives notice of from any Lender and shall provide each of the Lenders with copies of all notices of Defaults or Events of Defaults sent to the Borrower by the Agent. (d) Except at the direction of the Majority Lenders, the Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, or with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, this Agreement and the Security Documents, and such exercise of discretion shall be binding on all the Lenders. SECTION 9.6 RELIANCE BY THE AGENT. (a) The Agent shall be entitled to rely on any notice, consent, certificate, affidavit, letter, telegram, teletype message, statement, order or other document received by it and believed by it to be genuine and correct and to have been signed and sent or delivered by a proper Person or Persons and, in respect of legal matters, upon the advice and statements of lawyers, independent accountants and other experts selected by the Agent. The Agent and each Lender may rely conclusively on each incumbency certificate furnished to it pursuant to Article 4 hereof until it receives such a certificate amending or rescinding the prior certificate. (b) As to any matter not expressly provided for in this Agreement, the Agent shall be fully protected in acting in accordance with instructions signed by the Majority Lenders and such instructions of the Majority Lenders and action taken or inaction pursuant thereto shall be binding on all the Lenders, including, but not limited to, any which has not signed such instructions or which has dissented from the actions or inactions specified in such instructions, provided that the Agent shall not be required to act or not to act if to do so, in its sole judgment, would expose the Agent to liability or would be contrary to this Agreement, any Security Document or applicable law, except that the Agent shall so act or not act if doing so would expose it to liability if and only if it shall have received from the Lenders such indemnities against all such liabilities and any and all expenses, including fees and expenses of its counsel satisfactory to it in its sole judgment. SECTION 9.7 EXCULPATORY PROVISIONS. (a) Neither the Agent nor any of its shareholders, directors, officers, employees or agents shall be liable in any manner to any of the Lenders for any action taken, or omitted to be taken, in good faith by it or them hereunder or in connection herewith, or be responsible for the consequences of any oversight or error of judgment, except for losses due to its gross negligence or willful misconduct. (b) The Agent shall not be responsible in any manner to any of the Lenders for the due execution, effectiveness, genuineness, validity or enforceability of any of this Agreement, the Notes, the Security Documents or the Loans or for the truth, accuracy or completeness of any recital, statement or warranty contained herein or in any Security Document or in any certificate, report or other document furnished to it by or on behalf of any Person in connection with this -55- 57 Agreement or any Security Document; nor shall the Agent be under any obligation to any of the Lenders to ascertain or inquire as to the performance or observance by the Borrower or any other Person of any of the agreements or conditions set forth herein or in any Security Document or as to the use of any moneys loaned hereunder. SECTION 9.8 REIMBURSEMENT OF THE AGENT. (a) The Lenders, severally, agree to indemnify the Agent (to the extent not reimbursed by the Borrower or from the income or proceeds of the sale of any of the Collateral), ratably according to the respective unpaid principal amounts of the Obligations at the time owing to each of them, from and against any and all liabilities, obligations, losses, damages, penalties, actions, suits, judgments, court costs and other out-of-pocket costs and expenses of any kind or nature whatsoever (hereinafter called, collectively, "EXPENSES") which may be imposed on, incurred by or asserted against the Agent, as such, in any way relating to or arising out of this Agreement or any Security Document or any action taken or omitted by the Agent under this Agreement or any Security Document, provided that no Lender shall be liable for any portion of such Expenses resulting from the gross negligence or willful misconduct of the Agent hereunder. (b) The Agent, as such, shall not be required to expend any of its own money to make up the full amount of any Loan requested by the Borrower hereunder, or otherwise or incur any expense as a consequence of the failure of any Lender to make available to the Agent its Commitment Percentage of any Loan which the Lenders have become obliged to make hereunder. Should such a failure occur and the Agent shall nevertheless have advanced money of its own or incurred expense in order to make up the full amount of any such Loan, it shall be deemed to have done so at the request of any Lender which is in default, unless such Lender shall have notified the Agent not less than one (1) Business Day prior to the proposed date of the related advance that it should not make such an advance or incur such an expense to make good such failure, and in the absence of such prior notice, such Lender shall be obligated to pay to the Agent on demand the amount expended by the Agent out of its own funds plus any costs incurred by the Agent to carry such funds while such Lender is in default to the Agent hereunder, all of which shall constitute a loan by the Agent to such Lender which shall bear interest from the date of the advance by the Agent at the "Federal Funds" rate from day to day on the Loan with respect to which the advance or expenditure was made. During the continuance of any such default as between the Agent and such Lender, and notwithstanding anything elsewhere herein to the contrary expressed or implied, the principal amount of Indebtedness in respect of Loans made by such Lender in default shall be deemed to be reduced, so long as the default continues by the amount not remitted by it to the Agent as described in the preceding sentence and such principal amount and interest thereon shall be deemed assigned to and collectible by the Agent for its own account for application against the amount of its claim under the preceding sentence. (c) In the event that the Agent does not receive from any Lender a payment which such Lender is required by the terms hereof to make to the Agent and the Agent has made the amount thereof available to the Borrower, as the intended recipient thereof, if the Borrower repays the Agent the amount made available to it, the Borrower shall be subrogated to the -56- 58 Agent's right to recover such amount from any Lender which failed to make such required payment. SECTION 9.9 THE AGENT INDIVIDUALLY. With respect to its obligation as a Lender to lend under this Agreement and the advances made pursuant hereto, the Agent shall have the same obligations and the same rights, powers and privileges as it would have were it not the Agent. The Agent may accept deposits from, lend money to and, generally, engage in any kind of banking, trust or other business with the Guarantor and its subsidiaries, including the Borrower, or any of their respective Affiliates, in all respects as if such Person were not acting as the Agent hereunder. SECTION 9.10 DEALING WITH THE LENDERS. (a) The Agent may at all times deal solely with the several Lenders for all purposes of this Agreement and the protection, enforcement and collection of the obligations, including the acceptance and reliance upon any certificate, consent or other document of such Lenders and the division of payments pursuant to Section 2.11, notwithstanding possession by the Agent of actual knowledge that any Lender has sold a participation in Loans made or to be made hereunder to another Person. The Agent may deem and treat the payees of the Notes as the owners thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof has been filed with the Agent. Any request, authority or consent of any holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note. (b) If any payment by or on behalf of the Borrower received by the Agent with respect to any Loan and distributed by the Agent to the Lenders on account of their ratable share therein is thereafter set aside, avoided or recovered from the Agent in connection with any receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay to the Agent, for its account, their ratable shares of such amount set aside, avoided or recovered together with interest at the rate required to be paid by the Agent upon the amount required to be repaid by it. SECTION 9.11 DUTIES NOT TO BE INCREASED. The duties and liabilities of the Agent shall not be increased without the written consent of the Agent. SECTION 9.12 SUCCESSOR AGENT. (a) The Agent may resign at any time by giving written notice to the Lenders and the Borrower, and the Agent may be removed at any time with or without cause by notice from two thirds of the Lenders, such resignation or removal to become effective only upon the appointment of a successor Agent as hereinafter provided. -57- 59 (b) Within thirty (30) days after receipt of written notice of any such resignation of the Agent or removal of the Agent by the Lenders in accordance with Section 9.12 (a), two thirds of the Lenders shall have the right (upon five days, prior written notice to the Borrower from the Lenders) to appoint a successor Agent, which shall be one of the Lenders, unless none of them is willing to act as successor Agent hereunder, in which event two thirds of the Lenders shall appoint as successor Agent any financial institution of international standing having an office in the United States of America, chartered by the State of New York, or another of the States of the United States of America or authorized as a national banking association organized under the laws of the United States of America, and who is willing to act in that capacity. (c) If no successor Agent shall have been appointed by two-thirds of the Lenders within thirty (30) days after the removal or resignation of the Agent, then the retiring Agent may on behalf of the Lenders appoint a successor Agent which shall be a financial institution of international standing having an office in the United States of America, chartered by the State of New York, or another of the States of the United States of America or authorized as a national banking association organized under the laws of the United States of America. Upon the acceptance of its appointment as Agent hereunder by any such successor Agent, the latter shall thereupon succeed to and become vested with the duties, rights, powers and privileges of the retiring Agent under this Agreement and the retiring Agent shall be discharged from all duties and liabilities under this Agreement. (d) After the resignation or removal of the Agent hereunder, the provisions of this Article 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent hereunder and it shall also continue to be entitled to the indemnities provided hereunder insofar as they relate to events which occurred while it was Agent hereunder. ARTICLE 10 ---------- ADDITIONAL LENDERS; PARTICIPATIONS SECTION 10.1 ASSIGNMENTS. Except as provided herein, each Lender may, with the prior written consent of the Agent (such consent not to be unreasonably withheld) , assign to one or more banks or other financial institutions all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its commitment hereunder and the Note or Notes held by it) ; PROVIDED, HOWEVER, that (i) each such assignment shall be of a fixed, and not a varying, percentage of all the assigning Lender' s rights and obligations under this Agreement, (ii) the amount of the assigning Lender' s portion of the Commitment or the aggregate principal amount of the Loans, as the case may be, subject to each such assignment (determined as of the date of the assignment with respect to such assignment) shall in no event be less than $3, 000,000 and shall be in some greater integral multiple of $1, 000, 000 unless such Lender assigns all of its interest, rights and obligations under this Agreement, and (iii) the parties. to such assignment shall execute and deliver to the Agent, for recording in the books of the Agent, an Assignment and Acceptance, substantially in the form of EXHIBIT I to the Original Loan Agreement or in such -58- 60 other form as may be consented to by the Majority Lenders and the Agent (the "ASSIGNMENT"), together with any Note or Notes subject to such assignment and together with payment by the assigning bank to the Agent, for the account of the Agent, an assignment administration fee in the amount of $2,500. Upon such execution, delivery, acceptance and recording, from and after the date of each Assignment, the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment, have the rights and obligations of a Lender hereby. SECTION 10.2 PARTICIPATIONS. (a) Each Lender shall have the right, subject to the further provisions of this Article 10, to grant or sell a participation in all or any part of its Loans, Notes and Commitment (a "PARTICIPATION") to any commercial lender, other financial institution or other entity (a "PARTICIPANT") without the consent of the Borrower, the Agent or any other party hereto, although notice thereof shall be given to the Borrower and the Agent by each selling Lender promptly after any Participation. (b) Notwithstanding anything in the foregoing to the contrary, (i) no Participant shall have any direct rights hereunder, (ii) the Borrower, the Agent and the Lenders other than the selling Lender shall deal solely with the selling Lender and shall not be obligated to extend any rights or make any payment to, or seek any consent of, the Participant, and (iii) no Participation shall relieve the selling Lender from its Commitment to make Loans hereunder or any of its other obligations hereunder and such Lender shall remain solely responsible for the performance thereof. (c) Each Lender may furnish any public or non-public information concerning the Borrower, including notices, certificates and documents delivered hereunder, which are in the possession of such Lender from time to time to Participants and potential Participants, PROVIDED that no such non-public information, certificates, notices or documents shall be furnished without the written undertaking of the recipient, a copy of which shall be furnished to the Borrower promptly upon receipt thereof, to keep all such non-public information confidential, except as may be required by law. SECTION 10.3 PURCHASE OPTION. With respect to any action requiring the approval or authorization hereunder of the Majority Lenders, if the Bank shall desire that such approval or authorization be granted, and any other Lender shall refuse to grant such approval or authorization, then the Bank shall have the right, and each Lender, by its execution and delivery of this Agreement or an Assignment hereby irrevocably grants to the Bank the right, to acquire, on such date as shall be specified by the Bank in writing, all of such Lender's interests, rights and obligations under this Agreement and the other Loan Documents, including such Lender's Commitment, upon the payment by the Bank to such Lender in immediately available funds of the principal of, and all interest accrued on, such Lender's Loans on such date and any other amounts payable hereunder to such Lender. Upon the request of the Bank and the surrender by such Lender of all its Notes to the Borrower, the Borrower shall issue to the Bank Notes payable to the Bank in substitution therefor. -59- 61 ARTICLE 11 ---------- MISCELLANEOUS PROVISIONS SECTION 11.1 FEES AND EXPENSES; INDEMNITY. (a) Borrower will promptly pay (i) all costs and expenses of the Agent in preparing the Loan Documents and all costs and expenses of the issue of the Notes including, but not limited to, the reasonable fees and expenses and disbursements of Rogers & Wells, counsel to the Agent, in connection with the preparation, execution and delivery of this Agreement, the Notes, the Security Documents, the other Loan Documents and all other agreements, instruments and documents relating to this transaction and the consummation of the transactions contemplated by all such documents, including the exercise by the Lenders of their rights and remedies hereunder (including an annual audit of the Borrowing Base) and (ii) all costs and expense of the Agent's administration of the transactions contemplated by this Agreement, all costs and expenses of the Agent's and the Lenders' enforcement of their rights and remedies hereunder and under the other Loan Documents, including, without limitation, the payment of the obligations, performance of and compliance with all agreements and conditions contained herein on the part of the Borrower to be performed or complied with (including, without limitation, all costs of filing or recording any assignments, mortgages, financing statements and other documents), the negotiation, preparation and execution and delivery of any amendment, modification or supplement of or to, or any consent or waiver under, any such document (or any such instrument which is proposed but not executed and delivered), the termination of this Agreement and the other Loan Documents and with any claim or action threatened, made or brought against the Agent or the Lenders arising out of or relating to any extent to this Agreement, the Security Documents, the other Loan Documents or the transactions contemplated hereby or thereby. In addition, the Borrower will promptly pay all reasonable fees and expenses incurred by the Agent with respect to an annual audit of the books and records of the Loan Parties relating to the Collateral, the Borrowing Base and the Loan Parties methods and procedures with respect thereto conducted by consultants, accountants or other professionals selected by the Agent in its sole discretion to perform such functions. (b) The Borrower shall indemnify the Agent and the Lenders against, and hold each of them harmless from, any loss, liabilities, damages, claims, costs and expenses (including reasonable attorneys' fees and disbursements) suffered or incurred by them arising out of, resulting from or in any manner connected with, the execution, delivery and performance of each of the Loan Documents, the Loans and any and all transactions related to or consummated in connection with the Loans, including, without limitation, losses, liabilities, damages, claims costs and expenses suffered or by the Agent or any Lender in investigating, preparing for, defending against, or providing evidence, producing documents or taking any other action in respect of any commenced or threatened litigation, administrative proceeding or investigation under any federal securities law or any other statute of any jurisdiction, or any regulation, or at common law or otherwise, which is alleged to arise out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact of the Borrower and its Affiliates in -60- 62 any document or schedule filed with any governmental body; (ii) any omissions or alleged omission to state any material fact required to be stated in such document or schedule, or necessary to make the statements made therein, in light of the circumstances under which made, not misleading; (iii) any acts, practices or omission or alleged acts, practices or omissions of the Borrower or its agents or representatives related to the making of any acquisition, purchase of shares or assets pursuant thereto, financing of such purchases or the consummation of any other transactions contemplated by any such acquisitions which are alleged to be in violation of any federal securities law or of any other statute, regulation or other law of any jurisdiction applicable to the making of any such acquisition, the purchase of shares or assets pursuant thereto, the financing of such purchases or the consummation of the other transactions contemplated by any such acquisition; or (iv) any withdrawal, termination or cancellation of any such proposed acquisition for any reason whatsoever. The indemnity set forth herein shall be in addition to any other obligations or liabilities of the Borrower to the Agent and the Lenders hereunder or at common law or otherwise. The provisions of this Section 11.1 shall survive the payment of the Notes and the termination of this Agreement. SECTION 11.2 TAXES. If, under any law in effect on the date of the closing of any Loan hereunder, or under any retroactive provision of any law subsequently enacted, it shall be determined that any federal, state or local tax is payable in respect of the issuance of any Note, or in connection with the filing or recording of any assignments, mortgages, financing statements, or other documents (whether measured by the amount of indebtedness secured or otherwise) as contemplated by this Agreement, then the Borrower will pay any such tax and all interest and penalties, if any, and will indemnify the Agent and the Lenders against and hold each of them harmless from any loss or damage resulting from or arising out of the nonpayment or delay in payment of any such tax. If any such tax or taxes shall be assessed or levied against any Lender or any other holder of a Note, such Lender, or such other holder, as the case may be, may notify the Borrower and make immediate payment thereof, together with interest or penalties in connection therewith, and shall thereupon be entitled to and shall receive immediate reimbursement therefor from the Borrower. Notwithstanding any other provision contained in this Agreement, the covenants and agreements of the Borrower in this Section 11.2 shall survive payment of the Notes and the termination of this Agreement. SECTION 11.3 PAYMENTS. All payments by the Borrower hereunder shall be made to the Agent as provided in Section 2.11 hereof. Any such payment made on such date but after such time shall, if the amount paid bears interest, be deemed to have been made on and interest shall continue to accrue and be payable thereon until the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day and such extension shall be included in computing interest in connection with such payment. All payments hereunder and under the Notes shall be made without setoff or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Agreement -61- 63 and the Notes (after withholding for or on account of (i) any present or future taxes, levies, imposts, duties or other similar charges of whatever nature imposed by any government or any political subdivision or taxing authority thereof, other than any tax (except those referred to in clause (ii) below) on or measured by the net income of the Lenders pursuant to applicable federal, state and local income tax laws, and (ii) deduction of amounts equal to the taxes on or measured by the net income of the Lenders payable by the Lenders with respect to the amount by which the payments required to be made under this sentence exceed the amounts otherwise specified to be paid in this Agreement and the Notes). Upon payment in full of each Note, the Agent shall mark such Note "Paid" and return it to the Borrower. SECTION 11.4 SURVIVAL OF AGREEMENTS AND REPRESENTATIONS. All agreements, representations and warranties made herein shall survive the delivery of this Agreement and the Notes. SECTION 11.5 LIEN ON AND SET-OFF OF DEPOSITS. As security for the due payment and performance of all the Obligations, the Borrower hereby grants to the Agent for the ratable benefit of the Lenders a Lien on any and all deposits or other sums at any time credited by or due from the Bank to the Borrower, whether in regular or special depository accounts or otherwise, and any and all monies, securities and other property of the Borrower, and the proceeds thereof, now or hereinafter held or received by or in transit to the Bank from or for the Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and any such deposits, sums, monies, securities and other property, may at any time after the occurrence and during the continuance of any Event of Default be set-off, appropriated and applied by the Bank against any of the Obligations, whether or not any of such Obligations is then due or is secured by any Collateral, or, if it is so secured, whether or not the Collateral held by the Agent is considered to be adequate. SECTION 11.6 MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE AGREEMENT. (a) No modification, amendment or waiver of or with respect to any provision of this Agreement, the Notes, the Security Documents or any of the other Loan Documents nor consent to any departure by the Borrower from any of the terms or conditions hereof or thereof, shall in any event be effective unless it shall be in writing and signed by the Majority Lenders; PROVIDED, HOWEVER, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) waive any of the conditions specified in Article 4, (ii) increase the amounts, renew the Lenders' Commitment or extend the Commitment Termination Date or subject the Lenders to any additional obligations, (iii) reduce the principal of or interest on, the Notes or any fees hereunder, (iv) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees hereunder, (v) modify or amend the definition of Borrowing Base in Section 1.1 hereof if the effect of such modification or amendment is to increase the applicable percentage used in the determination thereof, (vi) change the percentage in interest of the Lenders which shall be required to take action hereunder, (vii) release any Collateral, except as provided in Section 2.6 (b) hereof, or (viii) change any provision of this Section 11.6, -62- 64 pROVIDED, FURTHER, that no amendment, waiver or consent with respect to any provisions of Article 11 shall be effective unless signed by the Agent. No consent to or demand on the Borrower in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. (b) This Agreement embodies the entire agreement and understanding between the Agent, the Lenders and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof. SECTION 11.7 REMEDIES CUMULATIVE. Each and every right granted to the Agent and the Lenders hereunder or under any other document delivered hereunder or in connection herewith, or allowed them by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Agent or the Lenders to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. SECTION 11.8 FURTHER ASSURANCES. At any time and from time to time, upon the request of the Agent, the Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Agent may reasonably request in order to fully effect the purposes of this Agreement, the Notes, the Security Documents and the other Loan Documents. SECTION 11.9 NOTICES. Except as otherwise provided for herein, all notices, requests, reports and other communications pursuant to this Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by certified mail, return receipt requested, except for routine reports delivered in compliance with Article 5 hereof which may be sent by ordinary first-class mail), telecopier (followed by a hard copy) or telegram, addressed as follows: If to the Borrower: Leasecomm Corporation 950 Winter Street Waltham, Massachusetts 02154 Attention: Peter R. V. Bleyleben, President Telecopier: (617) 890-1368 -63- 65 with a copy to: Edwards & Angell 101 Federal Street Boston, Massachusetts 02110 Attention: Alan J. Bouffard, Esq. Telecopier: (617) 439-4170 If to the Agent or, in its capacity as a Lender, the Bank: NatWest Bank N.A. 175 Water Street New York, New York 10038 Attention: NatWest Financial Services Division Telecopier: (212) 602-2180 with a copy (other than in the case of Notices and reports and other documents delivered in compliance with Article 5 hereof) to: Rogers & Wells 200 Park Avenue New York, New York 10166 Attention: Shephard W. Melzer, Esq. Telecopier: (212) 878-8009 If to any other Lender, at the address set forth below such Lender's signature hereto. Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand, commercial messenger service or telegraph 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 confirmed. Any party may change the person or address to whom such 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. SECTION 11.10 CONSTRUCTION; GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) The headings used in this Agreement are for convenience of reference only and shall not in any way be deemed to limit, define or describe the scope and intent of this Agreement or any provision hereof. -64- 66 (b) All uses herein of the masculine gender or of singular or plural terms shall be deemed to include uses of the feminine or neuter gender or plural or singular terms, as the context may require. (c) This Agreement, the Notes, the Security Documents and the other Loan Documents shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York without reference to its principles of conflict of laws. (d) THE BORROWER HEREBY IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT, THE NOTES, OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK SITTING IN THE COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE BORROWER, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING. THE BORROWER 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 11.9 HEREOF. THE BORROWER 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 BORROWER 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 11.10 SHALL AFFECT, OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF THE LENDERS TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. (e) THE BORROWER WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS AGREEMENT, THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. SECTION 11.11 SEVERABILITY. The provisions of this Agreement are severable, and if any 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 -65- 67 clause or provision of this Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Agreement is independent and compliance by the Borrower with any of them shall not excuse noncompliance by the Borrower with any other covenant, agreement or condition. The Borrower shall not take any action the effect of which shall constitute a breach or violation of any provision of this Agreement. SECTION 11.12 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION. This Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and to the benefit of the Agent, the Lenders and their respective successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Majority Lenders, and any purported assignment or delegation without such consent shall be void. SECTION 11.13 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. -66- 68 IN WITNESS WHEREOF, the parties hereto have caused this Amended Agreement to be duly executed as of the date first above written. LEASECOMM CORPORATION By: /s/ Peter Bleyleben _____________________________________________ Name: Title: NATWEST BANK N.A., in its individual corporate capacity By: /s/ Kristen M. Walker _____________________________________________ Name: Title: Address: NatWest Bank N.A. 175 Water Street New York, New York 10038 Attention: Kristen M. Walker Assistant Vice President NatWest Financial Services Division Telecopier: (212) 602-2180 FLEET BANK OF MASSACHUSETTS, N.A. By: /s/ [Signature Illegible] _____________________________________________ Name: Title: Address: Fleet Bank of Massachusetts Fleet Center 75 State Street MABOF04S Boston, Massachusetts 02109 Attention: Mr. Scott Wheelock, Vice President Telecopier: (617) 346-1558 -67- EX-10.4 5 1ST AMENDMENT TO AMENDED & RESTATED LOAN AGREEMENT 1 EXHIBIT 10.4 FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "Amendment") made as of the 30th day of October, 1995 by and among LEASECOMM CORPORATION, a Massachusetts corporation (the "Borrower"), NATWEST BANK N.A., a national banking association, in its individual corporate capacity, FLEET BANK OF MASSACHUSETTS, N.A., a national banking association, SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation, CORESTATES BANK, N.A., a national banking association, PNC BANK, NATIONAL ASSOCIATION, a national banking association and COMMERZBANK AG, New York Branch, a New York State licensed branch of a German banking corporation ("Commerzbank") (individually, a "Lender" and, collectively, the "Lenders") , and NATWEST BANK N.A., as agent for the Lenders (the "Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement. WHEREAS: A. The Borrower, the Lenders and the Agent are parties to a Loan Agreement dated as of July 29, 1993, as amended and restated as of July 28, 1995 (the "Loan Agreement") pursuant to which, INTER ALIA, the Lenders agreed to make available to the Borrower a revolving credit and term loan facility; B. The Borrower has requested that the Loan Agreement be amended to provide for the inclusion within the Borrowing Base of security monitoring systems and the receivables relating thereto and that the Majority Lenders consent to the Bank of Boston Facility; C. The Lenders are willing to amend the Loan Agreement on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: 1. AMENDMENTS. The Loan Agreement is hereby amended as follows: (a) The following definitions shall be added to Section 1.1 of the Loan Agreement in their correct alphabetical position: "'DEALER' - a Person who is engaged in the business of selling, servicing and installing security/alarm monitoring and related equipment. 'DEALER AGREEMENT' - an agreement between the Borrower and a Dealer, substantially in the form of Exhibit J-1 hereto, setting forth the rights and obligations of each with respect to a Security Equipment Lease and/or Monitoring Agreement which has been assigned by such Dealer to the Borrower. 2 'ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENT' - a Security Equipment Lease and/or Monitoring Agreement: (a) Which is in full force and effect; (b) Which is assignable by the Dealer thereunder; (c) Which provides that the customer's obligations thereunder (solely as to any equipment covered thereby) 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; (d) Which is not subject to any Lien other than that in favor of the Agent on behalf of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; (e) Under which no payment is more than 90 days past due; (f) Under which no default has occurred other than to the extent permissible under clause (e) immediately above; (g) Which is the subject of a Dealer Agreement which is in full force and effect, under which no default shall have occurred by either party thereto and which is not subject to any Lien other than in favor of the Agent on behalf of the Lenders and in which the Agent has a duly perfected first priority security interest under the UCC; and (h) With respect to which the monitoring services are being provided by the Dealer under the applicable Dealer Agreement or by a Servicer which is acceptable to the Agent, which acceptance shall not be unreasonably withheld. 'SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENT' - an agreement between a Dealer and a customer, substantially in the form of Exhibit J-2 hereto, 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. 'SERVICER' - a Person engaged in the business of providing monitoring services for central alarm systems." (b) The definition of "Borrowing Base" in Section 1.1 of the Loan Agreement is hereby amended by (i) inserting in part (i) of the first sentence thereof after the words "Finance -2- 3 Leases" and before the comma, the words "or Eligible Security Equipment Lease and/or Monitoring Agreements", (ii) inserting in part (ii) thereof within the parenthetical after the words "(other than Rental Contracts)" the words "or Eligible Security Equipment Lease and/or Monitoring Agreements" and (iii) inserting in part (iii) thereof after the words "in the case of Eligible Rental Contracts" the words "(other than Eligible Security Equipment Lease and/or Monitoring Agreements)". (c) The definition of "Eligible Equipment" in Section 1.1 of the Loan Agreement is hereby amended by inserting the words "(other than with respect to security systems subject to a Security Equipment Lease and/or Monitoring Agreement)" after the words "and in which" in sub-clause (b) thereof. (d) The definition of "Eligible Lease" in Section 1.1 of the Loan Agreement is hereby amended by deleting the period at the end of sub-clause (1), inserting a semi-colon and the word "or" in lieu thereof, and by adding a new sub-clause which shall read as follows: "which is an Eligible Security Equipment Lease and/or Monitoring Agreement." (e) The definition of "Equipment" in Section 1.1 of the Loan Agreement is hereby amended by inserting after the words "other than electronic signs" within the parenthetical the words "or security systems subject to a Security Equipment Lease and/or Monitoring Agreement". (f) The proviso to Section 2.1 (a) of the Loan Agreement is hereby amended to read in its entirety as follows: "PROVIDED, HOWEVER, that no Loan will be made hereunder if, after giving effect thereto and to all other Loans being made concurrently therewith, (i) the aggregate outstanding principal amount of all Loans would exceed the Commitment, (ii) in the case of such Loans based upon Operating Leases, the aggregate outstanding principal amount of all such Loans would exceed the Sublimit and (iii) in the case of such Loans based upon Eligible Security Equipment Lease and/or Monitoring Agreements, the aggregate outstanding principal amount of all such Loans would exceed 25% of the Commitment." (g) Section 2.3(b) of the Loan Agreement is hereby amended by inserting the words "or Eligible Security Equipment Lease and/or Monitoring Agreements" (i) within the parenthetical after the words "(other than Operating Leases)" in part (i) thereof and, (ii) after the words "Rental Contracts" in part (ii) thereof, and by inserting the words "other than Eligible Security Equipment Lease and/or Monitoring Agreements" after the words "based upon Eligible -3- 4 Rental Contracts" in part (iii) thereof, and by adding a new sub-section (iv) thereto following sub-section (iii) thereof, which shall read in its entirety as follows: "(iv) With respect to Loans based upon Eligible Security Equipment Lease and/or Monitoring Agreements, the amount of each such Loan shall be an amount equal to the lesser of (x) 100% of the Adjusted Cost of the security system (including any monitoring services relating thereto) subject to such Eligible Security Equipment Lease and/or Monitoring Agreement or (y) 75% of the amount of Eligible Lease Receivables relating to such Eligible Security Equipment Lease and/or Monitoring Agreements, discounted to present value (which calculation shall not take into account payments due and payable under such Eligible Security Equipment Lease and/or Monitoring Agreements beyond 48 months after the commencement date of such Eligible Security Equipment Lease and/or Monitoring Agreements) by a percentage equal to the Borrowing Rate applicable to such Loan as of the applicable Borrowing Date." (h) Section 4.2(e) of the Loan Agreement is hereby amended by inserting after the words "its interest in the Equipment" in the first sentence thereof the words "(other than Equipment consisting of security systems subject to a Security Equipment Lease and/or Monitoring Agreement)". (i) Section 4.2(f) of the Loan Agreement is hereby amended to read in its entirety as follows: "(f) The Borrower shall have delivered to the Agent all executed original counterparts of each Lease(s), including (or in addition to), where applicable, each Security Equipment Lease and/or Monitoring Agreement included in the Collateral for such Loan, certified as such by the Borrower." (j) Section 4.2(j) of the Loan Agreement is hereby amended by inserting after the words "Compliance Certificate" the words "from the President or Chief Financial Officer of the Borrower in the form of Exhibit G-1 hereto". (k) Sections 5.11(a) and (b) are hereby amended by inserting in each case before the words "and other Miscellaneous Equipment" the words ", Security Equipment Lease and/or Monitoring Agreements". -4- 5 (1) Section 7.13 of the Loan Agreement is hereby amended to read in its entirety as follows: "Make or be or become obligated to make Capital Expenditures (i) in any fiscal quarter in excess of 20% of Consolidated Tangible Net Worth as of the end of the immediately preceding fiscal quarter and (ii) in no event to exceed in any fiscal year 20% of Consolidated Tangible Net Worth as of the end of such fiscal year (as reflected in the Guarantor's audited fiscal year end financial statements furnished to the Agent pursuant to Section 5.1 of this Agreement)." (m) Schedule 5.5 to the Loan Agreement is hereby deleted in its entirety and Schedule 5.5 attached hereto is hereby substituted in lieu thereof. (n) Exhibit G-1 is hereby added to the Loan Agreement in the form attached hereto as Exhibit G-1 and incorporated by reference. (o) Exhibits B and H to the Loan Agreement are hereby deleted in their entirety and Exhibits B and H, respectively attached hereto are hereby substituted in lieu thereof. (p) Exhibits J-1 and J-2 are hereby added to the Loan Agreement in the respective forms attached hereto as Exhibits J-1 and J-2 and incorporated by reference. 2. CONDITIONS PRECEDENT. Prior to or simultaneously with the entry by the Borrower into this Amendment and as a condition precedent to the effectiveness of this Amendment: (a) DOCUMENTS. The Borrower shall have executed and delivered to the Agent with sufficient original counterparts for each Lender (i) this Amendment, (ii) an amendment to the Security Agreement and the Assignment of Leases in form and substance satisfactory to the Agent and (iii) such UCC financing statements and related documents as the Agent shall require in connection therewith. (b) CORPORATE ACTION. The Borrower shall have taken all corporate action required to be taken to authorize the execution, delivery and performance of this Amendment, the agreements, documents and instruments referred to herein and the transactions contemplated hereby and thereby. (c) CORPORATE DOCUMENTS AND CERTIFICATES. The Borrower and the Guarantor shall have delivered to the Agent, with sufficient original counterparts for each Lender, an officer's certificate, in form and substance satisfactory to the Agent, confirming the following: (A) None of its organizational documents have been amended since the date(s) as of which copies of said organizational documents were certified to the Agent; -5- 6 (B) Specimen signature(s) of the person(s) authorized to execute this Amendment; (C) The execution, delivery and performance of this Amendment has been authorized by resolutions of the Board of Directors of the Borrower and the Guarantor, copies of which shall be attached to such officer's certificate; and (D) Each of the Borrower and the Guarantor remains in good standing in its respective jurisdiction of incorporation and in each jurisdiction in which it is qualified to do business. (d) Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Amendment and all documents incident thereto shall be reasonably satisfactory in form and substance to the Agent, and the Agent and each Lender, upon request by such Lender, shall have received all information and such counterpart originals or certified or other of such documents as the Agent may reasonably request prior to the date hereof. (e) Compliance. (i) The Borrower and the Guarantor shall have complied and shall then be in compliance with all of the terms, covenants and conditions of the Loan Agreement as amended by this Amendment; and (ii) The representations and warranties contained in Article 3 of the Loan Agreement shall be true and correct on the date hereof; and (iii) No Default or Event of Default shall have occurred, and the Agent and each Lender shall have received a Compliance Certificate dated the date hereof certifying, inter alia, that, the conditions set forth in this Section 4(e) are satisfied on such date. (f) Legal Matters. All legal matters incident to the effectiveness of this Amendment shall be satisfactory to counsel to the Agent. The Agent will advise the Borrower of any such matters prior to the date hereof. 3. Reaffirmation of Security Interest. The Borrower hereby reaffirms as of the date hereof each and every security interest and lien granted in favor of the Agent and the Lenders under the Loan Documents, and agrees and acknowledges that such security interests and liens shall continue from and after the date hereof, in each case after giving effect to the Loan Agreement as amended by this Amendment, and the obligations secured thereby and thereunder shall include Borrower's obligations under the Loan Agreement as amended by this Amendment. Each such reaffirmed security interest and lien remains and shall continue to remain in full force effect and is hereby in all respects ratified and confirmed. -6- 7 4. Consent to the Bank of Boston Facility. The Lenders hereby (a) consent to the Borrower entering into the Bank of Boston Facility, provided that the principal amount of Indebtedness permitted to be incurred thereunder not exceed $20,000,000 and that the documentation relating thereto be reasonably satisfactory to the Agent, and (b) authorize the Agent on behalf of the Lenders to enter into an intercreditor agreement, in form and substance satisfactory to the Agent, with The First National Bank of Boston ("Bank of Boston"), as lender under the Bank of Boston Facility, which confirms that Bank of Boston or the Agent, as the case may be, has a prior lien as to its collateral and shall not have an interest in the other's collateral. 5. Reference to and effect on Loan Documents. (a) On and after the date hereof, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference in the other Loan Documents, shall mean and be a reference to the Loan Agreement as amended hereby. (b) Except as specifically amended herein, the Loan Agreement shall remain in full force and effect in accordance with its terms. 6. Governing Law. This Amendment 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. 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on different counterparts, but all such counterparts shall together constitute but one agreement. 8. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment or be given any substantive effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. BORROWER: LEASECOMM CORPORATION By: /s/ Peter Bleyleben ----------------------------------- Name: Title -7- 8 LENDERS: NATWEST BANK N.A. Address: NatWest Bank N.A. 175 Water Street New York, New York 10038 Attention: Kristen M. Walker Assistant Vice-President NatWest Financial Services Division Telecopier: (212) 602-2180 By: /s/ Kristen M. Walker ----------------------------------- Name: Title -8- 9 CORESTATES BANK, N.A. Address: Corestates Bank PNB 1500 Market Street West Tower Philadelphia, Pennsylvania 19101-7618 Attention: Ms. Verna R. Prentice Vice President Telecopier: (215) 973-6054 By: /s/ Verna R. Prentice ----------------------------------- Name: Title PNC BANK, NATIONAL ASSOCIATION Address: PNC Bank, National Association 100 South Broad Street Philadelphia, Pennsylvania 19919 Attention: Mr. Michael Wilk Telecopier: (215) 585-8351 By: /s/ Michael T. Wilk ----------------------------------- Name: Title -9- 10 FLEET BANK OF MASSACHUSETTS, N.A. Address: Fleet Bank of Massachusetts Fleet Center 75 State Street MABOF04S Boston, Massachusetts 02109 Attention: Mr. Scott D. Wheelock, Vice President Telecopier: (617) 346-1558 By: /s/ Scott D. Wheluck ----------------------------------- Name: Title SANWA BUSINESS CREDIT CORPORATION Address: Sanwa Business Credit Corporation One South Wacker Drive Chicago, Illinois 60606 Attention: Ms. M. Gail Fitzpatrick Vice President Telecopier: (312) 853-1366 By: /s/ Mary Gail Fitzpatrick ----------------------------------- Name: Title -10- 11 COMMERZBANK AG, NEW YORK BRANCH Address: Commerzbank 2 World Financial Center 34th Floor New York, New York 10281-1050 Attention: Mr. Tom Ausfahl Telecopier: (212) 266-7235 By: /s/ Robert Donohue /s/ Tom Ausfahl ----------------------------------- Name: Title AGENT: NATWEST BANK N.A., as Agent By: /s/ Kristen M. Walker ----------------------------------- Name: Title -11- 12 SCHEDULE 5.5 [To be furnished on Leasecomm Corporation Letterhead] NATWEST BANK N.A. 175 Water Street New York, New York 10038 Attention: Financial Services Division Re: The Loan Agreement dated as of July 29, 1993, as amended and restated by the Amended and Restated Loan Agreement dated as of ____________ (the "Agreement"), and as further amended from time to time thereafter, among Leasecomm Corporation ("the Borrower"), the banks party thereto, and NatWest Bank N.A., as Agent. - -----------------: Pursuant to Section 5.5 of the Agreement, as the same may be amended from time to time: I, _______________, the duly elected, qualified and acting [President/Chief Financial Officer] of the Borrower certify that no event has occurred and is continuing which constitutes a Default or Event of Default with respect to the Agreement, and that no default under any other agreement to which either of the Loan Parties is a party or by which it is bound, or by which, to the best of the knowledge of the Borrower, any of its properties or assets, taken as a whole, may be materially affected. Additionally, I further certify that to the best of my knowledge after due inquiry, for the month ended ___________, 199__, the Borrower has complied with all covenants (including but not limited to those covenants outlined in Article 6 and Article 7), agreements and conditions in each Loan Document and that each representation and warranty contained in each Loan Document is true and correct with the same effect as though each such representation and warranty had been made on the date of this certificate. Attached hereto is a detailed calculation indicating compliance with the covenants contained in Section 6.9 of the Agreement. The calculations set forth in this certificate are true and correct as of _______________ ___, 199__. Capitalized terms used herein shall have the same meanings as those same terms in the Loan Agreement. IN WITNESS WHEREOF, I have executed this Covenant Compliance Certificate on this _______ day of _____________, 199__. - --------------------------------- Name: Title: -12- 13 COVENANT COMPLIANCE CALCULATIONS The Borrower shall maintain at all times:
(I) RATIO OF CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED TANGIBLE CAPITAL FUNDS OF NOT MORE THAN 6:1: (i) Consolidated Indebtedness: $________ (ii) Consolidated Tangible Capital Funds: a. Capital Stock: $_______ b. Additional Paid-in Capital: $_______ c. Retained Earnings: $_______ d. Subordinated Debt: $_______ Subtotal 1 (sum of a, b, c, and d): $_______ Less: x. Organizational Costs and Goodwill: $_______ y. Treasury Stock: $_______ z. 25% of Debt Issue Costs: $_______ Subtotal 2 (sum of x, y, and z): $_______ Total ii (Subtotal 1 minus Subtotal 2): $________ ACTUAL RATIO OF (i) TO (ii): _________ MAXIMUM RATIO: 6:1 _________ (II) MINIMUM CONSOLIDATED TANGIBLE NET WORTH: Actual Consolidated Tangible Net Worth: a. Capital Stock: $_______ b. Additional Paid-in Capital $_______ c. Retained Earnings: $_______ Subtotal 1 (sum of a, b, and c): $_______ Less: x. Organizational Costs and Goodwill: $_______ y. Treasury Stock: $_______ z. 25% of Debt Issue Costs: $_______ Subtotal 2 (sum of x, y, and z): $_______ $_______ Total Actual Consolidated Tangible Net Worth (Subtotal 1 minus Subtotal 2): $________
-13- 14 Minimum Consolidated Tangible Net Worth: a. Base Amount: $5,500,000 b. 50% of Consolidated Net Income for each fiscal Quarter after 12/31/94: $________ Total Minimum Consolidated Tangible Net Worth (sum of a and b): $________ (III) ALLOWANCE FOR BAD DEBT Actual Allowance for Bad Debt: $________ Minimum Allowance for Bad Debt (equal to 5% of Gross Lease Installments) $________ Difference between Actual and Minimum Allowance: $________ The Borrower shall have as of the end of each fiscal quarter: (IV) FIXED CHARGE RATIO (i) Consolidated Earnings: a. Consolidated Net Income $_______ b. Provisions for deferred federal, state, or other taxes $_______ c. Scheduled interest payments on all indebtedness $_______ Total (sum of a, b, and c): $________ (ii) Fixed Charges: a. Scheduled interest payments on all indebtedness $________ ACTUAL RATIO OF (i) TO (ii): _________ REQUIRED MINIMUM RATIO: 1.25:1 (V) MAXIMUM CAPITAL EXPENDITURES (i) Consolidated Tangible Net Worth as of the end of the immediately preceding fiscal quarter $________ (ii) Aggregate Capital Expenditures for the current quarter $________ (ii)REPORTED AS A PERCENTAGE OF (i) _________ MAXIMUM ALLOWABLE PERCENTAGE 20% _________ - --------------------------------------------------------------------------------
-14- 15 The Borrower shall have as of the end of the fiscal year: (iii) Consolidated Tangible Net Worth as of the end of the fiscal year (per the audited financial statements) $________ (iv) Aggregate Capital Expenditures for the fiscal year $________ (iv)REPORTED AS A PERCENTAGE OF (iii) _________ MAXIMUM ALLOWABLE PERCENTAGE 20% _________
-15- 16 EXHIBIT G-1 COMPLIANCE CERTIFICATE I, ________________, the duly elected, qualified and acting ____________________ of Leasecomm Corporation, a Massachusetts corporation (the "Corporation"), pursuant to Section 4.2(j) of the Loan Agreement dated as of July 29, 1993, as amended and restated as of July 28, 1995 (the "Loan Agreement"; capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement), by and among the Corporation, the Lenders signatory thereto, and NatWest Bank N.A., as agent for the Lenders, do hereby certify as follows: (i) The Corporation has fully complied with all the terms and conditions of the Security Documents, including, but not limited to, delivering to the Agent all executed copies of the Eligible Leases and Eligible Rental Contracts included in the Collateral for the Loan being made on the date hereof. (ii) The Corporation has complied, and as of the date hereof, is in compliance with all terms, covenants and conditions of the Loan Agreement. (iii) The representations and warranties of the Corporation contained in Article 3 of the Loan Agreement are true and correct on and as of the date of this Certificate. (iv) There exists no Default or Event of Default. IN WITNESS WHEREOF, I have executed this Certificate this ______ day of _____________, 199___. __________________________________________ [President] [Chief Financial Officer] -16- 17 EXHIBIT B LEASECOMM CORPORATION BORROWING COMPUTATION I, ________________________, the duly elected, qualified and acting ________________________ of Leasecomm Corporation, a Massachusetts corporation (the "Corporation"), pursuant to Section 2.3 of the Loan Agreement dated as of July 29, 1993, as amended and restated by the Amended and Restated Loan Agreement (the "Agreement") dated as of ____________________, and as further amended from time to time thereafter, among the Borrower, NatWest Bank N.A., Fleet Bank of Massachusetts, N.A., Sanwa Business Credit Corporation, CoreStates Bank, N.A., PNC Bank N.A., and Commerzbank AG, New York Branch, as Lenders, and NatWest Bank N.A., as Agent, and in connection with a request for the Lenders to make a Loan to the Corporation pursuant to Section 2.2 of the Agreement (capitalized terms used herein shall have the meanings respective meanings set forth in the Agreement), do hereby certify as follows: 1. The following is a complete description of the Equipment to be financed or refinanced with respect to the requested Loan: 2. The Original Cost and Adjusted Cost of the Equipment described above is $__________ and $_____________, respectively. 3. The following is a complete description of the Leases covering the above-described Equipment: 4. The following is a complete listing of the names of the Lessees under such Eligible Leases: 5. The above-described Equipment and Leases, subject to the acceptance by the Agent of such Equipment and no notice from the Agent that any lessee of such Equipment is unacceptable, satisfy the conditions set forth in the definitions of "Eligible Equipment" and "Eligible Leases", respectively, contained in Section 1.1 of the Agreement. ELIGIBLE LEASES OTHER THAN 0PERATING LEASES AND SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: (1) 100% of the Adjusted Cost of the Eligible Equipment subject to such Eligible Leases equals: $__________ -17- 18 (2) The aggregate dollar amount of Eligible Lease Receivables relating to such Eligible Leases equals: $__________ (3) 75% of the amount reported in Line 2 equals: $__________ (4) The amount indicated in Line 3 discounted to the present value by a percentage equal to the Borrowing Rate equals: $__________ (5) The requested Loan Amount: (the lesser of the amounts calculated in Line 1 and Line 4) equals: $__________ ELIGIBLE OPERATING LEASES OTHER THAN ELIGIBLE RENTAL CONTRACTS AND ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: (6) The Net Book Value of the Eligible Equipment subject to such Eligible Leases equals: $__________ (7) 60% of the amount calculated in Line 6 equals: $__________ (8) The aggregate dollar amount of Eligible Lease Receivables relating to such Eligible Leases equals: $__________ (9) 75% of the amount reported in Line 8 equals: $__________ (10) The amount indicated in Line 9 discounted to the present value by a percentage equal to the Borrowing Rate equals: $__________ (11) The requested Loan Amount: (the lesser of the amounts calculated in Line 7 or Line 10) equals: $__________ ELIGIBLE RENTAL CONTRACTS OTHER THAN ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: (12) The Net Book Value of the Eligible Equipment subject to such Eligible Rental Contracts equals: $__________ (13) The requested Loan Amount: 50% of the amount calculated in Line 12 equals: $__________ -18- 19 ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: (14) 100% of the Adjusted Cost of the security system subject to such Eligible Security Equipment Lease and/or Monitoring Agreements equals: $__________ (15) The aggregate dollar amount of Eligible Lease Receivables relating to such Eligible Security Equipment Lease and/or Monitoring Agreements equals: $__________ (16) 75% of the amount reported in Line 15 equals: $__________ (17) The amount indicated in Line 16 discounted to the present value by a percentage equal to the Borrowing Rate equals: $__________ (18) The requested Loan Amount: (the lesser of the amounts calculated in Line 14 or Line 17) equals: $__________ CALCULATION OF AGGREGATE BORROWING AVAILABILITY: (19) The available Loan Amount for Eligible Leases other than Operating Leases and Security Equipment Lease and/or Monitoring Agreements (Line 5 from above): $__________ (20) The aggregate amount of loans outstanding which are secured by Eligible Operating Leases other than Eligible Security Equipment Lease and/or Monitoring Agreements: $__________ (21) 5% of the aggregate Commitment outstanding (the "Sublimit") $__________ (22) The available Loan Amount for Operating Leases other than Eligible Security Equipment Lease and/or Monitoring Agreements is equal to the excess of a: $_______ (a) the Sublimit over (b) the sum of the amounts set forth in Line 11, Line 13, and Line 20: b: $_______ $__________ (23) The aggregate amount of loans outstanding which are secured by Eligible Security Equipment Lease and/or Monitoring Agreements: $__________ -19- 20 (24) The available Loan Amount for Eligible Security Equipment Lease and/or Monitoring Agreements is equal to the a: $_______ excess of (a) 25% of the Commitment Outstanding over (b) the sum of the amounts set forth in Line 18 and Line 23: b: $_______ $__________ (25) Aggregate Loan Amount Availability (the sum of Line 19, Line 22, and Line 24): $__________ (26) Aggregate Loan Amount Requested: $__________ (27) Total Committed Amount: $__________ (28) Aggregate Balance of Loans Outstanding as of the date of this Borrowing Computation: $__________ (29) Proposed Aggregate Amount Outstanding: (The sum of Line 26 and Line 28) $__________ (30) Unused Portion of the Commitment: $__________ (Line 27 less Line 29). The unused portion of the commitment must be greater than or equal to zero at all times. IN WITNESS WHEREOF, I have executed this Borrowing Computation this ______ day of ____________, 199__. __________________________________ Name: Title: -20- 21 EXHIBIT H LEASECOMM CORPORATION BORROWING BASE REPORT Borrowing Base Report dated as of _____________, ___, 199__: Annual Discount Rate: % FIXED RATE PACKAGES ONLY
- ------------------------------------------------------------------------------------------- REMAINING ESTIMATED ACQUISITION TOTAL LEASE 75% RESIDUAL COST NET PACKAGE FUNDED PACKAGE SUM RECEIVABLE NPV OF NPV VALUE HOLDBACKS NO. AMOUNT DATE - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- TOTAL: - -------------------------------------------------------------------------------------------
_______________________ Fixed Rate Loan Balance Over(Under) Collateralized: ____________________ Annual Discount Rate: _____% VARIABLE RATE PACKAGES ONLY I. ELIGIBLE LEASES OTHER THAN OPERATING LEASES AND SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS:
- --------------------------------------------------------------------------------------------- LESSER OF: REMAINING ESTIMATED ACQUISITION 75% OF NPV OR LEASE 75% RESIDUAL COST NET ACQ. COST LESS PACKAGE PACKAGE SUM RECEIVABLE NPV OF NPV VALUE HOLDBACKS HOLDBACKS NO. DATE - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- TOTAL: - ---------------------------------------------------------------------------------------------
-21- 22 -------------------------- Variable Rate Loan Balance Over(Under) Collateralized: ______________________ II. ELIGIBLE OPERATING LEASES OTHER THAN RENTAL CONTRACTS AND SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS:
- ------------------------------------------------------------------------------------------------- 60% OF LESSER OF: REMAINING ESTIMATED NET BOOK NET BOOK 75% OF NPV OR LEASE 75% RESIDUAL VALUE OF VALUE OR 60% OF NET PACKAGE PACKAGE SUM RECEIVABLE NPV OF NPV VALUE EQUIPMENT BOOK VALUE NO. DATE - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- TOTAL: - -------------------------------------------------------------------------------------------------
__________________________ Variable Rate Loan Balance Over(Under) Collateralized: __________________________ III. ELIGIBLE RENTAL CONTRACTS OTHER THAN SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS:
- ----------------------------------------------------------------------------------- NET BOOK VALUE ESTIMATED SUM OF EQUIPMENT 50% OF NBV RESIDUAL VALUE PACKAGE NO. PACKAGE DATE - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- TOTAL: - -----------------------------------------------------------------------------------
__________________________ Variable Rate Loan Balance Over(Under) Collateralized: __________________________ -22- 23 IV. ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS:
- -------------------------------------------------------------------------------------------- LESSER OF: REMAINING ESTIMATED ACQUISITION 75% OF NPV OR LEASE 75% RESIDUAL COST NET ACQ. COST LESS PACKAGE PACKAGE SUM RECEIVABLE NPV OF NPV VALUE HOLDBACKS HOLDBACKS NO. DATE - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- TOTAL: - --------------------------------------------------------------------------------------------
__________________________ Variable Rate Loan Balance Over(Under) Collateralized: __________________________ -23- 24 Dated as of ____________, 199__ LEASECOMM CORPORATION BORROWING BASE CERTIFICATE This Borrowing Base Certificate is delivered to the Agent pursuant to Section 5.10 of the Loan Agreement, dated as of July 29, 1993, as amended and restated by the Amended and Restated Loan Agreement (the "Agreement") dated as of ___________, and as further amended from time to time thereafter, among the Borrower, NatWest Bank N.A., Fleet Bank of Massachusetts, N.A., Sanwa Business Credit Corporation, CoreStates Bank, N.A., PNC Bank N.A., and Commerzbank AG, New York Branch, as Lenders, and NatWest Bank N.A., as Agent. This Certificate relates to the above stated Fiscal Month as of the last calendar day of such Fiscal Month and is signed by an authorized signatory. The undersigned certifies on behalf of the Borrower that: The Borrower is now in compliance with all provisions, covenants, warranties, and representations made by the Borrower in the Agreement and the other Loan Documents; there does not exist as of this date an Event of Default or Potential Default; and each of the leases or contracts included in the Borrowing Base Certificate meets the eligibility criteria as applicable for inclusion herein. (1) The Revolving Credit/Term Loan Commitment: $___________________ (2) Aggregate Amount of Loans Outstanding: $___________________ (3) 5% of the aggregate Commitment outstanding: $___________________ (4) 25% of the aggregate Commitment outstanding: $___________________ FIXED RATE PACKAGES: (5) ELIGIBLE LEASES: The aggregate dollar amount of 75% of the Net Present Value of the Eligible Lease Receivables: $___________________ (6) Aggregate Fixed Rate Loan Balance Outstanding: $___________________ (7) Net Collateral Position (Over/(Under) $___________________ collateralized): (Line 5 minus Line 6) VARIABLE RATE PACKAGES: (8) ELIGIBLE LEASES OTHER THAN OPERATING LEASES AND ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: -24- 25 The aggregate dollar amount of the lesser of 75% of the Net Present Value of the Eligible Lease Receivables OR the Acquisition Cost of the Eligible Equipment Less Holdbacks: $___________________ (9) ELIGIBLE OPERATING LEASES OTHER THAN ELIGIBLE RENTAL CONTRACTS AND ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: The aggregate dollar amount of the lesser of 75% of the Net Present Value of the Eligible Lease Receivables or 60% of the Net Book Value of the Eligible Equipment: $___________________ (10) ELIGIBLE RENTAL CONTRACTS OTHER THAN ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: The aggregate dollar amount of 50% of the Net Book Value of the Eligible Equipment: $___________________ (11) The Aggregate dollar amount of Eligible Operating Leases and Eligible Rental Contracts (the sum of Line 9 and Line 10): $___________________ (12) Additional Availability under Sublimit: the excess of: (a) 5% of the Aggregate Commitment Outstanding (Line 3) over (b) Aggregate Contracts and Leases under the Sublimit (Line 11): $___________________ (13) If number calculated in Line 12 is negative, then insert that negative number in Line 13, otherwise insert -0-: $___________________ (14) ELIGIBLE SECURITY EQUIPMENT LEASE AND/OR MONITORING AGREEMENTS: The aggregate dollar amount of the lesser of 75% of the Net Present Value of the Eligible Lease Receivables OR the Acquisition Cost of the Eligible Equipment Less Holdbacks: $___________________ (15) Additional Availability: the excess of: (a) 25% of the Aggregate Commitment Outstanding (Line 4) over (b) Aggregate Lease and/or Monitoring Agreements (Line 14): $___________________ (16) If number calculated in Line 15 is negative, then insert that negative number in Line 16, otherwise insert -0-: $___________________ (17) Aggregate Variable Rate Package Borrowing Base: (the sum of Line 8, Line 11, Line 13, Line 14, and Line 16) $___________________ (18) Aggregate Variable Rate Loan Balance Outstanding: $___________________ -25- 26 (19) Net Collateral Position (Over/(Under) collateralized): (Line 17 minus Line 18) $___________________ (20) Aggregate Net Collateral Position (sum of Line 7 and Line 19): $___________________ If the calculation in Line 20 results in an overall negative collateral position: (21) Amount of paydown to be applied to Variable Rate Loan or Fixed Rate Loan: $___________________ (21a) Aggregate Borrowing Base amount of Additional Leases and Security Equipment Leases and/or Monitoring Agreements forwarded to the Agent on behalf of the Lenders: $___________________ The sum of Line 21 and Line 21a must be equal to or exceed the amount calculated in Line 20. IN WITNESS WHEREOF, I have executed this Borrowing Computation this _________ day of _______, 199___. ___________________________________ Name: Title: -26- 27 EXHIBIT J-1 DEALER AGREEMENT This Dealer Agreement entered into this _______ day of ___________ 1995, by and between Leasecomm Corporation, Inc., 950 Winter Street, Waltham, MA 02154, a Massachusetts corporation hereinafter referred to as "Leasecomm" and ________________________________________ of _______________________ hereinafter referred to as "Dealer". LEASECOMM is a provider of finance leasing for alarm equipment and monitoring services. DEALER is in the business of selling, servicing and installing security/alarm monitoring and related equipment and may also provide security equipment monitoring services to customers if agreed to by Leasecomm. SECURITY EQUIPMENT LEASE AND MONITORING SERVICE ("Customer Agreement") as used in this Agreement shall mean any equipment, monitoring or related services. For the purposes of this Dealer Agreement, the term "FUNDING PACKAGE" shall include all of the following: 1. Dealer's Security Equipment Lease and Monitoring Agreement (original) 2. Dealer's Installation Certificate 3. Copy of Customer's Right of Rescission 4. Copy of Customer's signed Disclosure Statement 5. Assignment Form (original) 6. Dealer invoice WHEREAS Dealer desires to assign its Customer Agreements to Leasecomm and; WHEREAS in consideration for the assignment by Dealer, Leasecomm is willing to pay the Dealer fees as defined in the Dealer's lease program formulated by Leasecomm. NOW, THEREFORE, in consideration of the premises and the covenants and conditions contained herein the parties agree as follows: 1. GENERAL OBLIGATIONS OF LEASECOMM. Leasecomm shall provide the following services to Dealer: (a) Purchase monitoring service contracts for customers submitted by the Dealer and approved by Leasecomm. Approval shall be evidenced by Leasecomm issuing a customer authorization number. Leasecomm reserves the right to refuse any potential customer which the Dealer submits. Customer authorization numbers will automatically expire if Dealer or customer have not met Leasecomm's funding requirements (a complete, approved Funding Package and proper customer verification by Leasecomm), within 30 days from the date of issuance of the authorization number by Leasecomm. -27- 28 (b) Bill and collect monthly fees from customers as agreed in their Customer Agreement. (c) Pay Dealer fees as defined in the Dealer's lease program formulated by Leasecomm. (d) Collect all applicable taxes from customer and pay appropriate tax authorities from funds collected from customers on a timely basis. (e) On behalf of the Dealer, establish a direct financial relationship with a mutually agreed upon monitoring service (Central Station) to provide alarm monitoring services for customers who have submitted an approved Customer Agreement to Leasecomm. If customer stops paying Leasecomm according to the terms of the Customer Agreement or violates any material covenant of the Customer Agreement during such initial term, Leasecomm may cause monitoring services to be discontinued to the customer in default by notifying the Central Station of the customer's default. Such defaulting customers will fall under the terms and conditions of Sections 2, 3 and 4 of this agreement. 2. GENERAL OBLIGATIONS OF DEALER. Dealer shall provide the following services to Leasecomm: (a) Submit for approval to Leasecomm, Customer Agreements signed by potential customers on current authorized documents as issued by and/or approved by Leasecomm. Approved customers shall comprise the submitting Dealer's Customer Base. Dealer shall be responsible for his Customer Base as provided herein. (b) Coordinate, and perform or cause to be performed the proper installation of security monitoring equipment at approved customer locations. Installation shall be in accordance with industry standards and in compliance with all federal, state, municipal and local laws, rules and regulations and shall not be deemed complete until equipment is in satisfactory working order. (c) Perform or cause to be performed all maintenance and service on the installed equipment as requested by customer to ensure the proper working order of the equipment. Dealer will use their best efforts to provide such service to the customer within three (3) business days of receiving notice of an equipment problem. On an emergency basis such as runway alarms, etc., Dealer shall use their best efforts to provide service to the customer within 6 hours of receiving notice of an equipment problem. (d) Notify Leasecomm of any material event that has elected or may imminently affect the customer equipment or monitoring service in any way. (e) In the event of a customer default (for the purpose of this Agreement, the customer shall be deemed in default if the customer is past due 60 days on any of the first four statements -or- if the Customer violates any material covenant of the agreement, and/or if the Customer's first authorized ACH debit is declined by the bank. Leasecomm will -28- 29 either charge back or offset against future funding to the Dealer the original funded amount any time after 10 days after the default date. 3. DEALER COVENANTS, REPRESENTATIONS & WARRANTIES. Dealer covenants, represents and warrants to Leasecomm with regard to each approved Customer Agreement submitted under this Agreement that: (a) A current and authorized Customer Agreement is being used, that the Customer Agreement has been completed with the knowledge and consent of the Customer, that the Customer Agreement information is accurate, that the Customer Agreement has been duly executed by the Customer, and that the Customer information is accurately conveyed to Leasecomm. (b) The Service sold to the customer is fully and correctly described in the Customer Agreement and that the Dealer has made no representations, expressed or implied, whatsoever to the customer which are not included in the Customer Agreement and that the Dealer has not agreed to, any modification of the terms of the Customer Agreement, unless such changes have been agreed to in advance by all parties. Any such changes shall be in writing. (c) The equipment is installed and that all work necessary in connection with such installation has been performed. (d) The Dealer has not sold, assigned, transferred, mortgaged, pledged or granted a security interest in the monitoring agreement to anyone other than Leasecomm. Dealer ensures that Leasecomm shall at all times retain good and marketable title to the monitoring agreement free and clear of any and all liens, charges, encumbrances, mortgages, pledges, security interests and claims of any kind, until all payments have been received for the initial term of the Customer Agreement and the contract has been assigned to the Dealer. (e) The Dealer will have no right or authority to accept collections for monthly monitoring payments from customers under any Customer Agreement or to modify the terms of the Customer Agreement without Leasecomm's prior written consent. Any monthly payment Dealer receives from a customer, in relation to the Customer Agreement, shall be received in trust for Leasecomm's benefit and will be promptly remitted to Leasecomm in the same form as received. Under no circumstances is the Dealer to cash or deposit checks payable to Leasecomm. Leasecomm may endorse Dealer's name on any drafts, checks, money orders, or other forms of payment made by the customer with respect to monthly fees under the Customer Agreement. (f) The Dealer is engaged principally in the sale of goods and services to the general public and is licensed and in good standing as required by law. Such good standing shall be maintained during the term of this Agreement. -29- 30 (g) The Dealer shall at all times conduct its business in compliance with all applicable laws, rules and regulations. (h) When all payments due under the initial term of any Customer Agreement have been paid in full, Dealer may, by notice to Leasecomm, request that Leasecomm assign all of its rights, title, and interest in the Customer Agreement to the Dealer. Leasecomm shall then cease all functions and relinquish all obligations with respect to such Customer and such Customer Agreement. Dealer shall, thereafter, assume all obligations and provide all such functions directly to the customer. Both parties agree to take such actions as are reasonably requested to carry out the provisions hereof. For each Customer Agreement that defaults prior to Leasecomm having received payments from the customer equal to, or greater than, the original dollar amount paid by Leasecomm to the Dealer for that Customer Agreement, Leasecomm reserves the right to retain ownership of one Customer Agreement which has paid its full contractual obligation for the initial term from the Dealer's portfolio. In these instances, Leasecomm will assign the original, defaulted Customer Agreement back to the Dealer. Dealer understands and acknowledges that each of the above covenants, representations and warranties is material to Dealer's Customer Agreement. Any breach of covenant, representation or warranty shall constitute a Dealer default. 4. DEALER FEES. Leasecomm shall pay the Dealer fees in accordance with the following terms and conditions: (a) Dealer shall be paid for all Customer Agreements as approved by Leasecomm accordance with the terms of this Agreement and within the guidelines of the Dealer's rate program, other than as provided for in Section 2e. 5. TERMINATION. Either party may terminate this Agreement at anytime after thirty (30) days written notice to the other. Such termination will in no way affect the obligations of either party with respect to transactions already consummated. 6. WAIVER. Dealer's compensation, under this agreement, shall be in accordance with the terms and conditions stated herein. The Dealer waives any claims for consequential and/or punitive damages. 7. INDEMNIFICATION. Dealer agrees to indemnify and hold Leasecomm harmless from all losses, damages, liabilities and expenses (including reasonable attorney's fees and court costs) which may result from any claim or action against Leasecomm by any customer arising out of any action or omission by the Dealer in connection with the Customer Agreement and installed equipment, any representation or warranty made by the Dealer to the customer, or any other claim arising out of the Dealer's conduct in promoting or administering the Service. 8. RELATIONSHIP OF PARTIES. This Agreement does not make either party the agent, legal representative, employee, partner, franchisee or joint venture of the other for any -30- 31 any purpose whatsoever, nor does it grant either party any authority to assume or to create any obligation on behalf of or in the name of the other. Dealer shall conduct his business as an independent contractor, and all persons employed in the conduct of such business shall be Dealer's employees or agents. 9. GOVERNING LAW. This Agreement shall be considered to be MASSACHUSETTS contract and shall be deemed to have been made in Middlesex County, Massachusetts, regardless of the order in which the signatures of the parties shall be affixed thereto, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the law, and in the courts, of the Commonwealth of Massachusetts. The undersigned hereby consents and submits to the jurisdiction of the courts of the Commonwealth of Massachusetts for the purpose of any suit, action or other proceeding arising out of the undersigned's obligation thereunder, and expressly waives any objection to venue in any such courts. 10. NOTICES. Any modification to this Agreement shall be signed by the party giving such notice and sent to the parties at the address set forth in the first paragraph of this Agreement, or to such other address as either party may establish. By executing this document each of the parties hereto is warranting and representing that they have read the Agreement and understand each of the terms and conditions contained herein. Each of the parties further warrants and covenants that it agreess and is satisfied with the terms and conditions and is signing this Agreement at his free act and deed and not under any coercion. 11. WAIVER. The failure of either party at any time to exercise any of its rights under this Agreement shall not be deemed a waiver of such rights, nor shall such failure in any way prevent such party from subsequently asserting or exercising such rights. 12. ENTIRE AGREEMENT. This Agreement sets or the entire agreement of Leasecomm and the Dealer as to the subject matter, both written and verbal as of the date listed below. If any provision of this Agreement is held invalid or unenforceable under the laws of the United States or of any state, county or political subdivision thereof, such holding shall not invalidate any of the other provisions of the Agreement. If any provision of this Agreement is prohibited by any law, it shall be void but only where and to the minimum extent necessary for compliance with such law. Any changes or amendments to this Agreement shall be in writing, signed by authorized representatives of each party. In witness whereof, the parties hereto have caused this Agreement to be executed by their authorized representatives as of the date first written above. Leasecomm Corporation Dealer By: ___________________________ By: ___________________________ Title: ________________________ Title: ________________________ Date: _________________________ Date: _________________________ -31- EX-10.5 6 SECOND AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10.5 SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ------------------------------------------------------- SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "Amendment") made as of the 6th day of August, 1996 by and among LEASECOMM CORPORATION, a Massachusetts corporation (the "Borrower"), FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), in its individual corporate capacity, SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation, CORESTATES BANK, N.A., a national banking association, and PNC BANK, NATIONAL ASSOCIATION, a national banking association (individually, a "Lender" and, collectively, the "Lenders"), and FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), as agent for the Lenders (the "Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement. WHEREAS: A. The Borrower, the Lenders and the Agent are parties to a Loan Agreement dated as of July 29, 1993, as amended and restated as of July 28, 1995 and as further amended by the First Amendment to Loan Agreement made as of October 30, 1995 (the "Loan Agreement") pursuant to which, INTER ALIA, the Lenders agreed to make available to the Borrower a revolving credit and term loan facility; B. The Borrower has requested that the Loan Agreement be amended as hereinafter set forth; C. The Lenders are willing to amend the Loan Agreement on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: 1. AMENDMENTS. The Loan Agreement is hereby amended as follows: (a) The definition of "Commitment" set forth in Section 1.1 of the Loan Agreement is hereby amended by deleting the names of the Lenders and the amounts set forth opposite the Lenders' names at the end of such definition and replacing such names and amounts with the following: "Fleet Bank, N.A. $ 40,000,000 Sanwa Business Credit corporation 25,000,000 CoreStates Bank, N.A. 22,000,000 PNC Bank, National Association 13,000,000 ------------ Total: $100,000,000" 2 (b) The definition of "Commitment Termination Date" in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows: "'COMMITMENT TERMINATION DATE' - July 31, 1998, unless extended pursuant to Section 2.14 hereof." (c) The following definition is hereby added to Section 1.1 of the Loan Agreement after the definition of "Guaranty": "'HEDGE LENDER' - the Agent or any Lender (or any Affiliate of the Agent or any Lender) in its capacity as a party to a Lender Hedge Agreement." (d) The following definition is hereby added to Section 1.1 of the Loan Agreement after the definition of "Indebtedness": "'INTERCREDITOR AGREEMENT' - that certain Amended and Restated Intercreditor Agreement made as of August 6, 1996 among the First National Bank of Boston, Commerzbank AG, New York Branch and the Agent." (e) The definition of "Interest Period" in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows: "'INTEREST PERIOD' - with respect to any Libor Loan, each period commencing on the date such Libor Loan is made or converted from a Prime Rate Loan or the last day of the immediately preceding Interest Period for such Loan and ending on the numerically corresponding day in the first, second, third, sixth or twelfth calendar month thereafter, except that each Interest Period that commences on the last Libor Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Libor Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) each Interest Period that would otherwise end on a day which is not a Libor Business Day shall end on the next succeeding Libor Business Day (or, if such next succeeding Libor Business Day falls in the next succeeding calendar month, on the immediately preceding Libor Business Day); (ii) no Interest Period may commence before and end after any date on which the Borrower is required to make a payment or prepayment of the principal of the Loans unless, after giving effect thereto, the aggregate principal amount of the Loans having Interest Periods that end after such date shall be equal to or less than the aggregate principal amount of the Loans scheduled to be outstanding after giving effect to the payments or prepayments of principal required to be made on such date; and (iii) no Interest Period shall extend beyond the Maturity Date for such Loan." -2- 3 (f) The following definition is hereby added to Section 1.1 of the Loan Agreement after the definition of "Lease": "'LENDER HEDGE AGREEMENT' - any interest rate swap, cap or collar agreement, and any other similar agreement entered into by and between Borrower and the Agent or any Lender (or any Affiliate of the Agent or any Lender) the purpose of which is to hedge Indebtedness of the Borrower against fluctuations in interest rates." (g) The definition of "Libor Term Loan" in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following definition is hereby added to Section 1.1 of the Loan Agreement in substitution therefor: "'LIBOR LOAN' - a Loan the interest on which is determined on the basis of Libor." (h) Each reference to the term "Libor Term Loan" in the Loan Agreement is hereby deleted and the term "Libor Loan" is hereby substituted in each place therefor. (i) The definition of "Loan Documents" in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows: "'LOAN DOCUMENTS' - this Agreement, the Notes, the Security Documents, the Intercreditor Agreement and all other documents, except Lender Hedge Agreements, executed and delivered in connection herewith or therewith, including all amendments, modifications and supplements of or to all such documents." (j) The definition of "Prime Rate Term Loans" in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and each reference to the term "Prime Rate Term Loan" in the Loan Agreement is hereby deleted and the term "Prime Rate Loan" is hereby substituted in each place therefor. (k) The definition of "Sub-limit" in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows: "'SUB-LIMIT' - 10% of the aggregate Commitment outstanding from time to time." (1) Section 2.1(b) of the Loan Agreement is hereby amended and restated in its entirety as follows: "(b) Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow amounts in respect of the Revolving Credit Loans available under the Commitment during the Credit Period by means of Prime Rate Loans and Libor Loans. Amounts -3- 4 repaid on or after the Commitment Termination Date may not be reborrowed. Subject to the terms and conditions hereof, the Borrower may borrow amounts in respect of the Term Loans by means of Prime Rate Loans and Libor Loans and repay amounts in respect of such Loans." (m) Section 2.2 of the Loan Agreement is hereby amended and restated in its entirety as follows: "SECTION 2.2 NOTICES. The Borrower shall give the Agent written notice in the form of EXHIBIT A hereto (a "Notice") of each borrowing of a Loan, each conversion and prepayment of a Loan and, in the case of the borrowing, continuation or prepayment of, or conversion of a Prime Rate Loan into, a Libor Loan, the duration of each Interest Period applicable thereto; PROVIDED, that (i) if a Notice shall fail to specify the interest rate option applicable to the requested Loan, then the Borrower shall be deemed to have requested a Prime Rate Loan and (ii) if the Borrower fails to specify the duration of an Interest Period with respect to a Libor Loan, then the next Interest Period applicable to such Libor Loan shall automatically continue as an Interest Period with one month's duration. Each Notice shall be irrevocable and shall be effective only if received by the Agent no later than 1:00 P.M. New York City time, on the date which is, in the case of the borrowing of a Libor Loan, at least three (3) Business Days or, in the case of the borrowing of a Prime Rate Loan, at least two (2) Business Days, prior to the date of such borrowing designated in the Notice and, in the case of the prepayment, conversion or continuation of a Loan, at least three (3) Business Days prior to the date of such prepayment or conversion designated in the Notice or, with respect to continuation of a Libor Loan, the last day of the Interest Period then in effect for such Loan. Each such Notice of a borrowing, conversion, continuation or prepayment shall specify (a) the amount and type of Loan to be borrowed, converted, continued or prepaid, (b) the date of such borrowing, conversion or prepayment (which shall be a Business Day) and (c) in the case of a continuation, the duration of the new Interest Period. Promptly upon its receipt thereof, the Agent shall send to each of the Lenders copies of all Notices received pursuant to this Section 2.2." (n) Subsections (i) and (ii) of Section 2.9(a) of the Loan Agreement are hereby amended and restated in their entirety as follows: "(i) with respect to any Revolving Credit Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime Rate Loan, the Prime Rate plus .50%; and (y) during such periods that such Loan (or any portion thereof) is a Libor Loan, Libor plus 2.50% -4- 5 (ii) with respect to any Term Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime Rate Loan, the Prime Rate plus 2.25% and (y) during such periods that such Loan (or any portion thereof) is a Libor Loan, Libor plus 2.50%." (o) Section 2.9(c) of the Loan Agreement is hereby amended and restated in its entirety as follows: "(c) Accrued interest on each Loan shall be payable monthly in arrears on the first Business Day of each month, commencing with the first month immediately following the date of the making of such Loan and continuing on the first Business Day of each month thereafter until the maturity of such Loan or the payment or prepayment thereof in full; PROVIDED, that (x) with respect to Libor Loans, accrued interest shall be payable on the earlier of (i) the first Business Day of each month or (ii) the last day of the Interest Period applicable to such Libor Loan and (y) interest which is payable at a Post-Default Rate shall be payable from time to time on demand of the Agent." (p) The second sentence of Section 2.11(a) of the Loan Agreement is hereby modified by deleting the words "clause (ii) to" therefrom. (q) The word "indemnities" in the first line of the first sentence of Section 2.19 of the Loan Agreement is hereby deleted and replaced with the word "indemnifies." (r) Section 2.20(b) of the Loan Agreement is hereby amended by inserting the following proviso immediately after the word "thereof": "; PROVIDED, HOWEVER, that any Libor Loans outstanding as of August 6, 1996 shall be repaid based on the ratio which the outstanding principal balance of such Libor Loans of each Lender bears to the aggregate outstanding principal amount of such Libor Loans, after giving effect to the withdrawal from the Loan Agreement of Commerzbank AG, New York Branch." (s) The fourth sentence of Section 2.21 of the Loan Agreement is hereby amended and restated in its entirety as follows: "Notwithstanding the foregoing, in the event the Agent shall have made an advance on behalf of a Lender without prior notice not to do so, the Borrower shall, on demand from the Agent, repay to the Agent the amount so made available with interest thereon, in respect of each day during the period commencing on and including the date such advance was so made by the Agent until the date the Agent recovers such amount at a rate per annum equal to (i) with respect to any Revolving Credit Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime -5- 6 Rate Loan, the Prime Rate plus .50%; and (y) during such periods that such Loan (or any portion thereof) is a Libor Loan, Libor plus 2.50% or (ii) with respect to any Term Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime Rate Loan, the Prime Rate plus 2.25% and (y) during such periods that such Loan (or any portion thereof) is a Libor Loan, Libor plus 2.50%." (t) Section 2.22(a) of the Loan Agreement is hereby amended by inserting after the phrase "or any of the other Loan Documents" and immediately before the open parenthetical following such phrase the phrase "or under any Lender Hedge Agreements". (u) Section 3.6 of the Loan Agreement is hereby amended by inserting the phrase "Except as set forth on Schedule 3.6 hereto," immediately before the words "There are no outstanding judgments, actions or proceedings pending" at the beginning of such Section. (v) Section 5.6 of the Loan Agreement is hereby amended by deleting clause (ii) thereof and replacing such clause with the following: "(ii) nothing has come to their attention which would indicate that there was any failure to comply with the Borrowing Base limitation hereunder." (w) Section 6.9(a)(i) of the Loan Agreement is hereby amended and restated in its entirety as follows: "(i) a ratio of Consolidated Indebtedness to Consolidated Tangible Capital Funds of not more than 6:1; PROVIDED, HOWEVER, that in the event the Borrower shall amend Section 5.10(a)(4)(i) of the Note Agreement dated as of July 1, 1994 with respect to the Guarantor's 12% Senior Subordinated Notes solely to increase the percentage set forth therein to 650% or greater, then the ratio in this subsection (a)(i) shall, effective as of the date of such amendment, but provided no Default or Event of Default shall have occurred and be continuing, increase to 6.5:1." (x) Section 7.1(f) of the Loan Agreement is hereby amended and restated in its entirety as follows: "(f) Indebtedness of the Borrower to The First National Bank of Boston pursuant to the Bank of Boston Facility, provided that the principal amount thereof shall not at any time exceed $50,000,000." (y) A new subsection (h) is hereby added to Section 7.1 of the Loan Agreement as follows: "(h) Indebtedness in respect of Lender Hedge Agreements." (z) Section 7.5 of the Loan Agreement is hereby amended and restated in its entirety-as follows: -6- 7 "SECTION 7.5 DIVIDENDS. Declare or pay any cash dividends or make any cash distribution of any kind on the outstanding stock of any Loan Party, except to the extent that such declarations and payments (without duplication) are of cash dividends and distributions not in excess of 50% of Consolidated Net Income for the immediately preceding fiscal year, or set aside any sum for any such purpose, except upon the express prior written consent of the Majority Lenders, which consent shall not be unreasonably withheld." (aa) A new Section 8.11 is hereby added to the Loan Agreement after Section 8.10 as follows: "SECTION 8.11 MATERIAL CHANGE. The occurrence of any material change in the condition or affairs (financial or otherwise) of the Borrower or any of its Subsidiaries or of any endorser, guarantor or surety for any Obligations which causes the Majority Lenders to deem themselves insecure." (ab) Section 10.2(c) of the Loan Agreement is hereby deleted in its entirety. (ac) A new Section 11.14 is hereby added to the Loan Agreement after Section 11.13 as follows: "SECTION 11.14 CONFIDENTIALITY. The Agent and the Lenders shall hold all confidential information delivered by 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 Borrower shall be the third party beneficiary, to agree to hold all such information as confidential to the extent required by the first sentence of this Section 11.14." -7- 8 (ad) Exhibit A to the Loan Agreement is hereby deleted in its entirety and Exhibit A attached hereto is hereby substituted in lieu thereof. (ae) Exhibit C-3 to the Loan Agreement is hereby deleted in its entirety and Exhibit C-3 attached hereto is hereby substituted in lieu thereof. (af) Schedule 3.1 to the Loan Agreement is hereby deleted in its entirety and Schedule 3.1 attached hereto is hereby substituted in lieu thereof. (ag) Schedule 3.2 to the Loan Agreement is hereby deleted in its entirety and Schedule 3.2 attached hereto is hereby substituted in lieu thereof. (ah) Schedule 3.5 to the Loan Agreement is hereby deleted in its entirety and Schedule 3.5 attached hereto is hereby substituted in lieu thereof. (ai) Schedule 3.6 attached hereto is hereby attached to the Loan Agreement as Schedule 3.6 thereof. (aj) Schedule 3.16 to the Loan Agreement is hereby deleted in its entirety and Schedule 3.16 attached hereto is hereby substituted in lieu thereof. (ak) Schedule 3.20 to the Loan Agreement is hereby deleted in its entirety and Schedule 3.20 attached hereto is hereby substituted in lieu thereof. 2. CONDITIONS PRECEDENT. Prior to or simultaneously with the entry by the Borrower into this Amendment and as a condition precedent to the effectiveness of this Amendment: (a) DOCUMENTS. The Borrower shall have executed and delivered to the Agent with sufficient original counterparts for each Lender (i) this Amendment, (ii) an amendment to the Security Agreement and the Assignment of Leases in form and substance satisfactory to the Agent and (iii) such UCC financing statements and related documents as the Agent shall require in connection therewith, and the Guarantor shall have executed and delivered to the Agent with sufficient original counterparts for each Lender the Confirmation of Guaranty annexed to this Amendment. (b) CORPORATE ACTION. The Borrower shall have taken all corporate action required to be taken to authorize the execution, delivery and performance of this Amendment, the agreements, documents and instruments referred to herein and the transactions contemplated hereby and thereby. (c) CORPORATE DOCUMENTS AND CERTIFICATES. The Borrower and the Guarantor shall have delivered to the Agent, with sufficient original counterparts for each Lender, an officer's certificate, in form and substance satisfactory to the Agent, confirming the following: (A) None of its organizational documents have been amended since the date(s) as of which copies of said organizational documents were certified to the Agent; -8- 9 (B) Specimen signature(s) of the person(s) authorized to execute this Amendment; (C) The execution, delivery and performance of this Amendment has been authorized by resolutions of the Board of Directors of the Borrower and the Guarantor, copies of which shall be attached to such officer's certificate; and (D) Each of the Borrower and the Guarantor remains in good standing in its respective jurisdiction of incorporation and in each jurisdiction in which it is qualified to do business. (E) There shall have been no amendment, waiver or other modification to the Bank of Boston Facility except for the Amendments dated as of even date herewith to the Credit Agreement governing the Bank of Boston Facility and certain documents related thereto, true and complete copies of which shall have been delivered to the Agent (the "Bank of Boston Amendments"). (d) PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Amendment and all documents incident thereto, including, without limitation, the Bank of Boston Amendments, shall be reasonably satisfactory in form and substance to the Agent, and the Agent and each Lender, upon request by such Lender, shall have received all information and such counterpart originals or certified or other of such documents as the Agent may reasonably request prior to the date hereof. (e) COMPLIANCE. (i) The Borrower and the Guarantor shall have complied and shall then be in compliance with all of the terms, covenants and conditions of the Loan Agreement as amended by this Amendment; and (ii) The representations and warranties contained in Article 3 of the Loan Agreement shall be true and correct on the date hereof; and (iii) No Default or Event of Default shall have occurred, and the Agent and each Lender shall have received a Compliance Certificate dated the date hereof certifying, INTER ALIA, that the conditions set forth in this Section 2(e) are satisfied on such date. (f) LEGAL MATTERS. All legal matters incident to the effectiveness of this Amendment shall be satisfactory to counsel to the Agent. (g) LETTER OF WITHDRAWAL. The Agent shall have received a letter of withdrawal duly executed and delivered by Commerzbank AG, New York Branch ("Commerzbank"), evidencing Commerzbank's agreement to withdraw as a Lender under the Loan Agreement. -9- 10 3. REAFFIRMATION OF SECURITY INTEREST. The Borrower hereby reaffirms as of the date hereof each and every security interest and lien granted in favor of the Agent and the Lenders under the Loan Documents, and agrees and acknowledges that such security interests and liens shall continue from and after the date hereof, in each case after giving effect to the Loan Agreement as amended by this Amendment, and the obligations secured thereby and thereunder shall include Borrower's obligations under the Loan Agreement as amended by this Amendment. Each such reaffirmed security interest and lien remains and shall continue to remain in full force and effect and is hereby in all respects ratified and confirmed. 4. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. (a) On and after the date hereof, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference in the other Loan Documents, shall mean and be a reference to the Loan Agreement as amended hereby. (b) Except as specifically amended herein, the Loan Agreement shall remain in full force and effect in accordance with its terms. 5. GOVERNING LAW. This Amendment 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. 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties on different counterparts, but all such counterparts shall together constitute but one agreement. 7. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment or be given any substantive effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. BORROWER: LEASECOMM CORPORATION By: /s/ Peter Bleyleben ______________________________ Name: Title: -10- 11 LENDERS: FLEET BANK, N.A.(formerly known as NatWest Bank N.A.) Address: Fleet Bank, N.A. 175 Water Street New York, New York 10038 Attention: Mr. Robert Young Vice President Telecopier: (212) 602-2180 By: /s/ Robert F. Young ------------------------------ Name: Title: SANWA BUSINESS CREDIT CORPORATION Address: Sanwa Business Credit Corporation One South Wacker Drive Chicago, Illinois 60606 Attention: Ms. M. Gail Fitzpatrick Vice President Telecopier: (312) 853-1366 By: /s/ Mary Gail Fitzpatrick ------------------------------ Name: Title: -11- 12 CORESTATES BANK, N.A. Address: Corestates Bank PNB 1500 Market Street West Tower Philadelphia, Pennsylvania 19101-7618 Attention: Ms. Verna R. Prentice Vice President Telecopier: (215) 973-6054 By: /s/ Velma R. Prentice --------------------------------- Name: Title: PNC BANK, NATIONAL ASSOCIATION Address: PNC Bank, National Association 100 South Broad Street Philadelphia, Pennsylvania 19919 Attention: Ms. Ann Fryland Vice President Telecopier: (215) 585-8351 By: /s/ Ann Fryland --------------------------------- Name: Title: AGENT: FLEET BANK, N.A.(formerly known as NatWest Bank N.A.), as Agent By: /s/ [Signature Illegible] --------------------------------- Name: Title: -12- EX-10.6 7 THIRD AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10.6 THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AND CONSENT THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AND CONSENT (this "Amendment") made as of the 11th day of August, 1997 by and among LEASECOMM CORPORATION, a Massachusetts corporation (the "Borrower"), FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), a national banking association, in its individual corporate capacity, SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation, CORESTATES BANK, N.A., a national banking association, PNC BANK, NATIONAL ASSOCIATION, a national banking association, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company (individually, a "Lender" and, collectively, the "Lenders"), and FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), as agent for the Lenders (the "Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement. WHEREAS: A. The Borrower, the Lenders and the Agent are parties to a Loan Agreement dated as of July 29, 1993, as amended and restated as of July 28, 1995, as further amended by the First Amendment to Amended and Restated Loan Agreement made as of October 30, 1995 and the Second Amendment to Amended and Restated Loan Agreement made as of August 6, 1996 (the "Loan Agreement") pursuant to which, INTER ALIA, the Lenders agreed to make available to the Borrower a revolving credit and term loan facility; B. The Borrower has requested that State Street Bank and Trust Company ("State Street Bank") be added as an additional Lender under the Loan Agreement and that the Loan Agreement be amended in certain respects as hereinafter set forth; C. The Lenders are willing to admit State Street Bank as an additional Lender and to amend the Loan Agreement, subject to the terms and conditions hereinafter set forth; and D. The Borrower wishes the Lenders to consent to certain amendments to the Certificate of Incorporation of the Borrower and the Lenders are willing to consent to such amendments; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: 1. TO ADMIT A NEW LENDER UNDER THE LOAN AGREEMENT (a) Subject to its execution of this Amendment Agreement, State Street Bank shall be a party to the Loan Agreement and assume all of the rights and obligations of a Lender under the Loan Agreement. Every reference to "Lender" or "Lenders" in the Loan Agreement shall be deemed to include State Street Bank 2 (b) State Street Bank hereby (i) represents and warrants that it is authorized to became a party to the Loan Agreement; (ii) appoints and authorizes Fleet Bank, N.A. to serve as its Agent under the Loan Agreement and the Security Documents, as contemplated by Section 9.1 of the Loan Agreement, and hereby irrevocably authorizes such Person, as Agent, to take such action on its behalf under the Loan Agreement and the Security Documents, and to exercise such powers, and perform such duties under the Loan Agreement and the Security Documents as are specifically delegated to or required of the Agent by the terms of the Loan Agreement and the Security Documents, together with all such other powers as are reasonably incidental thereto, including, without limitation, the right to release collateral in accordance with Section 2.6(b) of the Loan Agreement; and (iii) agrees that it will abide and be bound by all of the terms, covenants and agreements, and perform all of the obligations, which by the terms of the Loan Agreement are required to be abided and performed by it as a Lender, and shall be entitled to all of the rights, benefits and privileges available or accruing to Lenders under the Loan Documents. Notwithstanding the foregoing to the contrary, State Street Bank shall not participate in the two Libor Loans outstanding under the Loan Agreement which mature on November 28, 1998 and August 2, 1999, respectively. All notices, requests, reports and other communications pursuant to the Loan Agreement to be delivered to State Street Bank as Lender shall, for purposes of Section 11.9 of the Loan Agreement, be addressed to State Street Bank at its address set forth immediately above its signature to this Amendment except as such address may be changed in accordance with Section 11.9 of the Loan Agreement. 2. AMENDMENTS. The Loan Agreement is hereby amended as follows: (a) The definition of "COMMITMENT" set forth in Section 1.1 of the Loan Agreement is hereby amended by deleting the names of the Lenders and the amounts set forth opposite the Lenders' names at the end of such definition and replacing such names and amounts with the following: "Fleet Bank, N.A. $ 30,000,000 CoreStates Bank, N.A. 25,000,000 Sanwa Business Credit Corporation 25,000,000 PNC Bank, National Association 15,000,000 State Street Bank and Trust Company 10,000,000 ------------ Total: $105,000,000" (b) The parenthetical phrase "(which calculation shall not take into account rental payments due and payable under such Eligible Leases beyond 48 -2- 3 months after the commencement date of such Eligible Leases)" in the definition of "BORROWING BASE" in Section 1.1 of the Loan Agreement, and in each of Sections 2.3(b)(i) and 2.3(b)(ii) of the Loan Agreement, is hereby amended and restated in its entirety, in each instance where it appears, as follows: "(which calculation shall not take into account rental payments due or payable under such Eligible Leases beyond 60 months after the commencement date of such Eligible Leases)" (c) The definition of "COMMITMENT TERMINATION DATE" in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows: "'COMMITMENT TERMINATION DATE' - July 31, 1999, unless extended pursuant to Section 2.14 hereof." (d) The definition of "EQUIPMENT" in Section 1.1 of the Loan Agreement is hereby amended by adding "stand-alone automated teller machines, non-fixture food preparation machines for use by restaurants," to such definition, immediately before "bank credit card authorization terminals." (e) The definition of "PRINCIPAL OFFICE" in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows: "'PRINCIPAL OFFICE' - the principal office of the Agent, which office is currently located at 592 Fifth Avenue, New York, New York 10036." (f) The second sentence of Section 2.1(a) of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "Such Loans shall be made by the Lenders on a PRO RATA basis, calculated for each Lender based on its Commitment Percentage at the date of the making of such Loan; PROVIDED, HOWEVER, at no time shall (i) the aggregate outstanding principal amount of all Loans exceed the Commitment or the principal amount of the Loans of any Lender exceed such Lender's Commitment, (ii) in the case of Loans based upon Operating Leases, the aggregate outstanding principal amount of all such Loans exceed the Sub-limit, (iii) in the case of Loans based upon Eligible Security Equipment Lease and/or Monitoring Agreements, the aggregate outstanding principal amount of all such Loans exceed 25% of the Commitment or (iv) in the case of Loans based upon Eligible Leases, the aggregate -3- 4 outstanding principal amount of all Loans based on Eligible Leases with an original term of more than 48 months exceed 10% of the aggregate outstanding principal amount of all Loans; and no Loan will be made hereunder if, after giving effect thereto and to all other Loans being made concurrently therewith, any of the foregoing limits in parts (i) through (iv) shall be exceeded." (g) Section 2.1(c) of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "(c) The Borrower shall pay to the Agent for the benefit of the Lenders the principal amount outstanding of each Credit Period Term Loan in consecutive equal monthly installments equal in number to the weighted average remaining number of (x) monthly payments due under the Eligible Leases relating to such Loan without giving effect to amounts due and payable more than 60 months after the commencement date of such Eligible Leases (subject to Sections 2.1(a) and (d)), and (y) months remaining to fully amortize in accordance with GAAP the Net Book Value of the Eligible Equipment subject to Eligible Rental Contracts relating to such Loan, in each case as specified in the Borrowing Computations with respect thereto, with a payment being due on the first Business Day of each calendar month following the applicable Borrowing Date; provided, however, that all principal of and interest on all Credit Period Term Loans shall be paid in full on the fourth anniversary of the Commitment Termination Date." (h) Part (ii) of Section 2.1(d) of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "(ii) the Borrower shall have delivered to each Lender a duly completed and executed Conversion Term Note, in form and substance satisfactory to the Agent, be converted to Conversion Term Loans the principal amount of which shall be payable by the Borrower to the Agent in consecutive monthly installments, (provided that the last installment shall be in an amount sufficient to pay the entire outstanding amount of such Loan) equal in number to the weighted average remaining number of (x) monthly payments under the Eligible Leases relating to such Loans and (y) months remaining to fully amortize in accordance with GAAP the Net Book Value of any Eligible Rental -4- 5 Contracts relating to such Loan without giving effect to amounts due and payable more than 48 months after the, commencement date of such Eligible Leases and Eligible Rental Contracts, as specified in the Borrowing Computations with respect thereto, with a payment being due on the first Business Day of each calendar month following the Commitment Termination Date; PROVIDED, HOWEVER, that all principal of and interest on all Conversion Term Loans shall be paid in full on the fourth anniversary of the Commitment Termination Date." (i) The first sentence of Section 2.5(a) of the Loan Agreement is hereby amended by deleting ".425% per annum" and substituting in lieu thereof ".25% per annum." (j) Subsection (i) of Section 2.9(a) of the Loan Agreement is hereby amended and restated in its entirety as follows: "(i) with respect to any Revolving Credit Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime Rate Loan, the Prime Rate; and (y) during such periods that such Loan (or any portion thereof) is a Libor Loan, Libor plus 1.85%;" (k) Subsection (ii)(y) of Section 2.9(a) of the Loan Agreement is hereby amended to add the following proviso immediately prior to the end thereof: "PROVIDED, HOWEVER, that any Term Loans outstanding on August 6, 1996 which are Libor Loans shall bear interest at the rate established and in effect with respect thereto as of such date." (l) Part (i) of the fourth sentence of Section 2.21 of the Loan Agreement is hereby amended and restated in its entirety as follows: "(i) with respect to any Revolving Credit Loan, (x) during such periods that such Loan (or any portion thereof) is a Prime Rate Loan, the Prime Rate; and (y) during such periods that such Loan (or any portion thereof) is a Libor Loan, Libor plus 1.85%." 3. CONSENT TO AMENDMENT TO THE CERTIFICATE OF INCORPORATION. The Lenders hereby consent, pursuant to Section 7.12 of the Loan Agreement, to the amendment by the Borrower of its Certificate of Incorporation in the form annexed hereto as Exhibit A ("Certificate of Incorporation Amendments"), effective as of the date thereof. -5- 6 4. CONDITIONS PRECEDENT. Prior to or simultaneously with the entry by the Borrower into this Amendment and as a condition precedent to the effectiveness of this Amendment: (a) DOCUMENTS. The Agent shall have received with sufficient original counterparts for each Lender (i) this Amendment duly executed by the Borrower and each Lender and (ii) the Confirmation of Guaranty annexed to this Amendment duly executed by the Guarantor and, for State Street Bank and each Lender whose Commitment shall have changed pursuant to Section 2(a) of this Amendment, substitute Revolving Credit Notes and Credit Period Term Notes in the amount of the Commitment of such Lender, as set forth in Section 2(a) of this Amendment, duly executed by the Borrower. (b) CORPORATE ACTION. The Borrower shall have taken all corporate action required to be taken to authorize the execution, delivery and performance of this Amendment, the agreements, documents and instruments referred to herein and the transactions contemplated hereby and thereby. (c) CORPORATE DOCUMENTS AND CERTIFICATES. The Borrower and the Guarantor shall have delivered to the Agent, with sufficient original counterparts for each Lender, an officer's certificate, in form and substance satisfactory to the Agent, confirming the following: (i) None of its organizational documents have been amended since the date(s) as of which copies of said organizational documents were certified to the Agent (except for the Certificate of Incorporation Amendments); (ii) Specimen signature(s) of the person(s) authorized to execute this Amendment; (iii) The execution, delivery and performance of this Amendment has been authorized by resolutions of the Board of Directors of the Borrower and the Guarantor, copies of which shall be attached to such officer's certificate; and (iv) Each of the Borrower and the Guarantor remains in good standing in its respective jurisdiction of incorporation and in each jurisdiction in which it is qualified to do business. (v) There shall have been no amendment, waiver or other modification to the Bank of Boston Facility. (d) PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Amendment and all documents incident -6- 7 thereto, including, without limitation, the Certificate of Incorporation Amendments, shall be reasonably satisfactory in form and substance to the Agent, and the Agent and each Lender, upon request by such Lender, shall have received all information and such counterpart originals or certified or other of such documents as the Agent may reasonably request prior to the date hereof. (e) COMPLIANCE. (i) The Borrower and the Guarantor shall have complied and shall then be in compliance with all of the terms, covenants and conditions of the Loan Agreement as amended by this Amendment; and (ii) The representations and warranties contained in Article 3 of the Loan Agreement shall be true and correct on the date hereof; and (iii) No Default or Event of Default shall have occurred, and the Agent and each Lender shall have received a Compliance Certificate dated the date hereof certifying, INTER ALIA, that the conditions set forth in this Section 4(e) are satisfied on such date. (f) LEGAL MATTERS. All legal matters incident to the effectiveness of this Amendment shall be satisfactory to counsel to the Agent. 5. REAFFIRMATION OF SECURITY INTEREST. The Borrower hereby reaffirms as of the date hereof each and every security interest and lien granted in favor of the Agent and the Lenders under the Loan Documents, and agrees and acknowledges that such security interests and liens shall continue from and after the date hereof, in each case after giving effect to the Loan Agreement as amended by this Amendment, and the obligations secured thereby and thereunder shall include Borrower's obligations under the Loan Agreement as amended by this Amendment. Each such reaffirmed security interest and lien remains and shall continue to remain in full force and effect and is hereby in all respects ratified and confirmed. 6. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. (a) On and after the date hereof, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference in the other Loan Documents, shall mean and be a reference to the Loan Agreement as amended hereby. (b) Except as specifically amended herein, the Loan Agreement shall remain in full force and effect in accordance with its terms. -7- 8 7. GOVERNING LAW. THIS AMENDMENT 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. 8. FURTHER ASSURANCES. Each of the parties hereto hereby agrees to do such further acts and things and to execute, deliver and acknowledge such additional agreements, powers and instruments as any other party hereto may reasonably require to carry into effect the purposes of this Amendment. 9. COSTS AND EXPENSES. The Borrower hereby agrees to pay all reasonable costs and expenses of the Agent (including reasonable attorneys' fees and expenses) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment. 10. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be executed in any number of counterparts and by different parties on different counterparts, but all such counterparts shall together constitute but one agreement. Execution and delivery of this Amendment by facsimile transmission shall constitute execution and delivery of this Amendment for all purposes, with the same force and effect as execution and delivery of an originally manually signed copy hereof. 11. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment or be given any substantive effect. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURES TO FOLLOW] -8- 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. BORROWER: LEASECOMM CORPORATION By: /s/ Peter Bleyleben ---------------------------------- Name: Title: LENDERS: FLEET BANK, N.A. (formerly known as NatWest Bank N.A.) Address: Fleet Bank, N.A. 592 Fifth Avenue New York, New York 10036 Attention: Mr. Harris C. Mehos Vice President Telecopier: (212) 819-6515 By: /s/ Harris Mehos ---------------------------------- Name: Title: SANWA BUSINESS CREDIT CORPORATION Address: Sanwa Business Credit Corporation One South Wacker Drive Chicago, Illinois 60606 Attention: Ms. M. Gail Fitzpatrick Vice President Telecopier: (312) 853-1366 By: /s/ M. Gail Fitzpatrick ---------------------------------- Name: Title: -9- 10 CORESTATES BANK, N.A. Address: Corestates Bank PNB 1500 Market Street West Tower Philadelphia, Pennsylvania 19101-7618 Attention: Ms. Verna R. Prentice Vice President Telecopier: (215) 973-6054 By: /s/ Verna R. Prentice ---------------------------------- Name: Title: PNC BANK, NATIONAL ASSOCIATION Address: PNC Bank, National Association 1600 Market Street Philadelphia, Pennsylvania 19103 Attention: Ms. Ann Fryland Vice President Telecopier: (215) 585-4769 By: /s/ A. Fryland ---------------------------------- Name: Title: STATE STREET BANK AND TRUST COMPANY Address: State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110-2804 Attention: F. Andrew Beise Vice President, Large Corporate Department Telecopier: (617) 664-4971 By: /s/ L. Anne Boutiette ---------------------------------- Name: Title: -10- 11 AGENT: FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), as Agent By: /s/ Harris Mehas ---------------------------------- Name: Title: -11- EX-10.7 8 LEASE AGREEMENT, AJ PARTNERS 1 Exhibit 10.7 LEASE 39899 BALENTINE DRIVE NEWARK, CA 94560 Lessor: AJ PARTNERS LIMITED PARTNERSHIP Lessee: LEASECOMM CORPORATION Managed by: DRAPER AND KRAMER OF CALIFORNIA, INCORPORATED 39899 BALENTINE DRIVE NEWARK, CA 94560 2 TABLE OF CONTENTS 1. BASIC LEASE TERMS ................................................ 1 2. TERM; POSSESSION; SURRENDER....................................... 4 2.1 Term....................................................... 4 2.2 Possession................................................. 4 2.3 Surrender.................................................. 4 3. BASE RENT......................................................... 4 4. ADDITIONAL RENT................................................... 5 4.1 Real Estate Taxes.......................................... 5 (a) Definitions............................................ 5 (b) Time of Payment........................................ 6 4.2 Operating Expenses......................................... 6 (a) Definitions............................................ 6 (b) Time of Payment; Records and Inspection................ 7 4.3 Consumer Price Index....................................... 8 (a) Escalation............................................. 8 (b) Definition............................................. 8 4.4 Other Elements of Additional Rent.......................... 8 4.5 Late Payment............................................... 8 5. SECURITY DEPOSIT.................................................. 8 6. CONSTRUCTION; ALTERATIONS......................................... 9 6.1 Initial Construction....................................... 9 6.2 Alteration; Lessee's Work.................................. 9 6.3 Removal or Retention of Alterations........................ 9 7. HOLDING OVER...................................................... 9 8. USE............................................................... 10 8.1 Basic Use.................................................. 10 8.2 Specific Matters........................................... 10 9. LESSEE'S TAX...................................................... 10 3 9.1 Taxes On Lessee or its Property............................ 10 9.2 Certain Reimbursement of Lessor............................ 11 10. CONDITION OF PREMISES............................................. 11 11. BUILDING SERVICES................................................. 11 11.1 Utilities ................................................. 11 11.2 Excess Usage by Lessee..................................... 11 11.3 Public Facilities; Cleaning and Janitorial................. 12 11.4 Addition Work or Service; Cost as Additional Rent.......... 12 11.5 No Warranty; Waiver of Lessor's Liability.................. 12 12. ASSIGNMENT AND SUBLETTING; CHANGE IN OWNERSHIP OF LESSEE............................................................ 12 12.1 Lessor's Consent Required.................................. 12 (a) Effect of Unapproved Sublet............................ 12 (b) Certain Effects of Consent............................. 13 12.2 Lessor's Right to Terminate................................ 13 12.3 Change in Ownership of Lessee.............................. 13 (a) Corporation or Partnership............................. 13 (b) Proprietorship......................................... 13 (c) Notice to Lessor....................................... 14 13. CARE OF PREMISES.................................................. 14 13.1 Lessee's Repairs........................................... 14 13.2 Lessor's Repairs........................................... 14 14. RIGHTS RESERVED TO LESSOR......................................... 14 15. DAMAGE TO PROPERTY; INJURY TO PERSON; INSURANCE................... 15 15.1 Indemnification............................................ 15 15.2 Waiver of Certain Claims................................... 16 15.3 Lessee's Insurance......................................... 16 15.4 Personalty; Leasehold Improvements......................... 16 16. FIRE OR CASUALTY.................................................. 16 16.1 Repair; Termination of Lease............................... 16 16.2 Lessee's Property.......................................... 17 17. ACCESS............................................................ 17 4 18. CONDEMNATION...................................................... 17 18.1 Substantial Taking......................................... 17 18.2 Insubstantial Taking....................................... 17 18.3 Compensation............................................... 17 19. ABANDONMENT....................................................... 18 20. SALE BY LESSOR.................................................... 18 21. MUTUAL RELEASE; WAIVER OF SUBROGATION............................. 18 22. WAIVER............................................................ 18 22.1 Effect of Waivers and Consents............................. 18 22.2 Certain Waivers by Lessee.................................. 19 23. ESTOPPEL CERTIFICATE.............................................. 19 23.1 Obligation to Provide Certificate.......................... 19 23.2 Effect of Failure to Provide............................... 19 24. INTEREST ON PAST DUE OBLIGATIONS.................................. 19 25. DEFAULTS; REMEDIES; EARLY TERMINATION............................. 19 25.1 Default Defined............................................ 19 25.2 Remedies................................................... 20 (a) In General............................................. 20 (b) Reletting.............................................. 20 (c) Injunctive Relief...................................... 21 25.3 Re-entry: Authorities and Effects.......................... 21 25.4 Additional Remedies: Termination; Costs................... 21 (a) Termination; Damages................................... 21 (b) Recovery of Costs and Expenses......................... 21 26. NOTICES........................................................... 21 27. INABILITY TO PERFORM.............................................. 21 28. SUBORDINATION..................................................... 22 29. SUBSTITUTION OF PREMISES.......................................... 22 5 30. BROKERAGE......................................................... 22 31. EXCULPATION....................................................... 22 32. SECURITY.......................................................... 23 33. MISCELLANEOUS..................................................... 23 EXHIBIT A -- Site Plan of Premises EXHIBIT B -- Location of Premises EXHIBIT B1 -- Space Plan of Premises EXHIBIT C -- Rules and Regulations EXHIBIT D -- Acknowledgement of Lease Commencement EXHIBIT E -- Addendum EXHIBIT E1 -- Amended Space Plan 6 OFFICE LEASE Located at 39899 Balentine Drive Newark, CA 94560 (hereinafter referred to as the "Building") THIS LEASE, made this 12th day of JULY, 1993 by and between AJ Partners Limited Partnership ("Lessor"); and LEASECOMM CORPORATION a Massachusetts Corporation having its principal place of business at: 281 Winter Street Waltham, MA 02154-8716 ("Lessee") WITNESSETH: That, Lessor hereby leases to Lessee and the Lessee hereby leases from the Lessor the Premises described herein for the term, the rent, and subject to the covenants and conditions herein set forth: 1. BASIC LEASE TERMS This Paragraph 1 contains the basic Lease terms agreed to between Lessor and Lessee and referred to elsewhere in this Lease. Each reference in this Lease to any of the basic Lease terms shall be construed to incorporate all the terms provided herein under each such basic Lease term: 1.1 PROJECT The Building (including the Premises) together with the land upon which it is located and all improvements on such land, the legal description of which is set forth on Exhibit A annexed hereto (the "Project"). 1.2 PREMISES: RENTABLE AND USABLE AREA (a) PREMISES. The Premises shall be and mean 365 located on the third floor of the building as designated on the plan attached hereto as Exhibit B. (b) RENTABLE AREA. Lessor and Lessee conclusively and finally agree that the Premises consist of 2,933 rentable square feet (the "Rentable Area"), and 2,550 usable square feet. Lessor's Initials ____ Lessee's Initials ____ 7 1.3 INITIAL RENTABLE AREA OF THE PROJECT: 109,626 square feet 1.4 BASE RENT (a) Base Annual Rent: Mos 1-16 $13.80 per square foot per year. Mos 17-32 $14.40 per square foot per year. Mos 33-48 $15.00 per square foot per year. (b) Base Monthly Rent: Months 1 - 16 $3,372.95/month Months 17 - 32 $3,519.60/month Months 33 - 48 $3,666.25/month (c) "Aggregate Annual Rent" means Base Annual Rent multiplied by the Rentable Area of the Premises. 1.5 ADDITIONAL RENT (a) Base Tax Amount: $(INCLUDED IN OPERATING AMOUNT) per rentable square foot per year. (b) Base Operating Amount: $5.55 per rentable square foot per year. (c) Base Consumer Price Index: NOT APPLICABLE. (d) CPI Percentage: NOT APPLICABLE. 1.6 TERM The term ("Term") of this Lease shall be for FORTY-EIGHT (48) months and shall commence (the "Commencement Date") at 12:01 a.m. on SEPTEMBER 1, 1993, or such earlier time and date as Lessor permits Lessee to take possession of the Premises, and shall conclude at 11:59 p.m. on AUGUST 31, 1997, (the "Expiration Date"). 1.7 USE The Premises shall be used as general business offices and for related uses, specifically LEASE ADMINISTRATION AND COLLECTIONS, and for no other purpose whatsoever. 1.8 SECURITY DEPOSIT: NONE 1.9 INSURANCE Lessor's Initials ____ Lessee's Initials ____ 8 (a) Comprehensive General Liability: One Million Dollars ($1,000,000.00) per occurrence. (b) Property Damage: One Million Dollars ($1,000,000.00) per occurrence. (c) Workers Compensation: $ N/A. (d) Bodily Injury: One Million Dollars ($1,000,000.00) per person, One Million Dollars ($1,000,000.00) per occurrence. 1.10 BROKER: Draper and Kramer of California, Inc. 1.11 LESSOR'S MAILING ADDRESS: Draper and Kramer of California, Incorporated as Manager for AJ Partners Limited Partnership 39899 Balentine Drive Newark, CA 94560 1.12 RENT The term "Rent" means Base Rent and Additional Rent, collectively. 1.13 INTEREST ON PAST DUE OBLIGATION: ten percent (10%) per month. 1.14 MISCELLANEOUS: (a) Lessor to improve the premises in accordance with the preliminary space plan (exhibit B-1) within standard building finish; improvements not to exceed Forty thousand Four Hundred Fifty dollars ($40,450.00); any improvements over and above that amount, and any changes to the preliminary space plan will be the sole cost of tenant. (b) In consideration for this lease, Lessor and Lessee agree that certain lease dated January 3, 1991, for the premises commonly known as 39899 Balentine Drive, Suite 265 in Newark, CA 94560, shall terminate upon commencement of this lease. 2. TERM; POSSESSION 2.1 TERM The Term of this Lease is as specified in Paragraph 1 hereof. 2.2 POSSESSION Lessor's Initials ____ Lessee's Initials ____ 9 If the Lessor shall be unable to give possession of the Premises on the Commencement Date for any reason whatsoever (including, but not limited to, the Premises not being ready for occupancy), the Lessor (and its employees, agents and contractors) shall not be subject to any liability for the failure to give possession on said date. Under such circumstances, unless the delay is the fault of the Lessee (which fault shall include, but not be limited to, Lessee's failure to provide Lessor with plans and specifications relating to any alteration of the Premises in a timely manner) the Rent shall not commence until the Premises are available for occupancy by the Lessee, and no such failure to give possession on the date of commencement of the Term shall in any wise affect the validity of this Lease or the obligations of the Lessee hereunder, nor shall same be construed in any wise to extend the term of this Lease. If, at the Lessee's request, the Lessor shall make the Premises available to the Lessee prior to the date of commencement of the Term for the purpose of decorating, furnishing and equipping the Premises, the use of the Premises for such work shall not create a landlord-tenant relationship between the parties nor constitute occupancy of the Premises within the meaning of the next sentence or of Paragraph 2.2 hereof, but the provisions of this Lease concerning indemnification, insurance and waiver of claims shall apply. If, with the consent of the Lessor, the Lessee shall enter into occupancy of the Premises to do business therein prior to the date of commencement of the Term, all provisions of this Lease shall apply and the Rent shall accrue and be payable from the date of occupancy and the Term shall then commence. 2.3 SURRENDER OF PREMISES; REPAIR; REMOVAL OF EFFECTS Upon the termination or expiration of this Lease and the Term hereby created or upon the termination of Lessee's right of possession, whether by lapse of time or at the option of Lessor by exercise of default remedies or elsewise, Lessee will at once surrender possession of the Premises to Lessor in good order, repair and condition, ordinary wear excepted, and remove all effects therefrom. Without limiting the generality of the foregoing, Lessee agrees to remove, at the termination of this Lease, the items of personal property to which Lessee is entitled under Paragraph 6.3 hereof. All damage to the Premises or the Project arising out of Lessee's moving of property in or out of the Building or Project, including damage to floors due to overloading, shall be fully repaired at Lessee's sole cost and expense. If Lessee shall fail or refuse to remove all such property from the Premises, Lessee shall be conclusively presumed to have abandoned the same, and the title thereto shall thereupon, at Lessor's option upon written notice to Lessee of Lessor's exercise of such option, pass to Lessor without any cost either by set off, credit allowance or otherwise, and Lessor may, at its option as defined under this section, accept the title to such property, or, at Lessee's expense, (a) remove the same or any part thereof in any manner that Lessor shall choose and (b) store the same without incurring liability to Lessee or any other person. 3. BASE RENT Lessor's Initials ____ Lessee's Initials ____ 10 Lessee shall pay Lessor the Base Monthly Rent in lawful money of the United States which shall be legal tender at the time of payment, in advance on the first day of each calendar month during the Term (or earlier as contemplated by Paragraph 2.2 hereof), at Lessor's Mailing Address (as set forth in Paragraph 1) or at such other place as Lessor may from time to time so designate in writing, except that the first month's rent shall be paid upon the execution hereof. Rent shall be paid, in every instance, without notice, deduction or setoff. The installment of rent payable for any portion, less than all, of a calendar month shall be a pro rata portion of the Rent payable for a full calendar month. 4. ADDITIONAL RENT 4.1 REAL ESTATE TAXES Lessee shall pay to Lessor, as Additional Rent, in addition to Base Rent and other amounts due Lessor, an amount (the "Tax Contribution") equal to the product of: (1) the Rentable Area of the Premises; multiplied by (2) the amount by which Taxes Per Foot exceeds the Base Tax Amount. (a) DEFINITIONS (i) "Taxes Per Foot" means Taxes divided by the Total Rentable Area of the Project (being initial Rentable Area of the Project increased or reduced by any additions or deletions of rentable area to or from the Project); (ii) "Taxes" means and includes: (1) all real estate taxes and assessment (whether general or special), sewer rents, rates and charges, transit taxes, rent tax (as hereinafter defined), and any other federal, state or local governmental charge, tax or the like, general, special, ordinary or extraordinary, which may now or hereafter be levied or assessed against or in connection with the Project or any element thereof, or with respect to the ownership, leasing, management control or operation thereof, including state equalization factor, if any; (2) ad valorem or other taxes for or upon Lessor's personal property used in, on, around or in conjunction with the Project; (3) any taxes or the like which shall be levied in lieu of any of the above stated taxes, including, but not limited to, any ax, assessment, levy or charge on rents received from the Project or any portion thereof, or a charge, fee, or a tax on Lessor which is otherwise related to the Project, or an income or franchise tax; Lessor's Initials ____ Lessee's Initials ____ 11 (4) any assessment, special assessments or installments thereof (including interest on such installments) against the Project which shall be required to be, or may be, paid during the calendar year in respect to which Taxes are being determined, provided, however, the amount of special assessments to be included shall be limited to the amount of the installment (plus any interest payable thereon) of such special assessment which would have been required to have been paid during such year if the Lessor had elected to have such special assessment paid over the maximum period of time permitted by law; and (5) the fees and costs associated with contesting the foregoing (including, but not to be limited to, such expenses as relate to seeking or obtaining reductions in and refunds of Taxes, including but not limited to the expenses of contesting the amount or validity of any taxes, charges or assessments, including, but not limited to, appraisers' fees, experts' fees and other costs incurred without regard to the tax year involved, such expense to be applicable to the year in which such charges are incurred). (iii) "Rent Tax" means and includes any excise, sales or transaction privilege tax imposed or levied by any government or government agency upon Lessor as a result of Lessor's receipt of any payment from Lessee, and also means and includes any tax or other charge based in whole or in part upon the value of this Lease, or upon receipt, payment or right to collect Rent hereunder; provided, however, there is excluded herefrom any tax, charge, assessment or the like which is imposed in lieu of real estate taxes and other ad valorem taxes. (b) TIME OF PAYMENT Lessee shall pay the Tax Contribution to Lessor with respect to each calendar year in monthly installments at the same time and place as installments of Base Monthly Rent are to be paid, in an amount estimated from time to time by Lessor by a written notice to Lessee. Upon receipt by Lessor of all bills for Taxes attributable to a calendar year, Lessor shall furnish Lessee with a written statement of the actual Tax Contribution for such calendar year. If the total amount paid by Lessee during any calendar year of the Term is less than the actual Tax Contribution due from Lessee for such calendar year as shown on such statement, Lessee shall pay the deficiency to Lessor within fifteen (15) days after demand therefor by Lessor. If the total amount paid by Lessee during any calendar year exceeds the actual Tax Contribution due from Lessee for such calendar year, such excess shall be credited against payments hereunder next due. If no such payments are next due, such excess shall be refunded by Lessor. The Lessor's Initials ____ Lessee's Initials ____ 12 amount of any refund of Taxes received by Lessor. The amount of any refund of Taxes received by Lessor shall be credited against Taxes for the year in which such refund is received. 4.2 OPERATING EXPENSES Lessee shall pay to Lessor, as Additional rent, in addition to Base Rent and other amounts due Lessor, an amount (the "Operating Contribution") equal to the product of: (1) the Rentable Area of the Premises multiplied by (2) the amount by which Operating Expenses Per Foot exceeds the Base Operating Amount. (a) DEFINITIONS (i) "Operating Expenses Per Foot" means Operating Expenses divided by the Total Rentable Area of the Project (being the Initial Rentable Area increase or reduced by any additions or deletions of rentable area to or from the Project). (ii) "Operating Expenses" means and includes all cost and expenses incurred or paid by or on behalf of Lessor with respect to the operation, maintenance, repair, or replacement of the Project (except same relating to the premises of individual tenants when the expense is reimbursed to Lessor by the tenant or an insurer) including, but not limited to, the following: the cost of electricity (except electricity used in the Premises or in other demised premises, if the cost thereof is billed directly to Lessee and the tenants of such other demised premises) all utilities, steam, water, fuel, heating, lighting, air-conditioning, window cleaning, janitorial service security service; all insurance (including, but not limited to, fire, extended coverage, liability, workman's compensation, rent loss, elevator, any other insurance carried in good faith by Lessor and applicable to the Project), painting (but not painting of the space of individual tenant), uniforms, supplies, sundries, and sales or use taxes on supplies or services; costs of compensation, wages, salaries and so-called fringe benefits (including Social Security taxes, unemployment insurance taxes, cost for providing coverage for disability benefits, cost of any pensions, hospitalization, welfare or retirement plans) of all persons engaged in the operation, maintenance and repair of the Project, or any other similar or like expenses incurred under the provisions of any collective bargaining agreement, or any other cost or expense which Lessor pays or incurs to provide benefits for employees so engaged in the operation, maintenance and repair of the Project; the charges of any agent or independent contractor who, under contract with Lessor or its representatives, does any of the work of operating, maintaining or repairing of the Project; management fees; legal and accounting expenses; or any other expense or Lessor's Initials ____ Lessee's Initials ____ 13 charge, whether or not hereinbefore mentioned, which in accordance with generally accepted management principles would be considered as an expense of maintaining, operating, or repairing the Project. If any Operating Expense, though paid in one year, relates to more than one calendar year, at the option of Lessor, such expense may be proportionately allocated among such related calendar years. Operating Expenses shall also include the cost, as reasonable amortized by the Lessor, of any capital improvement made after completion of initial construction of any improvements in the Project which reduces other Operating Expenses, but in an amount not to exceed such reduction for the relevant year. For purposes of determining Operating Expenses for any year, if the entire Rentable Area shall not have been occupied for any part of the year, Operating Expenses shall include the amount of such expenses that would reasonably have been incurred had the entire Rentable Area been occupied. Operating Expenses shall not include franchise or income taxes imposed on the Lessor, except to the extent hereinbefore provided, nor the cost to the Lessor of any work or service performed in any instance for any tenant (including the Lessee) at the cost of such tenant. Installations of capital improvements for individual tenants within their demised premises is not to be included in Operating Expenses. If Lessor makes any capital improvement during the term of this Lease in order to comply with safety or any other requirements of any federal, state or local law or governmental regulation, then the reasonable annual amortization of the cost of such improvement (with reasonable interest thereon) shall be deemed an Operating Expense in each of the calendar years during which such amortization occurs. (b) TIME OF PAYMENT; RECORDS AND INSPECTION (i) PAYMENT. Lessee shall pay the Operating Contribution to Lessor with respect to each calendar year in monthly installments at the same time and place as Base Monthly Rent is to be paid, in an amount reasonably estimated from time to time by Lessor by a written notice to Lessee. As promptly as practicable following the close of each calendar year, Lessor shall deliver to Lessee a certificate specifying, in reasonable detail, the amount of Operating Expenses for such calendar year; Lessee shall pay any deficiency to Lessor as shown by such certificate within fifteen (15) days after receipt thereof. If the total amount paid by Lessee during any calendar year exceeds the actual Operating Contribution due from Lessee for such calendar year, such excess shall be credited against payments next Lessor's Initials ____ Lessee's Initials ____ 14 due hereunder. If no such payments are next due, such excess shall be refunded by Lessor. (ii) RECORDS AND INSPECTION. Lessor shall cause to be kept books and records with an appropriate system of accounts and accounting practices consistently maintained. Lessee shall have the right for sixty (60) days after receipt of the certificate, during normal business hours after reasonable notice, to inspect records pertinent to Lessor's calculations and Lessor shall make all pertinent bills and the like available for Lessee's inspection. The certificate of Lessor shall constitute a determination which is final and conclusive on both Lessor or Lessee, unless Lessee asserts in a writing addressed to Lessor specified error(s) in Lessor's certificate within sixty (60) days after delivery thereof. 4.3 CONSUMER PRICE INDEX ESCALATION (a) ESCALATION In the event of the Base Consumer Price Index set forth in Paragraph 1 above shall be less than the Consumer Price Index for the month of January of each calendar year during the Term of this Lease, Lessee shall pay to Lessor on a monthly basis, as Additional Rent, a sum equal to one-twelfth of the following: the CPI Percentage of the Aggregate Annual Rent multiplied by the percentage by which the Consumer Price Index for January of such calendar year exceeds the Base Consumer Price Index. Lessor shall notify Lessee of any such Additional Rent as soon as reasonably practicable after the beginning of each calendar year during the Lease Term; Lessee shall be required to pay Additional Rent based on increases in the Consumer Price Index with respect to the period between the beginning of the calendar year and the date of receipt of the Lessor's notice of such increased rent with the payment of Rent next due. In the event that the Base Consumer Price Index is not set forth in Paragraph 1, then such shall be the Consumer Price Index for the month which includes the Commencement Date; if the CPI Percentage is not set forth in Paragraph 1, then such shall be thirty percent (30%). (b) DEFINITION "Consumer Price Index" or "CPI" means the Consumer Price Index - All Urban Consumer - for San Francisco/Oakland (all items) of the U.S. Bureau of Labor Statistics. If the manner in which the Consumer Price Index is determined by the Bureau of Labor Statistics shall be substantially revised, and adjustment shall be made in such revised index which would produce results equivalent, as nearly as possible, to those which would have been obtained if the Consumer Price Index had not been so revised. If the Consumer Price Index shall become unavailable to Lessor's Initials ____ Lessee's Initials ____ 15 the public because publication is discontinued, or otherwise, Lessor will substitute therefor a comparable index base upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall be available, then a comparable index published by a major bank or other major financial institution or by a major university. 4.4 OTHER ELEMENTS OF ADDITIONAL RENT All costs and expenses which Lessee assumes or agrees to pay to Lessor pursuant to this Lease shall be deemed Additional Rent and shall be paid to Lessor without any deduction or set-off whatsoever. In the event of non-payment of such cost and expenses, Lessor shall have all the rights and remedies herein provided for in case of non-payment of Rent. 4.5 LATE PAYMENT Any remedies for non-payment of Rent notwithstanding, if the monthly payment of Rent is not received by Lessor on or before the fifth (5th) day of the month for which such Rent is due, or if any other payment due Lessor by Lessee is not received by Lessor on or before the fifth (5th) day of the month following the month in which Lessee was invoiced, a service charge of ten percent (10%) of such past due amount shall become due and payable in addition to such amounts owed under this Lease. 5. SECURITY DEPOSIT Lessee has deposited with lessor the sum of set forth in Paragraph 1 as a Security Deposit to secure the full and faithful performance of every provision of this Lease to be performed by Lessee. If Lessee defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of Rent or any other sum, or for the payment of any other amount which Lessor may spend or become obligated to spend by reason of Lessee's default or to compensate Lessor for any other loss or damage which Lessor may suffer by reason of Lessee's default, Lessor may use, apply or retain the Security Deposit, or any portion thereof, to reimburse or compensate itself or cure such default. If any portion of said deposit is so used or applied, Lessee shall, within five (5) days after written demand therefor, deposit cash with Lessor in an amount sufficient to restore the security deposit to its original amount and Lessee's failure to do so shall be a material breach of this Lease. Lessor shall not be required to keep this security deposit separate from its general funds and Lessee shall not be entitled to interest on such deposit. If Lessee shall fully and faithfully perform every provision of this Lease to be performed by it, the security deposit or a balance thereof shall be returned to lessee (or, at Lessor's option, to the last assignee of Lessee's interests hereunder) at the expiration of the Lease term. 6. CONSTRUCTION; ALTERATIONS 6.1 INITIAL CONSTRUCTION Lessor's Initials ____ Lessee's Initials ____ 16 Lessor agrees to cause the Premises to be completed or modified (the "Work") in accordance with the plans, specifications and agreements approved by both parties, which are attached to and made a part of this Lease. Lessor will not be obliged to construct or install at its expense any improvements or facilities of any kind other than those called for on the attached specifications and agreements. Lessor agrees to commence and complete the Work with reasonable diligence. 6.2 ALTERATION: LESSEE'S WORK Lessee shall make no alterations, modifications, additions or improvements (including initial tenant improvement) to the Premises without the prior written consent of Lessor, which consent shall not be unreasonably withheld Lessor may impose, as a condition of such consent, such requirements as Lessor in its sole discretion may deem reasonable or desirable, including, without limiting the generality of the foregoing, requirements as to the manner in which, the time or times at which, and the contractor by whom such work shall be done, insurance and bonding standards, and advance waivers of lien. 6.3 REMOVAL OR RETENTION OF ALTERATIONS AND ADDITIONS All alterations, additions, improvements, modification, fixtures, partitions, counter, railings, wall coverings, window treatments and the like shall become or remain the property of Lessor and shall be surrendered with the Premises, as a part thereof, at the end of the term hereof, except that the Lessor may, by written notice to Lessee given at least thirty (30) days prior to the end of the Term, require Lessee to remove any or all partitions, alterations, additions, improvements, modifications, fixtures, counters, railings, wall coverings, window treatments and the like installed by or for Lessee, and to repair any damage to the Premises from such removal. 7. HOLDING OVER If the Lessee retains possession of the Premises or any part thereof after the expiration of the Term or termination of the Lease or of Lessee's right to possession of the Premises, the Lessee shall pay the Lessor monthly rent at one hundred fifty percent (150%) of the monthly rate (including, but not limited to, Base Rent, Tax Contribution and Operating Contribution) payable by Lessee with respect to the last full calendar month prior to such expiration or termination for the time the Lessee thus remains in possession and, in addition thereto, shall pay the Lessor for all damages, consequential as well as direct, sustained by reason of the Lessee's retention of possession. The provision of this Paragraph do not exclude the Lessor's rights of re-entry or any other right hereunder, it being expressly understood that a hold over is a material breach of this Lease. 8. USE Lessor's Initials ____ Lessee's Initials ____ 17 8.1 BASIC USE Lessee shall use and occupy the Premises for the purposes set forth in Paragraph 1 hereof and for no other purpose. 8.2 SPECIFIC MATTERS Lessee shall: (i) Not use or permit upon the Premises anything that would invalidate any policies of insurance now or hereafter carried on the Project or that will increase the rate of insurance on the Premises or on the Project; (ii) Pay all extra insurance premiums which may be caused by the use which Lessee shall make of the Premises; (iii) Not use or permit upon the Premises anything that may be dangerous to life or limb; (iv) Not in any manner deface or injure the Building, the Project or any part thereof or overload any floor of the Premises; (v) Not do anything or permit anything to be done upon the Premises in any way tending to create a nuisance, or tending to disturb any other lessee in the Building or the occupants of neighboring property, or tending to injure the reputation of the Project; (vi) Comply with all governmental, health and police requirements and regulations respecting the Premises and the Project; (vii) Not use the Premises for lodging or sleeping purposes or for any immoral or illegal purpose, nor conduct or permit to be conducted upon the Premises any activity contrary to any of the laws of the United States of America or the state in which the Project is located or which is contrary to the ordinances of the municipality in which the Project is located nor commit or suffer to be committed any waste upon the Premises or the Project. (viii) Not take or permit to be taken or fail to take any action which permits or causes any mechanic's lien or other lien, charge or order for money to be filed against Lessor, all or any portion of the Premises or all or any portion of the Project. (ix) Lessee shall not exhibit, sell or offer for sale on the Premises, in the Building or on the Project any article or thing without the advance consent of Lessor. Lessor's Initials ____ Lessee's Initials ____ 18 (x) Abide by the Rules and Regulations of the Project, as same may exist from time to time or be amended by Lessor, the current Rules and Regulations being appended hereto as EXHIBIT C. 9. LESSEE'S TAXES 9.1 TAXES ON LESSEE OR ITS PROPERTY Lessee shall pay, prior to delinquency, all taxes assessed against or levied upon Lessee's fixtures, furnishings, equipment and other personal property located in or upon the Premises. Lessee shall cause said fixtures, furnishings, equipment and other person property to be assessed and billed separately from the Lessor, Project or Premises. In the event any or all of Lessee's fixtures, furnishings or equipment and other personal property shall be assessed and taxes with said Project or Premises or to Lessor, Lessee shall pay to Lessor its share of such taxes within fifteen (15) days after delivery to Lessee by Lessor of a statement in writing setting forth the amount of such taxes applicable to lessee's personal property. 9.2 CERTAIN REIMBURSEMENTS OF LESSOR Lessee shall, simultaneously with the payment of any sums required hereunder, reimburse Lessor for any excise, sales or transaction privilege tax imposed or levied by any government or governmental agency upon Lessor as a result of Lessor's receipt of any such payment. 10. CONDITION OF PREMISES Lessee's taking possession shall be conclusive evidence as against the Lessee that the Premises were in good order and satisfactory condition when Lessee took possession. No promise of Lessor to alter remodel or improve the Premises or the Building and no representation respecting the condition of the Premises or the Building have been made by Lessor to Lessee, other than as may be contained herein or in a separate rider or work letter attached hereto and made a part hereof. 11. BUILDING SERVICES 11.1 UTILITIES Lessor agrees to furnish to the Premises during reasonable hours of generally recognized business days, to be determined by Lessor, and subject to the Rules and Regulations, water, heat, electricity, air conditioning, and any other customary utilities required, in Lessor's sole judgment, for the comfortable use and occupation of the Premises. Lessor (and its employees and agents) shall not be liable for, and Lessee shall not be entitled to, any abatement or reduction of Rent by reason of Lessor's failure to furnish any of the Lessor's Initials ____ Lessee's Initials ____ 19 foregoing when such failure is due to any cause beyond the reasonable control of Lessor. Lessor (and its employees and agents) shall not be liable, under any circumstances, for loss, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing, regardless of the reason for such failure; it is understood that Lessee shall carry insurance against these risks with waiver of subrogation in favor of Lessor (and its employees and agents). Lessor may cause any utility to be separately metered and to be billed directly to Lessee; in such instance, Lessee shall promptly pay all utility bills when due. 11.2 EXCESS USAGE BY LESSEE Lessee will not, without the written consent of Lessor, use any apparatus or device in the Premises, including, but without limitation thereto, electronic data processing machines, punch card machines and machines using current in excess of 110 volts, which will in any way increase the amount of electricity, water, heat, ventilation, cooling or other utilities, which would otherwise be furnished or supplied for use of the Premises as general office space; nor connect with electric current (except through existing electrical outlets in the Premises) or water pipes, any apparatus or device for the purposes of using electric current, water or other utilities. If consumption of electricity, water, heat, air conditioning or other utilities by Lessee exceeds or can be expected to exceed that required for normal office use as specified, or should Lessee request the use of this service at other than the normal operating hours, Lessor reserves the right to change for such service. Lessor reserves the right, at Lessor's sole discretion, to separately assess an extra monthly charge against Lessee (which shall be Additional Rent) in an amount which, in Lessor's reasonable judgment, compensates for such excess usage. If Lessee refuses to pay upon demand of Lessor such extra monthly charge, such refusal shall constitute a breach of the obligation to pay Rent under this Lease and shall entitle Lessor to the rights hereinafter granted for such breach and to cease provision of such utility service beyond normal requirements. Whenever heat generating machines or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Lessor reserves the right to install supplementary air conditioning units in the Premises, and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Lessee to Lessor upon demand by Lessor as Additional Rent. 11.3 PUBLIC FACILITIES; CLEANING AND JANITORIAL SERVICE Lessor shall provide public restroom supplies, public area lamp replacement, window washing with reasonable frequency, and janitor and cleaning services to the Premises with reasonable frequency during the times and in the manner that such janitor services are customarily furnished in general office Building in the area. 11.4 ADDITIONAL WORK OR SERVICE; COST AS ADDITIONAL RENT Lessor's Initials ____ Lessee's Initials ____ 20 Should Lessee require any additional work or service, other than services described above or supplied other tenants of the Building without separate or additional charge, Lessor may, on terms to be agreed and upon reasonable advance notice by Lessee, furnish such additional service and Lessee agrees to pay the Lessor as Additional Rent such charges as may be agreed on, but in no event at a charge less than Lessor's actual cost plus overhead for the additional services provided, it being agreed that the cost to the Lessor of such additional services shall be excluded from Operating Expense. 11.5 NO WARRANTY; WAIVER OF LESSOR'S LIABILITY It is understood that Lessor does not warrant that any of the services referred to above, or any other services which Lessor may supply, will be free from interruption. Lessee acknowledges that any one or more of such services may be suspended by reason of operation of law, mechanical breakdown, or other causes beyond the reasonable control of Lessor, including, but not limited to, acts of God, acts of civil disobedience or strikes. No such interruption or discontinuance of service shall be deemed an eviction or disturbance of Lessee's use and possession of the Premises, or any part thereof, or render Lessor (and its employees and agents) liable to Lessee for damages by abatement of rent or otherwise, or relieve Lessee from performance of Lessee's obligation under this Lease. 12. ASSIGNMENT AND SUBLETTING; CHANGE IN OWNERSHIP OF LESSEE 12.1 LESSOR'S CONSENT REQUIRED Lessee shall not, either voluntarily or by operation of law, sell, assign, hypothecate or transfer this Lease, or sublet the Premises or any part thereof, or permit the Premises or any part thereof to be occupied by anyone other than Lessee or Lessee's employee, without the prior written consent of Lessor in each instance. Lessor's consent shall not be unreasonably withheld; provided, however, that the proposed assignee or sublessee must be reasonably satisfactory to Lessor as to credit and character and must occupy the Premises for office purposes consistent with Paragraph 8 of this Lease and Lessor's commitments to other tenants. Lessee shall notify Lessor's of its intent to assign or sublet in writing and shall provide Lessor with a copy of the proposed sublease or assignment and with any information requested by Lessor; Lessor shall inform Lessee of its decision within thirty (30) days after receipt of such notice and all requested information. (a) EFFECT OF UNAPPROVED ASSIGNMENT OR SUBLET Any sale, assignment, mortgage, transfer or subletting of this Lease or the Premises which is not in compliance with the provisions of this Paragraph 12 shall be a material breach of this Lease and shall, at Lessor's option, by void and without effect; with respect thereto Lessor shall have all remedies for default, including, but not limited to, the right to terminate this Lease. Lessor's Initials ____ Lessee's Initials ____ 21 (b) CERTAIN EFFECTS OF CONSENT The consent of Lessor to any assignment or subletting shall not be construed as relieving Lessee or any assignee or sublessee from obtaining the express written consent of Lessor to any further assignment or subletting or as releasing Lessee from any liability or obligation hereunder (including, but not limited to, the obligation to pay Rent), whether or not then accrued; further, any sublessee or assignee shall be bound by all of the terms and conditions of this Lease (including, but not limited to, this Paragraph 12). 12.2 LESSOR'S RIGHT TO TERMINATE The Lessor reserves the right, should the Lessee request such assignment or subletting, to release the Lessee from the terms and provisions of this Lease and the Lessor shall have thirty (30) days to make such determination. Should the Lessor exercise this right, then the Lease shall terminate as set forth in Paragraph 2.3 as of the date notice is given the Lessee. 12.3 CHANGE IN OWNERSHIP OF LESSEE (a) CORPORATION OR PARTNERSHIP; LESSOR'S RIGHT TO TERMINATE If Lessee is a corporation or partnership and if the ownership thereof shall materially change at any time or from time to time during the term of this Lease from the present composition of same, or if a substantial portion of the assets of Lessee shall be sold, assigned or transferred with or without a specific assignment of this Lease, or, if Lessee shall merge or consolidate with any firm or corporation, Lessor, at its option, may, by giving sixty (60) days prior written notice to Lessee, declare such change a breach of this Lease subject to the remedies provided for breach in Paragraph 25 hereof. (i) CORPORATION Ownership of a corporation shall be deemed to have materially changed if a number of its shares of any class or series which constitute thirty-three percent (33%) of the number thereof outstanding from time to time shall be transferred by either the owners thereof or by the corporation, and such transfer or shares shall not first have been approved in advance in writing by Lessor (which approval will not be unreasonably withheld). (ii) PARTNERSHIP Partnership ownership shall be deemed to have materially changed if one-third or more of the partners or if persons or entities holding one-third or Lessor's Initials ____ Lessee's Initials ____ 22 more of the partnership interests have changed at any time during the Term of this Lease, or one or more general partners of a limited partnership have changed at any time during the Term hereof and such change has not been approved in advance in writing by Lessor (which approval will not be unreasonably withheld). (b) PROPRIETORYSHIP; LANDLORD'S RIGHT TO TERMINATE If Lessee is a sole proprietorship, Lessor shall have the option, without prejudice to the remedies available to it hereunder or otherwise, to terminate this Lease in the event of Lessee's incapacity or death upon sixty (60) days' prior written notice to Lessee or his legal representative. If the ownership shall change or a new party or person acquires an interest without Lessor's prior written consent (which will not be unreasonably withheld), such shall be a breach of this Lease and subject to the remedies set forth in Paragraph 25 hereof. (c) NOTICE TO LESSOR Lessee shall immediately give written notice to Lessor of any change in ownership contemplated by this Paragraph 12.3. 13. CARE OF PREMISES 13.1 LESSEE'S REPAIRS Lessee, at Lessee's own expense, shall take good care of the Premises and shall be responsible for the repair of all damage to the Premises (including, but not limited to, leasehold improvements, fixtures, carpeting and wall coverings) and the Project, and shall replace or repair all damaged or broken fixtures, lamps, ballasts, glass and appurtenance which are made necessary as a result of any use, misuse, neglect or negligence of Lessee, its employees, agents or invitees. Lessor shall effect such repairs, and Lessee shall pay Lessor the cost thereof, as Additional Rent, upon being billed for same, or Lessor shall have the right to deduct the same from the Security Deposit held by Lessor. Lessor may, but shall not be required to, enter the Premises at all reasonable times to make any repairs as Lessor shall desire or deem necessary to the Premises or to the Building of which the Premises form a part or to any equipment in or servicing such Building or as Lessor may be required to do by the order or decree of any court or by any other governmental authority. 13.2 LESSOR'S REPAIRS Except as otherwise provided herein, Lessor shall repair and maintain the Building (including the plumbing, heating, air conditioning and electrical systems), grounds, common areas, facilities and other elements of the Project, the cost of such being Lessor's Initials ____ Lessee's Initials ____ 23 Operating Expenses. Lessor shall not be liable for any failure to make any repairs or to perform any maintenance unless written notice of the need for such repairs or maintenance is given to Lessor by Lessee, and unless Lessor then fails to commence such repairs or perform such maintenance within a reasonable period of time and thereafter fails to use due diligence in so doing. Except as provided in Paragraph 16 hereof, there shall be no abatement of rent and no liability of Lessor (and its employees and agents) by reason of any entry to or interference with Lessee's business arising from the making of any repairs or effectuation of any maintenance in or to any portion of the Building or the Premises or the Project or in or to fixtures, appurtenances and equipment therein or thereon. Lessee waives the right to make repairs at Lessor's expense under any provision of statutory or common law now or thereafter in effect. 14. RIGHT RESERVED TO LESSOR Lessor has, and shall retain, all rights with respect to the Premises, Building and Project not expressly granted to Lessee hereunder; such right are, and shall be, exercisable without notice and without liability to Lessee for damage or injury to property, person or business and without effecting an eviction, constructive or actual, or disturbance of Lessee's use or possession or giving rise to any claims for set off or abatement of Rent. Such rights include, but are not limited to, the following: (i) To change the Building's name or street address. (ii) To install, affix and maintain any and all signs on the exterior, interior and/or roof of the Building. (iii) To designate and/or approve, prior to installation, all types of window shades, blinds, drapes, awnings, window ventilators and other similar equipment and control all internal lighting, that may be visible from the exterior lobbies, hallways or other common areas. (iv) To show the Premises to prospective tenants at reasonable hours and if vacated by Lessee, to prepare the Premises for reoccupancy. (v) To retain at all times, and to use in appropriate instances, keys to all doors within and into the Premises. No lock shall be changed and no new lock shall be installed without the prior written consent of Lessor. (vi) To decorate and to make repairs, alterations, additions or improvements, whether structural or otherwise, in and about the Building in any part thereof and for such purposes to enter upon the Premises and, during the continuance of any such work, to temporarily close doors, entryways, public space and corridors in the Building and to interrupt or temporarily suspend obligations hereunder so long as the Premises are reasonable accessible. Lessor's Initials ____ Lessee's Initials ____ 24 (vii) To have and retain a paramount title to the Premises, free and clear of any act of Lessee purporting to burden or encumber it. (viii) To grant or deny to anyone the right to conduct any business or render any services in or to the Building or the Project, provided such exclusive right shall not operate to exclude Lessee from the use expressly permitted herein. (ix) To require all furniture and similar items to be moved into and/or out of the Building and Premises only at such times and in such manner as Lessor shall direct in writing. Movements of Lessee's property into or out of the Building and within the Building are entirely at the risk and responsibility of Lessee, and Lessor reserves the right to require permits before allowing any such property to be moved into or out of the Building. (x) To approve or disapprove in writing the placing of vending or dispensing machines of any kind in or about the Premises. (xi) To have access for Lessor and other tenants of the Building or the Project to any mail chutes located on the Premises according to the rules of the United States Post Office. (xii) To close the Building after regular working hours and on Saturday, Sunday and legal holidays, subject, however, to Lessee's right to admittance under such regulations as Lessor may prescribe from time to time. 15. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE 15.1 INDEMNIFICATION Lessee shall, and does hereby agree to indemnify and hold Lessor and its employees and agents harmless from any and all loss, cost, liability, damage or claims arising from Lessee's use of the Premises or the conduct of its business or from any activity, work or thing done, permitted or suffered by Lessee (or any of its employees, agents or invitees) in or about the Premises or the Project, and shall further indemnify and hold Lessor and its employees and agents harmless from any and all loss, cost, liability, damage or claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any act, failure to act or negligence of Lessee, or any of its agents or employees, and from all costs, attorneys' fees, expenses and liabilities incurred as a result of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Lessor or its employees and agents by reason of any such claim, Lessee, upon notice from Lessor, shall defend the same at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of Lessor's Initials ____ Lessee's Initials ____ 25 damage to property or injury to persons, in, upon, or about the Premises from any cause which does not result solely and directly from the negligence of Lessor, and Lessee hereby waives all claims in respect thereof against Lessor and agrees to carry insurance sufficient to protect against all such claims (with waiver of subrogation in Lessor's favor). 15.2 WAIVER OF CERTAIN CLAIMS Lessor and its employees and agents or anyone authorized to act for Lessor shall not be liable for any damage to property entrusted to employees of Lessor, Lessor's agent or the Project, nor for the loss of or damage to any property by theft or otherwise, nor for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein, or from the roof, street or subsurface, or from any other place resulting from dampness or any other cause whatsoever which does not result solely and directly from the negligence of Lessor. Lessor or its agents shall not be liable for interference with the natural light, nor shall Lessor be liable for any latent defect in the Premises or in the Building. Lessee shall give prompt notice to Lessor of any fire, accident or defect discovered within the Premises or the Building. 15.3 LESSEE'S INSURANCE Lessee agrees to carry at its own expense throughout the term of the Lease, insuring both Lessor (and its employees and agents) and Lessee, insuring both Lessor (and its employees and agents) and Lessee, comprehensive public liability insurance and such other insurance specified in Paragraph 1 hereof, all of which shall be in the amounts specified in Paragraph 1, insurance customarily carried by entities in businesses similar to that of Lessee in customary amounts for the size of Lessee's business, and such other insurances as Lessor may reasonably request; all insurance shall be placed with insurance companies approved by Lessor. Lessee shall deliver a Certificate of Insurance to Lessor prior to the date of occupancy of the Premises and said insurance policy shall list and protect Lessor and Lessee as their interests may appear and shall contain an endorsement stating that the insurer agrees to give no less than thirty (30) days' prior written notice to Lessor in the event of modification or cancellation thereof. 15.4 PERSONALTY; LEASEHOLD IMPROVEMENTS Lessee shall carry insurance for the FULL REPLACEMENT VALUE of its personal property and leasehold improvements, trade fixtures and the like; Lessor (and its employees and agents) shall be a named or additional insured on all such policies. 16. FIRE OR CASUALTY 16.1 REPAIR; TERMINATION Lessor's Initials ____ Lessee's Initials ____ 26 If the Premises or the Building (including machinery and equipment used in its operation) or the Project is wholly or partially destroyed or damaged by fire or other casualty which is covered by the usual form of fire and extended coverage insurance, and if such destruction or damage is not caused by the act or neglect of Lessee, its agents or servants, then Lessor shall be obligated to repair and restore the same with reasonable promptness, unless Lessor elects to terminate this Lease as hereinafter set forth. In the event the Premises or the Building or the Project is wholly or partially destroyed or damaged as a result of any cause, other than the perils covered by the usual form of fire and extended coverage insurance, or in the event the Premises or the Building or the Project is destroyed or damaged by any fire or casualty to the extent of not less than twenty-five percent (25%) of the replacement cost thereof, then Lessor shall have the option to terminate this Lease by giving notice to Lessee within sixty (60) days after the occurrence of such damage or destruction. If Lessor does not terminate this Lease as provided above, it shall proceed to complete the necessary restoration or repairs with reasonable diligence and this Lease shall continue in full force and effect; provided, however, that if any destruction or damage not caused by the act or neglect of Lessee, its agents or servant, renders the Premises untenantable, and if this Lease is not terminated as provided herein by reason of such damage or destruction, then Rent shall abate during the period beginning with the date of such destruction or damage and ending with the date when the Premises are again rendered tenantable by an amount bearing the same ratio to the total amount of Rent due for such period that the untenantable portion of the Premises bears to the entire Premises. 16.2 LESSEE'S PROPERTY Lessor shall in no event be obligated to repair any injury or damage by fire or other cause or to make any repairs or replacements of any items, improvements, alterations, modifications or the like installed or effected by or for the Lessee or at its expense. 17. ACCESS Lessor, and any one authorized by Lessor, shall have the right to enter the Premises at all reasonable times for the purpose of examining or inspecting the same, showing the same to prospective purchasers or lessees of the Premises, Project or Building, and making such alterations, repairs, improvements or additions to the Premises or to the Project or Building of which they are a part as Lessor may deem necessary or desirable. If Lessee shall not personally be present to open and permit an entry into the Premises at any time when such entry by Lessor is necessary or permitted hereunder, Lessor may enter by means of a master key or may enter forcibly, without liability to Lessee except for any failure to exercise due care of Lessee's property, and without breaching the terms of this Lease. 18. CONDEMNATION Lessor's Initials ____ Lessee's Initials ____ 27 18.1 SUBSTANTIAL TAKING If all or any part of the Premises or the Project is permanently taken or condemned by any competent authority for any public use or purpose (including a deed given in lieu of condemnation), or if any adjacent property or street is so taken or is improved, and such taking, condemnation or improvements renders the Premises substantially untenantable, this Lease shall terminate as of the date title vests in such authority or such improvements is completed, and Base Rent and Additional Rent shall be apportioned as of such date. 18.2 INSUBSTANTIAL TAKING If any part of the Premises or the Project is taken or condemned for any public use or purpose (including a deed given in lieu of condemnation), or if any adjacent property or street is so taken or so improved, and this Lease is not terminated pursuant to Paragraph 18.1 hereof, Lessor, upon receipt and to the extent of the award in condemnation or proceeds of sale, shall make necessary repairs and restoration (exclusive of leasehold improvements and personal property installed by Lessee) to restore the Premises remaining to as near its former condition as circumstances will permit, and to the Project to the extent necessary to constitute the portion of same not so taken or condemned as a complete architectural unit. In the event of any taking or condemnation described in this Paragraph 18.2, the Rentable Area of the Premises stated in Paragraph 1 hereof and the Rentable Area of the Project as specified in this Lease, shall, for the period of such taking, be reduced, respectively, for all purposes under this Lease (including the calculation of Rent) by the number of square feet of rentable area of the Premises, if any, and the Project, if any, so taken or condemned. 18.3 COMPENSATION Lessor shall be entitled to receive the entire price or award from any such sale, taking or condemnation without any payment to Lessee, and Lessee hereby assigns to Lessor all of Lessee's interest, if any, in such award; provided, however, Lessee shall have the right separately to pursue against the condemning authority an award in respect of the loss, if any, to leasehold improvements paid for by Lessee without any credit or allowance from Landlord and the expense of relocation. 19. ABANDONMENT Lessee shall not vacate or abandon the Premises at any time during the Term, and if Lessee shall abandon, vacate or surrender said Premises or be dispossessed by process of law or otherwise, any personal property belonging to Lessee and left in the Premises shall be conclusively presumed to be abandoned and may be kept or disposed of by Lessor as provided in Paragraph 2.3 and Paragraph 7 hereof. Any such vacation, abandonment, surrender or dispossession shall be a material breach of this Lease, and Lessor shall have all remedies set Lessor's Initials ____ Lessee's Initials ____ 28 forth herein or otherwise available at law, equity or elsewise with respect thereto. The Premises shall be deemed "abandoned" as defined in Paragraph 25.1(i). 20. SALE BY LESSOR In the event of a sale or conveyance by Lessor of the Project, the Premises or the Building, the same shall operate to release Lessor from any future liability upon or with respect to this Lease and any of the covenants or conditions, express or implied, herein contained in favor of Lessee, and in such event Lessee agrees to look solely to the successor in interest of Lessor in and to this Lease with respect to such matters and the performance of Lessor's obligations hereunder. This Lease shall not be affected by any such sale, and Lessee agrees to attorn to such successor in interest. If any security deposit has been made by Lessee hereunder, Lessor may transfer such security deposit to such successor in interest and thereupon Lessor shall be discharged from any further liability in reference thereto. 21. MUTUAL RELEASE; WAIVER OF SUBROGATION Lessor and Lessee each hereby release the other, and the management agent of the Project, from any and all liability or responsibility for any direct or consequential loss, injury or damage to the Premises, its contents, caused by fire or any other casualty, during the Term of this Lease, even if such fire or other casualty may have been caused by the negligence (but not the willful act) of the other party or one for whom such party may be responsible. Inasmuch as the above mutual waivers will preclude the assignment of any aforesaid claim by way of subrogation (or otherwise) to an insurance company (or any other person), each party hereto agrees if required by said policies to give to each insurance company which has issued to it fire and other property insurance, written notice of the terms of said mutual waivers, and to have said insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverage by reason of said waivers. 22. WAIVER 22.1 EFFECT OF WAIVERS AND CONSENTS No waiver by Lessor of any provision of this Lease or any breach by Lessee hereunder shall be deemed to be a waiver of any other provision hereof, or of any subsequent breach by Lessee of the same or any other provision. Lessor's consent to or approval of any act by Lessee requiring Lessor's consent or approval shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of any subsequent act of Lessee whether or not similar to the act so consented to or approved. No act done by Lessor or anyone authorized by Lessor during the term of this Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Lessor. No agent or employee of Lessor or of any entity authorized by Lessor shall have any power to accept the keys to the Premises prior to the termination of this Lease, and the delivery of the keys to any such Lessor's Initials ____ Lessee's Initials ____ 29 employee or agent shall not operate as a termination of the Lease or a surrender of the Premises. 22.2 Certain Waivers by Lessee Except as provided in Paragraph 25 relating to Lessor's remedies, Lessee hereby expressly waives the service of any notice of intention to terminate this Lease or to re-enter the Premises and waives the service of any demand for payment of rent or for possession and waives the service of any other notice or demand prescribed by any statute or other law. 23. ESTOPPEL CERTIFICATE 23.1 OBLIGATION TO PROVIDE CERTIFICATE Lessee shall, at any time and from time to time, upon not less than ten (10) days' prior written notice from Lessor, execute, acknowledge and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the dates to which the rental and other charges are paid in advance, if any; (ii) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such default if they are claimed. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part. 23.2 EFFECT OF FAILURE TO PROVIDE Lessee's failure to deliver such statement within such time shall be conclusive upon Lessee (i) that this Lease is in full force and effect, without modification except as may be represented by Lessor, (ii) that there are no uncured defaults in Lessor's performance, (iii) that no rental has been paid in advance, and (iv) that any other matters submitted for verification are true. Lessee's failure to provide such statement within the specified time shall be a material breach of this Lease. 24. INTEREST ON PAST DUE OBLIGATIONS Any amount due from Lessee to Lessor hereunder which is not paid when due shall bear interest at the rate specified in Paragraph 1 hereof (or if none is so specified at the rate of one and one half percent (1-1/2%) per month from the due date until paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Lessee under this Lease. If the interest rate specified in this Lease is higher than the rate permitted by law, the interest rate is hereby decreased to the maximum legal interest rate permitted by law. Lessor's Initials ____ Lessee's Initials ____ 30 25. DEFAULT; REMEDIES; EARLY TERMINATION 25.1 DEFAULTS DEFINED The occurrence of any one or more of the following events shall constitute a material default ("Default") and breach of this Lease by Lessee: (i) The vacating, surrender or abandonment of the Premises by lessee or dispossession by process of law or otherwise. Lessee shall be deemed to "abandoned" the Premises for all purposes of this Paragraph 25 in the event Lessee shall not use the Premises in the conduct of its business for ten (10) or more consecutive business days, unless Lessee is prevented from doing so by fire, act of God, casualty or other cause (other than financial or business causes) beyond Lessee's reasonable control; such non-use of the Premises shall not be deemed an abandonment thereof if Lessee continues to pay Rent unless the Premises are on the ground floor. (ii) The failure of Lessee to make any payment of Rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of five (5) days after written notice thereof from Lessor to Lessee. (iii) The failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Lessee, other than described above, where such failure shall continue for a period of fifteen (15) days after written notice thereof from Lessor to Lessee. (iv) The making by Lessee of any general assignment, or general arrangement for the benefit of creditors; the filing by or against Lessee of a petition to have Lessee adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days; the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease where such seizure is not discharged within thirty (30) days. 25.2 REMEDIES (a) IN GENERAL Lessor's Initials ____ Lessee's Initials ____ 31 In the event of any Default by Lessee, at any time thereafter, and without limiting Lessor in the exercise of any other right or remedy which Lessor may have by reason of such default or breach, Lessor may: (i) without terminating the Lease or Lessee's right to possession of the Premises, hold Lessee responsible for all terms of this Lease and all damages (including, but not limited to, consequential damages) resulting from the Default, (ii) terminate Lessee's right to possession of the Premises and re-enter the Premises with or without terminating this Lease and hold Lessee responsible for all terms of this Lease and all damages (including, but not limited to, consequential damages) resulting from the Default; (iii) distrain for Rent; or (iv) pursue any other remedy at law, in equity, by statute or elsewise available. In the event that Lessor elects to terminate Lessee's right to possession of the Premises, Lessee shall surrender the Premises as specified in Paragraph 2.3 hereof. (b) RELETTING Lessor shall have no obligation to attempt to relet. Upon re-entering the Premises, Lessor may relet the Premises or any part thereof (but giving priority to the letting of other available space in the Project) for such term, on such conditions and at such rental as Lessor may deem advisable with the right to make alterations and repairs to the Premises. Should Lessor elect to relet, rental received by Lessor from reletting shall be applied in this order: first, to any indebtedness other than rent due under this Lease; second, to the payment of any costs of such reletting; third, to the payment of the cost of any alteration and repairs to the Premises; fourth, to the payment of Rent due and unpaid under this Lease; and the remainder, if any, shall be held by Lessor and applied in payment of future Rent as the same becomes due and payable under this Lease. Should rentals received from such reletting during any month be less than that agreed to be paid during that month by Lessee under this Lease, then Lessee immediately shall pay and be liable for such deficiency to Lessor. (c) INJUNCTIVE RELIEF In the event of any violation or attempted violation of this Lease or of any of the terms, covenants or provisions hereof by Lessee, Lessor shall be entitled to equitable relief (including but not limited to, restraint by injunction) without waiting for such violation or attempted violation to become a Default. 25.3 RE-ENTRY: AUTHORITIES AND EFFECTS Upon any re-entry pursuant hereto, Lessor may remove therefrom all personal property, fixtures, signs and other property, and such property may be removed and stored in any place for the account and at the expense and risk of Lessee. Lessee hereby waives all claims for damages which may be caused by the re-entry of Lessor and taking possession Lessor's Initials ____ Lessee's Initials ____ 32 of the Premises, or the removing or storage of the property as herein provided, and will save Lessor harmless from any loss, cost or damages occasioned thereby, and no such re-entry shall be considered or construed to be forcible entry or detainer. No such re-entry or taking possession by Lessor shall be construed as an election on its part to terminate this Lease unless a written notice of such intention is given to Lessee. 25.4 ADDITIONAL REMEDIES: TERMINATION; COSTS (a) TERMINATION; DAMAGES At any time that as Default exists, and notwithstanding any reletting without termination or other action Lessor may have taken in relation to such Default, Lessor may elect to terminate this Lease; such election shall be effected by written notice to Lessee. Should Lessor at any time terminate this Lease for any Default, in addition to any other remedy Lessor may have, Lessor may recover from Lessee all damages Lessor may incur by reason of such breach, including, without limitation, consequential damages, the cost of recovering the Premises and the present worth (at the time of such termination) of the Rent and charges equivalent to rent as reserved in this Lease for the remainder of the Term. (b) RECOVERY OF COSTS AND EXPENSES Lessee shall reimburse Lessor for all costs and expenses (including, but not limited to, reasonable attorneys' fees) incurred by Lessor in conjunction with the enforcement of the terms of this Lease and the exercise of any remedies. 26. NOTICES All notices to be given by one party to the other under this Lease shall be in writing, mailed or delivered to each as follows: (a) To Lessor at the Mailing Address specified in Paragraph 1 hereof. (b) To Lessee at either the Premises or its principal place of business specified above. Such addresses may be changed by written notice to the other party. Mailed notices shall be sent by United States certified or registered mail, postage prepaid. Such notices shall be deemed to have been given upon posting in the United States mail. 27. INABILITY TO PERFORM Lessor's Initials ____ Lessee's Initials ____ 33 This Lease and the obligations of Lessee hereunder shall not be affected or impaired because Lessor is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of any strike, other labor dispute, FORCE MAJEURE or other cause beyond the reasonable control of Lessor. 28. SUBORDINATION Lessor expressly reserves the right, at any time or from time to time, to place liens and encumbrances on and against the Premises and the Project, superior in lien and effect to this Lease and the estate created hereby; provided, however, that any such lien or encumbrances shall provide that the holder thereof will recognize Lessee's rights hereunder, notwithstanding any foreclosure of such lien or encumbrance. If Lessor's interest in the Property is acquired by any ground Lessor, beneficiary under a Deed of Trust, mortgagee, or purchaser at a foreclosure sale, Lessee shall attorn to the transferee of or successor to Lessor's interest in the Property and recognize such transferee or successor as Lessor under the Lease. Tenant waives the protection of any statute or rule of law which gives, or purports to give, Lessee any right to terminate this Lease or surrender possession of the Property upon the transfer of Lessor's interest. 29. SUBSTITUTION OF PREMISES Lessor may, at its election, upon thirty (30) days' written notice to Lessee of its desire to do so, exclude the specified leased Premises from the Lease and substitute other premises (which will, thereafter, be the "Premises") within the Project therefore, upon the following terms and conditions: (a) The substituted premises shall contain approximately the same square footage as the specified leased Premises, without increase of rental and shall be usable for Lessee's purpose. (b) Any and all costs necessary or incidental to Lessee's move to the substituted premises shall be at the sole cost and expense of Lessor and free of all cost and expense to Lessee. (c) Upon the expiration of thirty (30) days after such written notice to Lessee, the substituted premises shall be considered the leased Premises described in the Lease, for all uses and purposes, as though originally leased unto Lessee at the time of the execution and delivery of this Lease, and the specified leased Premises shall be considered excluded from the Lease. Lessee's failure to cooperate and to move to the substitute premises in a timely and orderly fashion shall be a material breach hereof and shall be deemed to be a holdover of the Premises. Lessor's Initials ____ Lessee's Initials ____ 34 30. BROKERAGE Lessee represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction except as identified in Paragraph 1 hereof and that no broker, agent or other person brought about this transaction, other than the Broker identified in Paragraph 1, and the Lessee agrees to indemnify and hold Lessor harmless from and against any claim by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with or for Lessee with regard to this leasing transaction. The provisions of this Paragraph shall survive the termination of this Lease. 31. EXCULPATION Neither Lessor nor any present or future general or limited partner of Lessor, or its or their assigns, nor their respective partners, agents, officers, or employees, shall have any personal liability or any kind or nature, for or by reason of any matter or thing whatsoever, under or in connection with this Lease. Lessee shall look solely to the Project for satisfaction of any claim against Lessor or arising under this Lease. The limitation of liability provided in this Paragraph is in addition, and not in limitation of, any applicable limitation on liability provided by law or by any other contract, agreement or instrument. 32. SECURITY Lessor has no obligation or responsibility whatsoever to provide or oversee security or security services for the Premises, the Building or the Project; but Lessor may, in its sole discretion, provide security or retain a security service. Lessee (for itself, its employees and agents and any person claiming through Lessee) hereby releases Lessor and Lessor's employees, agents and manager from , and waives any and all claims for loss of or damage to person or property sustained by Lessee (or any employees or agents, or any persons claiming through Lessee) or by any occupant of the Project, Building or the Premises or any part thereof relating to, resulting from or in any way deriving from the effectiveness, sufficiency, insufficiency or absence of security or security services for or with respect to the Premises, the Building or the Project. 33. MISCELLANEOUS (a) All rights and remedies of Lessor under this Lease shall be cumulative and none shall exclude any other rights and remedies allowed by law. (b) The provisions hereof shall apply without regard to the number or gender of words and expressions unused herein. (c) Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit, not only of Lessor and of Lessee, but also Lessor's Initials ____ Lessee's Initials ____ 35 their respective heirs, legal representatives, successors and assigns, provided this clause shall not permit any assignment contrary to the provisions of Paragraph 12 hereof. (d) Submission of this instrument for examination shall not bind Lessor in any manner, and no lease or obligation of Lessor shall arise until this instrument is signed and delivered by Lessor and Lessee. (e) No rights to light or air over any property, whether belonging to lessor or any other person, are granted to Lessee by this Lease. (f) Lessor shall not be responsible to Lessee for the nonperformance by any other tenant or occupant of the Building of any of the Rules and Regulations established by the Lessor for the Building. (g) Clauses, plats and riders, if any, signed by Lessor and Lessee and endorsed on or affixed to this Lease are a part hereof. (h) Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. (i) The paragraph captions contained in this Lease are for convenience only and shall not be considered in the construction or interpretation of any provision hereof. (j) This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest. (k) This Lease shall be governed by and controlled pursuant to the laws of the state in which the Project is located. (l) No receipt of money by the Lessor from the Lessee after the termination of this Lease or Lessee's right to occupancy of the Premises, or after the service of any notice, or after the commencement of any suit, or after final judgment for possession of the Premises shall reinstate, continue or extend the term of this Lease or affect any such notice, demand or suit or imply consent for any action for which Lessor's consent is required. (m) This Lease shall not be recorded without the consent of Lessor. (n) In the absence of fraud, no person, firm or corporation, or the heirs, legal representative, successors and assigns, respectively thereof, executing this Lease Lessor's Initials ____ Lessee's Initials ____ 36 as agent shall ever be deemed or held individually liable hereunder for any reason or cause whatsoever. (o) In the event of variation or discrepancy, the Lessor's original copy of the Lease shall control. (p) If because of any act or omission of Lessee, its employees, agents, contractors or subcontractors, any mechanic's lien or other lien, charge or order for the payment of money shall be filed against Lessor, or against all or any portion of the Premises or the Building of which the Premises are a part or the Project, Lessee shall, at its own cost and expense, cause the same to be discharged of record or give the Lessor a surety bond of at least 200% of the lien, within thirty (30) days after the filing thereof, and Lessee shall indemnify and save harmless Lessor, its employees and agents against and from all costs, liabilities, suits, penalties, claims and demands, including reasonable attorneys' fees resulting therefrom. LESSOR: AJ Partners Limited Partnership LESSEE: By: Draper and Kramer of California, Inc. Leasecomm Corporation a California Corporation a Corporation Its: Manager /s/ Richard J. Loeber /s/ Stephen E. Obana FOR - ---------------------------------- -------------------------------- By: Richard J. Loeber By: Mike Lannon Its: Vice President Its: Vice President /s/ Lawrence A. Cohen - --------------------------------- By: Lawrence A. Cohen Its: Senior Vice President Lessor's Initials ____ Lessee's Initials ____ 37 ACKNOWLEDGEMENT OF LEASE COMMENCEMENT This Acknowledgement is executed as of _______ day of 1993 with reference to that certain Lease Agreement ("Lease") dated JULY 12, 1993, by and between AJ PARTNERS LIMITED PARTNERSHIP ("Lessor") and LEASECOMM CORPORATION ("Lessee"). Lessor and Lessee hereby acknowledge and agree as follows: 1. That the Lessee accepted possession of the Demised Premises (as described in said Lease) on _________________ 1993, and acknowledged that the premises are as represented by Lessor and in good order, condition and repair; and that the improvements, if any required to be constructed for Lessee by Lessor under this Lease, have been so constructed and are satisfactorily completed in all respects. 2. That all conditions of said Lease to be performed by Lessor prerequisite to the full effectiveness of said Lease have been satisfied and that Lessor has fulfilled all of its duties of an inducement nature. 3. The Commencement Date under the said Lease is _________________ 1993. The Termination Date under the said Lease is ________________ 1997, subject to any applicable provisions of the Lease for extension or early termination thereof. 4. That said Lease is in full force and effect and that the same represents the entire agreement between Lessor and Lessee concerning said Lease. 5. That there are no existing defenses which Lessee has against the enforcement of said Lease by Lessor and no offsets or credits against rentals. 6. That the minimum rental obligations of said Lease is presently in effect and that all rents, charges and other obligations on the part of the Lessee under said Lease commenced to accrue on ________________, 1993. 7. That the undersigned Lessee has no notice of prior assignment, hypothecation or pledge of said Lease or of rents thereunder. LESSOR: AJ Partners Limited Partnership LESSEE By: Draper and Kramer of California, Inc. Leasecomm Corporation a California Corporation Its: Manager - ---------------------------------- -------------------------------------- Lessor's Initials ____ Lessee's Initials ____ 38 By: Richard J. Loeber By: Mike Lannon Its: Vice President Its: --------------------------- - ---------------------------------- By: Lawrence A. Cohen Its: Senior Vice President Lessor's Initials ____ Lessee's Initials ____ 39 FIRST AMENDMENT TO LEASE by and between AJ PARTNERS LIMITED PARTNERSHIP, as Lessor and LEASECOMM CORPORATION, A MASSACHUSETTS CORPORATION, as Lessee This First Amendment to Lease (hereinafter called "First Amendment") is executed by and between AJ PARTNERS LIMITED PARTNERSHIP, AS LESSOR and LEASECOMM CORPORATION, A MASSACHUSETTS CORPORATION, AS LESSEE, with reference to the following facts: A. Lessor and Lessee are parties to that certain Lease dated July 12, 1993, (hereinafter called the "Lease"), which commenced on September 1, 1993, covering approximately 2,933 rentable square feet commonly known as 39899 Balentine Drive, Suite 365 in Newark, California 94560 (the "Premises"). NOW THEREFORE, in consideration of the mutual covenants and obligations contained herein, Lessor and Lessee hereby amends and supersedes the following paragraphs of said Lease as follows: LESSEE'S PRINCIPAL OFFICE: Leasecomm Corporation 950 Winter Street Waltham, MA 02154-876 PARAGRAPH 1.4 BASE RENT: The Base Rent for the Premises shall be: $4,106.20 per month for September 1, 1997 through December 31, 1998; $4,399.50 per month for January 1, 1999 through April 30, 2000; and $4,692.80 per month for May 1, 2000 through August 31, 2001. PARAGRAPH 1.5 ADDITIONAL RENT: The base operating amount for the period of September 1, 1997 through August 31, 2001, shall be modified to the 1997 Base Year. PARAGRAPH 1.6 TERM: The lease term shall be extended for a period of forty-eight (48) months commencing at 12:01 a.m. on September 1, 1997 (the "Extension Commencement Date") and shall conclude at 11:59 p.m. on August 31, 2001 (the "Expiration Date"). PARAGRAPH 1.8 SECURITY DEPOSIT: Lessee's security deposit shall be $4,700.00. PARAGRAPH 1.9 LESSEE'S INSURANCE: (a) Comprehensive General Liability: One Million Dollars ($1,000,000.00) per occurrence and Two Million Dollars ($2,000,000.00) aggregate. Lessor's Initials ____ Lessee's Initials ____ 40 (b) Automotive Liability: One Million Dollars ($1,000,000.00) per occurrence for non-owned vehicles and hired vehicles. (c) Workers Compensation: Proof of workers compensation insurance. (d) Employer's Liability: Five Hundred Thousand Dollars ($500,000.00) per accident. PARAGRAPH 1.10 LESSOR'S BROKER: Birtcher Property Services. LESSEE'S BROKER: None. PARAGRAPH 1.13 LESSOR'S MAILING ADDRESS: AJ Partners Limited Partnership c/o Birtcher Property Services 39899 Balentine Drive, Suite 115 Newark, CA 94560 PARAGRAPH 34 ENVIRONMENTAL: (a) Lessee shall not cause or permit the release, discharge, or disposal nor the presence, use, transportation, generation or storage of any Hazardous Materials (as hereinafter defined) in, on, under, about, to, or from the Premises by either Lessee, Lessee's employees, agents, contractors, or invitees (collective the "Lessee") other than the use of such materials in the minimum quantities reasonably necessitated by the Lessee's regular business activities. (b) Lessee further agrees and covenants to Lessor, its agents, employees, affiliates and shareholders (collectively, the "Lessor") the following: (i) To comply with all Environmental Laws in effect, or may come into effect, applicable to the Lessee or Lessee's use and occupancy of the Premises; (ii) To immediately notify Lessor, in writing, of any existing, pending or threatened (a) investigation, inquiry, claim or action by any governmental authority in connection with any Environmental Laws; (b) third party claims; (c) regulatory actions; and (d) contamination of the Premises; Lessor's Initials ____ Lessee's Initials ____ 41 (iii) Lessee shall at Lessee's expense, investigate, monitor, remediate, and/or clean up any Hazardous Material or other environmental condition on, about, or under the Premises required as a result of Lessee's use or occupancy of the Premises; (iv) To keep the Premises free of any lien imposed pursuant to any Environmental Laws; and (v) To indemnify, defend, and save Lessor harmless from and against any and all claims (including personal injury, real or personal property damage), actions, judgments, damages, penalties, fines, costs, liability, interest or attorney's fees that arise, directly or indirectly from Lessee's violation of any Environmental Laws or the presence of any Hazardous Materials on, under or about the Premises; (c) The Lessee's obligations, responsibilities, and liabilities under this Section shall survive expiration of the Lease. (d) For purposes of this Section, the following definitions apply: (i) "Hazardous Materials" shall mean: (1) any "hazardous waste" and/or "hazardous substance" defined pursuant to any Environmental Laws; (2) asbestos or any substance containing asbestos; (3) polychlorinated biphenyl's; (4) lead; (5) radon; (6) pesticide; (7) petroleum or any other substance containing hydrocarbons; (8) any substance which, when on the Premises, is prohibited by any Environmental Laws; and (9) any other substance, materials, or waste which (i) by any Environmental Laws requires special handling or notification of any governmental authority in its collection, storage, treatment, or disposal or (ii) is defined or classified as hazardous, dangerous, or toxic pursuant to any legal requirement. (ii) "Environmental Law" shall mean: any and all federal, state, and local laws, statutes, codes, ordinances, regulations, rules or other requirements, relating to human health or safety or to the environment, including, but not limited to, those applicable to the storage, treatment, disposal, handling, and release of any Hazardous Materials, all as amended or modified from time to time. In consideration for this renewal, Lessor shall shampoo the carpets in the entire premises. Except as otherwise noted, all other terms and conditions of the Lease which commenced on September 1, 1993, shall remain in full force and effect. Lessor's Initials ____ Lessee's Initials ____ 42 IN WITNESS WHEREOF, Lessor and Lessee execute this First Amendment to Lease on this 26TH day of August 1997. LESSOR: LESSEE: AJ PARTNERS LIMITED PARTNERSHIP LEASECOMM CORPORATION By: Birtcher Property Services a Massachusetts Corporation a California Corporation Its: Manager /s/ Lynda L. Bettini /s/ Richard F. Latour - -------------------------------- ---------------------------------------- By: Lynda L. Bettini By: Richard F. Latour Its: Vice President Its: Executive Vice President /s/ Michael S. Buzar - -------------------------------- By: Michael S. Buzar Its: Senior Vice President Lessor's Initials ____ Lessee's Initials ____ 43 EXHIBIT A [Diagram of Ground Level Floorplan and Parking Areas] [Diagram of Third Level Floor Plan] 44 EXHIBIT B [Diagram of Third Floor] 45 EXHIBIT B1 [Diagram of Suite 365] EX-10.8 9 LEASE AGREEMENT, BOYLE LEASING 1 EXHIBIT 10.8 ================================================================================ BAY COLONY CORPORATE CENTER ================================================================================ 950 Winter Street Waltham, Massachusetts REFERENCE DATA -------------- LANDLORD: Desmond Taljaard and Howard Friedman, Trustees of London & Leeds NDAI Bay Colony I Realty Trust LANDLORD'S ADDRESS: c/o London & Leeds Development Corporation One Wall Street Court New York, NY 10005 Copies to: I. Aaron Cohen, P.C. c/o Kassler & Feuer, P.C. 101 Arch Street Boston, MA 02110 and Thomas Collins, Esquire c/o London & Leeds Development Corporation One Wall Street Court New York, NY 10005 LANDLORD'S REPRESENTATIVE: Howard Friedman and John O'Neil, III c/o London & Leeds Development Corporation 1000 Winter Street Waltham, MA 02154 TENANT: Leasecomm Corporation, a Massachusetts corporation; and Boyle Leasing Technologies, Inc., a Massachusetts corporation, jointly and severally TENANT'S ADDRESS: 950 Winter Street, Waltham, MA 02154 INITIAL TERM: 60 months (plus, if the commencement date is a day other than the first day of a calendar month, the partial month between the commencement date and the last day of the calendar month in which the commencement date occurs, inclusive) 2 SIZE OF SPACE: 17,039 square feet BASIC RENT: (a) For the partial calendar month (if any) between the Commencement Date and the first day of the first full calendar month during the Term - $417,455.50, multiplied by a fraction whose numerator is the number of days in the partial calendar month and whose denominator is 365. (b) For the 1st full calendar month during the Term - $0. (c) For the 2nd through 4th full calendar months during the Term - at the rate of $70,217.00 per annum (i.e. $5851.42 per month). (d) For the 5th through 12th full calendar months during the Term - at the rate of $392,955.50 per annum (i.e. $32,746.29 per month). (e) For the remainder of the Term - at the rate of $417,455.50 per annum (i.e. $34,787.96 per month, and proportionately at such rate for any partial month). 2 3 STANDARD OFFICE LEASE 950 WINTER STREET BAY COLONY CORPORATE CENTER WALTHAM, MASSACHUSETTS << TABLE OF CONTENTS >> C a p t i o n Article Number I. BASIC LEASE PROVISIONS................................................... II. PREMISES AND APPURTENANT RIGHTS.......................................... III. BASIC RENT; TENANT'S ELECTRICAL CHARGE................................... IV. TERM OF LEASE............................................................ V. REAL ESTATE TAXES........................................................ VI. OPERATING EXPENSES....................................................... VII. USE OF PREMISES.......................................................... VIII. ASSIGNMENT AND SUBLETTING................................................ IX. RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES; SERVICES TO BE FURNISHED BY LANDLORD........................... X. INDEMNITY AND INSURANCE.................................................. XI. LANDLORD'S ACCESS TO PREMISES............................................ XII. FIRE, EMINENT DOMAIN, ETC................................................ XIII. DEFAULT.................................................................. XIV. MISCELLANEOUS PROVISIONS 14.1 Extra Hazardous Use 14.2 Waiver 14.3 Covenant of Quiet Enjoyment 14.4 Landlord's Liability 14.5 Rules and Regulations 14.6 Additional Charges 14.7 Invalidity of Particular Provisions 14.8 Provisions Binding, Etc. 14.9 Recording 14.10 Notices 14.11 When Lease Becomes Binding 14.12 Paragraph Headings 14.13 Subordination; Attornment 14.14 Assignment of Rents and Transfer of Title 14.15 Status Report 14.16 Remedying Defaults 14.17 Holding Over 14.18 Waiver of Subrogation 14.19 Surrender of Premises i 4 14.20 Brokerage 14.21 [INTENTIONALLY OMITTED] 14.22 Waiver of Jury Trial 14.23 Governing Law 14.24 [INTENTIONALLY OMITTED] 14.25 Termination of the Existing Lease 14.26 Landlord's Contribution toward Tenant's Relocation Expenses 14.27 Tenant's Option to Extend 14.28 Tenant's Right of First Offer {EXHIBITS}. The Exhibits listed below are incorporated in this Lease by reference and are to be construed as part of this Lease. Exhibit A: Plan(s) Showing Leased Premises Exhibit B: Rules and Regulations Exhibit C: Tenant's Floor Plans Exhibit D: Building Standard Tenant Improvements Exhibit E: Building Services Exhibit F: Description of Land Exhibit G: Description of Office Park Exhibit H: Offer Space ii 5 L E A S E THIS INSTRUMENT IS A LEASE, dated as of April 14, 1994, in which Landlord and Tenant are the parties hereafter named, and which relates to space in a building (the "Building") known as 950 Winter Street, located in Bay Colony Corporate Center, Waltham, Massachusetts. The parties to this instrument hereby agree as follows: ARTICLE I BASIC LEASE PROVISIONS ---------------------- 1.1 INTRODUCTION. Each reference in this Lease to any of the following subjects referred to in Section 1.2 or 1.3 shall be construed to incorporate the data stated for that subject in this Article. 1.2 BASIC DATA. Landlord: Desmond Taljaard and Howard Friedman, Trustees of London & Leeds NDAI Bay Colony I Realty Trust Landlord's Address: c/o London & Leeds Development Corporation One Wall Street Court New York, NY 10005 Attention:Desmond Taljaard with a copy to: I. Aaron Cohen, P.C. c/o Kassler & Feuer, P.C. 101 Arch Street Boston, MA 02110 and Thomas Collins, Esquire c/o London & Leeds Development Corporation One Wall Street Court New York, NY 10005 Tenant: Leasecomm Corporation, a Massachusetts corporation; and Boyle Leasing Technologies, Inc., a Massachusetts corporation, jointly and severally Tenant's Original Address: 281 Winter Street, Suite 311, Waltham, MA 02154 Building Rentable Area: 274,628 square feet 1 6 Tenant's Rentable Area: 17,039 square feet Leased Premises or Premises: See Exhibit A Anticipated Term Commencement Date: July 1, 1994 Initial Term: 60 months Option to Extend: One (1) period of five (5) years Basic Rent: (a) For the partial calendar month (if any) between the Commencement Date and the first day of the first full calendar month during the Term - $417,455.50, multiplied by a fraction whose numerator is the number of days in the partial calendar month and whose denominator is 365. (b) For the 1st full calendar month during the Term - $0. (c) For the 2nd through 4th full calendar months during the Term at the rate of $70,217.00 per annum (i.e. $5851.42 per month). (d) For the 5th through 12th full calendar months during the Term - at the rate of $392,955.50 per annum (i.e. $32,746.29 per month). (e) For the remainder of the Term - at the rate of $417,455.50 per annum (i.e. $34,787.96 per month, and proportionately at such rate for any partial month). Operating Expense Base: Operating Expenses incurred on account of calendar 1994 Tax Base: Taxes incurred on account of calendar 1994 Tenant's Tax and Operating Percentage: 6.204% (See Section 5.1.) Tenant's Electrical Charge: $14,483.15 per annum ($0.85 per rentable sq. ft.) Security Deposit: None 2 7 Landlord's Maximum Contribution toward Tenant's Moving Expenses: $17,039.00 Public Liability Insurance: combined single limit for bodily insurance and property damage of $3,000,000.00. Permitted Uses: administrative offices, clerical offices and statistical offices. Broker(s): Fallon, Hines & O'Connor; and RSI Properties Construction Representatives: For Landlord: Rustom Cowasjee For Tenant: Richard Latour 1.3 ADDITIONAL DEFINITIONS. Building: The building erected on the Land, and all alterations and additions thereto and replacements thereof. Business Days: All days except Sundays and legal holidays. Commencement Date: As defined in Section 4.1. Common Property: All of the land and improvements in the Office Park, as from time to time constituted (including land owned by any entity affiliated with Landlord), which is used or enjoyed by, or made available to, Tenant and other lessees of the Office Park for access, parking or other purposes. The term Common Property shall include all retention ponds, drainage facilities, electric substations, utility lines, pumping stations and other facilities and structures which serve the Building and other buildings in the Office Park; provided, however, that Common Property shall not include (a) any office building located in the Office Park except the Building, (b) land reserved exclusively to provide parking or other amenities for other buildings within the Office Park and (c) property reserved for future development (or under construction) by Landlord, except to the extent the same is reserved for, made available to or used by all lessees of the Office Park. Default Rate: As defined in Section 14.16. Escalation Charges: The amounts prescribed in Sections 5.1, 5.2 and 6.2 plus Tenant's Electrical Charge. Existing Lease Termination Date: As defined in Section 14.25. 3 8 Land: The lot or parcel of land on which the Building is located as more particularly set forth on Exhibit F, subject to adjustments of the Lot boundaries from time to time. Landlord's Work: As defined in Section 4.2. Leased Premises or Premises: A portion of the Building as shown on Exhibit A annexed hereto. Office Park: Bay Colony Corporate Center, which includes all of the land described in Exhibit G (subject to adjustments of the boundaries thereof and/or the boundaries of each lot thereof) plus such additional land as may be added thereto from time to time. Operating Expenses: As determined in accordance with Section 6.1. Property: The Building and the Land. Taxes: As determined in accordance with Section 5.1. Tax Year: As defined in Section 5.1. Tenant's Floor Plans: As defined in Section 4.2. Tenant's Plans: As defined in Section 4.2. Tenant's Removable Property: As defined in Section 7.2. Term of this Lease: The Initial Term and any proper extension thereof exercised in accordance with the provisions of this Lease. The Initial Term shall commence on the Commencement Date and expire at the close of the day on which the Initial Term ends, except that if the Commencement Date shall be other than the first day of a calendar month, the expiration of the Initial Term shall be at the close of the day on the last day of the calendar month in which the end of the Initial Term shall fall. ARTICLE II PREMISES AND APPURTENANT RIGHTS ------------------------------- 2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant for the Term of this Lease and upon the terms and conditions hereinafter set forth, and Tenant hereby accepts from Landlord, the Premises and all appurtenant areas. 2.2 APPURTENANT RIGHTS AND RESERVATIONS. (a) Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use and permit its invitees to use, in common with others, public or common lobbies, hallways, stairways, elevators and common walkways necessary for access to the Building, and if the portion of the Premises on any floor includes less than the entire floor, the common toilets, 4 9 corridors and elevator lobby of such floor; but such rights shall always be subject to the rules and regulations from time to time established by Landlord pursuant to Section 14.5 and to the right of Landlord to designate and change from time to time areas and facilities so to be used. (b) Tenant shall have, as appurtenant to the Premises, the nonexclusive right, in common with others entitled thereto, to use the portions of the Land in such other locations thereon as are designated from time to time by Landlord, for parking by its customers, employees, suppliers and visitors. Landlord reserves the right from time to time, and at Landlord's sole discretion, to alter or redesign the parking area, to temporarily close portions of the parking area and/or to relocate the ingress and egress to and from the parking area and Building provided, however, that Landlord will use reasonable efforts to minimize interference with Tenant's use and enjoyment of the Premises. Tenant and its employees shall also have the right to use, in common with others entitled thereto, such other common areas and facilities in or appurtenant to the Building as Landlord may from time to time designate and provide. (c) Tenant shall also have, as appurtenant to the Premises, the non-exclusive right, in common with others entitled thereto from time to time, subject to such regulations as Landlord shall from time to time impose, to use the roads of the Office Park located within the Common Property for access to the Property and the Premises. (d) Excepted and excluded from the Premises are exterior faces of exterior walls, the common stairways and stairwells, elevators and elevator shafts; but the entry doors to the Premises are a part thereof. Landlord reserves the right from time to time (a) to install, use, maintain, replace and relocate for service to the Premises and other parts of the Building, or either, pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the Premises or Building, and (b) to alter or relocate any other common facility, provided that substitutions are substantially equivalent or better. However, with respect to any such activities within the Premises, Landlord shall act diligently to minimize interference with Tenant's activities, so as to assure that there will be no material interference with Tenant's use and enjoyment of the Premises. Landlord reserves the exclusive use of all fan rooms, electric and telephone closets, janitor closets, freight elevator vestibules, pipes, ducts, conduits, wires and appurtenant fixtures located within the Premises which serve exclusively or in common other parts of the Building. ARTICLE III BASIC RENT; TENANT'S ELECTRICAL CHARGE -------------------------------------- 3.1 BASIC RENT. (a) Tenant agrees to pay to Landlord, or as directed by Landlord, without offset, abatement (except as provided in Section 12.1), deduction or demand, Basic Rent and Tenant's Electrical Charge. Basic Rent and Tenant's Electrical Charge shall be payable in monthly installments, in advance, on the first day of each and every calendar month during the Term of this Lease, at Landlord's Address, or at such other place as Landlord shall from time to time designate by notice. Basic Rent and Tenant's Electrical Charge for any partial month shall be prorated on a daily basis. 5 10 (b) On the Commencement Date, Tenant shall pay to Landlord Tenant's Electrical Charge for the first full calendar month of the Term, along with Tenant's Electrical Charge and Basic Rent (in the amount specified in Section 1.2) for the partial calendar month (if any) between the Commencement Date and the first day of the first full calendar month during the Term. Beginning with the first day of the second full calendar month during the Term, and on the first day of each succeeding calendar month during the Term, Tenant shall pay to Landlord Basic Rent and Tenant's Electrical Charge, in the amounts specified in Section 1.2, above. (c) In addition to any charges pursuant to Section 14.16, Tenant shall pay a late charge equal to 5% of the amount of any Basic Rent payment or Escalation Charge not paid when due (unless such late charge is prohibited by any applicable law); provided, however, that on the first two occasions during any twelve month period during which any Basic Rent payment or Escalation Charge is not paid when due, such late charge shall be payable only if such payment is not made within ten (10) days after Tenant receives notice that such payment was not made when due. ARTICLE IV TERM OF LEASE ------------- 4.1 COMMENCEMENT DATE. The Commencement Date shall be the earlier of (a) that date on which the Premises are ready for occupancy as provided in Section 4.3, and (b) that date on which Tenant commences occupancy for the Permitted Uses. However, if the Premises are ready for occupancy prior to July 1, 1994, then the Commencement Date shall be the earlier of (a) July 1, 1994 and (b) that date on which Tenant commences occupancy for the Permitted Uses. 4.2 TENANT'S PLANS. As used herein, "Tenant's Floor Plans" shall mean the plans for the Premises specified on Exhibit C, annexed (including, without limitation, frosting of glass and installation of a wood rail at the windows from the Premises into the Building's central atrium); "Tenant's Plans" shall mean architectural plans and working drawings for the preparation of the Premises, based upon Tenant's Floor Plans and. incorporating the Building Standard Tenant Improvements specified on Exhibit D, annexed; and "Landlord's Work" shall mean the work shown on Tenant's Plans. Following the Existing Lease Termination Date (as defined in Section 14.25, below), Landlord shall, at its sole cost and expense, prepare Tenant's Plans. Within seven (7) business days after Tenant's receipt of Tenant's Plans, Tenant shall either approve Tenant's Plans or notify Landlord of any respect(s) in which Tenant requests that Tenant's Plans be modified. (Tenant's failure to respond prior to the expiration of such seven (7) business day period shall be deemed to constitute approval of Tenant's Plans as submitted by Landlord.) Promptly following Tenant's approval of Tenant's Plans (which approval shall not be unreasonably withheld or delayed), Landlord shall, at its sole cost and expense, undertake Landlord's Work. If, during the course of Landlord's Work, Tenant shall request a change in Tenant's Plans, Landlord shall notify Tenant of the anticipated increase (if any) in Landlord's costs resulting from such change. (The increase in Landlord's Costs resulting from such change shall be comprised of the actual increase in out-of-pocket costs and expenses incurred by Landlord as a 6 11 result of such change, plus an additional charge of ten (10%) percent of such increased out-of-pocket costs and expenses, serving as reimbursement to Landlord for additional administrative costs and supervisory fees arising on account of such change.) If Tenant shall thereafter authorize such change, then, incident to the delivery of such authorization, Tenant shall deliver to Landlord a payment in the amount of the anticipated increase in Landlord's costs. At such time as Landlord's Work has been completed, a final determination of the actual increase in Landlord's costs resulting from changes in Tenant's Plans during the course of Landlord's Work will be made and additional payment by Tenant to Landlord or reimbursement by Landlord to Tenant will be made, as appropriate, so that Tenant will be required to pay the actual amount of the increase in Landlord's costs. 4.3 LANDLORD'S AND TENANT'S WORK; DELAYS. (a) Tenant hereby agrees that the initial installation of improvements to the Premises will be performed by Landlord's general contractor. Landlord agrees to use due diligence to complete the work described in Tenant's Plans on or before the Anticipated Term Commencement Date. Landlord shall not be required to install any improvements which are not in conformity with plans and specifications for the Building or which are not approved by Landlord's architect or which do not comply with applicable laws, ordinances or codes. In case of delays due to governmental regulation, unusual scarcity or inability to obtain labor or materials, labor difficulties, casualty or other causes beyond Landlord's reasonable control, the Anticipated Term Commencement Date shall be extended for the period of such delays. The Premises shall be deemed ready for occupancy when (i) the work described in Tenant's Plans, together with the common facilities for access and services to the Premises, has been completed except for items of work and adjustment of equipment and fixtures which can be completed after occupancy has been taken without causing substantial interference with Tenant's use of the Premises (i.e. so-called "punch list items"), and (ii) Tenant has received Landlord's certificate of the completion of the Premises in accordance with clause (i) of this sentence. Landlord shall complete as soon as conditions practicably permit all items of work excepted by said clause (i) and Tenant shall cooperate reasonably with Landlord so as to avoid unreasonable interference with such completion. Prior to the Commencement Date, Landlord shall permit Tenant access for installing furnishings in portions of the Premises when it can be done without material interference with remaining work. In connection with such access, Tenant covenants (i) to cease promptly upon request by Landlord any activity or work during any period which, in Landlord's judgment, shall interfere with or delay Landlord's prosecution or completion of Landlord's Work at the earliest possible date, (ii) that Tenant shall comply promptly with all procedures and regulations prescribed by Landlord from time to time for coordinating such work and activities with any other activity or work in the Premises or the Building, (iii) that such access shall be at the sole risk of Tenant and shall be deemed to be a license, (iv) that Tenant shall indemnify and hold harmless Landlord from and against any and all claims arising from, or claimed to arise from or out of the performance of any work by or on behalf of Tenant in the Building or the Premises, or which may arise by reason of any matter collateral thereto, and from and against any and all claims arising from, or claimed to arise from, any negligence, act or failure to act of Tenant, its contractors, decorators, servants, agents or employees or for any other reason whatsoever arising 7 12 out of Tenant's access to or being in the Premises or in connection with Tenant's work, (v) that Tenant shall not employ or permit the employment of any contractor, mechanic or laborer, or permit any materials in the Premises, if the use of such contractor, mechanic or laborer would, in Landlord's opinion, create any difficulty, strike or jurisdictional dispute with other contractors, mechanics or laborers employed by Tenant, Landlord or others, or would in any way disturb, interfere with or delay any work being performed by Landlord or any other tenant or their respective contractors, and (vi) to pay any loss or additional expense caused to Landlord by any delay in the completion of Landlord's Work resulting from Tenant's access and Tenant's work. Such access by Tenant shall be deemed to be pursuant to all the provisions of this Lease and Tenant shall comply therewith, except that the obligation to pay rent shall not commence until the Commencement Date. No material or equipment shall be incorporated in the Premises in connection with the making of such installations which is subject to any lien, charge, mortgage or other encumbrance of any kind whatsoever, or subject to any conditional sale or other similar or dissimilar title retention agreement. If Tenant fails to comply with any of the foregoing obligations, then, in addition to all other rights and remedies hereunder, Landlord may by notice to Tenant require Tenant to cease the performance of such activity and Tenant's work until Landlord's Work has been completed. (b) Tenant agrees that if the Premises would have been ready for occupancy at an earlier date but for Tenant's Delay (as hereinafter defined), then, for the purposes of subparagraphs 4.3(a) and 4.3(c), the Premises shall be deemed to have been ready for occupancy on the date on which the Premises would have been ready for occupancy if such delay(s) had not occurred. As used herein, the term "Tenant's Delay" means any delay in the completion of Landlord's Work resulting from: (i) Tenant's request for changes in Tenant's Plans subsequent to the original approval of Tenant's Plans; (ii) Tenant's failure to approve Tenant's Plans and authorize Landlord to proceed within the time required in Section 4.2, above; (iii) Tenant's request for materials, finishes or installations other than Building Standard Tenant Improvements (and those above building standard improvements (if any) which are expressly set forth on Tenant's Floor Plans); (iv) The performance or delay by a person, firm or corporation employed by Tenant and/or the completion or delay of the work of said person, firm or corporation; (v) Any change by Tenant in any air conditioning requirement, or in any information furnished by Tenant; (vi) The fact that work other than Building Standard Tenant Improvements (and those above building standard improvements (if any) which are expressly set forth on Tenant's Floor Plans) requires lead time to obtain particular materials or parts or additional time to perform in excess of the time 8 13 required for the corresponding Building Standard Tenant Improvements (and those above building standard improvements (if any) which are expressly set forth on Tenant's Floor Plans); (vii) Installation of Tenant's telephone and/or communications systems; (viii) Any direction by Tenant that Landlord delay in proceeding with a segment of Landlord's Work in anticipation of a possible change or for any other reason; or (ix) Any other act or omission of Tenant, its agents, employees, contractors or subcontractors. (c) If Landlord shall be unable to give possession of the Premises on the Anticipated Term Commencement Date because the Premises are not completed and ready for occupancy, or if the previous occupant of the Premises has not yet vacated the Premises, or if repairs, improvements or decorations of the Premises or of the Building are not completed, Landlord shall not be subject to any liability for failure to give possession on said date (nor shall such failure affect the validity of this Lease), except as expressly provided in the remaining provisions of this subparagraph (c). If, however, the Premises are not completed and ready for occupancy within five (5) days following the Anticipated Term Commencement Date, then, for each day between the Anticipated Term Commencement Date and the date on which the Premises are completed and ready for occupancy, Landlord shall grant to Tenant a credit toward Tenant's rental an other monetary obligations hereunder, in the amount of $2,287.43. If the Premises are not completed and ready for occupancy within sixty (60) days following the Anticipated Term Commencement Date, then, as Tenant's sole remedy on account thereof, Tenant shall have the right to terminate this Lease. Such right shall be exercised (if at all) by notice to Landlord not later than the date on which the Premises are completed and ready for occupancy. If Tenant exercises such right, then this Lease shall terminate and be of no further force and effect, and neither of the parties hereto shall have any further rights or obligations hereunder. (d) All of Tenant's alterations, additions and installation of furnishings shall be coordinated with any work being performed by Landlord and in such manner as to maintain harmonious labor relations and not damage the Property or interfere with Building construction or operation and, except for installation of furnishings, shall, at Landlord's option, be performed by Landlord's general contractor or by contractors or workmen first approved by Landlord. If Landlord shall require that Tenant retain Landlord's contractor, Landlord's contractor shall provide its services at costs reasonably comparable to the charges imposed by other reputable contractors in the Metropolitan Boston area; and Landlord shall provide supervisory services (for which Tenant shall pay to Landlord a reasonable supervisory fee, except that Landlord shall not be entitled to receive a supervisory fee in connection with Landlord's initial improvements to the Premises, as provided in subsection 4.3(a), above). If Landlord shall not require that Tenant retain Landlord's contractor, Landlord shall not unreasonably withhold or delay its approval of contractors and workmen chosen by Tenant. Except for work by Landlord's general contractor, Tenant before its work is started shall: secure all licenses and permits necessary therefor; deliver to Landlord a statement of the names of all of its contractors and subcontractors and the 9 14 estimated cost of all labor and material to be furnished by them; and cause each contractor to carry workmen's compensation insurance in statutory amounts covering all of the contractor's and subcontractor's employees and comprehensive public liability insurance and property damage insurance with such limits as Landlord may reasonably require but in no event less than, with respect to public liability insurance, the amount specified in Section 1.2 (all such insurance to be written in companies approved by Landlord and insuring Landlord and Tenant as well as the contractors), and to deliver to Landlord certificates of all such insurance. Tenant agrees to pay promptly when due the entire cost of any work done on the Premises by Tenant, its agents, employees, or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the Premises or the Property and immediately to discharge any such liens which may so attach and, at the request of Landlord, to deliver to Landlord security satisfactory to Landlord against liens arising out of the furnishing of such labor and materials. Upon completion of any work done on the Premises by Tenant, its agents, employees or independent contractors, Tenant shall promptly deliver to Landlord original lien releases and waivers executed by each contractor, subcontractor, supplier, materialman, architect, engineer or other party which furnished labor, materials or other services in connection with such work and pursuant to which all liens, claims and other rights of such party with respect to labor, material or services furnished in connection with such work are unconditionally released and waived. 4.4 WORKMANSHIP AND APPROVAL. Prior to the date on which Tenant commences occupancy of the Premises for the Permitted Uses, Landlord and Tenant shall conduct a "joint walk through" in the Premises, for the purpose of determining any items of Landlord's Work which are then uncompleted or do not conform to Tenant's Plans. Following such joint walk through, Landlord's Work shall be deemed approved by Tenant when Tenant commences occupancy of the Premises for the Permitted Uses, except for items which are then uncompleted or do not conform to the drawings and specifications referred to in Section 4.2 and as to which, in either case, Tenant. shall have given notice to Landlord prior to such date. However, with respect to latent defects (that is, defects in the completion of Landlord's Work which could not be discovered through a careful visual inspection of the Premises), the work required of Landlord pursuant to this Article IV shall be deemed approved by Tenant except for items as to which Tenant shall have given notice to Landlord within six (6) months following the date on which Tenant commences occupancy of the Premises for the Permitted Uses. 4.5 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION. All construction work required or permitted by this Lease shall be done in a good and workmanlike manner and in compliance with all applicable laws and lawful ordinances, regulations and orders of governmental authority and insurers of the Property. Each party may inspect the work of the other at reasonable times (and without causing interference with on-going construction activities) and shall promptly give notice of observed defects. Each party authorizes the other to rely, in connection with design and construction, upon approval and other actions on the party's behalf by the Construction Representative of the party, if any, named in Article I or any person named in substitution or addition by notice to the party relying. 4.6 CHANGES IN THE OFFICE PARK. Landlord expressly reserves the right to change the layout, design and plans for the Office Park and the Common Property at any time 10 15 and to add to or reduce the size of the Land; provided that no change in the size of the Land may result in a permanent material adverse effect upon the Building or the parking areas, streets or sidewalks serving the Building; and provided further that any change in the size of the Land which results in a temporary adverse effect upon the Building or the parking areas, streets or sidewalks serving the Building shall be deemed to constitute an interruption of services which Landlord is required to supply hereunder, and shall be governed by the provisions of Section 9.8 below. Landlord hereby expressly reserves the right to dedicate the roads within the Office Park for public use. ARTICLE V REAL ESTATE TAXES ----------------- 5.1 PAYMENTS ON ACCOUNT OF REAL ESTATE TAXES. (a) For the purpose of this Article, the term "Tax Year" shall mean the twelve-month period commencing on the July 1 immediately preceding the Commencement Date and each twelve-month period thereafter occurring wholly or partially during the Term, and the term "Taxes" shall mean all taxes and special assessments of every kind and nature assessed by any governmental authority upon or against the Land and/or the Building and/or the Property or any part thereof, or payments in lieu thereof, or which Landlord shall become obligated to pay because of or in connection with the ownership, leasing and operation of the Land and/or the Building and/or the Property and reasonable expenses of any proceedings for abatement of Taxes. "Taxes" shall also include, if any, such portion of any taxes and special assessments assessed against the remainder of the Office Park as may be allocated to Landlord as owner of the Land and/or the Building and/or the Property, pursuant to any joint operating agreement or other similar arrangement between Landlord and the owner(s) of the remaining portions of the Office Park (Landlord agreeing hereby that such allocation shall be made in good faith, in a fair manner). The amount of special taxes or special assessments to be included shall be limited to the amount of the installment (plus any interest, other than penalty interest, payable thereon) of such special tax or special assessment required to be paid during the year in respect of which such taxes are being determined. There shall be excluded from Taxes (i) any federal, state or local income, profit, franchise, privilege, capital levy, excise, inheritance, estate, succession, gift, deed, conveyance or transfer taxes, and (ii) so long as Tenant has satisfied its obligations under this Article V on a timely basis, any penalties or interest resulting from the late payment of Taxes; provided, however, that if at any time during the Term the present system of ad valorem tax on real property shall be changed so that, in lieu of the whole or any part of the ad valorem tax on real property, there shall be assessed to Landlord a capital levy or other tax on the gross rents received with respect to the Property, or a federal, state, county, municipal, or other local income, franchise, excise or similar tax, assessment, levy or charge (distinct from any now in effect in the jurisdiction in which the Property is located) measured by or based, in whole or in part, upon any such gross rents, then any and all of such capital levy or taxes shall be included within the term "Taxes", but only to the extent that the same would be payable if the Property were the only property of Landlord. 11 16 (b) In the event that, for any reason, Taxes shall be greater during any Tax Year than the Tax Base, Tenant shall pay to Landlord, as an Escalation Charge, an amount (the "Tax Excess") equal to the excess of Taxes over the Tax Base multiplied by Tenant's Tax and Operating Percentage, such amount to be apportioned for any fraction of a Tax Year in which the Commencement Date falls or the Term ends. (c) Payment of Tenant's Tax Excess shall be made to Landlord within thirty (30) days from the date Landlord shall give written notice to Tenant that, based upon a bill received for Taxes (or partial Taxes), or other form of notice received from any governmental authority responsible for Taxes, there is due from Tenant any Tax Excess (which collection notice shall set forth the manner of computation of any Tax Excess due from Tenant). At Landlord's election, simultaneously with Tenant's monthly payments of Basic Rent, Tenant shall remit to Landlord one-twelfth of Landlord's estimate of the Tax Excess for the then-current Tax Year. If the total of such monthly remittances is greater than the Tax Excess for such Tax Year, Landlord shall credit the difference against the next installment of Tax Excess due to Landlord hereunder (except, that, upon Tenant's request, and so long as Tenant is not then in default in the performance of its obligations hereunder, Landlord shall pay such excess directly to Tenant, in cash); and if the total of such remittances is less than the Tax Excess for such Tax Year, Tenant shall pay the difference at the time any Tax Excess becomes due and payable as hereinabove provided. (d) If Landlord shall receive any refund of Taxes as to which Tenant has paid Tax Excess, Tenant shall be entitled to receive a refund from Landlord in an amount equal to the smaller of (i) the amount of Tax Excess paid by Tenant with respect to the Tax Year as to which the refund was obtained by Landlord and (ii) Tenant's Tax and Operating Percentage multiplied by the amount (if any) by which the amount of the refund received by Landlord exceeds the costs and expenses incurred by Landlord in obtaining such refund. 5.2 ALTERNATE TAXES. If some method of taxation shall replace the current method of assessment of real estate taxes, or the type thereof, Tenant agrees that Tenant shall pay an equitable share of the same computed in a fashion consistent with the method of computation herein provided, to the end that Tenant's share thereof shall be, to the maximum extent practicable, comparable to that which Tenant would bear under the foregoing provisions. 5.3 PERSONAL PROPERTY TAXES. Tenant shall pay, promptly when due, all taxes which may be imposed upon personal property (including, without limitation, fixtures and equipment) in the Premises to whomever assessed. ARTICLE VI OPERATING EXPENSES ------------------ 6.1 DEFINITIONS. For the purpose of this Article, the following terms shall have the following respective meanings: Operating Year: Each calendar year in which any part of the Term shall fall. 12 17 Operating Expenses: All costs and expenses incurred with respect to the operation, administration, cleaning, repair, management, maintenance and upkeep of (i) the Property and (ii) the Common Property (including the amount (if any) of any Operating Expenses incurred by other parties with respect to the remainder of the Office Park and allocated to Landlord as owner of the Land and/or the Building and/or the Property (Landlord agreeing hereby that such allocation shall be made in good faith, in a fair manner)), including without limiting the generality of the foregoing: (a) all salaries, wages, fringe benefits, payroll taxes and workmen's compensation insurance premiums related thereto with respect to any employees of Landlord engaged in security, operation, management and maintenance of the Property and the Common Property, exclusive, however, of the allocable share of all management personnel expenses not related to the operation, maintenance or upkeep of the Property and the Common Property; (b) all utilities and other costs related to provision of heat (including oil and/or gas), air-conditioning, lighting, and water (including sewer charges) and other utilities (other than electrical service, for which provision is made elsewhere in this Lease) to the Property and the Common Property; (c) all out-of-pocket costs, including, without limitation, material and equipment costs, for cleaning, maintenance, replacement, reasonable repair and upkeep of the Property (including without limitation window cleaning of the Building) and/or the Common Property, and of all parking areas, roads and landscaping located on the Property and the Common Property; (d) all costs of any insurance carried by Landlord relating to the Property and/or the Common Property; (e) all out-of-pocket costs of operating and maintaining the Property and/or the Common Property in good working order, appearance and condition (including, but not limited to, snow removal, security, operation and repair of heating and air-conditioning equipment, elevators, and any other common Building equipment or system), as well as the cost of all repairs and replacements other than repairs for which Landlord has received full reimbursement from contractors, other tenants of the Building or others; (f) all legal, accounting, management and other fees and charges directly related to the operation, management and administration of the Property and the Common Property (including any management fee charged by Landlord for its services in connection with the operation, management and administration of the Property; provided, however, that such management fee shall be included in Operating Expenses only to the extent that such management fee does not exceed the management fee then being charged by reputable third-party management agents in the metropolitan Boston area for providing similar services); (g) all costs for electricity supplied to the Property and/or the Common Property after deducting (i) Tenant's Electrical Charge paid by Tenant for such period and (ii) all payments of electricity charges from other tenants in the Property for such period which are separately stated 13 18 in such other tenant leases as "Tenant's Electrical Charge". The cost of electricity supplied to Tenant and to other tenants of the Building which is separately metered shall not be included in Operating Expenses (but, in such case, the Operating Expense Base shall be reduced as and to the extent such Operating Expense includes sums attributable to the electricity being metered); (h) all costs of disposal of refuse from the Property and/or the Common Property; (i) all license, permit and inspection fees relating to the Property, the Common Property or any part thereof; (j) (INTENTIONALLY OMITTED.); (k) if, during the Term, Landlord shall add or replace a capital item other than as provided in subparagraph (ix) of the next succeeding paragraph hereof, there shall be included in Operating Expenses for that and each succeeding calendar year the amount of the annual charge-off (determined as hereinafter provided) of such capital expenditure together with interest at an annual rate equal to 2% over the "prime rate" of Bank of Boston in effect at the time of making such capital expenditure (less insurance or other proceeds, if any, collected by Landlord by reason of damage to, or destruction of, any capital item so replaced). (Annual charge-off shall be determined by dividing the original cost of a capital item or a capital expenditure made during the Term by the number of years of useful life of the item acquired, and the useful life shall be determined by Landlord's accountants in accordance with generally accepted accounting principles and practices in effect at the time of acquisition of the capital item.); and (1) all costs and fees payable under service and management contracts relating to matters referred to in Items (a) through (i) hereof (provided, however, that costs and fees payable under service and management contracts with parties affiliated with Landlord shall be included in Operating Expenses only to the extent that such costs and fees do not exceed the costs and fees then being charged by reputable third parties in the metropolitan Boston area for providing similar services). There shall not be included in Operating Expenses: (i) Painting, decoration or other work which Landlord performs for any other tenant or prospective tenant of the Building other than painting, decoration or other work which is standard for the Building and performed generally for tenants subsequent to their initial occupancy (and will be made available to Tenant); (ii) Leasing commissions and expenses of procuring tenants, including lease concessions and lease takeover obligations; (iii) Legal fees incurred in connection with the execution or enforcement of any other lease concerning premises in the Building; (iv) Depreciation; 14 19 (v) Interest on and amortization of debt; (vi) Wages or salaries of employees over the rank of building manager; (vii) Taxes; (viii) Rents payable under any ground lease affecting the Property; and (ix) Capital expenses related to expansion of the Building or the exterior facilities serving the Building, correction of defects in the initial construction of the Building, correction of any violation of any federal, state or local regulation or ordinance if such violation exists as of the date of this Lease and any improvement to the Building intended to benefit one or more specific occupants of the Building (it being intended that capital expenses which are to be included in Operating Expenses will be expenses relating to activities (such as, for example, roof replacement, repair and replacement of structural and mechanical systems of the Building and repair of parking facilities and roadways) which are intended to benefit generally the occupants of the Building). If, during any portion of the Operating Year for which Operating Expenses are being computed, less than 95% of Building Rentable Area was occupied by tenants, actual Operating Expenses incurred shall be reasonably extrapolated by Landlord on an item by item basis to the estimated Operating Expenses that would have been incurred if the Building were 95% occupied for such year, and such extrapolated amount shall, for the purpose hereof, be deemed to be Operating Expenses for such Year. Tenant acknowledges that Landlord's formula for sharing of Operating Expenses stated in this Lease is based on the assumption that Landlord will be providing substantially similar services to all tenants in the Property from year to year. If this assumption is not, in fact, correct (that is, if Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord), Operating Expenses shall be deemed, for purposes of this paragraph, to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had, at its own expense, furnished such work or service to such tenant. 6.2 TENANT'S PAYMENTS. In the event that Operating Expenses for any Operating Year shall exceed the Operating Expense Base, Tenant shall pay to Landlord, as an Escalation Charge, an amount (the "Operating Expense Excess") equal to Tenant's Tax and Operating Percentage multiplied by the sum of (i) 100% of such increase in Operating Expenses related to the Property plus (ii) the percentage of any such increase in Operating Expenses related to the Common Property which Landlord fairly allocates to the Property, such amount to be apportioned for any Operating Year in which the Commencement Date falls or the Term ends. 15 20 Payment of any Operating Expense Excess shall be made to Landlord within thirty (30) days from the date Landlord shall furnish to Tenant an itemized statement of Tenant's share of any such excess, prepared, allocated and computed in accordance with generally accepted accounting principles. At Landlord's election, simultaneously with Tenant's monthly payments of Basic Rent, Tenant shall remit to Landlord one-twelfth (1/12th) of Landlord's estimate of the Operating Expense Excess for the then-current Operating Year. If the total of such monthly remittances is greater than the Operating Expense Excess for such year, Landlord shall credit any such excess payments against the next installment of Operating Expense Excess due to Landlord hereunder (except that, upon Tenant's request, and so long as Tenant is not then in default in the performance of its obligations hereunder, Landlord shall pay such excess directly to Tenant, in cash); and if the total of such remittances is less than the Operating Expense Excess for such year, Tenant shall pay the difference to Landlord at the time the first monthly installment of Operating Expense Excess with respect to the next succeeding Operating Year becomes due and payable as hereinabove provided. ARTICLE VII USE OF PREMISES --------------- 7.1 PERMITTED USES. (a) Tenant agrees that the Premises shall be used and occupied by Tenant only for the Permitted Uses and for no other purposes. (b) Tenant agrees to conform to the following provisions during the Term: (i) Tenant shall cause all freight and other property to be delivered to or removed from the Building and the Premises in accordance with reasonable rules and regulations established by Landlord therefor. Tenant shall not receive or ship articles of any kind except through loading and receiving facilities, if any, provided for those purposes by Landlord; provided, however, that Tenant shall be permitted to receive and ship ordinary mail, Federal Express packages, UPS packages and other small items without using loading and receiving facilities, so long as such activities are conducted in a manner consistent with the operation of a first-class office building; and (ii) Tenant will not place on the exterior of the Premises (including both interior and exterior surfaces of windows and door(s)), or on any part of the Land or Building outside the Premises, any sign, symbol, advertisement or the like visible to public view outside of the Premises. Landlord will not unreasonably withhold consent for signs or lettering on the entry doors to the Premises provided such signs conform to Building standards adopted by Landlord and Tenant has submitted to Landlord a plan or sketch of the sign to be placed on such entry doors. Landlord agrees, however, to maintain a tenant directory in the lobby of the Building in which will be placed Tenant's name and the location of the Premises in the Building; and 16 21 (iii) Tenant shall not perform any act or carry on any practice which may injure the Premises, or any other part of the Property or the Office Park, or cause any offensive odors or loud noise or constitute a nuisance or a menace to any other tenant or tenants or other persons in the Building or the Office Park. Tenant shall not overload or otherwise misuse the plumbing, electrical and other utilities systems serving the Premises and the Building. Tenant shall not use or devote the Premises or any part thereof for any use which is inconsistent with the maintenance of the Building as an office building of first class quality in maintenance, use and occupancy, or which is improper, offensive, contrary to law or ordinance or liable to render necessary any alteration or addition to the Building; and (iv) Tenant shall not operate any cooking apparatus (except for coffee making equipment, a microwave oven and a refrigerator), or locate any vending machines (other than a vending machine serving Tenant's employees) in the Premises without Landlord's prior written consent; and (v) Tenant shall continuously, throughout the Term of this Lease, occupy the Premises for the Permitted Uses; and (vi) Tenant will comply with all laws, ordinances, rules and regulations of governmental authorities and recommendations of the Fire Underwriters Rating Bureau or any similar entity with respect to the condition, use or occupancy of the Premises and the use or occupancy of the Building; and (vii) Tenant shall not obstruct in any manner any portion of the Building not hereby leased or of the Property or the Common Property used by Tenant in common with others. 7.2 INSTALLATIONS AND ALTERATIONS BY TENANT. (a) Tenant shall make no alterations, additions (including, for the purposes hereof, wall-to-wall carpeting), or improvements (including Tenant's initial improvements) in or to the Premises without Landlord's prior written consent (Landlord agreeing hereby that such consent shall not be unreasonably withheld or delayed with respect to any proposed alteration or addition which will not affect (i) the structural elements or utilities systems of the Building, (ii) the exterior appearance of the Building or (iii) the appearance of any common area of the Building or the Office Park). Any such alterations, additions or improvements shall (i) be performed in a good and workmanlike manner and in compliance with Building standards, the applicable provisions of Article IV, and all applicable laws (Without limitation, if, because of alterations, additions or improvements undertaken (or proposed to be undertaken) by or on behalf of Tenant, applicable laws require additional alterations, additions or improvements to the Premises or the Building which would not have been required but for Tenant's additions, etc. (or proposed additions, etc.), Tenant shall be obligated, at its sole cost and expense, to undertake and complete all such additional alterations, additions or improvements.), (ii) be made only by Landlord's contractor or by contractors or mechanics approved by Landlord (all as provided in subsection 17 22 4.3(d), above), (iii) be made at Tenant's sole expense and at such times as Landlord may designate, and (iv) become part of the Premises and the property of Landlord. Tenant agrees not to employ or permit the use of any labor or otherwise take any action which might result in a labor dispute involving personnel providing services, labor or material in the Building or the Office Park pursuant to arrangements made by Landlord or Landlord's contractor. Furthermore, Tenant agrees that it will not permit any contractors or other persons retained by Tenant to make alterations, additions or improvements on the Premises to commence their activities until such time as Landlord has received Certificates of Insurance confirming that such persons maintain public liability, automobile liability, workmen's compensation and other insurance required by Landlord, in amounts satisfactory to Landlord. (b) All articles of personal property and all business fixtures, machinery, equipment and furniture owned or installed by Tenant solely at its expense in the Premises ("Tenant's Removable Property") shall remain the property of Tenant and may be removed by Tenant at any time prior to the expiration of the Term, provided that Tenant, at its expense, shall repair, to the reasonable satisfaction of Landlord (but subject to ordinary wear and tear), any damage to the Property caused by such removal. (c) Notice is hereby given that Landlord shall not be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic's or other lien for any such labor or materials shall attach to or affect the reversion or other estate or interest of Landlord in and to the Premises. Whenever and as often as any mechanic's lien shall have been filed against the Property based upon any act or interest of Tenant or of anyone claiming through Tenant, Tenant shall forthwith take such action by bonding, deposit or payment as will remove or satisfy the lien. ARTICLE VIII ASSIGNMENT AND SUBLETTING ------------------------- 8.1 PROHIBITION. (a) Subject to the remaining provisions of this subsection (a), Tenant covenants and agrees that neither this Lease nor the term and estate hereby granted, nor any interest herein or therein, will be assigned, mortgaged, pledged, encumbered or otherwise transferred, and that neither the Premises nor any part thereof will be encumbered in any manner by reason of any act or omission on the part of Tenant, or used or occupied or permitted to be used or occupied by anyone other than Tenant, or for any use or purpose other than a Permitted Use, or be sublet (which term, without limitation, shall include granting of concessions, licenses and the like) in whole or in part, without in each case having first obtained the express written consent of Landlord. The foregoing restrictions shall not be applicable to an assignment of this Lease or a subletting of the Premises by Tenant to a subsidiary wholly-owned by Tenant or to a controlling corporation, the stock of which is wholly-owned by the stockholders of Tenant (any such entity being referred to herein as a "Related Party") . It shall be a condition of the validity of any assignment, whether with the consent of Landlord or to a subsidiary or controlling corporation, that the assignee agrees directly with Landlord, by written instrument in form satisfactory to Landlord, to be bound by all the obligations of Tenant hereunder including, without limitation, 18 23 the covenant against further assignment and subletting. No assignment or subletting shall relieve Tenant from its obligations hereunder and Tenant shall remain fully and primarily liable therefor. Landlord agrees that its consent to a proposed assignment or sublease shall not be unreasonably withheld or delayed, and Tenant agrees to provide to Landlord such information as Landlord may reasonably require in order to reach an informed decision. Without limitation, Landlord shall not be deemed to be unreasonable in withholding its consent to a proposed assignment or sublease unless each of the following criteria has been satisfied: (i) the proposed assignee or subtenant is of good reputation and character and is financially stable (provided, however, that any, proposed assignee or subtenant which purchases all or substantially all of the stock or assets of Tenant shall be deemed to be financially stable if, following such purchase, the purchaser has a net worth not less than the net worth of Tenant immediately prior to such purchase), (ii) the proposed assignee or subtenant is not otherwise a tenant of the Office Park, (iii) the proposed assignee or subtenant will use the Premises solely for the Permitted Uses, (iv) the proposed assignee or subtenant does not intend to use the Premises for a "Prohibited Activity" (as hereinafter defined), and (v) the intended use of the Premises by the proposed assignee or subtenant is consistent with the maintenance of the Building as a first-class office building, and will not interfere with the business activities of other occupants of the Office Park. Tenant shall not advertise or otherwise offer to the general public any portion (or all) of the Premises at a rental rate which is lower than the rental rate then being quoted by Landlord for equivalent space in the Building. (The provisions of the immediately preceding sentence are intended to apply to advertisements in media of general circulation, but shall not limit Tenant's publications through brokers.) For the purposes of the immediately preceding paragraph, a "Prohibited Activity" is a use which will, in Landlord's reasonable judgment, (i) introduce undue amounts of public traffic in the Building (in excess of average traffic which Landlord reasonably believes is generated by other tenants in the Building), or (ii) place a strain on the existing plumbing, electrical and mechanical systems of the Building or (iii) generate unusually high densities of employees or invitees per square foot of rentable space. (b) If this Lease be assigned, or if the Premises or any part thereof be sublet or occupied by anyone other than Tenant, Landlord may, whether or not it has consented to any such assignment, subletting or occupancy, at any time and from time to time collect rent and other charges from the assignee, subtenant or occupant, and apply the net amount collected to the rent and other charges herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of any breach of Section 8.1 (a), or the acceptance of the assignee, subtenant or occupant as a tenant or a release of Tenant from the further performance by Tenant of its obligations hereunder. In the event that Basic Rent and other charges payable to Tenant under any assignment or sublease exceed Basic Rent and other charges payable hereunder, after Tenant has been reimbursed from such excess for all reasonable out-of-pocket costs and expenses incurred by Tenant in entering into the assignment or sublease, Tenant shall pay to Landlord, as and when received from the assignee or subtenant, 50% of such excess. (If only a portion of the Premises is subleased, determination of any excess shall be computed by allocating Basic Rent and other charges hereunder on a per square foot basis between the portion of the Premises which is subject to the sublease and the remainder of the Premises.) The consent 19 24 by Landlord to an assignment or subletting shall in no way be construed to relieve Tenant or any successor from obtaining the express written consent of Landlord to any further assignment or subletting. No assignment or subletting and no use of the Premises by a subsidiary wholly-owned by Tenant or controlling corporation of Tenant shall affect the Permitted Uses. (c) In the event of any request by Tenant for any consent to a proposed assignment or sublease (other than an assignment or sublease to a Related Party), Landlord shall have the option instead to terminate this Lease. In the case of a proposed sublease concerning only a portion of the Premises, at Landlord's option, such termination shall apply only to that portion of the Premises which is intended to be the subject of the sublease. In such event, Basic Rent and other charges hereunder shall be reduced proportionately, to take account of the reduction in the size of the Premises which will be occupied by Tenant following such termination. Furthermore, in the case of a sublease which is intended to apply to only a portion of the Term, at Landlord's option, this Lease shall be terminated only for the period of the proposed sublease, and shall be reinstated upon the expiration of the term of the proposed sublease. Upon any termination, as provided above, the Premises (or the portion of the Premises to which the termination relates) shall be delivered to Landlord in the condition in which the Premises are required to be delivered to Landlord upon the expiration of the Term as provided herein. Following any such termination, Landlord shall be entitled to enter into any lease or occupancy arrangement concerning the Premises (or portion of the Premises, as the case may be) with any party, including, without limitation, the assignee or subtenant proposed by Tenant. ARTICLE IX RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES; SERVICES TO BE FURNISHED BY LANDLORD ------------------------------------ 9.1 LANDLORD REPAIRS. Except as otherwise provided in this Lease, Landlord agrees to make such repairs to the roof, exterior walls, floor slabs, common areas and common electrical, heating, air conditioning and other common mechanical systems and facilities of the Building as may be necessary to keep them in serviceable condition, all insofar only as they affect the Premises, except that Landlord shall in no event be responsible to Tenant for the condition of glass in and about the Premises or the doors leading to the Premises, or for any condition in the Premises or the Building caused by any act or neglect of Tenant, its invitees or contractors. Landlord shall also perform snow removal and resurfacing, repairs and replacements to the surface parking areas and sidewalks of the Property. Landlord shall not be responsible to make any improvements or repairs to the Building, the Land or the Office Park other than as expressly in this Section 9.1 provided, unless expressly provided otherwise in this Lease. 9.2 TENANT'S AGREEMENT. (a) Tenant will keep neat and clean and maintain in good order, condition and repair the Premises and every part thereof, excepting only those repairs for which Landlord is responsible under the terms of this Lease, reasonable wear and tear of the Premises, and damage by fire or other casualty and as a consequence of the exercise of the power of eminent domain excepted; and shall surrender the Premises, at the end of the Term, in such condition. Without 20 25 limitation, Tenant shall maintain and use the Premises in accordance with all directions, rules and regulations of all governmental agencies having jurisdiction, and shall, at Tenant's own expense, obtain all permits, licenses and the like required by applicable law. Tenant shall be responsible for the cost of repairs which may be made necessary by reason of damage to common areas in the Building and the parking areas, sidewalks, paved areas, landscaping, lighting and other facilities on the Land or in the Office Park by Tenant, Tenant's independent contractors, or Tenant's invitees. (b) If repairs are required to be made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable dispatch, after such demand, Landlord may (but shall not be required to do so) make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to Tenant's stock or business by reason thereof. In the case of emergency (that is, any condition which, if not remedied promptly, would result in additional damage or risk of damage to persons or property), Landlord shall be permitted to act immediately, without the requirement of demand or notice to Tenant. If Landlord makes or causes such repairs to be made, Tenant agrees that Tenant shall forthwith, on demand, pay to Landlord the cost thereof, with interest thereon at the Default Rate, as an additional charge. 9.3 FLOOR LOAD - HEAVY MACHINERY. (a) Tenant shall not place a load upon any floor in the Premises exceeding the floor load commonly placed by office tenants in first-class office buildings. Landlord reserves the right to prescribe the position of all heavy business machines and mechanical equipment, including safes, which shall be placed so as to distribute the weight thereof. Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant's expense in settings sufficient, in Landlord's judgment, to absorb and prevent vibration, noise and annoyance. Tenant shall not move any safe, heavy machinery, heavy equipment, freight, furniture, bulky matter or fixtures into or out of the Building without Landlord's prior consent, which consent may include a requirement to provide insurance in such amounts as Landlord may deem reasonable. Tenant shall protect all elevators, sidewalks and other areas of the Property from possible damage prior to moving any such items and shall comply with all requirements of Landlord in connection therewith. (b) If any such safe, machinery, equipment, freight, bulky matter or fixture requires special handling with hoisting or other similar equipment, Tenant agrees to employ only persons holding a Master Rigger's License to do such work, and all work in connection therewith shall comply with applicable laws and regulations. Any such moving shall be at the sole risk and hazard of Tenant, and Tenant will exonerate, indemnify and save Landlord harmless against and from any liability, loss, injury, claim or suit resulting directly or indirectly from such moving. 9.4 BUILDING SERVICES. (a) Landlord shall, on Business Days (except Saturdays) from 8:00 a.m. to 6:00 p.m. (and on Saturdays from 9:00 a.m. to 1:00 p.m.), furnish heating and cooling as normal seasonal 21 26 changes may require to provide reasonably comfortable space temperature and ventilation for occupants of the Premises under normal business operation at an occupancy of not more than one person per 150 square feet of usable floor space. If Tenant shall require air conditioning, heating or ventilation outside the hours and days above specified, Landlord shall furnish such service and Tenant shall pay to Landlord therefor such charges as may from time to time be in effect. (Landlord's current charge for off-hours HVAC service is $35.00 per hour. Landlord shall have the right to increase such cost from time to time, so as to reflect fairly actual increases in Landlord's out-of-pocket costs and expenses incurred in providing such service.) In the event Tenant introduces into the Premises personnel or equipment which overloads the capacity of the Building system or in any other way interferes with the system's ability to perform adequately its proper functions, or which affects the temperature otherwise maintained by the air conditioning system, supplementary systems may, if and as needed, at Landlord's option, be provided by Landlord, at Tenant's expense. Landlord and Tenant expressly acknowledge that the Premises will include a "computer room", which computer room will require HVAC service on a 24 hour per day basis. Accordingly, Landlord will install such computer room and a supplemental HVAC unit (the "Supplemental Unit") serving the computer room, as elements of Landlord's Work. The cost of maintaining the Supplemental Unit shall be borne by Tenant. A separate "check meter" shall be installed by Landlord, measuring Tenant's electrical usage resulting from the operation of the Supplemental Unit. Landlord shall measure Tenant's electricity usage (as shown on such check meter) from time to time and shall bill Tenant therefor by applying to such usage the rates then being charged by the electrical utility supplier) . The amount so billed shall be paid by Tenant to Landlord within thirty days after Tenant's receipt of such bill, as additional rent hereunder. The hourly charge for off-hours HVAC service specified above shall not be assessed if Tenant uses only its supplemental HVAC unit during off hours. Notwithstanding anything to the contrary set forth in the foregoing provisions of this paragraph, for the purposes of Section 14.19, below, the Supplemental Unit shall be deemed to constitute an element of Tenant's Removable Property. (b) Landlord shall also provide: (i) Hot water for lavatory purposes and cold water (at temperatures supplied by the utility service supplying same) for drinking, lavatory and toilet purposes. If Tenant uses water for any purposes other than for ordinary lavatory and drinking purposes, Landlord may assess a reasonable charge for the additional water so used, or install a water meter and thereby measure Tenant's water consumption for all purposes. In the latter event, Tenant shall pay the cost of the meter and the cost of installation thereof and shall keep such meter and equipment in good working order and repair. Tenant agrees to pay for water consumed, as shown on such meter, together with the sewer charge based on such meter charges, as and when bills are rendered, and in the event of any default in making such payment Landlord may pay such charges and collect the same from Tenant as an additional charge. 22 27 (ii) Cleaning and janitorial services to the Premises, provided the same are kept in order by Tenant, in accordance with the cleaning standards set forth in Exhibit E attached hereto. (iii) Passenger elevator service from the existing passenger elevator system, for use by Tenant in common with Landlord and other tenants of the Building. 9.5 ELECTRICITY. (a) Landlord, in its sole discretion, will either (i) furnish electricity to the Premises sufficient to operate normal lighting and business machines approved by Landlord (exclusive, however, of Tenant's electrical needs for computers and similar equipment having special power or environmental requirements), charging Tenant's Electrical Charge for such service, to be paid by Tenant in equal monthly installments on the same day in each month that rental payments are due and payable hereunder (but in no event shall Landlord be obligated to furnish electricity to supply a requirement in excess of the amount of electricity commonly supplied to office tenants in first-class office buildings), or (ii) elect, at any time during the Term, to cause electricity furnished to the Premises to be separately metered, in which event all charges for electricity consumed on the Premises will be billed directly to, and paid for by, Tenant. The cost of any such electrical meter as well as the cost of installation, repair and replacement shall be borne by Tenant, who shall reimburse Landlord for the cost thereof within 30 days after receipt of written demand therefor. (b) Whether or not Landlord is furnishing electricity to Tenant, if Tenant shall require electricity in excess of the quantity which is to be furnished as provided in Section 9.5(a), Tenant shall, upon demand, reimburse Landlord for the cost of such excess electricity. Further, if (i) in Landlord's judgment, Landlord's facilities are inadequate for such excess requirements, or (ii) such excess shall result in an additional burden on the Building's or the Office Park's utility systems or additional cost on account thereof, as the case may be, Tenant shall, upon demand, reimburse Landlord for all additional costs related thereto. Further, if Tenant requires electricity in excess of the quantity which is to be furnished as provided in Section 9.5(a) above, Landlord, at the sole cost and expense of Tenant, will furnish and install such additional wires, conduits, feeders, switchboards and appurtenances as Landlord may require to supply such additional requirements of Tenant (if electricity therefor is then available to Landlord without affecting the Office Park or Landlord's plans therefor); provided that Landlord shall have no obligation to furnish any such excess electricity unless the same shall be permitted by applicable laws and insurance regulations and shall not cause or threaten permanent damage or injury to the Building or the Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or repairs, or interfere with or disturb other tenants or occupants of the Building or the Office Park or interfere with Landlord's plans for the Office Park. (c) Landlord shall furnish and install the bulbs required within the Premises as of the Commencement Date. Thereafter, Landlord, at Tenant's expense (consisting of Landlord's out-of-pocket costs for such replacement ballasts, lamps and bulbs, plus a reasonable installation fee), shall replace and install all ballasts, lamps and bulbs (including, but not limited to, 23 28 incandescent and fluorescent) used in the Premises. All such replacements shall be of such type, color and size as are approved by Landlord. (Operating Expenses shall be reduced by the amount of any payment received by Landlord pursuant to this subsection 9.5(c), or pursuant to any corresponding provision under the Lease with any other tenant of the Building.) (d) Landlord shall not in any way be liable or responsible for any loss, damage or expense which Tenant may sustain or incur if the quantity, character, or supply of electricity is changed or is no longer available or suitable for Tenant's requirements, unless such condition results from the negligence or other tortious act of Landlord or Landlord's employees or agents. (e) Landlord shall have the right to discontinue furnishing electric power to the Premises at any time upon not less than thirty (30) days' notice to Tenant, provided Landlord shall first have arranged for the supply of power for Tenant's use to be provided to the Premises by the public utility company furnishing electric service to the Building and shall, at Tenant's expense, separately meter the Premises. If Landlord exercises such right, from and after the effective date of such termination, Landlord shall not be obligated to furnish electricity to the Premises, and Tenant shall have no obligation to pay any portion of Tenant's Electrical Charge. 9.6 PARKING. Landlord shall make available to Tenant parking on a nonexclusive basis on the Land as provided in Section 2.2 of this Lease, except that Tenant shall not have the right to make use of parking spaces (if any) marked for visitor or handicapped parking or which are otherwise regulated by Landlord. By its execution of this Lease, Landlord warrants and agrees that (i) the parking facilities serving the Building currently contain parking spaces of a number sufficient to provide at least 3.5 parking spaces for each 1000 usable square feet contained in the Building; and (ii) Landlord will not voluntarily undertake any action which would have the result of permanently reducing the number of parking spaces in the parking facility serving the Building to a number which is less than 3.5 for each 1000 usable square feet contained in the Building. 9.7 ADDITIONAL SERVICES. In the event Tenant wishes to provide outside services for the Premises over and above those services to be provided by Landlord as set forth herein, Tenant shall obtain the prior written approval of Landlord for the installation and/or utilization of such services. ("Outside services" shall include, but shall not be limited to, cleaning services, television, so-called "canned music", security services, catering and the like.) In the event Landlord approves the installation and/or utilization of such services, such installation and utilization shall be at Tenant's sole cost, risk and expense and subject to such requirements as Landlord may from time to time elect to impose in connection therewith. 9.8 INTERRUPTION OF SERVICES. Landlord reserves the right to curtail, suspend, interrupt and/or stop the supply of water, sewage, electricity, cleaning, parking and other services, and to curtail, suspend, interrupt and/or stop the use of the roads providing access to the Building, without thereby incurring any liability to Tenant, when necessary by reason of accident or emergency, or for repairs, alterations, replacements or improvements in the judgment of Landlord desirable or necessary, or when prevented from supplying such services or use by strikes, lockouts, difficulty of obtaining materials, accidents or any other cause beyond Landlord's reasonable control, or by laws, orders or inability, by exercise of reasonable diligence, 24 29 to obtain electricity, water, gas, steam, coal, oil or other suitable fuel or power, or by any other condition not reasonably within the control of Landlord. Except as expressly provided below, no diminution or abatement of rent or other compensation, nor any direct, indirect or consequential damages shall or will be claimed by Tenant as a result of, nor shall this Lease or any of the obligations of Tenant be affected or reduced by reason of, any such interruption, curtailment or suspension. Failure or omission on the part of Landlord to furnish any of the foregoing services or use shall not be construed as an eviction of Tenant, actual or constructive, nor, except as expressly provided below, entitle Tenant to an abatement of rent, nor render Landlord liable in damages, nor release Tenant from prompt fulfillment of any of its covenants under this Lease. If, there shall occur any interruption or reduction of service(s), and if (i) such interruption or reduction materially interferes with Tenant's use and enjoyment of the Premises, and (ii) such interruption or reduction shall continue until the Abatement Date (as defined below), then, commencing with the day immediately following the Abatement Date and continuing until such time as such service(s) have been restored to the extent necessary to avoid material interference with Tenant's use and enjoyment of the Premises, Tenant shall be entitled to a reasonable reduction or abatement of rent (consistent with the extent of interference with Tenant's activities). Furthermore, if such material interference with Tenant's use and enjoyment of the Premises continues until the Termination Date (as defined below) then Tenant shall have the right to terminate this Lease (which right shall be exercised, if at all, by notice to Landlord not later than the date on which service(s) have been restored to the extent necessary to avoid material interference with Tenant's use and enjoyment of the Premises). As used herein, the "Abatement Date" shall mean (x) if the interruption or reduction results from a condition reasonably within Landlord's control - that day which is five (5) days following the date on which material interference with Tenant's use and enjoyment of the Premises commences, (y) if the interruption or reduction results from a condition not reasonably within Landlord's control, and if such condition affects only the Building - that day which is seven (7) days following the date on which material interference with Tenant's use and enjoyment of the Premises commences and (z) if the interruption or reduction results from a condition not reasonably within Landlord's control, and if such condition affects the Building and other properties in the geographical area in which the Building is located - that day which is twelve (12) days following the date on which material interference with Tenant's use and enjoyment of the Premises commences. As used herein, the "Termination Date" shall mean (x) if the interruption or reduction results from a condition reasonably within Landlord's control - that day which is fifteen (15) days following the date on which material interference with Tenant's use and enjoyment of the Premises commences, (y) if the interruption or reduction results from a condition not reasonably within Landlord's control, and if such condition affects only the Building that day which is twenty-one (21) days following the date on which material interference with Tenant's use and enjoyment of the Premises commences and (z) if the interruption or reduction results from a condition not reasonably within Landlord's control, and if such condition affects the Building and other properties in the geographical area in which the Building is located - that day which is twenty-eight (28) days following the date on which material interference with Tenant's use and enjoyment of the Premises commences. 25 30 ARTICLE X INDEMNITY AND INSURANCE ----------------------- 10.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made effective according to law, Tenant agrees to indemnify and save harmless Landlord from and against all loss, costs, penalties and liability damage claims of whatever nature arising from any act, omission or negligence of Tenant or Tenant's contractors, licensees, agents, servants or employees or arising from any death, accident, injury or damage whatsoever caused to any person, or to the property of any person, occurring after the date of this Lease until the end of the Term of this Lease and thereafter, so long as Tenant is in occupancy of any part of the Premises, in or about the Premises; or arising from any death, accident, injury or damage occurring outside of the Premises but on the Property or the office Park, where such accident, damage or injury results from any act or omission on the part of Tenant or Tenant's agents or employees or independent contractors or invitees or suppliers. This indemnity shall, to the maximum extent this agreement may be made effective according to law, also extend to all loss, costs, penalties, damage and claims of whatever nature asserted against Landlord arising out of the use or occupancy of, passage or travel over or upon, the Property or the Office Park by Tenant or by any person claiming by, through or under Tenant (including, without limitation, all employees, agents, contractors and customers of Tenant), or arising out of any delivery to or service supplied to the Premises, or on account of or based on anything whatsoever done on the Premises, except if the same was caused by the negligence, fault or misconduct of Landlord, its agents, servants or employees. This indemnity and hold harmless agreement shall include indemnity against all costs, expenses and liabilities incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof with counsel approved by Landlord. 10.2 LIABILITY INSURANCE. Tenant shall keep in force, at its own expense, so long as this Lease remains in effect and during such other times as Tenant occupies the Premises or any part thereof, comprehensive general liability insurance including broad form endorsement contractual liability, with respect to the Premises, with combined single limits in an amount not less than the amount specified in Section 1.2 (and in such higher amounts as may reasonably be required by Landlord from time to time), and so-called "All Risk" insurance on (and in an amount not less than the full replacement value of) Tenant's personal property, including trade fixtures, floor coverings, furniture and other property removable by Tenant. All such insurance shall be written by companies and on forms acceptable to Landlord. Tenant will further deposit the policy or policies of such insurance or certificates thereof with Landlord, which policies shall name Landlord and/or its designees) as additional named insured, and shall also contain a provision stating that such policy or policies shall not be cancelled or amended except after thirty 30) days written notice to Landlord. If the nature of Tenant's business is such as to place all or any of its employees under the coverage of local workmen's compensation or similar statutes, Tenant shall also keep in force, at its expense, so long as this Lease remains in effect and during such other times as Tenant occupies the Premises or any part thereof, workmen's compensation or similar insurance affording statutory coverage and containing statutory limits. If Tenant shall not comply with its covenants made in this Section 10.2, Landlord may cause insurance as aforesaid to be issued, and, in such event, Tenant agrees to pay, as additional rent and charge, the premium for such insurance upon Landlord's demand. 26 31 10.3 TENANT'S RISK. To the maximum extent this agreement may be made effective according to law, Tenant agrees to use and occupy the Premises and to use such other portions of the Building, the Property and the Common Property as Tenant is herein given the right to use at Tenant's own risk; and Landlord shall have no responsibility or liability for any loss of or damage to Tenant's Removable Property (including, without limitation, damage resulting from the breaking, bursting, or leaking of pipes, conduits, electrical lines and the like or from any other cause or condition) . The provisions of this Section shall be applicable from and after the execution of this Lease and until the end of the Term, and during such further period as Tenant may use or be in occupancy of any part of the Premises or the Building. 10.4 INJURY CAUSED BY THIRD PARTIES. To the maximum extent this agreement may be made effective according to law, Tenant agrees that Landlord shall not be responsible or liable to Tenant, or to those claiming by, through or under Tenant, for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connecting with the Premises or any part of the Property or the Office Park or otherwise. 10.5 LANDLORD'S NEGLIGENCE. Notwithstanding anything to the contrary set forth in the foregoing provisions of this Article X, Landlord agrees to indemnify and hold harmless Tenant from and against all loss, cost and expense resulting from the negligence or other tortuous act of Landlord or Landlord's agents, servants or employees. ARTICLE XI LANDLORD'S ACCESS TO PREMISES ----------------------------- 11.1 LANDLORD'S RIGHTS. Landlord shall have the right to enter the Premises at all reasonable hours for the purpose of inspecting or making repairs to the same, and Landlord shall also have the right to make access available at all reasonable hours to prospective or existing mortgagees, purchasers or tenants of any part of the Property. ARTICLE XII FIRE, EMINENT DOMAIN, ETC. -------------------------- 12.1 ABATEMENT OF RENT. If the Premises shall be damaged by fire or casualty, Basic Rent payable by Tenant shall abate proportionately for the period in which, by reason of such damage, there is substantial interference with Tenant's uses of the Premises, having regard to the extent to which Tenant may be required to discontinue Tenant's use of all or a portion of the Premises, but such abatement or reduction shall end if and when Landlord shall have substantially restored the Premises to the condition which they were in prior to such damage (subject, however, to the provisions of applicable zoning and building regulations). If the Premises shall be affected by any exercise of the power of eminent domain, Basic Rent payable by Tenant shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by Tenant. 12.2 LANDLORD'S RIGHT OF TERMINATION. If (a) the Premises or (b) the Building or (c) the parking area serving the Building or (d) any roadway or other facility within 27 32 the Common Property necessary for the use and enjoyment of the Premises (hereinafter referred to as "Critical Common Facilities") are substantially damaged by fire or casualty (the term "substantially damaged" meaning damage of such a character that the same cannot reasonably be expected to be repaired within sixty (60) days from the time that repair work would commence), or if access to the Property through the Common Property is, or if (i) any part of the Building or (ii) a substantial part of the parking area serving the Building or (iii) Critical Common Facilities are, taken by any exercise of the right of eminent domain, then Landlord shall have the right to terminate this Lease (even if Landlord's entire interest in the Premises may have been divested) by giving notice of Landlord's election so to do within 90 days after the occurrence of such casualty or the effective date of such taking, whereupon this Lease shall terminate 30 days after the date of such notice with the same force and effect as if such date were the date originally established as the expiration date hereof. 12.3 RESTORATION. If this Lease shall not be terminated pursuant to Section 12.2, Landlord shall thereafter use due diligence to restore the Premises to proper condition for Tenant's use and occupation, provided that Landlord's obligation shall be limited to the amount of insurance proceeds or condemnation awards made available to Landlord therefor. If, for any reason, such restoration shall not be substantially completed within five (5) months after the occurrence of the casualty or taking (which five-month period may be extended for such periods of time as Landlord is prevented from proceeding with or completing such restoration for any cause beyond Landlord's reasonable control). Tenant shall have the right to terminate this Lease by giving notice to Landlord thereof within thirty (30) days after the expiration of such period (as so extended). Upon the giving of such notice, this Lease shall cease and come to an end without further liability or obligation on the part of either party unless, within such 30-day period, Landlord substantially completes such restoration. Such right of termination shall be Tenant's sole and exclusive remedy at law or in equity for Landlord's failure to complete such restoration. 12.4 AWARD. Landlord shall have and hereby reserves and excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover for damages to the Property and the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of taking, damage or destruction, and by way of confirming the foregoing, Tenant hereby grants and assigns, and covenants with Landlord to grant and assign to Landlord, all rights to such damages or compensation. Nothing contained herein shall be construed to prevent Tenant from prosecuting in any separate condemnation proceedings a claim for the value of any of Tenant's Removable Property installed in the Premises by Tenant at Tenant's expense and for relocation expenses, provided that such action shall not affect the amount of compensation otherwise recoverable by Landlord from the taking authority and shall be instituted in a proceeding separate and apart from Landlord. ARTICLE XIII DEFAULT ------- 13.1 TENANT'S DEFAULT. (a) If at any time subsequent to the date of this Lease any one or more of the following events (each herein referred to as a "Default of Tenant") shall happen: 28 33 (i) Tenant shall fail to pay the Basic Rent, Escalation Charges or other charges hereunder when due and such failure shall continue for seven (7) full business days after notice to Tenant from Landlord that the required payment was not made when due; or (ii) Tenant shall neglect or fail to perform or observe any other covenant herein contained on Tenant's part to be performed or observed and Tenant shall fail to remedy the same within thirty (30) days after written notice to Tenant specifying such neglect or failure (or, if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly to remedy the same and to prosecute such remedy to completion with diligence and continuity); or (iii) Tenant's leasehold interest in the Premises shall be taken on execution or by other process of law directed against Tenant; or (iv) Tenant shall make an assignment for the benefit of creditors or shall file a voluntary petition in bankruptcy or shall be adjudicated bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future Federal, State or other statute, law or regulation for the relief of debtors, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any substantial part of its property, or shall admit in writing its inability to pay its debts generally as they become due; or (v) A petition shall be filed against Tenant in bankruptcy or under any other law seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future Federal, State or other statute, law or regulation and shall remain undismissed or unstayed for an aggregate of sixty (60) days (whether or not consecutive), or if any debtor in possession (whether or not Tenant), trustee, receiver, or liquidator of Tenant or of all or any substantial part of its property or of the Premises shall be appointed without the consent or acquiescence of Tenant and such appointment shall remain unvacated or unstayed for an aggregate of sixty (60) days (whether or not consecutive); then in any such case (1) if such Default of Tenant shall occur prior to the Commencement Date, this Lease shall IPSO FACTO, and without further act on the part of Landlord, terminate, and (2) if such Default of Tenant shall occur after the Commencement Date, Landlord may terminate this Lease by notice to Tenant, and this Lease shall come to an end on the date of such notice, as fully and completely as if such date were the date herein originally fixed for the expiration of the Term; and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter provided. 29 34 (b) If this Lease shall have been terminated as provided in this Article, or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the Premises shall be taken or occupied by someone other than Tenant, then Landlord may, without notice, re-enter the Premises, either by force, summary proceedings, ejectment or otherwise, and remove and dispossess Tenant and all other persons and any and all property from the same, as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. (c) In the event of any termination resulting from a Default of Tenant, Tenant shall pay the Basic Rent, Escalation Charges and other sums payable hereunder up to the time of such termination, and thereafter Tenant, until what would have been the end of the Term in the absence of such termination, and whether or not the Premises shall have been relet, shall be liable to Landlord for, and shall pay to Landlord, as liquidated current damages, the Basic Rent, Escalation Charges and other sums which would be payable hereunder if such termination had not occurred, less the net proceeds, if any, of any reletting of the Premises for the corresponding period, after deducting all expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, advertising costs, expenses of employees, alteration costs and expenses of preparation for such reletting. Tenant shall pay such current damages to Landlord monthly on the days on which Basic Rent would have been payable hereunder if this Lease had not been terminated. (d) At any time after such termination, whether or not Landlord shall have collected any such current damages, as liquidated final damages and in lieu of all such current damages beyond the date of such demand, Tenant shall pay to Landlord upon demand an amount equal to the excess, if any (discounted to present value by application of a reasonable interest rate chosen by Landlord), of the Basic Rent, Escalation Charges and other sums as hereinbefore provided which would be payable hereunder from the date of such demand (assuming that, for the purposes of this paragraph, annual payments by Tenant on account of Taxes and Operating Expenses would be the same as the payments required for the immediately preceding Operating or Tax Year) for what would be the then unexpired Term if the same remained in effect, over the then fair net rental value of the Premises for the same period. (e) In case of any Default by Tenant, following any re-entry, termination and dispossession by summary proceedings or otherwise, Landlord may (i) re-let the Premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term of this Lease and may grant concessions or free rent to the extent that Landlord (in the exercise of reasonable business judgment) considers advisable and necessary to re-let the same and (ii) may make such alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable and necessary for the purpose of re-letting the Premises; and the making of such alterations, repairs and decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall use commercially reasonable efforts to re-let the Premises. However, so long as Landlord uses such commercially reasonable efforts, Landlord shall in no event be liable in any way whatsoever for failure to re-let the Premises, or, in the event that the Premises are re-let, for failure to collect the rent under such re-letting. Tenant hereby expressly waives any and all rights of redemption 30 35 granted by or under any present or future laws in the event of Tenant being evicted or dispossessed, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the conditions of this Lease. (f) The happening of any of the events described in paragraphs (a)(iv) or (a)(v) of this Section 13.1 with respect to either of the parties who, collectively, constitute Tenant shall constitute a Default of Tenant hereunder. Furthermore, the obligations of such parties hereunder shall be joint and several; and Landlord shall have the right to seek and obtain recovery for any obligation of Tenant hereunder from either of such parties without being required to seek or obtain recovery from the other party. (g) The specified remedies to which Landlord may resort hereunder are not intended to be exclusive of any remedies or means of redress to which Landlord may at any time be entitled lawfully, and Landlord may invoke any remedy (including the remedy of specific performance) allowed at law or in equity as if specific remedies were not herein provided for. (h) All costs and expenses incurred by or on behalf of Landlord (including, without limitation, attorneys' fees and expenses) in enforcing its rights hereunder or occasioned by any Default of Tenant shall be paid by Tenant. 13.2 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the performance of any of Landlord's obligations hereunder unless and until Landlord shall have failed to perform such obligation within thirty (30) days, or such additional time as is reasonably required to correct any such default, after notice by Tenant to Landlord specifying wherein Landlord has failed to perform any such obligations. After receipt of any such notice, Landlord shall commence the curing of any such default with reasonable promptness. ARTICLE XIV MISCELLANEOUS PROVISIONS ------------------------ 14.1 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do or permit anything to be done in or upon the Premises, or bring in anything or keep anything therein, which shall invalidate or increase the rate of property or liability insurance on the Premises or the Property above the standard rate applicable to premises being occupied for the Permitted Uses; and Tenant agrees that, in the event that Tenant shall do any of the foregoing, Tenant will promptly pay to Landlord, on demand, any such increase resulting therefrom, which shall be due and payable as an additional charge hereunder. 14.2 WAIVER. (a) Failure on the part of Landlord or Tenant to complain of any action or non-action on the part of the other, no matter how long the same may continue, shall never be a waiver by Tenant or Landlord, respectively, of any of the other's rights hereunder. Further, no waiver at any time of any provisions hereof by Landlord or Tenant shall be construed as a waiver of any of the other provisions hereof, and a waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions. The consent or approval of 31 36 Landlord or Tenant to or of any action by the other requiring such consent or approval shall not be construed to waive or render unnecessary Landlord's or Tenant's consent or approval to or of any subsequent similar act by the other. (b) No payment by Tenant, or acceptance by Landlord, of a lesser amount than shall be due from Tenant to Landlord shall be treated otherwise than as a payment on account. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full, shall be given no effect, and Landlord may accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant. The delivery of keys to any employee of Landlord or to Landlord's agent or any employee thereof shall not operate as a termination of this Lease or a surrender of the Premises. 14.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions of this Lease, on payment of the Basic Rent and Escalation Charges and other sums and charges due hereunder and observing, keeping and performing all of the other terms and provisions of this Lease on Tenant's part to be observed, kept and performed, shall peaceably and quietly have, hold and enjoy the Premises for the Term without hindrance or molestation by anyone claiming by, through or under Landlord, subject, however, to the rights of the holders of all mortgages affecting the property from time to time; provided, however, Landlord may at any time and from time to time; without the same constituting a breach of Landlord's covenant of quiet enjoyment or an actual or constructive eviction, and without incurring any liability to Tenant or otherwise affecting any of Tenant's obligations under this Lease, make such changes, alterations, additions, improvements, repairs or replacements in or to the interior and exterior of the Building (including the Premises) and the fixtures and equipment thereof, and in or to the Property and the Office Park (including, without limitation, landscaping, the construction of additional structures, signs and buildings, the relocation of access roads situated within the Office Park and the redesign or temporary closing of parking areas and other common facilities and roads serving the Building and the Office Park) as Landlord may deem necessary or desirable, and change the arrangement and/or location of entrances or passageways, doors and doorways, corridors, elevators, or other public parts of the Building, provided further, however, that there be no unreasonable interference with the conduct of Tenant's business or obstruction of access to the Premises by Tenant Nothing contained in this Section 14.3 shall be deemed to relieve Tenant of any duty, obligation or liability with respect to making any repair, replacement or improvement or complying with any law, order or requirement of any governmental or other authority. 14.4 LANDLORD'S LIABILITY. (a) Tenant specifically agrees to look solely to Landlord's then equity interest in the Property at the time owned by Landlord, for recovery of any judgment from Landlord; it being specifically agreed that neither Landlord (original or successor) nor any partner, beneficiary, shareholder, officer, director, employee or any other party holding any interest in or being affiliated with Landlord shall ever be personally liable for any such judgment, or for the payment of any monetary obligation to Tenant. The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive 32 37 relief against Landlord or Landlord's successors in interest, or to take any action not involving the personal liability of Landlord (original or successor) to respond in monetary damages from Landlord's assets other than Landlord's equity interest in the Property. (b) In no event shall Landlord ever be liable for any indirect or consequential damages suffered by Tenant from whatever cause. 14.5 RULES AND REGULATIONS. Tenant shall abide by reasonable rules and regulations from time to time established by Landlord (including, without limitation, the Rules and Regulations annexed hereto as Exhibit B), it being agreed that such rules and regulations will be established and applied by Landlord in a nondiscriminatory fashion, such that all rules and regulations shall be generally applicable to other tenants of the Building of similar nature to the Tenant named herein (having in mind the location and nature of the Premises and the nature of Tenant's business activities). Landlord agrees to use reasonable efforts to insure that any such rules and regulations are uniformly enforced, but Landlord shall not be liable to Tenant for violation of the same by any other tenant or occupant of the Building, or persons having business with them. Landlord expressly reserves the right to waive application of any rule or regulation as to any tenant. 14.6 ADDITIONAL CHARGES. If Tenant shall fail to pay when due any sums under this Lease designated as an additional charge, additional rent or Escalation Charge or any other charge hereunder, Landlord shall have the same rights and remedies as Landlord has hereunder for failure to pay Basic Rent. 14.7 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this Lease, or the application thereof to any person or circumstance, shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and shall be enforced to the fullest extent permitted by law. 14.8 PROVISIONS BINDING, ETC. Except as herein provided, the terms hereof shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of Landlord and Tenant, and, if Tenant shall be an individual, upon and to his heirs, executors, administrators, successors and assigns. Each term and each provision of this Lease to be performed by Tenant shall be construed to be both a covenant and a condition. The reference contained to successors and assigns of Tenant is not intended to constitute a consent to assignment by Tenant, but has reference only to those instances in which Landlord may later give consent to a particular assignment (or as to which Landlord's consent is not required), pursuant to Article VIII hereof. 14.9 RECORDING. Tenant agrees not to record this Lease, but each party hereto agrees, on the request of the other, to execute a so-called notice of lease in recordable form and complying with applicable law and reasonably satisfactory to Landlord's attorneys. In no event shall such document set forth the rent or other charges payable by Tenant under this Lease; and 33 38 any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease, and is not intended to vary the terms and conditions of this Lease. 14.10 NOTICES. Whenever, by the terms of this Lease, notice shall or may be given either to Landlord or to Tenant, such notice shall be in writing and shall be sent by registered mail, return receipt requested, postage prepaid, or by prepaid Federal Express or other similar overnight delivery service: If intended for Landlord, addressed to Landlord at Landlord's Address (or to such other address or addresses as may from time to time hereafter be designated by Landlord by like notice); and If intended for Tenant, addressed to Tenant at the Premises (or to such other address or addresses as may from time to time hereafter be designated by Tenant by like notice); provided, however, that, prior to the Commencement Date, notices intended for Tenant shall be addressed to Tenant's Original Address. All such notices shall be effective upon receipt by or tender for delivery to the intended recipient thereof. 14.11 WHEN LEASE BECOMES BINDING. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall become effective and binding only upon execution and delivery by both Landlord and Tenant. Except for the provisions of any written instrument or agreement executed substantially concurrently herewith by Landlord and Tenant, all negotiations, considerations, representations and understandings between Landlord and Tenant are incorporated herein and this Lease expressly supercedes any proposals or other written documents executed prior hereto. This Lease may be modified or altered only by written agreement between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof. 14.12 PARAGRAPH HEADINGS. The paragraph headings in this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease. 14.13 SUBORDINATION; ATTORNMENT. (a) Tenant's rights under this Lease are and shall always be subordinate to the operation and effect of any lease of land only or of land and buildings in a sale-leaseback transaction, and any mortgage, deed of trust or other security instrument now or hereafter placed upon the Property, or any part or parts thereof, by Landlord. This clause shall be self-operative, and no further instrument of subordination shall be required. In confirmation thereof, Tenant shall execute such further assurances as may be requisite. In addition, Tenant agrees to attorn to any successor in interest to Landlord whether by purchase, foreclosure, sale in lieu of foreclosure, power of sale, termination of any lease of land only or land and buildings in a sale- 34 39 leaseback transaction or otherwise, if so requested or required by such successor in interest, and Tenant agrees, upon demand, to execute such agreement or agreements in confirmation of such attornment as may be requested by Landlord. However, Tenant's obligation of subordination and attornment with respect to any mortgage hereafter encumbering the Property shall be conditioned upon the execution by the holder of such mortgage of an agreement, in the form then commonly used by such holder, to the effect that, notwithstanding any foreclosure of such mortgage or other exercise by the holder of its rights thereunder, Tenant shall be permitted to continue to occupy the Premises and exercise its rights hereunder, so long as there shall occur no condition which, pursuant to the terms of this Lease, would have permitted Landlord to terminate this Lease or otherwise interfere with Tenant's rights hereunder. Landlord or its mortgagee, any ground lessor or other similar secured party, may, at its option, make this Lease superior to any such mortgage, ground lease or other security instrument by giving Tenant ten (10) days prior written notice and no other documentation shall be necessary to effect such change. (b) If any person shall succeed to all or part of Landlord's interest in the Premises upon the exercise of any remedy provided for in any mortgage of the Premises now or hereafter recorded, (i) Tenant shall attorn to and recognize such person as Tenant's landlord as above provided and this Lease shall continue in full force and effect as a direct lease between such person and Tenant as fully and with the same force and effect as if this Lease had originally been entered into by such person and Tenant, except that such person shall not be liable for any act or omission of Landlord occurring prior to such person's succession to title nor be subject to any offset, defense or counterclaim accruing prior to such person's succession to title, nor be bound by any modification of this Lease or any waiver, compromise, release or discharge of any obligation of Tenant hereunder unless such modification, waiver, compromise, release or discharge shall have been specifically consented to in writing by the mortgagee under said mortgage, nor be bound by any payment of Basic Rent or Escalation Charges which Tenant has paid more than one month in advance (other than deposits in the nature of security deposits) , and (ii) such person and each person succeeding to its interest in the Premises shall not be liable for any warranty or guaranty of Landlord under this Lease and shall be liable for the performance and observance of the other covenants and conditions to be performed and observed by Landlord under this Lease only with respect to the period during which such person shall own such interest. (c) Concurrently with any notification from Tenant to Landlord concerning any default by Landlord in the performance of its obligations hereunder, Tenant shall provide a copy of such notice to any mortgagee or ground lessor of the Property of which Tenant has received notice. Thereafter, Tenant will not exercise any right to terminate this Lease on account of such default unless such mortgagee or ground lessor has failed, within a reasonable time after its receipt of such notice from Tenant, to remedy such default on behalf of Landlord. (d) Neither receipt of a collateral assignment of Landlord's interest hereunder nor receipt of transfer of title to the Property when followed by a ground lease back to Landlord shall be deemed to constitute an assumption by the mortgagee or transferee (as the case may be) of the obligations of Landlord hereunder, unless such obligations shall be expressly assumed, in writing, by such mortgagee or transferee. 35 40 (e) If, in connection with obtaining construction, interim or permanent financing for the Property, the lender shall request reasonable modifications in this Lease as a condition to such financing, Tenant will not unreasonably withhold, delay or defer its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder, or affect Tenant's rental and other monetary obligations hereunder, the Term or any of the other "business" terms contained herein, or materially adversely affect the leasehold interest hereby created or Tenant's rights hereunder. 14.14 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. (a) With reference to any assignment of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage on property which includes the Premises, Tenant agrees that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage shall never be treated as an assumption by such holder of any of the obligations of Landlord hereunder unless such holder shall, by notice sent to Tenant, specifically otherwise elect, and that, except as aforesaid, such holder shall be treated as having assumed Landlord's obligations hereunder only upon foreclosure of such holder's mortgage and the taking of possession of the Premises. (b) In the event of any transfer of title to the Property by Landlord, Landlord shall thereafter be entirely freed and relieved from the performance and observance of all covenants and obligations hereunder. Furthermore, Landlord and each succeeding holder of Landlord's interest under this Lease shall be responsible only for defaults hereunder arising during or prior to the period during which such party holds Landlord's interest hereunder. 14.15 STATUS REPORT. Tenant agrees that, at any time and from time to time at reasonable intervals, within ten (10) days after written request by Landlord, Tenant will execute, acknowledge and deliver to Landlord and/or to Landlord's designee, mortgagee or other similar secured party as may be designated by Landlord, a certificate stating that this Lease is unmodified and in full force and effect (or that the same is in full force and effect as modified, listing the instruments of modification), the dates to which rent and other charges have been paid, and whether or not, to the best of Tenant's knowledge, Landlord is in default hereunder (and if so, specifying the nature of the default), and containing such other statements as to the status of matters under this Lease as Landlord may require, it being intended that any such statement delivered pursuant to this paragraph may be relied upon by any mortgagee, ground lessor or assignee of Landlord's interest in the Premises. The failure of Tenant to execute and deliver such certificate shall constitute a default hereunder, in which event, in addition to any other remedies which Landlord may have under this Lease as a result of Tenant's default, Landlord is hereby authorized, as attorney and agent of Tenant, to execute such certificate; and in such event Tenant hereby confirms and ratifies any such certificate executed by virtue of the power of attorney hereby granted. 14.16 REMEDYING DEFAULTS. Landlord shall have the right, but shall not be required, to pay such sums or do any act which requires the expenditure of monies which may be necessary or appropriate by reason of the failure or neglect 36 41 of Tenant to perform any of the provisions of this Lease, and in the event of the exercise of such right by Landlord, Tenant agrees to pay Landlord forthwith upon demand all such sums, together with interest thereon at a rate (the "Default Rate") equal to the greater of (i) 3% over the "prime rate" in effect from time to time at Bank of Boston and (ii) 18% per annum, as an additional charge. (However, in no event shall the Default Rate be greater than the highest rate of interest which may lawfully be charged.) Any payment of Basic Rent, Escalation Charges or other sums payable hereunder not paid when due shall, at the option of Landlord, bear interest at the Default Rate from the due date thereof, which interest shall be payable forthwith upon demand by Landlord. 14.17 HOLDING OVER. Any holding over by Tenant after the expiration or earlier termination of the Term shall be treated as a daily tenancy at sufferance at a rate equal to 1 1/2 times the sum of the Basic Rent and Escalation Charges herein provided (prorated on a daily basis), and shall otherwise be on the terms and conditions set forth in this Lease as far as applicable. 14.18 WAIVER OF SUBROGATION. Landlord shall cause each insurance policy carried by it insuring the Building against loss by fire or any of the casualties covered by standard extended coverage to be written in such a manner as to provide that the insurer waives all right of recovery by way of subrogation against Tenant in connection with any loss or damage covered by the policy. Tenant shall cause each insurance policy carried by it insuring the Premises as well as the contents thereof, including trade fixtures and personal property, against loss by fire or any of the casualties covered by standard extended coverage to be written in such a manner as to provide that the insurer waives all right of recovery by way of subrogation against Landlord in connection with any loss or damage covered by the policy. Neither party hereto shall be liable to the other for any loss or damage caused by fire or any of the casualties covered by standard extended coverage, which loss or damage is covered by the insurance policies maintained by the other party, provided that such policies are not invalidated by such waiver; and provided further that, if either party shall be unable to obtain the waiver of subrogation required by this Section without additional premium therefor, then unless the party claiming the benefit of such waiver shall agree to pay such party for the cost of such additional premium within thirty (30) days after notice of the statement setting forth such requirement and the amount of additional premium, such waiver shall be of no force and effect between such party and the claiming party; and provided further that neither party hereto shall be freed of liability to the extent of any deductible under the other party's insurance, or to the extent to which such other party's loss is greater than the coverage provided by the insurance policy to which the waiver of subrogation required by this Section applies. 14.19 SURRENDER OF PREMISES. Upon the expiration or earlier termination of the Term, Tenant shall peaceably quit and surrender to Landlord the Premises in neat and clean condition and in good order, condition and repair, together with all alterations, additions and improvements which may have been made or installed in, on or to the Premises prior to or during the Term, excepting only ordinary wear and use and damage by fire or other casualty for which, under other provisions of this Lease, Tenant has no responsibility of repair or restoration. Tenant shall remove all of Tenant's Removable Property and, to the extent specified by Landlord, all alterations and additions made by Tenant and all partitions wholly within the Premises unless installed initially by Landlord in preparing the Premises for Tenant's occupancy pursuant to 37 42 Article IV; and shall repair, to the satisfaction of Landlord, any damage to the Premises or the Building (or any other portion of the Office Park) caused by such removal. Any of Tenant's Removable Property which shall remain in the Building or on the Premises after the expiration or termination of the Term shall be deemed conclusively to have been abandoned, and either may be retained by Landlord as its property or may be stored by Landlord or disposed of in such manner as Landlord may see fit, at Tenant's sole cost and expense. 14.20 BROKERAGE. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Lease other than the Broker(s) (if any) specified in Section 1.2 (the "Broker"), and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim, provided that Landlord shall be solely responsible for the payment of brokerage commissions to the Broker. 14.21 (INTENTIONALLY OMITTED.) 14.22 WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive trial by jury in any action, proceeding or counter claim brought by either of the parties hereto against the other, on or in respect to any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant hereunder, Tenant's use or occupancy of the Premises and/or any claim of injury or damages. 14.23 GOVERNING LAW. This Lease shall be governed exclusively by the provisions hereof and by the laws of the Commonwealth of Massachusetts. 14.24 (INTENTIONALLY OMITTED.) 14.25 TERMINATION OF THE EXISTING LEASE. As used herein, "Existing Lease" means the lease, dated June 30, 1992, by and between Landlord as Landlord and Molten Metals, Inc. ("Molten Metals"), as Tenant. The Premises which are the subject of the Existing Lease include the Premises. It is a condition of the obligations of Landlord and Tenant under this Lease that the Existing Lease be terminated. Accordingly, following the execution of this Lease, Landlord shall attempt to reach agreement with Molten Metals concerning the termination of the Existing Lease, on such terms and conditions as Landlord shall deem to be acceptable. At such time as such agreement has been reached, Landlord shall so notify Tenant (the date of such notification being referred to herein as the "Existing Lease Termination Date"). If, however, the Existing Lease Termination Date has not occurred within seven (7) days following the date of execution of this Lease, then this Lease shall terminate automatically, the security deposit hereunder shall be refunded to Tenant and the parties hereto shall have no further rights or obligations hereunder. By its execution of this Lease, Landlord represents and warrants that it believes in good faith that an agreement in principle has been reached with Molten Metals concerning the termination of the Existing Lease, and that Landlord knows of no reason why such an agreement 38 43 will not be finalized prior to the expiration of the seven (7) day period referred to in the immediately preceding paragraph. 14.26 LANDLORD'S CONTRIBUTION TOWARD TENANT'S RELOCATION EXPENSES. Landlord shall make a contribution toward the costs and expenses incurred by Tenant in relocating to the Premises from Tenant's existing premises at 281 Winter Street, Waltham, MA, subject to the following terms and conditions: Following the Commencement Date, Tenant shall deliver to Landlord bills, invoices and the like, demonstrating the amount of Tenant's payments to third parties in connection with the relocation of its furniture, fixtures and personal property from Tenant's existing premises to the Premises and in connection with all other activities related to Tenant's relocation to the Premises (including, by way of example but without limitation, the cost of obtaining new stationery and the cost of installing new telecommunications and data processing equipment). Following Landlord's receipt of such bills, invoices and the like, Landlord shall deliver to Tenant a contribution toward the costs and expenses reflected therein, such contribution to be in an amount equal to the smaller of (i) the costs and expenses reflected in such bills, invoices and the like and (ii) Landlord's Maximum Contribution toward Tenant's Relocation Expenses, as specified in Section 1.2, above. At Landlord's option, such contribution shall be effected by crediting toward satisfaction of any monetary obligations of Tenant hereunder which are then due but unpaid. 14.27 TENANT'S OPTION TO EXTEND. Tenant not then being in default hereunder, and this Lease then being in full force and effect, shall have the option to extend the Term for one (1) period of five (5) years (such period of extension being referred to herein as the "New Term", which New Term shall commence on the day following the expiration of the Initial Term), on all of the terms and conditions set forth herein except for adjustment of Basic Rent, as provided below. Such option shall be exercised in the following manner: (a) Not later than six (6) months prior to the then current date of expiration of the Term (the "Expiration Date"), Tenant shall provide Landlord with notice (the "Intention Notice") of Tenant's potential desire to extend the Term. If Tenant fails to deliver the Intention Notice on or before six (6) months prior to the Expiration Date, Tenant shall have no further right to extend the Term. (b) If Tenant delivers the Intention Notice in a timely manner, then, not later than five (5) months prior to the Expiration Date, Landlord shall notify Tenant, in writing, of Landlord's estimate ("Landlord's Estimate") of the fair market rental value for the Premises with respect to the New Term. (c) Within twenty-one (21) days after Tenant's receipt of Landlord's Estimate, Tenant shall inform Landlord if Tenant disputes Landlord's Estimate. Tenant's failure to notify Landlord prior to the expiration of such twenty-one (21) day period shall be deemed to constitute a waiver of Tenant's right to dispute Landlord's Estimate, and, if the Term is extended for the New Term, Basic Rent for the New Term will be deemed to have been established as the greater of (i) the Basic Rent in effect immediately prior to the Expiration Date and (ii) Landlord's Estimate. 39 44 (d) If Tenant notifies Landlord of Tenant's desire to dispute Landlord's Estimate, Landlord and Tenant shall each select an independent appraiser, and the appraisers selected by Tenant and Landlord shall mutually agree upon a third appraiser (except that, if they cannot so agree within 14 days, then the third appraiser shall be chosen by, and in accordance with the then-existing rules of, the American Arbitration Association). Each such appraiser shall be a reputable independent real estate appraiser with at least ten (10) years of experience in the appraisal of rental office space in the metropolitan Boston area. If either party fails to appoint its appraiser within twenty (21) days after Tenant notifies Landlord of Tenant's desire to dispute Landlord's Estimate (such party being referred to herein as the "failing party"), then the other party may serve notice on the failing party requiring the failing party to appoint its appraiser within ten (10) days of the giving of such notice, and if the failing party does not respond by appointment of its appraiser within said ten (10) day period, then the appraiser appointed by the other party shall be the sole appraiser, whose determination of the fair market rental value for the Premises shall be binding and conclusive upon Landlord and Tenant. The costs and expenses of each appraiser shall be borne by the party which appointed such appraiser (except that, if only one appraiser is used to determine the fair market rental value of the Premises, pursuant to the immediately preceding sentence, the costs and expenses of such appraiser shall be shared equally by Tenant and Landlord); and the costs and expenses of the third appraiser shall be shared equally by Tenant and Landlord. The appraisers so chosen shall then attempt to reach agreement as to the fair market rental value for the Premises for the New Term. If the appraisers are unable to agree unanimously upon the fair market rental value for the Premises, then the fair market rental value for the Premises shall be deemed to be the average of the three values proposed by the appraisers (provided, however, that if the lowest proposed value is less than 90% of the second-to-lowest proposed value, the lowest proposed value will be deemed to be 90% of the second-to-lowest proposed value; and if the highest proposed value is, more than 110% of the second-to-highest proposed value, the highest proposed value will be deemed to be 110% of the second-to-highest proposed value). In determining the fair market rental value for the Premises, the appraisers shall consider, without limitation, the lay-out and condition of the Premises, the age, condition and geographical location of the Building, the Escalation Base Years specified in Section 1.2 and such provisions in this Lease as may afford specific benefit to Tenant. Upon determination of the fair market rental value for the Premises by the appraisers), as provided above, the Basic Rent for the New Term shall be deemed to be the greater of (i) the Basic Rent in effect immediately prior to the Expiration Date and (ii) the fair market rental value for the Premises established by the appraiser(s). (e) Tenant shall have the right to exercise its option to extend the Term by notice to Landlord not later than that date (the "Last Notice Date") which is the later to occur of (i) thirty (30) days after the date on which the Basic Rent for the New Term has been established and (ii) four (4) months prior to the Expiration Date. If Tenant shall fail to exercise its option to extend the Term prior to the Last Notice Date, Tenant shall have no further right to extend the Term and this Lease shall expire as of the Expiration Date. 40 45 However, notwithstanding such failure by Tenant, Landlord shall have the option (which option shall be exercised, if at all, by notice to Tenant not later than thirty (30) days after the Last Notice Date), (i) to extend the Term for the New Term, for Basic Rent which is the Basic Rent in effect immediately prior to the Expiration Date, or (ii) if the Last Notice Date is a date which is later than four (4) months prior to the Expiration Date, to extend the Term for a period equal to the number of days between the date which is four (4) months prior to the Expiration Date and the Last Notice Date, for Basic Rent which is the Basic Rent in effect immediately prior to the Expiration Date. (f) If the Term shall be extended for the New Term, as provided above, the Basic Rent payable with respect to the New Term shall be in the amount determined above. If the Basic Rent payable with respect to the New Term has not been established prior to the Expiration Date, Tenant shall continue to pay Basic Rent on the basis of Basic Rent in effect immediately prior to the Expiration Date. At such time as the new Basic Rent has been established, (i) all future payments of Basic Rent will be in the amount so established and (ii) if the new Basic Rent is higher than the Basic Rent previously paid by Tenant, Tenant shall make an appropriate additional payment allocable to the period prior to establishment of the new Basic Rent, to the end that Tenant will be required to pay the new Basic Rent with respect to the entire New Term. 14.28 TENANT'S RIGHT OF FIRST OFFER. As used herein the term "Offer Space" shall mean certain space on the same floor in the Building as the Premises, all as outlined on Exhibit "H", annexed. Subject to the terms and conditions set forth below, Tenant shall have a right of first offer to add the Offer Space to the Premises; provided, however, that (a) such right shall not be exercisable if this Lease is not then in full force and effect, or if Tenant is then in default in the performance of any of its obligations under this Lease, (b) said right shall not be severed from this Lease nor separately assigned, mortgaged or transferred, (c) said right may not be exercised if any other portion of the Premises is then subject to a sublease, (d) such right shall not be available at any time within twenty-four (24) months of the date of expiration of the Initial Term unless Tenant irrevocably exercises its option to extend the Term for the New Term, either prior to or concurrently with the exercise of its rights under this Section 14.26, and (e) such right shall not be available at any time within twenty-four (24) months of the date of expiration of the New Term. Subject to the foregoing qualifications, at any time when Landlord desires to offer the Offer Space for rental by third parties, Landlord shall notify Tenant (by "Landlord's Notice") of the Basic Rent which Landlord would be willing to accept for the rental of the Offer Space (including a statement as to the method of computing the Operating Expense Base and the Tax Base (collectively, the "Bases") for determination of operating Expense Excess and Tax Excess applicable to the offer Space) for a term equal to the remainder of the Term of this Lease, and assuming that Landlord will deliver possession of the Offer Space in a condition substantially similar to the condition of the Premises immediately following completion of Landlord's Work. Tenant shall have the right to accept Landlord's offer by notice to Landlord not later than 14 days following Tenant's receipt of Landlord's Notice. If Tenant shall accept Landlord's offer, then Landlord shall improve the Offer Space in a manner consistent with Landlord's initial improvements to the Premises, and, from and after the Delivery Date (i.e. the date on which Landlord's improvements are substantially completed and the Offer Space is delivered to 41 46 Tenant), this Lease shall automatically be deemed to have been amended in the following respects: (i) Except as expressly provided in (iii), below, the Premises shall be deemed to include the Offer Space for all purposes; (ii) Basic Rent shall be increased by the Basic Rent specified in Landlord's Notice, and Tenant's Electrical Charge shall be increased by a proportion corresponding to the proportionate increase in the size of the Premises; and (iii) If the Bases specified in Landlord's Notice are identical to the Bases specified in Section 1.2, above, then Tenant's Tax and Operating Percentage shall be increased by a proportion corresponding to the proportionate increase in the size of the Premises. If, however, the Bases specified in Landlord's Notice are different from the Bases specified in Section 1.2, then Tenant's Tax and Operating Percentage shall be computed separately for the Offer Space, and, thereafter, the computations under Articles V and VI shall be made separately with respect to the Premises originally demised hereunder (using the Bases and Tenant's Tax and Operating Percentage specified in Section 1.2) and the Offer Space (using the Bases specified in Landlord's Offer and Tenant's Tax and Operating Percentage as computed by reference to the Offer Space). If, however, Tenant shall not accept Landlord's offer, then (subject to the next succeeding sentence hereof), for a period of nine (9) months following the date of Landlord's Notice, Landlord shall be permitted to enter into a lease concerning the Offer Space with any third party. However, except if a condition exists which would prevent Tenant from exercising its right of first offer (as provided in the first paragraph of this Section), Landlord shall not be permitted to enter into a lease concerning the offer Space for Basic Rent which is less than 90% of the Basic Rent specified in Landlord's Notice unless (i) Landlord first notifies Tenant (by "Landlord's Re-Offer Notice") of the Basic Rent which is then being offered to Landlord in connection with the proposed lease of the Offer Space (including the Bases applicable to the Offer Space under such offer) and (ii) Tenant fails to notify Landlord, within fourteen (14) days after Tenant's receipt of Landlord's Re-Offer Notice, of Tenant's desire to add the Offer Space to the Premises, for the Basic Rent specified in Landlord's Re-Offer Notice. If Tenant shall so notify Landlord prior to the expiration of such fourteen (14) day period, then the Offer Space shall be improved by Landlord as provided above, and, from and after the Delivery Date, Basic Rent payable by Tenant with respect to the Offer Space shall be the Basic Rent specified in Landlord's Re-Offer Notice (equitably adjusted in order to reflect (x) costs anticipated to be incurred by Landlord in order to reflect the build-out and finish required by the offeror, as compared to the build-out and finish which Landlord is required to provide to Tenant, and (y) Landlord's election (if it shall so elect), for administrative convenience, to use, as the Bases applicable to the Offer Space, the Bases specified in Section 1.2, rather than the Bases specified in Landlord's Re-Offer Notice), and Tenant's Tax and Operating Percentage shall be increased by a proportion corresponding to the proportionate increase in the size of the Premises (or, if the Bases specified in Landlord's Re-Offer Notice are different from the Bases specified in Section 1.2, and if Landlord elects to apply 42 47 the Bases specified in Landlord's Re-Offer Notice to the Offer Space following addition of the Offer Space to the Premises, then Tenant's Tax and Operating Percentage shall be computed separately with respect -to the Premises as originally demised hereunder and the Offer Space, and the computations provided in Articles V and VI shall be made separately with respect to the Premises as originally demised hereunder and the Offer Space). (In determining whether Basic Rent then being offered by a third party is such as to require Landlord's Re-Offer Notice, Landlord shall have the right to make equitable adjustments in order to reflect (x) costs anticipated to be incurred by Landlord in order to reflect the build-out and finish required by the offeror, as compared to the build-out and finish which Landlord is required to provide to Tenant, and (y) differences between the Bases included in the proposed agreement between Landlord and the offeror and the Bases specified in Landlord's Notice.) Tenant's right of first offer, as provided in this Section 14.28, shall be subordinated to the existing right of first offer in favor of Private Healthcare Systems, Inc. That is, Tenant's right of first offer with respect to the Offer Space shall be exercisable only if Private Healthcare Systems, Inc. fails to exercise its right of first offer with respect to the Offer Space. IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly executed, under seal, by persons hereunto duly authorized, in multiple copies, each to be considered an original hereof, as of the date first set forth above. TENANT: LANDLORD: Leasecomm Corporation By: /s/ Peter R. Bleyleben /s/ Desmond Taljaard ----------------------------- ----------------------------- Its President Desmond Taljaard, Trustee Hereunto duly authorized /s/ Howard Friedman ----------------------------- Howard Friedman, Trustee As Trustees as aforesaid, and not individually Boyle Leasing Technologies, Inc. By: /s/ Peter R. Bleyleben ----------------------------- Its President Hereunto duly authorized 43 48 Exhibit A [Diagram of Level 4 of 950 Winter Street] 49 EXHIBIT B CORPORATE CENTER OFFICE LEASE FOR WINTER STREET, WALTHAM, MASSACHUSETTS RULES AND REGULATIONS RULES AND REGULATIONS. Tenant agrees to observe the rights reserved to Landlord in the Lease and agrees, for itself, its employees, agents, clients, customers, invitees, contractors and guests, to comply with the following rules and regulations and with such reasonable modifications thereof and additions thereto as Landlord may make, from time to time, for the Building. (a) Any sign, lettering, curtain, picture, notice, or advertisement within Tenant's Premises (including but not limited to Tenant identification signs on doors to the Premises) which is visible outside of the Premises shall be installed at Tenant's cost and in such manner, character and style as Landlord may approve in writing. No sign, lettering, picture, notice or advertisement shall be placed on any outside window or in any position so as to be visible from outside the Building or from any atrium or lobbies of the Building. (b) Tenant shall not use the name of the Building or use pictures or illustrations of the Building in advertising or other publicity, without prior written consent of Landlord. (c) Tenant, its customers, invitees, licensees, and guests shall not obstruct sidewalks, entrances, passages, courts, corridors, vestibules, halls, elevators and stairways in and about the Building. Tenant shall not place objects against glass partitions or doors or windows or adjacent to any open common space which would be unsightly from the Building corridors or from the exterior of the Building, and will promptly remove the same upon notice from Landlord. (d) Tenant shall not make noises, cause disturbances, create vibrations, odors or noxious fumes or use or operate any electrical or electronic devises or other devices that emit sound waves or are dangerous to other tenants and occupants of the Building or that would interfere with the operation of any device or equipment or radio or television broadcasting or reception from or within the Building or elsewhere, or with the operation of roads or highways in the vicinity of the Building and shall not place or install any projections, antennae, aerials or similar devices inside or outside of the Premises. (e) Tenant shall not make any room-to-room canvass to solicit business from other tenants in the Building and shall not exhibit, sell or offer to sell, use, rent or exchange any item or services in or from the Premises unless ordinarily embraced within Tenant's use of the Premises as specified in its Lease. (f) Tenant shall not waste electricity or water and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air conditioning and 1 50 shall refrain from attempting to adjust any controls. Tenant shall keep public corridor doors closed. (g) Door keys for doors in the Premises will be furnished at the commencement of the Lease by Landlord. Tenant shall not affix additional locks on doors and shall purchase duplicate keys only from Landlord. When the Lease is terminated, Tenant shall return all keys to Landlord and will provide to Landlord the means of opening any safes, cabinets or vaults left in the Premises. (h) Tenant assumes full responsibility for protecting its space from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed and secured. (i) Peddlers, solicitors and beggars shall be reported to the office of the Building or as Landlord otherwise requests. (j) Tenant shall not install nor operate machinery or any mechanical devices of a nature not directly related to Tenant's ordinary use of the Premises without the written permission of Landlord. (k) No person or contractor not employed or approved by Landlord shall be used to perform window washing, cleaning, decorating, repair or other work in the Premises. (l) Tenant may not (without Landlord's approval therefor, which approval will be signified on Tenant Plans submitted pursuant to the Lease) and Tenant shall not permit or suffer anyone to: (1) Cook in the Premises. (2) Place vending or dispensing machines of any kind in or about the Premises; (3) At any time sell, purchase or give away, or permit the sale, purchase or gift of, food in any form; (m) Tenant shall not: (1) Use the Premises for lodging, manufacturing or for any immoral or illegal purposes. (2) Use the Premises to engage in the manufacture or sale of, or permit the use of any spirituous, fermented, intoxicating or alcoholic beverages on the Premises. (3) Use the Premises to engage in the manufacture or sale of, or permit the use of any illegal drugs on the Premises. 2 51 (n) In no event shall any person bring into the Building inflammables such as gasoline, kerosene, naphtha and benzene or explosives or firearms (except as may be used in normal security procedures) or any other article of intrinsically dangerous nature. If by reason of the failure of Tenant to comply with the provisions of this paragraph any insurance premium payable by Landlord for all or any part of the Building shall at any time be increased above normal insurance premiums for insurance not covering the items aforesaid, Landlord shall have the option to either terminate the Lease or to require Tenant to make immediate payment for the whole of the increased insurance premium. (o) Tenant shall comply with all applicable federal, state and municipal laws, ordinances and regulations and building rules, and shall not directly or indirectly make any use of the Premises which may be prohibited thereby or which shall be dangerous to person or property or shall increase the cost of insurance or require additional insurance coverage. (p) If Tenant desires signal, communication, alarm or other utility or service connection installed or changed, the same shall be made at the expense of Tenant, with approval and under direction of Landlord. (q) Bicycles shall not be permitted in the Building in other than Landlord-designated locations. (r) Tenant shall cooperate and participate in all security programs affecting the Building. (s) In any event Landlord allows one or more tenants in the Building to do any act prohibited herein, Landlord shall not be precluded from denying any other tenant the right to do any such act. (t) Tenant, or the employees, agents, servants, visitors or licensees of Tenant shall not at any time place, leave or discard any rubbish, paper, articles, or objects of any kind whatsoever outside the doors of the Premises or in the corridors or passageways of the Building. No animals or birds shall be brought or kept in or about the Building. (u) Landlord shall have the right to prohibit any advertising by Tenant which in Landlord's opinion, tends to impair the reputation of the Building or its desirability for offices, and, upon written notice from Landlord, Tenant will refrain from or discontinue such advertising. (v) Tenant shall not mark, paint or drill into, or in any way deface any part of the Building or the Premises. No boring, driving of nails or screws, cutting or stringing wires shall be permitted, except with the prior written consent of Landlord and as Landlord may direct. Tenant shall not install any resilient tile or similar floor covering in the Premises except with the prior approval of Landlord. The use of cement or other similar adhesive materials is expressly prohibited. 3 52 (w) Landlord shall have the right to limit or control the number and format of listings on the main Building directory. (x) Tenants use of delivery areas, loading areas and freight elevators shall be scheduled in advance with Landlord and shall be subject to the reasonable approval of Landlord. (y) Entry and exiting to and from the office Park and use of all roads, driveways and walkways in the office Park shall be subject to such traffic and use rules and regulations as Landlord may promulgate and provide to Tenant from time to time. 4 53 EXHIBIT C [Diagram of Floor 1 of 950 Winter Street] 54 EXHIBIT D BUILDING STANDARD TENANT IMPROVEMENTS Landlord shall install, in accordance with Approved Tenant's Plans, the following materials and work (all to building standard unless otherwise expressly stated) in the initial preparation of the premises for Tenant's occupancy. I. DRYWALL A. Furnish and install inside layer of GWB at perimeter walls, taped and ready for paint. B. Enclose interior columns with GWB satisfactory to meet code and fireproofing classification. C. Interior partitioning to the extent of 1 linear foot per 15 s.f. of useable area. Standard partitioning shall consist of 2 1/2" metal studs 16" o.c. with one layer 5/8" GWB each side. Partition will extend from the floor to 6" above the acoustic ceiling. D. Demising partitions shall extend from the floor to the underside of the structure above. They will consist of 2 1/2" metal studs 16" o.c. with one layer 5/8" GWB each side. Partitions will be fully insulated to minimize noise transmission. Demising partitions will be furnished by Landlord at common tenant walls. II. DOORS, FRAMES & HARDWARE A. Standard Tenant Entrance unit shall consist of a full height (3'0" x 8'4"), solid core, 1 3/4" plain sliced red oak door installed in a pressed metal sidelight frame. Each door will receive two (2) pairs of spring loaded hinges, a lever handled mortised lockset and a door stop. Sidelight will be (1'6" x 8'0"). B. Standard Tenant Interior doors will be installed to the extent of one door unit per every 40 l.f. of allowable interior partitioning. A standard interior door unit shall consist of a solid core, 1 3/4", full height (3'0" x 8'6") pressed metal frame. Standard hardware shall consist of two pair of hinges, a lever handled passage set and a doorstop. Hardware shall be manufactured by Almet, Sargent, Yale & Towne or equal. III. CEILINGS Accoustical ceilings shall be 3/4", 2' x 2' natural fissured tile in a "Fineline" grid or equal, as manufactured by Celotex, Armstrong or equal. 1 55 IV. FLOORING A. Carpet may be selected from a range of Building Standard colors. In the event Tenant wishes to upgrade from the Building Standard, an allowance of $15/s.y. installed, will be applied towards their selection. B. 4" vinyl/rubber cove base will be provided on both sides of Tenant's allowable interior partitioning plus all perimeter and core walls. V. PAINTING A. All wall surfaces shall receive one finish coat of Zolotone or Plextone paint over one prime coat or equal as Landlord may elect. B. Doors will have a natural finish with one (1) coat of polyurethane over one coat of clear primer/sealer. C. Door frames shall be finished in a building standard bronzetone with one (1) coat of enamel paint over one coat of primer. D. Landlord will provide the above up to the allowable quantities for walls & doors. VI. ELECTRICAL A. Lighting shall consist of recessed, fluorescent (2' x 4') fixtures with parabolic lens and return air louvre. Landlord shall provide one such fixture or every 85 s.f. of useable area. B. Wall switches of the single pole quiet type shall be provided to the extent of one per every 350 s.f. of useable area. C. Duplex receptacles shall be provided to the extent of 1/125 s.f. of useable area. Not more than 10% of the allowed receptacles may be located in the floor. D. Landlord will make necessary provisions for telephone outlets to the extent of one outlet for every 200 s.f. of useable area. Nor more than 10% of the allowed telephone boxes may be located in the floor. Installation of wiring and coordination of same is Tenant's responsibility. VII. HVAC - The building heating and air conditioning will be provided roof mounted air handling units with individual VAV boxes treating tenant spaces. A. Landlord will provide one such VAV box for every 1500 s.f. of useable area complete with thermostatic controls. B. Landlord will install all perimeter ductwork and diffusers plus one supply air diffuser for every 450 s.f. of useable area. 2 56 VIII. SPRINKLERS A. Landlord will install chrome pendant or recessed sprinkler heads to the extent of one head per 170 s.f. of useable area. IX. PLUMBING Wet stacks will be available on the typical office floor containing hot and cold water, waste and vent. Tenant dishwasher, disposal, and sink shall be connected at points set forth in the Approved Tenant's Plan by Landlord at Landlord's expense. X. SUN CONTROL Landlord will furnish and install vertical blinds, at all perimeter windows, in color and style selected by Landlord and Landlord's Architect and acceptable to Tenant. 3 57 EXHIBIT E BAY COLONY CORPORATE CENTER BUILDING SERVICES/CLEANING SPECIFICATIONS I. Premises A. Daily (Monday through Friday, Holidays excluded) 1) Empty and clean all waste receptacles and ashtrays and remove waste material from the premises. 2) Sweep and dust mop all uncarpeted areas using a dust treated mop. 3) Hand dust and wipe clean with treated cloths all furniture, telephones, files, fixtures and window sills as necessary. 4) Spot vacuum or sweep all carpeted areas. 5) Upon completion of cleaning, all lights will be turned off and doors locked leaving the premises in an orderly condition. B. Weekly 1) Vacuum all rugs and carpeted areas. 2) Remove finger marks from entrance doors and light switches. 3) Wipe clean and polish bright metal work as necessary. C. Quarterly - All high dusting not reached in daily cleaning to include: 1) Dusting of all pictures, frames, charts, graphs and similar wall hangings. 2) Dusting of all vertical surfaces such as walls, doors and ducts. 3) Dusting of all exposed pipes, air conditioning louvres and high moldings. II. Public Lobbies & Elevators A. Daily (Monday through Friday) Holidays excluded) 1) All stone, ceramic tile and other unwaxed flooring swept and or damp mopped. 2) Vacuum and spot clean all carpeted areas. 3) Wash or sweep clean all floor entry mats. 1 58 4) Empty and clean all ashtrays urns. 5) Wash and clean all water fountains and coolers. 6) Wipe clean all metal work and glass as required. 7) Clean elevators, wash or vacuum floors and wipe clean all metal, glass and/or wood. 8) Check and clean all building stairwells as required. B. Monthly 1) Wax and or spray buff all non-carpeted flooring areas. 2) Dust and clean all lobby walls and ventilating louvres. 2 59 EXHIBIT F DESCRIPTION OF LAND All that certain tract, piece or parcel of land situate in the City of Waltham, County of Middlesex, Commonwealth of Massachusetts, more particularly described as follows: Lot 1 as shown on Plan 41218-B on file with the Engineer's Office of the Middlesex South Registry District of the Land Court. 3 60 EXHIBIT G DESCRIPTION OF OFFICE PARK All those certain tracts, pieces or parcels of land situate in the City of Waltham, County of Middlesex, Commonwealth of Massachusetts, more particularly described as follows: Lots 1, 2, 3 and 4 as shown on Plan 41218-B on file with the Engineer's office of the Middlesex South Registry District of the Land Court. 4 61 EXHIBIT H [Diagram of Level 4 of 950 Winter Street] 62 SECOND AMENDMENT TO LEASE Reference is made to the following facts, documents and definitions: A. Landlord - Desmond Taljaard and Howard Friedman, Trustees of London & Leeds NDAI Bay Colony I Realty Trust. B. Tenant - Leasecomm Corporation and Boyle Leasing Technologies, Inc. C. Lease - That certain Lease, dated as of April 14, 1994, by and between Landlord as Landlord and Tenant as Tenant. Capitalized terms which are used herein but which are not otherwise defined herein shall have the meanings ascribed to such terms in the Lease. D. New Premises - Certain premises on the fourth floor of the Building, as more fully shown on Exhibit A, annexed. The New Premises contain 4,617 rentable square are feet. E. Landlord's Work - See Paragraph 1, below. F. Effective Date - The earlier to occur of (a) that date on which the New Premises are ready for occupancy as provided in subparagraph 1.B, below and (b) that date on which Tenant commences occupancy of the New Premises for the Permitted Uses. G. Landlord and Tenant wish to memorialize the agreement which has been reached concerning the addition of the New Premises to the Premises originally demised pursuant to the Lease. Now therefore, for one ($1.00) dollar and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, Landlord and Tenant hereby agree that the Lease shall be (and it hereby is) amended in the following respects: 1. A. TENANT'S PLANS. As used herein, "Tenant's Floor Plans" shall mean the plans for the New Premises specified on Exhibit B, annexed; "Tenant's Plans" shall mean architectural plans and working drawings for the preparation of the New Premises, based upon Tenant's Floor Plans and incorporating the Building Standard Tenant Improvements specified on Exhibit C, annexed; and "Landlord's Work" shall mean the work shown on Tenant's Plans. Following the execution of this Amendment to Lease, Landlord shall, at its sole cost and expense, prepare Tenant's Plans. Within five (5) business days after Tenant's receipt of Tenant's Plans, Tenant shall either approve Tenant's Plans or notify Landlord of any respect(s) in which Tenant requests that Tenant's Plans be modified. (Tenant's failure to respond prior to the expiration of such five (5) business day period shall be deemed to constitute approval of Tenant's Plans as submitted by Landlord.) Promptly following Tenant's approval of Tenant's Plans (which approval shall not be unreasonably withheld or delayed), Landlord shall, at its sole cost and expense (but subject to the provisions of subparagraph D, below) , undertake Landlord's Work. 63 B. LANDLORDS AND TENANT'S WORK; DELAYS. (a) The New Premises shall be deemed ready for occupancy when (i) the work described in Tenant's Plans, together with the common facilities for access and services to the New Premises, has been completed except for items of work and adjustment of equipment and fixtures which can be completed after occupancy has been taken without causing substantial interference with Tenant's use of the New Premises (i.e. so-called "punch list items"), and (ii) Tenant has received Landlord's certificate of the completion of the New Premises in accordance with clause (i) of this sentence, along with a Certificate of occupancy, issued by the appropriate governmental authority, confirming that the New Premises may lawfully be used for the uses intended under the Lease. Landlord shall complete as soon as conditions practicably permit all items of work excepted by said clause (i) and Tenant shall not use the New Premises in such manner as will unreasonably interfere with such completion. Landlord shall permit Tenant access for installing furnishings in portions of the New Premises when it can be done without material interference with remaining work. In connection with such access, Tenant covenants (i) to cease promptly upon request by Landlord any activity or work during any period which, in Landlord's judgment, shall interfere with or delay Landlord's prosecution or completion of Landlord's Work at the earliest possible date, (ii) that Tenant shall comply promptly with all procedures and regulations prescribed by Landlord from time to time for coordinating such work and activities with any other activity or work in the New Premises or the Building, (iii) that such access shall be at the sole risk of Tenant and shall be deemed to be a license, (iv) that Tenant shall indemnify and hold harmless Landlord from and against any and all claims arising from, or claimed to arise from or out of the performance of any work by or on behalf of Tenant in the Building or the New Premises, or which may arise by reason of any matter collateral thereto, and from and against any and all claims arising from, or claimed to arise from, any negligence, act or failure to act of Tenant, its contractors, decorators, servants, agents or employees or for any other reason whatsoever arising out of Tenant's access to or being in the New Premises or in connection with Tenant's work, (v) that Tenant shall not employ or permit the employment of any contractor, mechanic or laborer, or permit any materials in the New Premises, if the use of such contractor, mechanic or laborer would, in Landlord's opinion, create any difficulty, strike or jurisdictional dispute with other contractors, mechanics or laborers employed by Tenant, Landlord or others, or would in any way disturb, interfere with or delay any work being performed by Landlord or any other tenant or their respective contractors, and (vi) to pay any loss or additional expense caused to Landlord by any delay in the completion of Landlord's Work resulting from Tenant's access and Tenant's work. Such access by Tenant shall be deemed to be pursuant to all the provisions of the Lease and Tenant shall comply therewith, except that the obligation to pay rent shall not commence until the Effective Date. No material or equipment shall be incorporated in the New Premises in connection with the making of such installations which is subject to any lien, charge, mortgage or other encumbrance of any kind whatsoever, or subject to any conditional sale or other similar or dissimilar title retention agreement. If Tenant fails to comply with any 2 64 of the foregoing obligations, then, in addition to all other rights and remedies hereunder, Landlord may by notice to Tenant require Tenant to cease the performance of such activity and Tenant's work until Landlord's Work has been completed. (b) Tenant agrees that if the New Premises would have been ready for occupancy at an earlier date but for Tenant's Delay (as hereinafter defined), then at Landlord's option, for the purposes of determining the Effective Date, the New Premises shall be deemed to have been ready for occupancy on the date on which the New Premises would have been ready for occupancy if such delay(s) had not occurred. As used herein, the term "Tenant's Delay" means any delay in the completion of Landlord's Work resulting solely and directly from the occurrence of any of the following: (i) Tenant's request for changes in Tenant's Plans subsequent to the original approval of Tenant's Plans; (ii) Tenant's failure to approve Tenant's Plans and authorize Landlord to proceed within the time required in subparagraph A, above; (iii) Tenant's request for materials, finishes or installations other than Building Standard Tenant Improvements; (iv) The performance or delay by a person, firm or corporation employed by Tenant and/or the completion or delay of the work of said person, firm or corporation; (v) Any change by Tenant in any air conditioning requirement, or in any information furnished by Tenant; (vi) The fact that work other than Building Standard Tenant Improvements requires lead time to obtain particular materials or parts or additional time to perform in excess of the time required for the corresponding Building Standard Tenant Improvements; (vii) Installation of Tenant's telephone and/or communications systems; (viii) Any direction by Tenant that Landlord delay in proceeding with a segment of Landlord's Work in anticipation of a possible change or for any other reason; (ix) Any delay by Tenant in delivering the estimated Tenant's Immediate Contribution, as provided in subparagraph D, below, if (but only if) the estimated Tenant's Immediate Contribution exceeds $25,000; or (x) Any other act or omission of Tenant, its agents, employees, contractors or subcontractors. 3 65 (c) Landlord agrees to use reasonable diligence to cause the New Premises to be ready for occupancy on or before January 1, 1995 (the "Anticipated Delivery Date"). However, except as expressly set forth in the remainder of this subparagraph (c), Landlord shall not be subject to any liability for failure to give possession on said date, nor shall such failure affect the validity of this Amendment to Lease. If the Effective Date has not occurred within thirty (30) days following the Anticipated Delivery Date, then, as Tenant's sole remedy on account thereof, Tenant shall receive a rent credit (commencing on the Effective Date) equal to the product of $309.90 (i.e. the daily increase in Basic Rent resulting from the addition of the New Premises to the Premises) multiplied by the number of days in the period beginning on the 31st day following the Anticipated Delivery Date and ending on the day immediately preceding the Effective Date (inclusive). (d) All of Tenant's alterations, additions and installation of furnishings shall be coordinated with any work being performed by Landlord and in such manner as to maintain harmonious labor relations and not damage the Property or interfere with Building construction or operation and, except for installation of furnishings, shall, at Landlord's option, be performed by Landlord's general contractor or by contractors or workmen first approved by Landlord. If Landlord shall require that Tenant retain Landlord's contractor, Landlord's contractor shall provide its services at costs reasonably comparable to the charges imposed by other reputable contractors in the Metropolitan Boston area; and Landlord shall provide supervisory services (for which Tenant shall pay to Landlord a reasonable supervisory fee, except that Landlord shall not be entitled to receive a supervisory fee in connection with Landlord's initial improvements to the New Premises, as provided in subparagraph A, above). If Landlord shall not require that Tenant retain Landlord's contractor, Landlord shall not unreasonably withhold or delay its approval of contractors and workmen chosen by Tenant. Except for work by Landlord's general contractor, Tenant before its work is started shall: secure all licenses and permits necessary therefor; deliver to Landlord a statement of the names of all of its contractors and subcontractors and the estimated cost of all labor and material to be furnished by them; and cause each contractor to carry workmen's compensation insurance in statutory amounts covering all of the contractor's and subcontractor's employees and comprehensive public liability insurance and property damage insurance with such limits as Landlord may reasonably require (all such insurance to be written in companies approved by Landlord and insuring Landlord and Tenant as well as the contractors), and to deliver to Landlord certificates of all such insurance. Tenant agrees to pay promptly when due the entire cost of any work done on the New Premises by Tenant, its agents, employees, or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the New Premises or the Property and immediately to discharge any such liens which may so attach and, at the request of Landlord, to deliver to Landlord security satisfactory to Landlord against liens arising out of the furnishing of such labor and materials. Upon completion of any work done on the New Premises by Tenant, its agents, employees or independent contractors, Tenant shall promptly deliver to Landlord original lien releases and waivers executed by each contractor, subcontractor, supplier, materialman, architect, engineer or other party which furnished labor, materials or other services in connection with such 4 66 work and pursuant to which all liens, claims and other rights of such party with respect to labor, material or services furnished in connection with such work are unconditionally released and waived. C. WORKMANSHIP AND APPROVAL. The work required of Landlord pursuant to this Paragraph 1 shall be deemed approved by Tenant except for items specified in a written notice delivered to Landlord on or before the Defect Notice Date. As used herein, the "Defect Notice Date" shall mean: (i) with respect to cosmetic damage to the New Premises (e.g. broken windows, scratches on walls and floors and the like) - the date on which Tenant commences occupancy of the New Premises (or, if earlier, the Effective Date); (ii) with respect to defective conditions which could reasonably have been discovered through a careful visual inspection of the New Premises, but which do not constitute cosmetic damage (e.g. missing hardware, uncompleted items and the like) - that day which is fourteen (14) days following the Effective Date; and (iii) with respect to defective conditions which could not reasonably be discovered through a careful visual inspection of the New Premises (i.e. "latent defects") - that day which is three (3) months following the Effective Date. D. CONTRIBUTIONS TO LANDLORD' S WORK. As used herein the following terms shall have the following meanings: (a) Landlord's Construction Costs - All out-of-pocket costs and expenses incurred by Landlord in connection with the prosecution of Landlord's Work, including, without limitation, all "hard costs", contractors' fees, permit fees, insurance premiums and the like. (b) Landlord's Contribution - The product of $7.00 and the number of rentable square feet contained in the New Premises. (c) Landlord's Loan - The smaller of (i) the product of $5.00 and the number of rentable square feet contained in the New Premises and (ii) the excess of Landlord's Construction Costs over Landlord's Contribution. (d) Tenant's Immediate Contribution - The amount (if any) by which Landlord's Construction Costs exceed the sum of Landlord's Contribution and Landlord's Loan. Incident to the submission of proposed Tenant's Plans (and any modification thereof), Landlord shall submit to Tenant a statement of the estimated Landlord's Construction Costs. Such estimate shall be used to determine whether it is expected that any Tenant's Immediate Contribution will be required. If it is estimated that a Tenant's Immediate Contribution will be required, then the estimated amount of Tenant's Immediate Contribution shall be paid by Tenant to Landlord concurrently with Tenant's approval of Tenant's Plans and its authorization to Landlord to proceed with Landlord's Work. Such payment shall be used by Landlord to satisfy Landlord's Construction Costs if (and to the extent that) Landlord's Construction Costs actually exceed the product of $12.00 and the number of rentable square feet contained in the New Premises. If, during the course of 5 67 Landlord's Work, Tenant shall request a change in Tenant's Plans, Landlord shall notify Tenant of Landlord's good faith estimate of the anticipated increase (if any) in Landlord's Construction Costs, Landlord's Loan and Tenant's Immediate Contribution (all as defined above) resulting from such change. (The increase in Landlord's Construction Costs resulting from such change shall be comprised of the actual increase in out-of pocket costs and expenses incurred by Landlord as a result of such change, plus an additional charge of five (5%) percent of such increased out-of-pocket costs and expenses, serving as reimbursement to Landlord for additional administrative costs and supervisory fees arising on account of such change.) If Tenant shall thereafter authorize such change, then, incident to the delivery of such authorization, Tenant shall deliver to Landlord a payment in the amount of the anticipated increase in Tenant's Immediate Contribution. At such time as Landlord's Work has been completed, a final determination of the total Landlord's Construction Costs, Landlord's Loan and Tenant's Immediate Contribution shall be made. An appropriate adjustment (by additional payment or reimbursement) shall be made to correct for any difference between the actual Tenant's Immediate Contribution and all payments on account of Tenant's Immediate Contribution previously received by Landlord. Landlord shall then determine the monthly payment which would be required under a fully amortizing direct reduction loan (i.e. a loan having equal monthly payments allocable first to interest and then to principal) having an initial principal amount equal to Landlord's Loan, a term equal to the number of full calendar months then remaining in the Initial Term (starting with the first full calendar month which begins, at least 15 days following Landlord's notice to Tenant of its determination) and a fixed interest rate of 9% per annum. Commencing with the first day of the first full calendar month beginning at least 15 days following Landlord's notice of the determination provided in the immediately preceding sentence (and thereafter on the first day of each succeeding calendar month during the Initial Term), Tenant shall pay to Landlord, as additional rent under the Lease, the monthly payment so determined. Tenant's monthly payment on account of Landlord's Loan shall not be reduced or abated, notwithstanding any reduction or abatement of Tenant's other rental obligations under the Lease. Furthermore, if, for any reason, the Lease is terminated prior to the expiration of the Initial Term, then, not later than such termination date, Tenant shall pay to Landlord the entire unamortized amount of Landlord's Loan, along with any accrued but unpaid interest thereon. 2. From and after the Effective Date, the Premises shall be deemed to consist of both the Premises as heretofore demised pursuant to the Lease and the New Premises. Accordingly, from and after the Effective Date, the Lease shall be deemed to have been amended in the following respects: (a) "Size of Space" and "Tenant's Rentable Area" shall mean 21,656 square feet. (b) "Tenant's Tax and Operating Percentage" shall mean 7.923%. 6 68 (c) Basic Rent shall be the sum of (x) Basic Rent as originally specified in the Lease and (y) $113,116.50 per annum. Accordingly, the Basic Rent heretofore specified in the Lease shall be increased by $9426.38 per month. (d) Tenant's Electrical Charge shall be $18,407.60 per annum. Tenant's Electrical Charge consists of the sum of (x) $14,483.15 previously payable under the Lease and (y) $3,924.45 per annum payable as a result of the inclusion of the New Premises in the Premises. If Tenant exercises its option to extend the Term for the New Term (as provided in Section 14.27 of the Lease), then the fair market rental value of the Premises shall be determined by reference to the entire Premises, including the New Premises. 3. As used herein, the term "New Offer Space" shall mean certain space in the Building, all as outlined on Exhibit "H-1", annexed. Tenant shall have a right of first offer to add the New Offer Space to the Premises. Such right of first offer shall be upon all of the terms and conditions set forth in Section 14.28 of the Lease, which terms and conditions are incorporated herein by this reference as if fully set forth herein. 4. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Amendment to Lease other than Fallon, Hines & O'Connor and RSI, Inc. (collectively, the "Broker"), and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim, provided that Landlord shall be solely responsible for the payment of brokerage commissions to the Broker. 5. Except as expressly set forth herein, the Lease shall be and remain in full force and effect, in accordance with its terms. Executed under seal, as of the day of the 18th day of November 1994. /s/ Desmond Taljaard -------------------------------- Desmond Taljaard, Trustee /s/ Howard Friedman -------------------------------- Howard Friedman, Trustee As Trustees as aforesaid and not individually LEASECOMM CORPORATION 7 69 By: /s/ Peter R. Bleyleben -------------------------------- Its President Hereunto duly authorized BOYLE LEASING TECHNOLOGIES, INC. By: /s/ Peter R. Bleyleben -------------------------------- Its President Hereunto duly authorized 8 70 EXHIBIT [Floor plan of 950 Winter Street] 71 EXHIBIT H [Diagram of Level 4 of 950 Winter Street] 72 THIRD AMENDMENT TO LEASE REFERENCE is made to the following facts, documents and definitions: A. Original Landlord - Desmond Taljaard and Howard Friedman, Trustees of London & Leeds NDAI Bay Colony I Realty Trust. B. Tenant - Leasecomm Corporation and Boyle Leasing Technologies, Inc., collectively. C. Lease - That certain Lease, dated as of April 14, 1994, by and between Original Landlord as Landlord and Tenant as Tenant, as heretofore amended by various documents, including, without limitation, (i) that certain Amendment to Lease, dated as of November 18, 1994, and (ii) that certain Second Amendment to Lease, dated as of February 28, 1995. Capitalized terms which are used herein but which are not otherwise defined herein shall have the meanings ascribed to such terms in the Lease. D. Landlord - Shorenstein Management, Inc., as Trustee for SRI Two Realty Trust. Landlord is the current holder of Original Landlord's interest under the Lease. E. Original Premises - The premises which are currently demised to Tenant pursuant to the Lease. F. New Premises - The premises shown on Exhibit A-1, annexed, containing 13,195 rentable square feet. (Tenant expressly acknowledges that it has had a full opportunity to measure both the New Premises and the Building, and that the rentable area of the New Premises shall remain 13,195 square feet notwithstanding any subsequent measurement by Tenant.) G. Effective Date - The earliest to occur of (x) the date on which the Work is substantially completed, (y) 52 days following the date on which Landlord delivers possession of the Premises to Tenant and (z) the date on which Tenant commences occupancy of the New Premises for the Permitted Uses. At such time as the Effective Date has occurred, Landlord and Tenant shall enter into a written instrument, confirming the exact date of the Commencement Date. H. Rent Commencement Date The 31st day following the Effective Date. I. Landlord and Tenant wish to memorialize the agreement which has been reached concerning various amendments to the Lease. NOW, THEREFORE, for $1.00 and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, Landlord and Tenant hereby agree that the Lease shall be (and it hereby is) amended in the following respects: 73 1. "Landlord" shall mean Shorenstein Management, Inc., as Trustee for SRI Two Realty Trust. 2. "Landlord's Address" shall mean: c/o The Shorenstein Company 200 Park Avenue New York, NY 10166 Copies to: The Shorenstein Company 555 California Street, 49th Floor San Francisco, CA 94104 Attention: Legal Department 3. "Landlord's Representative" shall mean: William S. Elder c/o The Shorenstein Company 200 Park Avenue New York, New York 10166 4. "Landlord's Construction Representative" shall mean Richard Coleman. 5. "Tenant' s Construction Representative" shall mean Toozie Fuller. 6. A. As used herein, "Tenant's Plans" shall mean architectural plans and working drawings for the preparation of the New Premises, incorporating materials and improvements of quality and amount at least equal to Landlord's Building Standard Tenant Improvements; and the "Work" shall mean the work shown on Tenant's Plans. Following the execution of this Third Amendment to Lease, Tenant shall prepare Tenant's Plans. Tenant shall then submit the proposed Tenant's Plans for approval by Landlord, by delivering a copy of the proposed Tenant's Plans to (x) The Shorenstein Company, 1000 Winter Street, Waltham, MA 02154, Attn: Building Manager, and (y) The Shorenstein Company, 200 Park Avenue, New York, NY 10166, Attn: Richard Coleman. Landlord agrees that (i) Landlord will act diligently to attempt to comment upon or approve the proposed Tenant's Plans within five (5) business days following the date on which both addressees have received the proposed Tenant's Plans and (ii) in any event, Landlord's approval of Tenant's Plans shall not be unreasonably withheld or delayed. Promptly following Landlord's approval of Tenant's Plans, Tenant shall retain a general contractor approved by Landlord to perform the Work (Landlord agreeing hereby that such approval 2 74 shall not be unreasonably withheld or delayed; and Landlord further agreeing hereby that approval shall automatically be deemed to have been given with respect to the following general contractors: (i) J.J. Accaro, (ii) Lee Kennedy & Company, (iii) Heritage Builders and (iv) Payton Construction Company). Any material modification of Tenant's Plans (and any change of the general contractor retained by Tenant) during the course of the Work shall be subject to Landlord's approval, which approval process shall be governed by the foregoing provisions of this subparagraph A. B. Promptly following the execution of this Third Amendment to Lease, Landlord shall deliver the New Premises to Tenant, the New Premises to be then broom clean and free of furniture and other personal property. Except as expressly provided in the immediately preceding sentence, Tenant shall accept possession of the New Premises in a totally "as-is" condition, and Landlord shall have no obligation to alter, renovate or improve the New Premises in any respect. Tenant covenants (i) that Tenant shall comply promptly with all procedures and regulations prescribed by Landlord from time to time for coordinating the Work with any other activity or work in the Building, (ii) that Tenant's occupancy of the New Premises shall be at the sole risk of Tenant, (iii) that Tenant shall indemnify and hold harmless Landlord from and against any and all claims arising from, or claimed to arise from or out of, the performance of the Work by or on behalf of Tenant, or which may arise by reason of any matter collateral thereto, and from and against any and all claims arising from, or claimed to arise from, any negligence, act or failure to act of Tenant, its contractors, decorators servants, agents or employees or for any other reason whatsoever arising out of Tenant's access to or being in the New Premises or in connection with the Work, and (iv) that Tenant shall not employ or permit the employment of any contractor, mechanic or laborer, or permit any materials in the New Premises, if the use of such contractor, mechanic or laborer would, in Landlord's opinion, create any difficulty, strike or jurisdictional dispute with other contractors, mechanics or laborers employed by Tenant, Landlord or others, or would in any way disturb, interfere with or delay any work being performed by Landlord or any other tenant or their respective contractors. No material or equipment shall be incorporated in the New Premises which is subject to any lien, charge, mortgage or other encumbrance of any kind whatsoever, or subject to any conditional sale or other similar or dissimilar title retention agreement. If Tenant fails to comply with any of the foregoing obligations, then, in addition to all other rights and remedies under the Lease, Landlord may by notice to Tenant require Tenant to cease the performance of such activity and the Work until the offending condition has been remedied. Before the Work is started, Tenant shall: secure all licenses and permits necessary therefor; deliver to Landlord a statement of the names of all of 3 75 its contractors and subcontractors and the estimated cost of all labor and material to be furnished by them; and cause each contractor to carry workmen's compensation insurance " in statutory amounts covering all of the contractor's and subcontractor's employees and comprehensive public liability insurance and property damage insurance with such limits as Landlord may reasonably require but in no event less than, with respect to public liability insurance, the amount specified in Section 1.2 of the Lease (all such insurance to be written in companies approved by Landlord and insuring Landlord and I Tenant as well as the contractors), and to deliver to Landlord certificates of all such insurance. Subject to the provisions of Paragraph 7, below, Tenant agrees to pay promptly when due the entire cost of any work done on the New Premises by Tenant, its agents, employees, or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the New Premises or the Property and immediately to discharge any such liens which may so attach and, at the request of Landlord, to deliver to Landlord security satisfactory to Landlord against liens arising out of the furnishing of such labor and materials. Upon completion of any work done on the Premises by Tenant, its agents, employees or independent contractors, Tenant shall promptly deliver to Landlord original lien releases and waivers executed by each contractor, subcontractor, supplier, materialman, architect, engineer or other party which furnished labor, materials or other services in connection with such work and pursuant to which all liens, claims and other rights of such party with respect to labor, material or services furnished in connection with such work are unconditionally released and waived. C. All construction work required or permitted by this Third Amendment to Lease shall be done in a good and workmanlike manner and in compliance with all applicable laws and lawful ordinances, regulations and orders of governmental authority and insurers of the Property. Each party may (but shall have no responsibility to) inspect the work of the other at reasonable times (and without causing interference with on-going construction activities) and shall promptly give notice of observed defects. Each party authorizes the other to rely, in connection with design and construction, upon approval and other actions on the party's behalf by the Construction Representative of the party, or any person named in substitution or addition by notice to the party relying. 7. As used herein, the "Cost of Construction" shall mean all costs and expenses incurred in connection with demolition of existing improvements in the New Premises and performance of the Work, including, without limitation, insurance costs, permit fees, payments to contractors, payments to architects and other design professionals (including, without limitation, payments for the preparation of Tenant's Plans) and all other "hard" and "soft" costs (Landlord expressly agreeing hereby that no supervisory fee shall be charged by Landlord in 4 76 connection with the performance of the Work); and "Landlord's Construction Contribution" shall mean the smaller of (i) the Cost of Construction and (ii) $131,000.00. At such time as the Work has been completed, Tenant shall submit to Landlord paid bills, invoices and the like, reflecting the Cost of Construction. Within 21 days following Landlord's receipt of such materials, Landlord shall pay to Tenant Landlord's Construction Contribution. (However, (x) any payment previously made by Landlord to any third party for any cost included in the Cost of Construction shall be credited toward satisfaction of Landlord's Construction Contribution, and (y) at Landlord's option, such payment to Tenant shall be effected by application toward satisfaction of any monetary obligation of Tenant which is then due but unpaid.) 8. From and after the date on which the New Premises are delivered to Tenant, the New Premises (and, Tenant's use and occupancy thereof) shall be governed by the provisions of the Lease; and, accordingly, from and after such date, the Premises shall be deemed to consist of the Original Premises and the New Premises. However, until the Effective Date, Tenant's obligations on account of Basic Rent and Escalation Charges shall be only those obligations arising with respect to the original Premises (as heretofore provided in the Lease). 9. From and after the Effective Date, Tenant's obligations on account of Basic Rent and Escalation Charges shall consist of the sum of (i) the obligations arising with respect to the Original Premises, plus (ii) the obligations arising under the Lease with respect to the New Premises. Tenant's obligations arising with respect to the New Premises shall consist of the following: (a) For the period beginning on the Effective Date and ending on the day immediately preceding the Rent Commencement Date, Basic Rent arising in connection with the New Premises shall be $00.00. (b) For the period beginning on the Rent Commencement Date and ending on June 30, 1997, Basic Rent arising in connection with the New Premises shall be $323,277.50 per annum (i.e., $26,939.79 per month, and proportionately at such rate for any partial calendar month). (c) For the period beginning on July 1, 1997 and ending on June 30, 1998, Basic Rent arising in connection with the New Premises shall be $329,875.00 per annum (i.e., $27,489.58 per month). (d) For the period beginning on July 1, 1998 and ending on the current date of expiration of the Term, Basic Rent arising in connection with the New Premises shall be $343,070.00 per annum (i.e., $28,589.17 per month). 5 77 (e) For the purpose of determining the Tax Excess and the Operating Expense Excess arising in connection with the New Premises, Tenant's Tax and Operating Expense Percentage (determined in the manner provided in the Lease) shall be deemed to be 4.80%, the Operating Expense Base shall be deemed to be Operating Expenses incurred on account of the calendar 1996 Operating Year and the Tax Base shall be deemed to be Taxes incurred on account of the July 1, 1995 - June 30, 1996 fiscal tax year. (f) Tenant's Electrical Charge arising in connection with the New Premises shall be $11,215.75 per annum. 10. (Intentionally Omitted] 11. Tenant shall not use any portion of the Premises for the use, generation, treatment, storage or disposal of "oil", "hazardous material", "hazardous wastes", or "hazardous substances" (collectively, the "Materials"), as such terms are defined under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended, the Resource Conversation and Recovery Act of 1976, 42 U.S.C. Section 9601 et seq., as amended, and the regulations promulgated thereunder, and all applicable state and local laws, rules and regulations (now or hereafter in effect), including, without limitation, Massachusetts General Laws, Chapters 21C and 21E (the "Superfund and Hazardous Waste Laws"), without the express written prior consent of Landlord and, if required, its mortgagees, and then only to the extent that the presence of the Materials is (i) properly licensed and approved by all appropriate governmental officials and in accordance with all applicable laws and regulations and (ii) in compliance with any terms and conditions stated in said prior written approvals by Landlord or its mortgagees. Tenant shall promptly provide Landlord with copies of all notices received by it, including, without limitation, any notice of violations, notice of responsibility or demand for action from any federal, state or local authority or official in connection with the presence 6 Materials in or about the Premises or any other portion of the Property. In the event of any release of Materials upon the Premises or any other portion of the Property, or upon adjacent lands, if caused by Tenant or its agents, representatives or those claiming under Tenant, as defined in the Superfund and Hazardous Waste Laws, Tenant shall promptly remedy the problem in accordance with all applicable laws and requirements and shall indemnify, defend and hold Landlord harmless from and against all loss, costs, liability and damage, including attorneys' fees and the cost of litigation, arising from the presence or release of any Materials caused by Tenant or its agents, representatives or those claiming under Tenant in or on the Premises or any other portion of the Property, or upon adjacent lands. With respect to any release of Materials brought (or caused to be brought) upon the Premises by Tenant, such release shall automatically be deemed to have been caused by Tenant ' unless such release resulted from the negligence or other tortuous conduct of Landlord. 6 78 12. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Third Amendment to Lease other than Fallon Hines & O'Connor and Shorenstein Management, Inc. (collectively, the "Broker"), and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim; provided, however, that Landlord shall be solely responsible for the payment of any brokerage commissions which may be payable to the Broker as a result of the execution of this Third Amendment to Lease. 13. Except as expressly set forth herein, the Lease shall be and remain in full force and effect, in accordance with its terms. EXECUTED UNDER SEAL, as of April 17, 1996. SHORENSTIEN MANAGEMENT, INC., as Trustee for SRI Two Realty Trust By: /s/ Glenn Shannon -------------------------------- Glenn Shannon Its Executive Vice President Hereunto duly authorized LEASECOMM CORPORATION By: /s/ Peter R. Bleyleben -------------------------------- Its President Hereunto duly authorized BOYLE LEASING TECHNOLOGIES, INC. By: /s/ Peter R. Bleyleben -------------------------------- Its President Hereunto duly authorized 7 79 EXHIBIT A-1 [Diagram of Floor plan of 950 Winter Street Building #1] EX-10.9 10 1987 STOCK OPTION PLAN 1 EXHIBIT 10.9 BOYLE LEASING TECHNOLOGIES, INC. 1987 STOCK OPTION PLAN The purpose of this Plan is to encourage and enable certain officers, employees, Directors, consultants and agents of Boyle Leasing Technologies, Inc. (the "Company"), to require an interest in the Company through the granting of options, as herein provided, to acquire its Common Stock, $.01 par value per share (the "Common Stock"). Two separate forms of option may be granted pursuant to this Plan: Incentive Stock Options under the provisions of Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"); and Non-Qualified Options. Both forms of option will be referred to collectively hereunder as "options". 1. SHARES OF STOCK SUBJECT TO THE PLAN. The stock that may be issued and sold pursuant to options granted under the Plan shall not exceed, in the aggregate, 30,500 shares of Common Stock, which may be (i) authorized but unissued shares, (ii) treasury shares, or (iii) shares previously reserved for issue upon exercise of options under the Plan, which options have expired or terminated; provided, however, that the number of shares subject to the Plan shall be subject to adjustment as provided in Section 6. 2. ELIGIBILITY AND GRANTING OF OPTIONS. (a) Non-qualified Options may be granted hereunder to any officer, employee, Director (except a disinterested Director under Paragraph 2(b) hereof), consultant or agent of the Company. Incentive Stock Options may only be granted to employees of the Company. (b) The Board of Directors of the Company (the "Board"), acting by a majority of its disinterested Directors, shall determine the persons to be granted options (the "Optionees"), the number of shares subject to each option, whether the options shall be Incentive Stock Options or Non-Qualified Options, and the terms of the options, consistently with the provisions of this Plan. The Board may appoint from its disinterested Directors a committee of three (3) or more persons who may exercise the powers of the Board in granting options under the Plan. As used herein, a "disinterested" Director shall mean one who is not currently eligible, and has not been eligible at any time within one (1) year prior to the granting of the options in question, to receive any option granted under the Plan or any stock, stock options or stock appreciation rights under any other plan of the Company or its affiliates. The Board of Directors shall from time to time determine the disinterested Directors. For purposes of qualifying a Director as "disinterested," the Board with the consent of such Director may for a specified period of time treat such Director as being ineligible to receive option grants under any plan even though he is otherwise a member of a class of people to whom options may be granted. 3. PRICE AND LIMITATION ON GRANT OF OPTIONS. (a) The purchase price of shares which may be purchased under each Incentive Stock Option shall be at least equal to the fair market value per share of the outstanding Common Stock of the Company at the time the option is granted as determined by the Board in its discretion. The aggregate fair market value (determined as of the time the option is granted) of the stock for which an individual may be granted Incentive Stock Options in any calendar year under this Plan and all other plans of the Company and any parent or subsidiary of the Company (as defined in Section 425 of the Code) shall not exceed $100,000 plus any "unused limit carryover" as that term is defined in Section 422A of the Code. (b) The purchase price of shares which may be purchased under each Incentive Stock Option issued to a person who, immediately prior to the grant of such option owns (directly or indirectly) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of its parent or subsidiaries (a "restricted -2- 2 individual") shall be at least equal to 110 percent of the fair market value of the stock subject to the option, as determined in 3(a) above. (c) The purchase price of shares which may be purchased under each Non-Qualified Option shall be at least equal to 50 percent of the fair market value of the stock subject to the option, as determined in 3(a) above. 4. PERIOD OF OPTION AND LIMITATIONS ON RIGHT TO EXERCISE. Each Incentive Stock Option shall be execrable at such time or times as are set forth in the Incentive Stock Option Agreement attached to this Plan, but in no event after the expiration of ten (10) years from the date, such option is granted. An Incentive Stock Option granted to a restricted individual (as defined in 3(a) above) shall not be exercisable after the expiration of 5 years front the date such option is granted. A Non-Qualified Option shall be exercisable for such consideration, in such manner and at such time or times as shall be set forth in a Non-Qualified Option agreement containing such provisions as the Board shall determine in granting such an option, and may be exercisable for a period of ten years and one day from the date such option is granted, but in no event after such period. The delivery of certificates representing shares under any option will be contingent upon receipt by the Company from the Optionee (or a purchaser acting in his stead in accordance with the provisions of the option) of the full purchase price for such shares and the fulfillment of any other requirements contained in the option or in applicable provisions of law; and until such receipt of the purchase price and fulfillment of other requirements no Optionee or person entitled to exercise the option shall be, or shall be deemed to be, a holder of any shares subject to the option for any purpose. -3- 3 5. NON-TRANSFERABILITY OF OPTION. Each option granted under the Plan shall provide that it is personal to the Optionee, is not transferable by the Optionee in any manner otherwise than by will or the laws of descent and distribution and is exercisable during the Optionee's lifetime, only by him. 6. DILUTION OR OTHER ADJUSTMENTS. The terms of the options and the number of shares subject to this Plan shall be equitably adjusted in such manner as to prevent dilution or enlargement of option rights in the following instances: (a) the declaration of a dividend payable to the holders of Common Stock in stock of the same class; (b) a split-up of the Common Stock or a reverse split thereof; (c) a recapitalization of the Company under which shares of one or more different classes are distributed in exchange for or upon the Common Stock without payment of any valuable consideration by the holders thereof. The terms of any such adjustment shall be conclusively determined by the Board. 7. SHAREHOLDER APPROVAL. The Plan is subject to the approval of the shareholders of the Company, and although options may be granted prior to such approval, none may be exercised until shareholder approval has been obtained. If such approval is not given within twelve (12) months after the date hereof, the Plan and all outstanding options shall terminate and be null and void. 8. ADMINISTRATION AND AMENDMENT OF THE PLAN. The Plan shall be administered by the Board or a committee thereof as provided in Section 2, which shall effect the grant of options under the Plan, determine the form of options to be granted in each case, and make any other determination under or interpretation of any -4- 4 provision of the Plan and any option. The Board or such committee shall maintain separate records with respect to Incentive Stock Options and Non-Qualified Options granted under the Plan to facilitate determination of the appropriate tax treatment for such options. Any of the foregoing actions taken by the Board or such committee shall be final and conclusive. The Board may amend and make such changes in and additions to the Plan as it may deem proper and in the best interest of the Company; provided, however, that no such action shall adversely affect or impair any options theretofore granted under the Plan without the consent of the Optionee; and provided, further, that no amendment (i) increasing the maximum number of shares which may be issued under the Plan, except as provided in Section 6, (ii) extending the term of the Plan or any option, (iii) changing the minimum exercise price of Incentive Stock Options to be granted under the Plan, or (iv) changing the requirements as to eligibility for participation in the Plan (except as provided in Section 2(b)), shall be adopted without the approval of the shareholders of the Company. 9. EXPIRATION AND TERMINATION OF THE PLAN. Options may be granted under the Plan at any time, or from time to time, within ten (10) years from the date the Plan is adopted or the date on which it is approved by the shareholders of the Company, whichever is earlier, as long as the total number of shares purchased under the Plan and subject to outstanding options under the Plan does not exceed 30,500 shares of the Common Stock of the Company, subject to adjustment as provided in Section 6. The Plan may be abandoned or terminated at any time by the Board, except with respect to any options then outstanding under the Plan. -5- 5 10. EFFECT OF CERTAIN TRANSACTIONS. If the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if the Company is liquidated or sells or otherwise disposes of all or substantially all of its assets to another corporation while unexercised Options remain outstanding under the Plan, (i) subject to the provisions of clause (iii) below, after the effective date of such merger, consolidation or sale, as the case may be, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares of Common Stock received pursuant to the terms of the merger, consolidation or sale; (ii) the Board may waive any discretionary limitations provided in the stock option agreement so that all Options from and after a date prior to the effective date of such merger, consolidation, liquidation or sale, as the case may be, specified by the Board, shall be exercisable in full; and (iii) all outstanding Options may be cancelled by the Board as of the effective date of any such merger, consolidation, liquidation or sale provided that notice of such cancellation shall be given to each holder of an Option not less than thirty (30) days preceding the effective date of such merger, consolidation, liquidation, sale or disposition and provided that the Board may in its sole discretion waive any discretionary limitations provided in the stock option agreement with respect to any Option so that such Option shall be exercisable in full or in part as the Board may determine during such thirty (30) day period. -6- EX-10.10 11 FORM OF GRANT UNDER 1987 STOCK OPTION PLAN 1 EXHIBIT 10.10 NON-QUALIFIED STOCK OPTION TO PURCHASE SHARES OF COMMON STOCK UNDER BOYLE LEASING TECHNOLOGIES, INC. 1987 STOCK OPTION PLAN AND CONFIDENTIALITY AGREEMENT PART A STOCK OPTION GRANT - ----------------- ------------------ NO. OF SHARES DATE Pursuant to its Stock Option Plan (the "Plan"), Boyle Leasing Technologies, Inc. (the "Company"), which term shall include its successors as provided in the Plan, hereby grants to _________________________ (the "Optionee") an Option to purchase prior to a date of ten years and one day from the date of the grant (the "Expiration Date") all or any part of _________ shares of the Common Stock of the Company (the "Option Shares") at a price of $_______ per share ("Option Price") in accordance with the schedule set forth in Section 1 and subject to the terms and conditions set forth hereinafter and in the Plan. 1. VESTING SCHEDULE. Subject to the determination of the Company to accelerate the vesting schedule hereunder due to other circumstances, this Option shall be vested and exercisable with respect to the following percentages of the Option Shares during the following periods determined from the date of this Option: (i) 20% of such total number upon or after the expiration of one year from the date of this option grant; (ii) An additional 20% of such total number upon or after the expiration of two years from the date of this option grant; (iii) an additional 20% of such total number upon or after the expiration of three (3) years from the date of this option grant; (iv) an additional 20% of such total number upon or after the expiration of four (4) years from the date of this option grant; -1- 2 (v) an additional 20% of such total number upon or after the expiration of five (5) years from the date of this option grant; (vi) the above percentages are cumulative so that the failure of the Optionee in any year to exercise this option for all or any portion of the total number of shares represented hereby shall not prejudice his right to acquire in any period such number of shares which when added to the number of share acquired by the Optionee hereunder in any prior period, if any, shall not exceed that percentage of the total number of shares represented hereby as is equal to: (a) 40% thereof upon or after the expiration of two years from the date of this grant, (b) 60% thereof upon or after the expiration of three years from the date of the grant, (c) 80% thereof upon or after the expiration of four years from the date of this grant, (d) 100% thereof upon or after the expiration of five years from the date of the grant. In any event, this Option shall become fully vested and exercisable with respect to all of the Option Shares five years after the date hereof. Once vested, options shall continue to be exercisable at any time or times prior to the Expiration Date. 2. MANNER OF EXERCISE. The Optionee may exercise this Option only in the following manner: From time to time prior to the Expiration Date of this Option, the Optionee may give written notice to the Company of his election to purchase some or all of the vested Option Shares purchasable at the time of such notice. Said notice shall specify the number of shares to be purchased and shall be accompanied by payment therefor in cash or in shares of the Company's Common Stock, valued at their fair market value on the date of exercise as determined in good faith by the Board of Directors of the Company or a Committee thereof acting under the Plan. No certificates for the shares so purchased will be issued to Optionee until the Company has completed all steps required by law to be taken in connection with the issue and sale of the shares, including without limitation, if said shares have not been registered under the Securities Act of 1933, as amended, -2- 3 receipt of a representation from the Optionee upon each exercise of this Option that he is purchasing the shares for his own account and not with a view to any resale or distribution thereof, legending of any certificate representing said shares, and the imposition of a stop transfer order with respect thereto, to prevent a resale or distribution in violation of Federal or state securities laws. If requested upon the exercise of the Option, certificates for shares may be issued in the name of the Optionee jointly with another person with rights of survivorship or in the name of the executor or administrator of his estate, and the foregoing representations shall be modified accordingly. 3. TRANSFERABILITY. This Option is personal to Optionee, is not transferable by the Optionee in any manner by operation of law or otherwise, and is exercisable, during the Optionee's lifetime, only by him. 4. OPTION SHARES. The shares of stock which are the subject of this Option are shares of Common Stock of the Company as constituted on the date of this Option, subject to adjustment as provided in Section 6 of the Plan. 5. EFFECT OF CERTAIN TRANSACTIONS. If the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if the Company is liquidated or sells or otherwise disposes of all or substantially all of its assets to another corporation while this Option remains outstanding, (i) subject to the provisions of clause (iii) below, after the effective date of such merger, consolidation or sale, as the case may be, the holder of this Option shall be entitled, upon exercise of such Option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares of Common -3- 4 Stock received pursuant to the terms of the merger, consolidation or sale; (ii) the Board may waive any discretionary limitations in this stock option agreement so that the Option shall be exercisable in full; and (iii) the Option may be cancelled by the Board as of the effective date of any such merger, consolidation, liquidation or sale provided that notice of such cancellation shall be given to the holder not less than thirty (30) days preceding the effective date of such merger, consolidation, liquidation, sale or disposition and provided that the Board may in its sole discretion waive any discretionary limitations imposed in this stock option agreement so that such Option shall be exercisable in full or in part as the Board may determine during such thirty (30) day period. 6. STOCK RESTRICTION . (a) Optionee represents and warrants that he is acquiring the Shares of his own account for the purpose of investment and not with a view to resale or distribution. (b) The certificates evidencing the Shares shall be endorsed with a legend, in addition to any other legends required by this Agreement, substantially as follows: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT." (c) Optionee understands and agrees that neither the Company nor any agent of the Company shall be under any obligation to recognize any transfer of any of the Shares if, in the opinion of counsel for the Company, such transfer would result in violation by the Company of any federal or state law with respect to the offering, issuance or sale of securities. -4- 5 7. MISCELLANEOUS. Notices hereunder shall be mailed or delivered to the Company at its principal place of business, 950 Winter Street, Waltham, MA 02154, and shall be mailed or delivered to Optionee at his address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing. PART B: CONFIDENTIALITY AND NON-COMPETITION 1. REPURCHASE OF OPTIONEE'S STOCK BY THE COMPANY. The term "affiliation" as used in this Part B shall mean, and include any one or more of the following: employment by the Company, service as a member of the Board of Directors of Company or of any Advisory Board of the Company, or engagement by the Company as a consultant. The term "affiliate" shall mean any person having an affiliation with the Company. 1.1 REPURCHASE OPTION UPON TERMINATION OF AFFILIATION. Upon termination of the Optionee's affiliation with the Company at any time, by either the Company or the Optionee, for any reason including death, the Company shall have the option to repurchase (hereinafter called the "Repurchase Option") some or all of the Optionee's Stock at a per share price determined in accordance with Section B.1.2 hereof. 1.2 REPURCHASE OPTION PRICE PER SHARE. The repurchase price per share (the "Repurchase Price") shall be the fair market value of a share of the Company's Common Stock as of the date of termination of the Optionee's affiliation with the Company as determined in good faith by the Board of Directors of the Company. 1.3 ELECTION OF REPURCHASE OPTION. In the event the Company is entitled to and does elect to exercise the Repurchase Option, it shall give to the Optionee or his estate a written notice within sixty (60) days of the Optionee's termination specifying the number of shares which the Company elects to purchase and a date for closing hereunder, which date shall not be more than -5- 6 fourteen (14) calendar days after the giving of such notice. The closing shall take place at the office of the Company, or such other place as shall be mutually agreed upon. The Repurchase Price shall be paid in full in cash or, at the election of the Company, by the promissory note of the Company payable to the order of the Optionee or his estate in not more than thirty-six (36) equal monthly installments with simple interest to be charged on the unpaid balance at a rate of interest equal to the prime rate charged by the Bank of Boston on the date of the closing, payable with each installment. The first such installment shall be due and payable on the first day of the month following the date of the closing as hereinbefore provided. Such note shall provide that the Company shall provide that the Company shall have the right to pay the principal, or any portion thereof, at any time or times; that upon default for thirty (30) days in the payment of any such installment or of the interest thereon, or in the event of bankruptcy, receivership, or dissolution of the Company, or if the Company shall make an assignment for the benefit of its creditors, the entire balance then remaining unpaid shall become due and payable forthwith at the option of the holder of the note; and that presentment, protest and notice of protest and nonpayment are waived. If, at the closing under this Section B.1.3, the Repurchase Price is paid in full in cash, the Optionee shall deliver to the Company all of the certificates of Stock and stock powers of the Optionee held by the Optionee that the Company is thereby repurchasing, or if, at the closing, any portion of the Repurchase Price is not paid in cash, the Company's attorneys shall retain and hold all of the certificates of Stock of the Optionee and all stock powers that the Company has elected to repurchase as collateral security for the payment of the Repurchase Price and any interest thereon until the Company shall have paid such price and interest in full. As soon as payment of said price and interest shall be made in full the Company's attorneys shall deliver to the Company any and all of the certificates of Stock and stock powers of the Optionee that the Company has repurchased. In the event that the balance of the note, including interest thereon, shall be accelerated and such balance shall remain unpaid for a period of thirty (30) days -6- 7 thereafter, the Optionee or his estate may cause to be hold at public or private sale the Stock held by the Company's attorneys as security hereunder for such note. The proceeds of any such sale, less the reasonable expenses incurred in connection therewith, shall be applied toward the payment of the balance due under such note and the excess, if any, shall be turned over to the Company. 1.4 DISPOSITION OF THE OPTIONEE'S STOCK UPON COMPANY'S ELECTION NOT TO REPURCHASE FOLLOWING TERMINATION. Where the Optionee's affiliation has been terminated for any reason including death and where the Company has elected not to repurchase some or all of his Stock under its Repurchase Option, all restrictions on the transfer of such Stock under this Agreement shall be terminated. The Company's attorneys shall remove from the certificate or certificates representing such Stock the legend set forth in Paragraph 4 hereof and deliver the Stock to the Optionee forthwith. 2. COMPANY'S RIGHT OF FIRST REFUSAL UPON PROPOSED SALE OF STOCK. 2.1 OPTION AND RIGHT OF FIRST REFUSAL. Except as otherwise provided herein, the Company is hereby granted the option and right to purchase any or all of the shares of the Optionee's Stock that the Optionee proposes to sell, assign, transfer or dispose of in any manner at any time before or after termination of the Optionee's affiliation by the Company. The Optionee shall deliver to the Company, not less than sixty (60) days prior to the anticipated date of consummation of a proposed sale, assignment, transfer or other disposition, a written notice setting forth the anticipated date of such transaction, the number of shares of Stock that are to be the subject of such transaction, the names and addresses of the prospective parties thereto, the proposed consideration and terms of payment and other material facts related thereto (the "Notice of Transaction"). The Company shall have the right to exercise the option created hereunder by delivering to the Optionee, within thirty (30) days of delivery of such Notice of Transaction, a written notice -7- 8 indicating that it is exercising this option and setting forth the number of shares to be acquired (the "Notice of Exercise"). The purchase price for the shares shall be the purchase price set forth in the Notice of Transaction which has been agreed to by the prospective parties (the "Offer Price"). At its option, the Company may pay the Offer Price either in cash or by issuance of a thirty-six month promissory note as described in Section B.1.3 hereof. The Company's election with respect to form of payment shall be set forth in the Notice of Exercise. The closing of the option created hereunder shall take place at the office of the Company or at such other location as the Company and the Optionee mutually shall agree not more than thirty (30) days after the delivery by the Company of the Notice of Exercise. If, at the closing under this Section B.2.1, the shares are purchased by the Company by payment in full in cash, the Optionee shall deliver to the Company all of the certificates of Stock and stock powers of the Optionee that the Company is hereby repurchasing, or if, at the closing, any portion of the Offer Price is not paid in cash, the Company's attorneys shall retain and hold all of the certificates of Stock of the Optionee and all stock powers that the Company has elected to repurchase as collateral security for the payment of the Offer Price and any interest thereon until the Company shall have paid said Offer Price and interest in full. As soon as payment of said Offer Price and interest shall be made in full, the Company's attorneys shall deliver to the Company any and all of the Certificates of Stock and stock powers of the Optionee that the Company has repurchased. In the event that the balance of the note, if any, including interest thereon, shall be accelerated and such balance shall remain unpaid for a period of thirty (30) days thereafter, the Optionee may cause to be sold at public or private sale the Stock held as security hereunder for such note. The proceeds of any such sale, less the reasonable expenses incurred in connection therewith, shall be applied toward the payment of the balance due under such note and the excess, if any, shall be turned over to the Company. 2.2 DISPOSITION OF OPTIONEE'S STOCK UPON COMPANY'S ELECTION NOT TO REPURCHASE PURSUANT TO ITS RIGHT OF FIRST REFUSAL. If, within thirty (30) days after the Company receives the -8- 9 Optionee's Notice of Transaction, the Company has not delivered its Notice of Exercise to the Option as to some or all of his Stock, then the Optionee may sell all or a part of his shares to the prospective parties at the Offer Price within ninety (90) days of the date of the Notice of Transaction, and all restrictions on the transfer of such shares under this Agreement shall be terminated. All shares not purchased by the Company or prospective parties at the Offer Price hereunder shall remain subject to the terms of this Agreement. 3. TRANSFERS IN VIOLATION OF THIS AGREEMENT. In addition to any other legal or equitable remedies which they may have, the Company or the Stockholders may enforce their respective rights by actions for specific performance (to the extent permitted by law) and the Company may refuse to recognize any transferee as one of its Stockholders for any purpose, including, without limitation, for purposes of dividend and voting rights, until all applicable provisions of this Agreement have been complied with. 4. LEGEND TO BE AFFIXED TO OPTIONEE'S STOCK. In addition to the legend required by A.6(b) of this Agreement, the following legend shall be displayed prominently on each Certificate of Stock purchased by or otherwise transferred to the Optionee under this Agreement: The shares represented by this certificate are subject to restriction on transfer set forth in the Non-Qualified Stock Option Grant and Confidentiality Agreement dated ___________, 1995, a copy of which will be furnished by the Company to the holder of this certificate upon written request and without charge. 5. CONFIDENTIALITY; PROPERTY RIGHTS. The Optionee agrees that he shall not directly or indirectly disclose any of the products, designs, techniques and trade secrets of the Company, nor use them in any way, either during the term of his affiliation with the Company or at any time thereafter, except as required in the course of his affiliation with the Company. All files, programs, software, records, documents -9- 10 and similar items relating to the business of the Company, including, but not limited to, lists of current and prospective customers, whether prepared by the Company or otherwise, coming into his possession, shall remain the exclusive property of the Company and shall not be removed from the premises of the Company under any circumstances whatsoever without the prior written consent of the Company, or except in his authorized capacity as an affiliate of the Company. 6. NONCOMPETITION. 6.1 COVENANTS NOT TO COMPETE. The Optionee covenants and agrees as follows: (a) that he will not, during the term of his affiliation with the Company and for a period of two (2) years immediately thereafter, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity ("directly or indirectly"), either (i) engage or participate in any business that is in competition in any manner whatsoever with the business of the Company or (ii) have any professional contract or relationship with any accounts of the Company for himself, directly or indirectly, or with or in conjunction with any other person, persons, firm, company, partnership or corporation engaged in any business that is in competition in any manner with the business of the Company or from time to time handled by the Company during the term of the Optionee's affiliation with the Company; (b) that he will not, during the term of his affiliation with the Company and for one (1) year immediately thereafter, directly or indirectly, or in conjunction with any other person, persons, firm, company, partnership or corporation call upon to sell, lease or license or endeavor to sell, lease or license to any of the customers, prospective customers (i.e., any company that has been contacted by the Company during a one year period prior to a contact by the Optionee) of the Company the same types of products and services provided by the Company as of the date hereof or provided by the Company during the term of this Agreement; -10- 11 (c) the Optionee recognizes and acknowledges that the Company's Confidential Information (including, but not limited to, lists of the Company's customers and prospective customers and the Company's specially designed computer software) is valuable, special and unique to the Company. The Optionee will not during the term of his affiliation with the Company or at any time thereafter disclose any Confidential Information to any person, persons, firm, corporation, partnership, association or other entity for any reason or purpose whatsoever. In the event of a breach or threat of breach by the Optionee of the provisions of this Section B.6(c), the Company shall be entitled to an injunction restraining the Optionee from disclosing in whole or in part any Confidential Information and/or from otherwise violating the terms of this Agreement. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach including the recovery of damages from the Optionee. 6.2 INDEPENDENT COVENANTS. The foregoing covenants shall be construed as covenants independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Optionee against the Company (whether predicated on this Agreement or otherwise) shall not constitute a defense to the enforcement by the Company of the foregoing covenants. In the event that the Optionee leaves the employ of the Company by his own request, at the request of the Company or otherwise, the foregoing covenants shall remain in full force and effect as independent covenants, regardless of any other covenants, terms, or conditions in this Agreement or any other Agreement. 7. GENERAL PROVISIONS. 7.1 NOTICE. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, addressed to the other party hereto at -11- 12 his or its address as listed below or at such other address as such party may designate by ten (10) days advance written notice to the other party hereto. 7.2 FURTHER AGREEMENTS. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the intent of this Agreement. 7.3 WAIVER, MODIFICATION AND TERMINATION. The Company, by vote of its Board of Directors, and the Optionee, by written consent, may waive their respective rights hereunder, either generally or with respect to one or more specific transfers which have been proposed, attempted or made. This Agreement may be modified or terminated by vote of the Board of Directors of the Company and the written consent of the Optionee, if the Optionee is still affiliated by the Company or otherwise subject to a provision of this Agreement. This Agreement shall terminate automatically upon the occurrence of any of the following events: (a) The dissolution of the Company; or the appointment of a receiver of the property of the Company; or the assignment by the Company of its assets for the benefit of creditors or the filing by the Company of a petition, or the approval by a court of competent jurisdiction of a petition filed against the Company, under any bankruptcy or insolvency laws; and (b) The mutual consent of the Company and the Optionee to the termination of this Agreement. Upon termination of this Agreement all obligations and rights of the Company and the Optionee hereunder shall cease, except that those obligations under both Sections B.5 and B.6 hereof shall continue until the times specified therein, and any obligations of the Company to pay for Stock that arose under Sections B.1 and B.2 shall survive. 7.4 PROHIBITION BY LAW OF REPURCHASE BY THE COMPANY. The Company may not elect to repurchase the Stock under this Agreement if such repurchase would violate any applicable provisions of law with respect to minimum capital requirement and use of corporate funds to repurchase the Company's shares. -12- 13 7.5 GOVERNING LAW, COUNTERPARTS, ETC. (a) This Agreement shall be construed under and governed by the laws of the Commonwealth of Massachusetts. (b) This Agreement may be executed in one or more counterparts each of which shall be deemed an original and all of which together shall constitute a single instrument. (c) In case any term of this Agreement shall be held invalid, illegal or unenforceable in whole or in part, neither the validity of the remaining part of such a term nor the validity of any other term of this Agreement shall in any way be affected thereby. (d) This Agreement shall insure to the benefits of and be binding upon the successors and assigns of the Company and the heirs, executors and administrators of the Optionee. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Boyle Leasing Technologies, Inc. By:_________________________________ President ____________________________________ Optionee ____________________________________ Address ____________________________________ City/State/Zip -13- 14 INCENTIVE STOCK OPTION TO PURCHASE SHARES OF COMMON STOCK UNDER BOYLE LEASING TECHNOLOGIES, INC. 1987 STOCK OPTION PLAN AND CONFIDENTIALITY AGREEMENT PART A STOCK OPTION GRANT - ----------------- ------------------ NO. OF SHARES DATE Pursuant to its 1987 Stock Option Plan (the "Plan"), Boyle Leasing Technologies, Inc. (the "Company"), which term shall include its successors as provided in the Plan, hereby grants to _________________________ an Option to purchase prior to a date of ten years from the date of the grant (the "Expiration Date") all or any part of _________ shares of the Common Stock of the Company (the "Option Shares") at a price of $_______ per share ("Option Price") in accordance with the schedule set forth in Section 1 and subject to the terms and conditions set forth hereinafter and in the Plan. 1. VESTING SCHEDULE. Subject to the determination of the Company to accelerate the vesting schedule hereunder due to other circumstances, this Option shall be vested and exercisable with respect to the following percentages of the Option Shares during the following periods determined from the date of this Option: (i) 20% of such total number upon or after the expiration of one year from the date of this option grant; (ii) An additional 20% of such total number upon or after the expiration of two years from the date of this option grant; (iii) an additional 20% of such total number upon or after the expiration of three (3) years from the date of this option grant; (iv) an additional 20% of such total number upon or after the expiration of four (4) years from the date of this option grant; (v) an additional 20% of such total number upon or after the expiration of five (5) years from the date of this option grant; -1- 15 (vi) the above percentages are cumulative so that the failure of the Optionee in any year to exercise this option for all or any portion of the total number of shares represented hereby shall not prejudice his right to acquire in any period such number of shares which when added to the number of share acquired by the Optionee hereunder in any prior period, if any, shall not exceed that percentage of the total number of shares represented hereby as is equal to: (a) 40% thereof upon or after the expiration of two years from the date of this grant, (b) 60% thereof upon or after the expiration of three years from the date of the grant, (c) 80% thereof upon or after the expiration of four years from the date of this grant, (d) 100% thereof upon or after the expiration of five years from the date of the grant. In any event, this Option shall become fully vested and exercisable with respect to all of the Option Shares five years after the date hereof. Once vested, options shall continue to be exercisable at any time or times prior to the Expiration Date. 2. MANNER OF EXERCISE. The Optionee may exercise this Option only in the following manner: From time to time prior to the Expiration Date of this Option, the Optionee may give written notice to the Company of his election to purchase some or all of the vested Option Shares purchasable at the time of such notice. Said notice shall specify the number of shares to be purchased and shall be accompanied by payment therefor in cash or in shares of the Company's Common Stock, valued at their fair market value on the date of exercise as determined in good faith by the Board of Directors of the Company or a Committee thereof acting under the Plan. No certificates for the shares so purchased will be issued to Optionee until the Company has completed all steps required by law to be taken in connection with the issue and sale of the shares, including without limitation, if said shares have not been registered under the Securities Act of 1933, as amended, receipt of a representation from the Optionee upon each exercise of this Option that he is purchasing the shares for his own account and not with a view to any resale or distribution -2- 16 thereof, legending of any certificate representing said shares, and the imposition of a stop transfer order with respect thereto, to prevent a resale or distribution in violation of Federal or state securities laws. If requested upon the exercise of the Option, certificates for shares may be issued in the name of the Optionee jointly with another person with rights of survivorship or in the name of the executor or administrator of his estate, and the foregoing representations shall be modified accordingly. 3. TRANSFERABILITY. Except as provided in Section 4, this Option is personal to Optionee, is not transferable by the Optionee in any manner by operation of law or otherwise, and is exercisable, during the Optionee's lifetime, only by him. 4. TERMINATION OF EMPLOYMENT. This Option, as to any shares not theretofore purchased, shall terminate whenever Optionee is no longer employed by the Company or a subsidiary as defined in the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that if such termination of employment results from Optionee's death or disability as defined in Section 105 of the Code this Option may be exercised by the Optionee or his personal representative within six (6) months after his death or disability, or until the Expiration Date, whichever first occurs, but only to the extent that this Option was exercisable by the Optionee on the date of his death or disability. No Option will confer upon any Optionee any right with respect to continuance of employment by the Company or a subsidiary, nor will it interfere in any way with the right of his employer to terminate his employment at any time. 5. OPTION SHARES. -3- 17 The shares of stock which are the subject of this Option are shares of Common Stock of the Company as constituted on the date of this Option, subject to adjustment as provided in Section 6 of the Plan. 6. EFFECT OF CERTAIN TRANSACTIONS. If the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if the Company is liquidated or sells or otherwise disposes of all or substantially all of its assets to another corporation while this Option remains outstanding, (i) subject to the provisions of clause (iii) below, after the effective date of such merger, consolidation or sale, as the case may be, the holder of this Option shall be entitled, upon exercise of such Option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares of Common Stock received pursuant to the terms of the merger, consolidation or sale; (ii) the Board may waive any discretionary limitations in this stock option agreement so that the Option shall be exercisable in full; and (iii) the Option may be cancelled by the Board as of the effective date of any such merger, consolidation, liquidation or sale provided that notice of such cancellation shall be given to the holder not less than thirty (30) days preceding the effective date of such merger, consolidation, liquidation, sale or disposition and provided that the Board may in its sole discretion waive any discretionary limitations imposed in this stock option agreement so that such Option shall be exercisable in full or in part as the Board may determine during such thirty (30) day period. 7. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. The Optionee hereby agrees that he will promptly give notice to the Company in the event that he sells, transfers, exchanges or otherwise disposes of any shares of Stock or other securities obtained pursuant to any exercise of this Option before the later of (a) the second anniversary of the date of grant set forth at the conclusion of this Agreement and (b) the first anniversary of -4- 18 the date on which the shares of Stock or other securities were transferred to him pursuant to his exercise of this Option. 8. STOCK RESTRICTION . (a) Optionee represents and warrants that he is acquiring the Shares of his own account for the purpose of investment and not with a view to resale or distribution. (b) The certificates evidencing the Shares shall be endorsed with a legend, in addition to any other legends required by this Agreement, substantially as follows: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT." (c) Optionee understands and agrees that neither the Company nor any agent of the Company shall be under any obligation to recognize any transfer of any of the Shares if, in the opinion of counsel for the Company, such transfer would result in violation by the Company of any federal or state law with respect to the offering, issuance or sale of securities. 9. MISCELLANEOUS. Notices hereunder shall be mailed or delivered to the Company at its principal place of business, 950 Winter Street, Waltham, MA 02154, and shall be mailed or delivered to Optionee at his address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing. This Option shall be construed in a manner to qualify it as an incentive stock option under Section 422 of the Code and shall be governed by the laws of the Commonwealth of Massachusetts. PART B: CONFIDENTIALITY AND NON-COMPETITION -5- 19 1. REPURCHASE OF OPTIONEE'S STOCK BY THE COMPANY. 1.1 REPURCHASE OPTION UPON TERMINATION OF EMPLOYMENT. Upon termination of the Optionee's employment with the Company at any time, by either the Company or the Optionee, for any reason including death, the Company shall have the option to repurchase (hereinafter called the "Repurchase Option") some or all of the Optionee's Stock at a per share price determined in accordance with Section B.1.2 hereof. 1.2 REPURCHASE OPTION PRICE PER SHARE. The repurchase price per share (the "Repurchase Price") shall be the fair market value of a share of the Company's Common Stock as of the date of termination of the Optionee's employment with the Company as determined in good faith by the Board of Directors of the Company. 1.3 ELECTION OF REPURCHASE OPTION. In the event the Company is entitled to and does elect to exercise the Repurchase Option, it shall give to the Optionee or his estate a written notice within sixty (60) days of the Optionee's termination specifying the number of shares which the Company elects to purchase and a date for closing hereunder, which date shall not be more than fourteen (14) calendar days after the giving of such notice. The closing shall take place at the office of the Company, or such other place as shall be mutually agreed upon. The Repurchase Price shall be paid in full in cash or, at the election of the Company, by the promissory note of the Company payable to the order of the Optionee or his estate in not more than thirty-six (36) equal monthly installments with simple interest to be charged on the unpaid balance at a rate of interest equal to the prime rate charged by the Bank of Boston on the date of the closing, payable with each installment. The first such installment shall be due and payable on the first day of the month following the date of the closing as hereinbefore provided. Such note shall provide that the Company shall provide that the Company shall have the right to pay the principal, or any portion thereof, at any time or times; that upon default for thirty (30) days in the payment of any such installment or of the interest thereon, or in the event of bankruptcy, receivership, or dissolution of the Company, or if the Company shall make an assignment for the benefit of its creditors, the entire balance then remaining unpaid shall become due and payable forthwith at the -6- 20 option of the holder of the note; and that presentment, protest and notice of protest and nonpayment are waived. If, at the closing under this Section B.1.3, the Repurchase Price is paid in full in cash, the Optionee shall deliver to the Company all of the certificates of Stock and stock powers of the Optionee held by the Optionee that the Company is thereby repurchasing, or if, at the closing, any portion of the Repurchase Price is not paid in cash, the Company's attorneys shall retain and hold all of the certificates of Stock of the Optionee and all stock powers that the Company has elected to repurchase as collateral security for the payment of the Repurchase Price and any interest thereon until the Company shall have paid such price and interest in full. As soon as payment of said price and interest shall be made in full the Company's attorneys shall deliver to the Company any and all of the certificates of Stock and stock powers of the Optionee that the Company has repurchased. In the event that the balance of the note, including interest thereon, shall be accelerated and such balance shall remain unpaid for a period of thirty (30) days thereafter, the Optionee or his estate may cause to be hold at public or private sale the Stock held by the Company's attorneys as security hereunder for such note. The proceeds of any such sale, less the reasonable expenses incurred in connection therewith, shall be applied toward the payment of the balance due under such note and the excess, if any, shall be turned over to the Company. 1.4 DISPOSITION OF THE OPTIONEE'S STOCK UPON COMPANY'S ELECTION NOT TO REPURCHASE FOLLOWING TERMINATION. Where the Optionee's employment has been terminated for any reason including death and where the Company has elected not to repurchase some or all of his Stock under its Repurchase Option, all restrictions on the transfer of such Stock under this Agreement shall be terminated. The Company's attorneys shall remove from the certificate or certificates representing such Stock the legend set forth in Paragraph 4 hereof and deliver the Stock to the Optionee forthwith. 2. COMPANY'S RIGHT OF FIRST REFUSAL UPON PROPOSED SALE OF STOCK. -7- 21 2.1 OPTION AND RIGHT OF FIRST REFUSAL. Except as otherwise provided herein, the Company is hereby granted the option and right to purchase any or all of the shares of the Optionee's Stock that the Optionee proposes to sell, assign, transfer or dispose of in any manner at any time before or after termination of the Optionee's employment by the Company. The Optionee shall deliver to the Company, not less than sixty (60) days prior to the anticipated date of consummation of a proposed sale, assignment, transfer or other disposition, a written notice setting forth the anticipated date of such transaction, the number of shares of Stock that are to be the subject of such transaction, the names and addresses of the prospective parties thereto, the proposed consideration and terms of payment and other material facts related thereto (the "Notice of Transaction"). The Company shall have the right to exercise the option created hereunder by delivering to the Optionee, within thirty (30) days of delivery of such Notice of Transaction, a written notice indicating that it is exercising this option and setting forth the number of shares to be acquired (the "Notice of Exercise"). The purchase price for the shares shall be the purchase price set forth in the Notice of Transaction which has been agreed to by the prospective parties (the "Offer Price"). At its option, the Company may pay the Offer Price either in cash or by issuance of a thirty-six month promissory note as described in Section B.1.3 hereof. The Company's election with respect to form of payment shall be set forth in the Notice of Exercise. The closing of the option created hereunder shall take place at the office of the Company or at such other location as the Company and the Optionee mutually shall agree not more than thirty (30) days after the delivery by the Company of the Notice of Exercise. If, at the closing under this Section B.2.1, the shares are purchased by the Company by payment in full in cash, the Optionee shall deliver to the Company all of the certificates of Stock and stock powers of the Optionee that the Company is hereby repurchasing, or if, at the closing, any portion of the Offer Price is not paid in cash, the Company's attorneys shall retain and hold all of the certificates of Stock of the Optionee and all stock powers that the Company has elected to repurchase as collateral security for the payment of the -8- 22 Offer Price and any interest thereon until the Company shall have paid said Offer Price and interest in full. As soon as payment of said Offer Price and interest shall be made in full, the Company's attorneys shall deliver to the Company any and all of the Certificates of Stock and stock powers of the Optionee that the Company has repurchased. In the event that the balance of the note, if any, including interest thereon, shall be accelerated and such balance shall remain unpaid for a period of thirty (30) days thereafter, the Optionee may cause to be sold at public or private sale the Stock held as security hereunder for such note. The proceeds of any such sale, less the reasonable expenses incurred in connection therewith, shall be applied toward the payment of the balance due under such note and the excess, if any, shall be turned over to the Company. 2.2 DISPOSITION OF OPTIONEE'S STOCK UPON COMPANY'S ELECTION NOT TO REPURCHASE PURSUANT TO ITS RIGHT OF FIRST REFUSAL. If, within thirty (30) days after the Company receives the Optionee's Notice of Transaction, the Company has not delivered its Notice of Exercise to the Option as to some or all of his Stock, then the Optionee may sell all or a part of his shares to the prospective parties at the Offer Price within ninety (90) days of the date of the Notice of Transaction, and all restrictions on the transfer of such shares under this Agreement shall be terminated. All shares not purchased by the Company or prospective parties at the Offer Price hereunder shall remain subject to the terms of this Agreement. 3. TRANSFERS IN VIOLATION OF THIS AGREEMENT. In addition to any other legal or equitable remedies which they may have, the Company or the Stockholders may enforce their respective rights by actions for specific performance (to the extent permitted by law) and the Company may refuse to recognize any transferee as one of its Stockholders for any purpose, including, without limitation, for purposes of dividend and voting rights, until all applicable provisions of this Agreement have been complied with. 4. LEGEND TO BE AFFIXED TO OPTIONEE'S STOCK. -9- 23 In addition to the legend required by A.8(b) of this Agreement, the following legend shall be displayed prominently on each Certificate of Stock purchased by or otherwise transferred to the Optionee under this Agreement: The shares represented by this certificate are subject to restriction on transfer set forth in the Incentive Stock Option Grant and Confidentiality Agreement dated ___________, 1995, a copy of which will be furnished by the Company to the holder of this certificate upon written request and without charge. 5. CONFIDENTIALITY; PROPERTY RIGHTS. The Optionee agrees that he shall not directly or indirectly disclose any of the products, designs, techniques and trade secrets of the Company, nor use them in any way, either during the term of his employment with the Company or at any time thereafter, except as required in the course of his employment with the Company. All files, programs, software, records, documents and similar items relating to the business of the Company, including, but not limited to, lists of current and prospective customers, whether prepared by the Company or otherwise, coming into his possession, shall remain the exclusive property of the Company and shall not be removed from the premises of the Company under any circumstances whatsoever without the prior written consent of the Company, or except in his authorized capacity as an employee of the Company. 6. NONCOMPETITION. 6.1 COVENANTS NOT TO COMPETE. The Optionee covenants and agrees as follows: (a) that he will not, during the term of his employment with the Company and for a period of two (2) years immediately thereafter, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity ("directly or indirectly"), either (i) engage or participate in any business that is in competition in any manner whatsoever with the business of the Company or (ii) have any professional contract or relationship with any accounts of the Company for himself, directly or indirectly, or with or in conjunction with any other person, persons, firm, company, -10- 24 partnership or corporation engaged in any business that is in competition in any manner with the business of the Company or from time to time handled by the Company during the term of the Optionee's employment with the Company; (b) that he will not, during the term of his employment with the Company and for one (1) year immediately thereafter, directly or indirectly, or in conjunction with any other person, persons, firm, company, partnership or corporation call upon to sell, lease or license or endeavor to sell, lease or license to any of the customers, prospective customers (i.e., any company that has been contacted by the Company during a one year period prior to a contact by the Optionee) of the Company the same types of products and services provided by the Company as of the date hereof or provided by the Company during the term of this Agreement; (c) the Optionee recognizes and acknowledges that the Company's Confidential Information (including, but not limited to, lists of the Company's customers and prospective customers and the Company's specially designed computer software) is valuable, special and unique to the Company. The Optionee will not during the term of his employment with the Company or at any time thereafter disclose any Confidential Information to any person, persons, firm, corporation, partnership, association or other entity for any reason or purpose whatsoever. In the event of a breach or threat of breach by the Optionee of the provisions of this Section B.6.1(c), the Company shall be entitled to an injunction restraining the Optionee from disclosing in whole or in part any Confidential Information and/or from otherwise violating the terms of this Agreement. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach including the recovery of damages from the Optionee. 6.2 INDEPENDENT COVENANTS. The foregoing covenants shall be construed as covenants independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Optionee against the Company (whether predicated on this Agreement or otherwise) shall not constitute a defense to the enforcement by the Company of the foregoing covenants. In the event that the Optionee leaves the employ of the Company by his own request, at the request -11- 25 of the Company or otherwise, the foregoing covenants shall remain in full force and effect as independent covenants, regardless of any other covenants, terms, or conditions in this Agreement or any other Agreement. 7. GENERAL PROVISIONS. 7.1 NOTICE. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, addressed to the other party hereto at his or its address as listed below or at such other address as such party may designate by ten (10) days advance written notice to the other party hereto. 7.2 FURTHER AGREEMENTS. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the intent of this Agreement. 7.3 WAIVER, MODIFICATION AND TERMINATION. The Company, by vote of its Board of Directors, and the Optionee, by written consent, may waive their respective rights hereunder, either generally or with respect to one or more specific transfers which have been proposed, attempted or made. This Agreement may be modified or terminated by vote of the Board of Directors of the Company and the written consent of the Optionee, if the Optionee is still employed by the Company or otherwise subject to a provision of this Agreement. This Agreement shall terminate automatically upon the occurrence of any of the following events: (a) The dissolution of the Company; or the appointment of a receiver of the property of the Company; or the assignment by the Company of its assets for the benefit of creditors or the filing by the Company of a petition, or the approval by a court of competent jurisdiction of a petition filed against the Company, under any bankruptcy or insolvency laws; and (b) The mutual consent of the Company and the Optionee to the termination of this Agreement. -12- 26 Upon termination of this Agreement all obligations and rights of the Company and the Optionee hereunder shall cease, except that those obligations under both Sections B.5 and B.6 hereof shall continue until the times specified therein, and any obligations of the Company to pay for Stock that arose under Sections B.1 and B.2 shall survive. 7.4 PROHIBITION BY LAW OF REPURCHASE BY THE COMPANY. The Company may not elect to repurchase the Stock under this Agreement if such repurchase would violate any applicable provisions of law with respect to minimum capital requirement and use of corporate funds to repurchase the Company's shares. 7.5 GOVERNING LAW, COUNTERPARTS, ETC. (a) This Agreement shall be construed under and governed by the laws of the Commonwealth of Massachusetts. (b) This Agreement may be executed in ne or more counterparts each of which shall be deemed an original and all of which together shall constitute a single instrument. (c) In case any term of this Agreement shall be held invalid, illegal or unenforceable in whole or in part, neither the validity of the remaining part of such a term nor the validity of any other term of this Agreement shall in any way be affected thereby. (d) This Agreement shall insure to the benefits of and be binding upon the successors and assigns of the Company and the heirs, executors and administrators of the Optionee. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Boyle Leasing Technologies, Inc. By:_________________________________ President -13- 27 ____________________________________ Optionee ____________________________________ Address ____________________________________ City/State/Zip -14- EX-10.11 12 BOARD OF DIRECTORS' STOCK UNIT COMPENSATION PLAN 1 EXHIBIT 10.11 BOARD OF DIRECTORS STOCK UNIT COMPENSATION PLAN SECTION 1. DEFERRAL OF FEES. Any Director of Boyle Leasing Technologies, Inc. (the "Company") shall have certain of the fees payable to him or her deferred and paid as provided in this Plan. SECTION 2. DEFERRED FEE ACCOUNTS. There shall be established for each Director a stock unit account, collectively designated as that Director's deferred fee account, to which the following credits shall be made: 2.1. the sum of three thousand, seven hundred fifty ($3,750.00) dollars per meeting; or 2.2. for each Committee Chairman, the sum of four thousand, three hundred seventy give ($4,375.00) dollars per meeting. Each stock unit in the deferred fee account shall be valued at the time each such credit is made at the then-current private company value of the Company's common stock, as that value is determined from time to time by the Board of Directors. Each such credit shall be made on the actual Board or Committee meeting date. No such credit shall be made if a Director fails to attend a scheduled meeting, unless prevented from attendance by hardship. SECTION 3. PAYMENTS. Each Director may elect to convert his or her stock units into cash if: (a) any person of group acting in concert acquires the right to obtain beneficial ownership of 51% or more of the outstanding shares of the Company's common stock; and (b) the per share price paid by such person or group is higher than the value at which the stock unit was granted. The amount payable to a Director pursuant to this Plan shall be an amount equal to the price paid by such acquiring person or group. In the event such price is lower than the stock unit value, a Director will not be entitled to any payment. SECTION 4. RECAPITALIZATION. If, as a result of a recapitalization of the Company (including a stock dividend, stock split, or other capital change affecting the Company's common stock), the Company's outstanding shares of common stock shall be changed into a greater or smaller number of shares, the number of units then credited to each stock unit account shall be appropriately adjusted on the same basis. SECTION 5. DEATH BENEFIT. If a Director dies prior to receipt of all distributions provided for in this Plan, all balances remaining distributable hereunder shall be distributed to such 2 beneficiary as the Director shall have designated, in the absence of designation, to the Director's personal representative, (unless the Board of Directors, after consulting the beneficiary, determines to make distribution on a different basis). SECTION 6. DIRECTOR'S RIGHTS UNSECURED. The right of any Director or Director's beneficiary to receive distributions under this Plan shall be an unsecured claim against the general assets of the Company. All such stock units shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate. SECTION 7. TERMINATION OF THE PLAN. The Board of Directors at any time, at its discretion, may terminate this Plan. This Plan shall be automatically terminated if any person or group acting in concert acquires the right to obtain beneficial ownership of 51% or more of the outstanding shares of the Company's common stock. In such event, full and prompt distribution shall be made from all Directors' deferred fee accounts. Otherwise, distributions in respect of credits to Directors' deferred fee accounts as of the date of termination shall be made in the manner and at the time prescribed in Section 3. SECTION 8. AMENDMENT OF THE PLAN. The Board of Directors of the Company may amend the Plan at any time and from time to time, PROVIDED, HOWEVER, that no amendment affecting credits already made to any director's deferred fee accounts may be made without the consent of that director or, if that director has dies, that director's beneficiary. -2- EX-10.15 13 EMPLOYMENT AGREEMENT FOR J. GREGORY HINES 1 Exhibit 10.15 EMPLOYMENT AGREEMENT AGREEMENT by and between Boyle Leasing Technologies, Inc., a Massachusetts corporation, and its subsidiaries (the "Company"), and Gregory Hines (the "Executive"), dated as of the 26th day of September, 1997 (this "Agreement"). The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined in Section 2) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY, AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of such date. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") or; 2 (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, in accordance with the terms and provisions of this Agreement, for the period commencing on the Effective Date and ending (subject to the terms hereof) on the day following the first anniversary of such date (the "Employment Period"); provided, however, that the Employment Period shall be automatically extended upon its expiration for successive periods of one (1) month each, in full accordance with the terms and provisions of this Agreement. 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office which is the headquarters of the Company and is less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, -2- 3 to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid in equal installments on a monthly basis, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive may be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash as determined in the discretion of the Company's President and Chief Executive Officer consistent with the practices and procedures of the Company. Any such Annual Bonus shall be paid no later than the end of the fourth month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Special Bonus. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, if the Executive remains employed with the Company and its affiliated companies to the first anniversary of the Effective Date, the Company shall pay to the Executive a special bonus (the "Special Bonus") in recognition of the Executive's services during the crucial one-year transition period following the Change of Control in cash in the amount of $575,000. The Special Bonus shall be paid no later than 30 days following the first anniversary of the Effective Date. (iv) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, -3- 4 practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (vi) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable employment expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. -4- 5 (ix) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a material breach by the Executive of the Executive's obligations under Section 4(a) of this Agreement (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach or (ii) the conviction of the Executive of a felony involving moral turpitude. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities or any other action by which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; -5- 6 (ii) any failure by the Company to comply with the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) of this Agreement; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement, provided that such successor has received at least ten days prior written notice from the Company or the Executive of the requirements of Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligation of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason: -6- 7 (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the Special Bonus, due to the Executive pursuant to Section 4(b)(iii) of this Agreement, to the extent not theretofore paid and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) of this Section 6(a)(i) shall be hereinafter referred to as the "Severance Amount"); and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally thereafter with respect to other peer executives of the Company and its affiliated companies and their families (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of the Severance Amount (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Death Benefits (as defined below)) and (ii) payment to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the present value (determined as provided in Section 280G(d)(4) of the Internal -7- 8 Revenue Code of 1986, as amended (the "Code") of any cash amount to be received by the Executive or the Executive's family as a death benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of life insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (ii) shall be hereinafter referred to as the "Death Benefits"). (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligation to the Executive, other than for (i) payment of Severance Amount (which shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Disability Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the present value (determined as provided in Section 280G(d)(4) of the Code) of any cash amount to be received by the Executive as a disability benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of disability insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (ii) shall be hereinafter referred to as the "Disability Benefits"). (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for (i) the Severance Amount and the timely payment or provision of Other Benefits if the Executive fulfills the criteria set forth in Section 4(b)(iii); and (ii) the Executive's Annual Base Salary through the Date of Termination and any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay (in each case to be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination). 7. Non-Exclusivity of Rights. Except as provided in Sections 6(a)(ii), 6(b) and 6(c) of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. -8- 9 8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(a)(ii) of this Agreement, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. (b) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(a) of this Agreement as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. -9- 10 (b) Subject to the provisions of Section 9(c) of this Agreement, all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Coopers & Lybrand L.L.P. (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) of this Agreement and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and -10- 11 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) of this Agreement, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c) of this Agreement) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) of this Agreement, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information; Non-Compete. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, -11- 12 without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. For a period of twelve months from and after the Date of Termination, the Executive shall not, directly or indirectly, be or become employed or associated with any microticket leasing business in the United States which is in competition with the Company. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Gregory Hines c/o Boyle Leasing Technologies, Inc. 950 Winter Street Waltham, MA 02154 If to the Company: -12- 13 Boyle Leasing Technologies, Inc. 950 Winter Street Waltham, MA 02154 Attention: Richard F. Latour, Executive Vice President, Chief Financial Officer, Chief Operating Officer With a copy to: Gerald P. Hendrick, Esq. Edwards & Angell 101 Federal Street Boston, MA 02110 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive's employment with the Company terminates, then the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Gregory Hines ----------------------------------- Gregory Hines -13- 14 Boyle Leasing Technologies, Inc. By: /s/ Peter Bleyleben -------------------------------- Its: President ---------------------------- -14- EX-10.16 14 EMPLOYMENT AGREEMENT FOR JOHN PLUMLEE 1 Exhibit 10.16 EMPLOYMENT AGREEMENT AGREEMENT by and between Boyle Leasing Technologies, Inc., a Massachusetts corporation, and its subsidiaries (the "Company"), and John Plumlee (the "Executive"), dated as of the 26th day of September, 1997 (this "Agreement"). The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined in Section 2) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY, AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of such date. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") or; 2 (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, in accordance with the terms and provisions of this Agreement, for the period commencing on the Effective Date and ending (subject to the terms hereof) on the day following the first anniversary of such date (the "Employment Period"); provided, however, that the Employment Period shall be automatically extended upon its expiration for successive periods of one (1) month each, in full accordance with the terms and provisions of this Agreement. 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office which is the headquarters of the Company and is less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, -2- 3 to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid in equal installments on a monthly basis, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive may be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash as determined in the discretion of the Company's President and Chief Executive Officer consistent with the practices and procedures of the Company. Any such Annual Bonus shall be paid no later than the end of the fourth month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Special Bonus. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, if the Executive remains employed with the Company and its affiliated companies to the first anniversary of the Effective Date, the Company shall pay to the Executive a special bonus (the "Special Bonus") in recognition of the Executive's services during the crucial one-year transition period following the Change of Control in cash in the amount of $600,000. The Special Bonus shall be paid no later than 30 days following the first anniversary of the Effective Date. (iv) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, -3- 4 practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (vi) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable employment expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. -4- 5 (ix) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a material breach by the Executive of the Executive's obligations under Section 4(a) of this Agreement (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach or (ii) the conviction of the Executive of a felony involving moral turpitude. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities or any other action by which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; -5- 6 (ii) any failure by the Company to comply with the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) of this Agreement; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement, provided that such successor has received at least ten days prior written notice from the Company or the Executive of the requirements of Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligation of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason: -6- 7 (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the Special Bonus, due to the Executive pursuant to Section 4(b)(iii) of this Agreement, to the extent not theretofore paid and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) of this Section 6(a)(i) shall be hereinafter referred to as the "Severance Amount"); and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally thereafter with respect to other peer executives of the Company and its affiliated companies and their families (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of the Severance Amount (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Death Benefits (as defined below)) and (ii) payment to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the present value (determined as provided in Section 280G(d)(4) of the Internal -7- 8 Revenue Code of 1986, as amended (the "Code") of any cash amount to be received by the Executive or the Executive's family as a death benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of life insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (ii) shall be hereinafter referred to as the "Death Benefits"). (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligation to the Executive, other than for (i) payment of Severance Amount (which shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Disability Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the present value (determined as provided in Section 280G(d)(4) of the Code) of any cash amount to be received by the Executive as a disability benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of disability insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (ii) shall be hereinafter referred to as the "Disability Benefits"). (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for (i) the Severance Amount and the timely payment or provision of Other Benefits if the Executive fulfills the criteria set forth in Section 4(b)(iii); and (ii) the Executive's Annual Base Salary through the Date of Termination and any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay (in each case to be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination). 7. Non-Exclusivity of Rights. Except as provided in Sections 6(a)(ii), 6(b) and 6(c) of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. -8- 9 8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(a)(ii) of this Agreement, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. (b) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(a) of this Agreement as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. -9- 10 (b) Subject to the provisions of Section 9(c) of this Agreement, all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Coopers & Lybrand L.L.P. (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) of this Agreement and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and -10- 11 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) of this Agreement, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c) of this Agreement) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) of this Agreement, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information; Non-Compete. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, -11- 12 without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. For a period of twelve months from and after the Date of Termination, the Executive shall not, directly or indirectly, be or become employed or associated with any microticket leasing business in the United States which is in competition with the Company. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: John Plumlee c/o Boyle Leasing Technologies, Inc. 950 Winter Street Waltham, MA 02154 If to the Company: -12- 13 Boyle Leasing Technologies, Inc. 950 Winter Street Waltham, MA 02154 Attention: Richard F. Latour, Executive Vice President, Chief Financial Officer, Chief Operating Officer With a copy to: Gerald P. Hendrick, Esq. Edwards & Angell 101 Federal Street Boston, MA 02110 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive's employment with the Company terminates, then the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ John Plumlee ----------------------------------- John Plumlee -13- 14 Boyle Leasing Technologies, Inc. By: /s/ Peter Bleyleben -------------------------------- Its: President ---------------------------- -14- EX-10.17 15 EMPLOYMENT AGREEMENT FOR CAROL SALVO 1 Exhibit 10.17 EMPLOYMENT AGREEMENT AGREEMENT by and between Boyle Leasing Technologies, Inc., a Massachusetts corporation, and its subsidiaries (the "Company"), and Carol Salvo (the "Executive"), dated as of the 26th day of September, 1997 (this "Agreement"). The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined in Section 2) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY, AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of such date. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") or; 2 (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, in accordance with the terms and provisions of this Agreement, for the period commencing on the Effective Date and ending (subject to the terms hereof) on the day following the first anniversary of such date (the "Employment Period"); provided, however, that the Employment Period shall be automatically extended upon its expiration for successive periods of one (1) month each, in full accordance with the terms and provisions of this Agreement. 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office which is the headquarters of the Company and is less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, -2- 3 to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid in equal installments on a monthly basis, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive may be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash as determined in the discretion of the Company's President and Chief Executive Officer consistent with the practices and procedures of the Company. Any such Annual Bonus shall be paid no later than the end of the fourth month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Special Bonus. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, if the Executive remains employed with the Company and its affiliated companies to the first anniversary of the Effective Date, the Company shall pay to the Executive a special bonus (the "Special Bonus") in recognition of the Executive's services during the crucial one-year transition period following the Change of Control in cash in the amount of $585,000. The Special Bonus shall be paid no later than 30 days following the first anniversary of the Effective Date. (iv) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, -3- 4 practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (vi) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable employment expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. -4- 5 (ix) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a material breach by the Executive of the Executive's obligations under Section 4(a) of this Agreement (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach or (ii) the conviction of the Executive of a felony involving moral turpitude. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities or any other action by which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; -5- 6 (ii) any failure by the Company to comply with the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) of this Agreement; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement, provided that such successor has received at least ten days prior written notice from the Company or the Executive of the requirements of Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligation of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason: -6- 7 (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the Special Bonus, due to the Executive pursuant to Section 4(b)(iii) of this Agreement, to the extent not theretofore paid and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) of this Section 6(a)(i) shall be hereinafter referred to as the "Severance Amount"); and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally thereafter with respect to other peer executives of the Company and its affiliated companies and their families (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of the Severance Amount (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Death Benefits (as defined below)) and (ii) payment to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the present value (determined as provided in Section 280G(d)(4) of the Internal -7- 8 Revenue Code of 1986, as amended (the "Code") of any cash amount to be received by the Executive or the Executive's family as a death benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of life insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (ii) shall be hereinafter referred to as the "Death Benefits"). (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligation to the Executive, other than for (i) payment of Severance Amount (which shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Disability Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the present value (determined as provided in Section 280G(d)(4) of the Code) of any cash amount to be received by the Executive as a disability benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of disability insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (ii) shall be hereinafter referred to as the "Disability Benefits"). (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for (i) the Severance Amount and the timely payment or provision of Other Benefits if the Executive fulfills the criteria set forth in Section 4(b)(iii); and (ii) the Executive's Annual Base Salary through the Date of Termination and any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay (in each case to be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination). 7. Non-Exclusivity of Rights. Except as provided in Sections 6(a)(ii), 6(b) and 6(c) of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. -8- 9 8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(a)(ii) of this Agreement, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. (b) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(a) of this Agreement as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. -9- 10 (b) Subject to the provisions of Section 9(c) of this Agreement, all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Coopers & Lybrand L.L.P. (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) of this Agreement and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and -10- 11 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) of this Agreement, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c) of this Agreement) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) of this Agreement, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information; Non-Compete. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, -11- 12 without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. For a period of twelve months from and after the Date of Termination, the Executive shall not, directly or indirectly, be or become employed or associated with any microticket leasing business in the United States which is in competition with the Company. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Carol Salvo c/o Boyle Leasing Technologies, Inc. 950 Winter Street Waltham, MA 02154 If to the Company: -12- 13 Boyle Leasing Technologies, Inc. 950 Winter Street Waltham, MA 02154 Attention: Richard F. Latour, Executive Vice President, Chief Financial Officer, Chief Operating Officer With a copy to: Gerald P. Hendrick, Esq. Edwards & Angell 101 Federal Street Boston, MA 02110 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive's employment with the Company terminates, then the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Carol Salvo ----------------------------------- Carol Salvo -13- 14 Boyle Leasing Technologies, Inc. By: /s/ Peter Bleyleben -------------------------------- Its: President ---------------------------- -14- EX-11.1 16 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 Statement Regarding Computation of Per Share Earnings
For the three months For the year ended December 31, ended March 31, -------------------------------------- ------------------------ 1995 1996 1997 1997 1998 ---------- --------- ---------- --------- ---------- (unaudited) Net Income.................................. $ 2,524 $ 5,080 $ 7,652 $ 1,827 $ 3,111 Shares used in computation: Weighted average common shares outstanding used in computation of net income per common share............ 3,676,094 4,841,425 4,896,570 4,887,818 4,899,911 Dilutive effect of redeemable convertible preferred stock............ 838,210 19,600 9,800 9,800 9,800 Dilutive effect of common stock options................................ 209,799 24,281 56,294 56,294 22,874 ---------- ---------- ---------- ---------- ---------- Shares used in computation of net income per common share -- assuming dilution.................................. 4,724,103 4,885,306 4,962,664 4,953,912 4,932,585 ========== ========== ========== ========== ========== Net income per common share................. $ 0.69 $ 1.05 $ 1.56 $ 0.37 $ 0.63 ========== ========== ========== ========== ========== Net income per common share -- assuming dilution......................... $ 0.53 $ 1.04 $ 1.54 $ 0.37 $ 0.63 ========== ========== ========== ========== ==========
EX-21.1 17 SUBSIDIARIES OF REGISTRANT 1 Exhibit 21.1 Subsidiaries of the Registrant Leasecomm Corporation BLT Finance Corp. III EX-23.1 18 CONSENT OF COOPERS & LYBRAND 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-1 of our report dated February 27, 1998, on our audits of the consolidated financial statements of Boyle Leasing Technologies, Inc. We also consent to the references to our firm under the captions "Experts" and "Selected Financial Data." /s/ COOPERS & LYBRAND L.L.P. June 4, 1998 Boston, Massachusetts EX-27 19 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1998 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 7,381 0 192,457 27,475 0 0 10,017 5,562 183,198 0 142,182 0 0 50 21,539 183,188 0 18,089 0 5,458 0 4,575 2,820 5,236 2,125 0 0 0 0 3,111 .63 .63 NET INVESTMENT IN FINANCING LEASES AND LOANS, EXCLUDING ALLOWANCE FOR CREDIT LOSSES.
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