EXHIBIT (4)
X X LENDING, INC.
and
XXXXX, TANNENBAUM, WOLFF,
BAND, GATES & XXXX, P.A.
Custodian
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CUSTODY AGREEMENT
Dated as of April 1, 2002
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$10,000,000
AGGREGATE PRINCIPAL AMOUNT
SECURED PROMISSORY NOTES
FIRST SERIES
TABLE OF CONTENTS
Page
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Preamble - Certain Recitals and Representations 1
Article 1 - Definitions 1
Article 2 - Appointment and Acceptance 3
Article 3 - The Notes 3
Article 4 - Covenants of the Corporation 5
Article 5 - Successor Corporation 8
Article 6 - Defaults and Remedies 8
Article 7 - Custodian 11
Article 8 - Discharge of Agreement 16
Article 9 - Amendments, Supplements and Waivers 16
Article 10 - Miscellaneous 17
Exhibit A - Form of Note
THIS CUSTODY AGREEMENT dated as of April 1, 2002, between X X LENDING,
INC., a Florida corporation ("Corporation") and XXXXX, TANNENBAUM, WOLFF, BAND,
GATES & XXXX, P.A. in Sarasota, Florida ("Custodian").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Corporation's Secured
Promissory Notes - First Series.
PREAMBLE
RECITALS AND REPRESENTATIONS
The Corporation will publicly offer its Secured Promissory Notes -
First Series in aggregate principal amount of $10,000,000 pursuant to a
prospectus included in a registration statement on Form SB-2, to be filed with
the United States Securities and Exchange Commission (such prospectus, as
amended or supplemented during the offering is hereinafter referred to as the
"Prospectus").
The Corporation desires to appoint the Custodian as custodian of
certain items of Eligible Collateral (as defined below) and the Custodian is
willing to act in such capacity upon the terms and conditions herein set forth.
The Custodian shall hold at all times Eligible Collateral with an aggregate
Unadjusted Value (as defined below) which, when taken with the Cash and Cash
Equivalents (of the Corporation) as defined below equals one hundred percent
(100%) of the aggregate outstanding principal balance of the Notes.
Pursuant to the terms and provisions of this Custodial Agreement, the
Custodian shall act in the collective interests of all of the Note Holders as
the representative and agent of all of the Note Holders.
Accordingly, the Corporation and the Custodian are entering into this
Agreement as of the date and year first above written.
ARTICLE 1 - DEFINITIONS
SECTION 1.01. DEFINITIONS.
"Agreement" means this Agreement in its present form or as amended
from time to time.
"Corporation" means X X Lending, Inc., a Florida corporation.
"Cash" or "Cash Equivalents" means the unrestricted cash held by the
Corporation from time to time or insured deposit accounts or debt securities
issued by the United States (or any agency thereof) which are convertible into
cash within a thirty (30) consecutive day period as certified by the
Corporation in any Certificate provided by the Corporation to the Custodian
pursuant to the terms of this Agreement.
"Certificate" means any certificate provided by the Corporation to the
Custodian pursuant to the terms of this Agreement and which is signed by any
two of the officers of the Corporation.
"Custodian" means the party named as such in this Agreement until a
successor replaces it and thereafter such term means the successor to such
party named.
"Default" means any event which is, or after notice or lapse of time
or both would be, an event of Default as set forth in Section 6.01.
"Eligible Collateral" means Portfolio Loans.
"Event of Default" has the meaning set forth in Section 6.01.
"Holder" or "Note Holder" means the person in whose name a Note is
registered on the Corporation's books.
"Money Market Funds" means money market or equivalent funds deposited
at a New York Stock Exchange member firm with net assets of at least $200
million.
"Note" means any of the Corporation's Secured Promissory Notes - First
Series.
"Note Rate" means the rate of interest, in the amount and paid at the
specified times on the principal of any Note as set forth in the Note.
"Officer" means the President, any Vice President, the Treasurer or
the Secretary of the Corporation.
"Oral Instructions" means an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the Custodian in
person or by telephone, telegram, telecopy or other mechanical or documentary
means lacking original signature, by a person or persons reasonably believed in
good faith by the Custodian to be a person or persons authorized by a
resolution of the Board of Directors of the Corporation to give Oral
Instructions on behalf of the Corporation.
"Portfolio Loan" means a secured loan made by the Corporation and
contained in the Loan Portfolio of the Corporation which is not in default with
respect to the principal and interest obligation thereof and has the
characteristics set forth in Section 4.04 of this Agreement.
"Principal" of a Note means the amount stated as principal on the face
of the Note.
"Registered Note" means the Secured Promissory Notes - First Series of
the Corporation issued by the Corporation and fully registered on the
Corporation's books.
"SEC" means the United States Securities and Exchange Commission.
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"Trust Account" has the meaning set forth in Section 7.01(2).
"Unadjusted Value" means with respect to a Portfolio Loan, the
outstanding balance due under the Loan.
"Written Instruction" means an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the Custodian in
original writing containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature, reasonably
believed in good faith by the Custodian to be the signature of a person
authorized by a resolution of the Board of Directors of the Corporation to give
Written Instructions on behalf of the Corporation.
SECTION 1.02. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the plural
include the singular.
ARTICLE 2 - APPOINTMENT AND ACCEPTANCE
The Corporation hereby appoints the Custodian as Custodian and
custodian of the Eligible Collateral delivered to the Custodian hereunder, to
be held by the Custodian and applied as provided in this Agreement. The
Custodian hereby accepts such appointment subject to the terms and conditions
set forth herein. From the date of this Agreement and until all Notes are paid,
the Custodian, in its capacity as Custodian and as representative and agent for
the Note Holders, shall physically possess such items of Eligible Collateral
and shall deal with the same in accordance with the terms hereof.
ARTICLE 3 - THE NOTES
SECTION 3.01. FORM AND DATING.
The Notes are substantially in the form of Exhibit A. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Corporation shall approve the form of the Note and any notation,
legend or endorsement on them. Each Note shall be dated as of the date that the
subscription thereto has been accepted by the Corporation.
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SECTION 3.02. EXECUTION AND ISSUANCE.
Two Officers or an Officer and an Assistant Secretary shall sign the
Notes for the Corporation by original or facsimile signature. The Corporation's
seal shall be reproduced on the Notes. The aggregate principal amount of Notes
outstanding at any time may not exceed $10,000,000.
SECTION 3.03. CORPORATION AS REGISTRAR.
The Corporation shall maintain an appropriate facility (which may be
the Corporation's principal office) where Notes may be presented for
registration of transfer or for exchange. The Corporation shall keep a register
of the Registered Notes and of their transfer and exchange.
SECTION 3.04. NOTE HOLDER LISTS.
As the Corporation issues Notes, it shall provide promptly to the
Custodian the names, addresses and taxpayer identification numbers of the Note
Holders. The Corporation shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names, addresses and
taxpayer identification numbers of the Note Holders. The Corporation shall
promptly furnish to the Custodian notice of any transfer of a Note by any Note
Holder, along with the new Note Holder's complete name, address and taxpayer
identification number, as provided by the Note Holder. Further, the Corporation
shall furnish to the Custodian at such times as the Custodian may request in
writing a list in such form and as of such date as the Custodian may reasonably
require of the names, addressees and taxpayer identification numbers of the
Note Holders and the Custodian may exclusively rely on the accuracy and
completeness of such list.
SECTION 3.05. REGISTRATION, TRANSFER AND EXCHANGE.
The Corporation will issue fully Registered Notes in the form of
Exhibit A.
When a Registered Note is presented to the Corporation with a request
to register transfer, the Corporation shall register the transfer as requested
if the applicable requirements of the Florida Uniform Commercial Code are met.
When Registered Notes are presented to the Corporation with a request to
exchange them for an equal principal amount of Registered Notes of other
denomina tions, the Corporation shall make the exchange as requested if the
same requirements are met. The Corporation may charge a reasonable fee for any
transfer or exchange but not for any exchange pursuant to Section 3.08.
SECTION 3.06. REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost, destroyed
on wrongfully taken, the Corporation shall issue a replacement Note
corresponding to the Note that was lost, destroyed or wrongfully taken, if the
applicable requirements of the Florida Uniform Commercial Code are met. In the
event any lost, destroyed or wrongfully taken Note shall have matured or is
about to mature, the Corporation may effect payment of same if the requirements
of the Florida Uniform
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Commercial Code are met. An indemnity bond shall be provided to the Corporation
to protect the Corporation from any loss which it may suffer if a replacement
Note is replaced. The Corporation may charge a Note Holder for its expenses in
replacing a Note.
SECTION 3.07. OUTSTANDING NOTES.
Notes outstanding at any time are all Notes issued by action of the
Corporation except for those canceled by it upon the repayment, exchange or
reissuance thereof. Notes outstanding include those held by the Corporation or
its affiliates.
SECTION 3.08. CANCELLATION.
The Corporation at any time may receive Notes for cancellation upon
payment or exchange. The Corporation shall promptly advise the Custodian of any
such Note cancellation and the Custodian may rely upon such representation. The
Corporation and no one else shall cancel and destroy all Notes surrendered for
transfer, exchange, payment or cancellation. Neither the Custodian nor the
Corporation may issue new Notes to replace Notes that have been paid or
canceled.
ARTICLE 4 - COVENANTS OF THE CORPORATION
SECTION 4.01. PAYMENT OF NOTES.
The Corporation shall promptly pay the principal of and interest on
the Notes on the dates and in the manner provided in the Notes.
The Corporation shall pay interest on overdue principal at the rate
borne by the Notes; it shall pay interest on overdue installments of interest
at the same rate to the extent lawful.
In the event that the Corporation desires the Custodian to make any
payments due under the Notes and the Custodian in each such instance is
endeavoring to act in such capacity, the Corporation shall, at least ten days
before the payment date, provide the Custodian with Written Instructions
concerning the payments to be made, including a schedule showing the payment to
be made to each Note Holder, with the name and address of each Note Holder and
whether any Notes must be tendered against payment (such as at maturity), along
with a set of checks of the Corporation, drawn on the Corporation's bank
account or accounts, made payable to the Note Holders who are to be paid on
such interest payment date or maturity date and duly signed by the requisite
signatories of the Corporation. The Company shall also provide stamped window
envelopes to the Custodian for use in mailing the checks.
A Note or Notes may only be prepaid by the Corporation in the event
that (i) the Holder or Holders of such Note or Notes requests repayment, (ii)
the Holder or Holders of such Notes to be prepaid by the Corporation consent to
such prepayment, and/or (iii) the Eligible Collateral, as defined and dealt
with in this Agreement, shall be constituted by Portfolio Loans having a face
amount as of the date of any calculation thereof constituting less than 75% of
the aggregate amount
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of Eligible Collateral and Cash or Cash Equivalents. Any prepayment made under
such circumstances shall be in an amount equal to the principal amount of the
Note being prepaid, together with accrued interest thereon to the date of such
prepayment. No prepayment penalty shall be assessed.
SECTION 4.02. LIEN OF AGREEMENT.
So long as any Note remains unpaid, the obligation of the Corporation
represented by the Notes shall be secured by a lien on the Eligible Collateral
held by the Custodian effected by this Agreement. Such security interest shall
be in favor of the Custodian and the Custodian shall act for the collective
benefit of Note Holders as provided herein. The lien effected pursuant to this
Section 4.02 shall be prior to any other liens which come into existence with
respect to the Eligible Collateral held by the Custodian. The Custodian shall
perfect such lien by effecting the appropriate filings under the Uniform
Commercial Code as enacted in Florida during the term of this Agreement. Such
perfection shall permit full substitution of Portfolio Loans during the term of
this Agreement.
SECTION 4.03. WRITTEN AND ORAL INSTRUCTIONS TO CUSTODIAN.
The Corporation shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Directors authorizing
execution of Written Instructions and the number of signatories required,
together with certified signatures of the officers and other signatories
authorized to sign, which shall constitute conclusive evidence of the authority
of the officers and other signatories designated therein to act, and shall be
considered in full force and effect with the Custodian fully protected in
acting in reliance thereon until it receives a new certified copy of a
resolution adding or deleting a person or persons with authority to give
Written Instructions. If the certifying officer is authorized to sign Written
Instructions, the certificate shall also be signed by a second officer of the
Corporation.
The Corporation shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Directors authorizing the
transmittal of Oral Instructions and specifying the person or persons
authorized to give Oral Instructions in accordance with this Agreement. Any
resolution so filed with the Custodian shall be considered in full force and
effect and the Custodian shall be fully protected in acting in reliance thereon
until it actually receives a new certified copy of a resolution adding or
deleting a person or persons with authority to give Oral Instructions. If the
certifying officer is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Corporation.
SECTION 4.04. DEPOSIT OF ELIGIBLE COLLATERAL.
The Corporation shall cause to be delivered to the Custodian all
original documents and papers which are utilized in the creation and making of
a Portfolio Loan, which documents shall include but not be limited to the
Portfolio Loan promissory note, any instrument of mortgage or other Portfolio
Loan collateral arrangements, any instruments of Portfolio Loan repayment
guarantee or any document or documents which modify the terms and provisions of
an existing Portfolio Loan
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(collectively "Loan Documents"). The Custodian shall provide a receipt to the
Corporation for each set of Loan Documents received hereunder. Such Loan
Documents shall be delivered to the Custodian by the Corporation within five
(5) business days of each Portfolio Loan consummation.
Each set of Loan Documents will be retained in the custody of the
Custodian until such time as a Portfolio Loan to which such Loan Documents
relate is paid off by the borrower thereof (or any guarantor) or is otherwise
satisfied, at which time the Custodian shall deliver such Loan Documents to the
borrower or other entitled entity or person.
All Portfolio Loans delivered by the Corporation to the Custodian
under this Agreement shall be originated in the manner and shall have the
characteristics described in the Prospectus which relates to the public offer
and sale of the Notes.
SECTION 4.05. CORPORATE EXISTENCE.
Subject to Article 5, the Corporation covenants and agrees that it
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchises; provided,
however, that the Corporation shall not be required to preserve any right or
franchise if it shall determine that the preservation thereof is no longer
desirable in the conduct of the Corporation's business and that the loss
thereof will not be disadvantageous in any material respect to the holders of
Notes. The Custodian shall be under no obligation to investigate the
Corporation's compliance with the foregoing covenant.
SECTION 4.06. COMPLIANCE CERTIFICATES.
On the last day of each calendar month during the term of this
Agreement, the Corporation shall calculate the outstanding Unadjusted Value of
all items of Eligible Collateral held by the Custodian and the value of the
Corporation's Cash and Cash Equivalents, as well as the aggregate outstanding
principal balance of Notes. A report of such calculations shall be delivered to
the Custodian within two (2) business days of the end of each calendar month.
If such report indicates that the aggregate Unadjusted Value of the Eligible
Collateral and the value of the Corporation's Cash and Cash Equivalents is less
than one hundred percent (100%) of the aggregate outstanding principal balance
of the Notes, the Corporation shall deliver, along with such report, Cash or
Cash Equivalents in such amount as is required to restore the ratio of
Unadjusted Value of the Eligible Collateral Cash and Cash Equivalents to the
outstanding principal balance of the Notes to 1 to 1. The Custodian may request
and the Corporation will provide appropriate schedules and evidence relating to
the Cash and Cash Equivalents of the Corporation reflected in any report
provided by the Corporation pursuant to this Section 4.06.
The Corporation shall deliver to the Custodian within ten (10) days
after the end of each calendar quarter an Officers' Certificate in a form
acceptable to the Custodian and signed by the President or Vice President of
the Corporation, stating whether or not the signer, after having made a
diligent investigation, knows of the existence of any Event of Default as set
forth in Section 6.01. If so, the Certificate shall describe the Default.
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SECTION 4.07. SEC REPORTS.
The Corporation shall provide to the Custodian exact copies of the
reports and other documents (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Corporation is
required to file with the SEC pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, if any, within fifteen (15) days after it
files such reports or documents with the SEC.
SECTION 4.08. NOTICE OF DEFAULT.
Upon the occurrence of an Event of Default, the Corporation shall
immediately provide to the Custodian written notice thereof.
ARTICLE 5 - SUCCESSOR CORPORATION
SECTION 5.01. WHEN CORPORATION MAY MERGE, ETC.
The Corporation shall not consolidate with or merge into, or transfer
all or substantially all of its assets to, another corporation unless the
resulting, surviving or transferee corporation assumes by appropriate binding
instrument all of the obligations of the Corporation under the Notes and this
Agreement. Thereafter all such obligations of the predecessor corporation shall
terminate.
SECTION 5.02. CONTINUANCE OF LIEN OF AGREEMENT AND UNIFORM COMMERCIAL CODE
FILING.
Upon the occurrence of any of the events affecting the Corporation
described in Section 5.01 above, the lien of this Agreement, as perfected by
the Custodian under the Uniform Commercial Code as enacted in Florida,
established by Section 4.02 hereof shall continue unabated and of the same
first lien priority. The Corporation shall initiate and complete such action as
is required to assure such continuation and priority and shall furnish such
evidence of the accomplishment of such as the Custodian may require.
ARTICLE 6 - DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Corporation defaults in the payment of interest on any
Note at the Note Rate when the same becomes due and payable
and the Default in the payment of such Note interest
continues for a period of thirty (30) consecutive days;
(2) the Corporation defaults in the payment of the principal of
any Note when the same becomes due and payable;
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(3) the Corporation or its assets become subject to any voluntary
or involuntary proceeding under the Federal Bankruptcy Act or
any state statute which relates to credit relief and/or the
liquidation of the Corporation, which proceeding remains
undismissed for a period of sixty (60) or more days; and/or
(4) the Corporation fails to perform any of the its covenants set
forth in Sections 4.04, 4.05, 4.06 or 4.07 hereof, and such
failure continues for a period of ten (10) consecutive days.
If an Event of Default occurs and is continuing, the respective maturities of
the Notes shall accelerate and the principal obligation of the Notes, together
with accrued interest at the Note Rate, shall be immediately due and payable.
SECTION 6.02. REMEDIES.
If an Event of Default occurs and is continuing, the Custodian or any
Note Holder or group of Note Holders, may, but are not required to, pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal or interest on the Notes or to enforce the performance of any
provision of the Notes or this Agreement. Such remedial action undertaken by
the Custodian and/or any Note Holder or group of Note Holders shall be
initiated in the Circuit Court of the Twelfth Judicial Circuit in and for
Sarasota County, Florida and may include action undertaken to effect the
liquidation and utilization of the Eligible Collateral held by the Custodian to
discharge to the extent possible the payment of the principal and interest
obligation of the Notes then subject to the lien pursuant to this Agreement.
The Custodian may use funds received with respect to, or from the sale of, the
Eligible Collateral to pursue remedies at law or in equity to collect the
payment of principal or interest on the Notes or to enforce the performance of
any provision of the Notes or this Agreement.
A delay or omission by the Custodian or any Note Holder in exercising
any right or remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All available remedies are
cumulative.
In the event of an occurrence of an Event of Default which is
continuing, the Custodian shall retain possession of all Loan Documents (except
with respect to Portfolio Loans which are paid off or otherwise satisfied) for
the collective benefit of the Note Holders. In the event the Custodian receives
funds constituted by payments made with respect to Portfolio Loans, such funds
will be applied to costs of pursuing available remedies as above contemplated
and for the benefit of Note Holders.
The Custodian may, as its sole pursuit of any remedy relating to a
continuing Event of Default, file an interpleader action naming the Corporation
and Note Holders as parties and in connection therewith deliver the Eligible
Collateral to the Court.
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SECTION 6.03. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes may direct
the time, method and place of conducting any proceeding for any remedy
available to the Custodian or exercise any power conferred on it. The
Custodian, however, may refuse to follow any direction that conflicts with the
law or this Agreement, that is unduly prejudicial to the rights of other Note
Holders or that may subject the Custodian to liability.
SECTION 6.04. LIMITATIONS ON SUITS.
A Note Holder may not use this Agreement to prejudice the rights of
another Note Holder or to obtain a preference or priority over the other Note
Holders.
SECTION 6.05. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Agreement, the right of
any Note Holder to receive payment of principal and interest on such Holder's
Note, to receive payment of interest on or after the respective due dates
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without
the consent of the Holder of the Note.
SECTION 6.06. COLLECTION SUIT BY CUSTODIAN.
If an Event of Default in payment of interest or principal specified
in Section 6.01 occurs and is continuing, the Custodian may recover judgment or
obtain settlement in its own name and as trustee of an express trust against
the Corporation for the whole amount of principal and interest remaining unpaid
along with costs associated with such action as described in Section 6.09.
SECTION 6.07. CUSTODIAN MAY FILE PROOFS OF CLAIM.
The Custodian may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Custodian and the Note Holders allowed in any judicial proceedings relative to
the Corporation, the Notes, its creditors or its property.
SECTION 6.08. PRIORITIES.
If the Custodian collects any money pursuant to this Article 6 or any
other provision of this Agreement, it shall pay the money in the following
order:
FIRST: to the Custodian for all amounts due under Section 6.09 and
Section 7.05;
SECOND: to Note Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and
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THIRD: to the Corporation.
The Custodian may fix a record date and payment date for any payment to Note
Holders.
SECTION 6.09. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Agreement or in any suit against the Custodian for any action taken or omitted
by it as Custodian, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit.
Additionally, the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made
by the party litigant. Each preceding sentence in this Section 6.09 shall not
apply to a suit by the Custodian or a suit by a Holder of Notes as provided in
this Article 6. All such costs and fees shall be paid pursuant to Sections 6.08
and 7.05. For purposes of this Section 6.09, attorneys' fees shall include
those fees incurred as a result of any trial of any controversy, appeal
therefrom, arbitration or mediation process, negotiation process or attorneys'
fees incurred as a result of any bankruptcy, receivership or similar
proceedings initiated, continuing and effecting the Corporation, the Note
Holders and the Eligible Collateral and the lien intended to be established by
this Agreement. The term "attorneys' fees" shall also include the fees and
costs of paraprofessional personnel and persons performing a similar function.
ARTICLE 7 - THE CUSTODIAN
SECTION 7.01. DUTIES OF THE CUSTODIAN.
1) GENERAL.
(a) If an Event of Default has occurred and is continuing, the
Custodian shall exercise its rights and powers in accordance with Article 6 and
use the same degree of care and skill in the exercise thereof as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Custodian need perform only those duties that are
specifically set forth in this Agreement and no others.
(2) In the absence of bad faith on its part, for all purposes
under this Agreement, the Custodian is authorized to act upon
receipt of the first of any Written or Oral Instructions it
receives. In cases where the first Instruction is an Oral
Instruction that is not in the form of a document or written
record, the Corporation shall be responsible for delivering,
or having delivered to the Custodian, a confirmatory Written
Instruction or Oral Instruction in the form of a document or
written record. The Custodian shall be entitled to rely on
the first Instruction received, and any
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reasonable act or omission undertaken in compliance therewith
shall be free of liability and fully indemnified and held
harmless by the Corporation. The Custodian shall act upon and
comply with any subsequent Written or Oral Instruction which
modifies such first Instruction. The sole obligation of the
Custodian with respect to any follow-up or confirmatory
Written Instruction or Oral Instruction in documen tary or
written form shall be to make reasonable efforts to detect
any discrepancy between the original Instruction and such
confirmation and to report such discrep ancy to the
Corporation. The Corporation shall be responsible, at the
Corporation's expense, for taking any action, including any
reprocessing, necessary to correct, any discrepancy or error,
and to the extent such action requires the Custodian to act,
the Corporation shall give the Custodian specific Written
Instructions as to the action required.
(c) The Custodian may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) The Custodian shall not be liable for any error of
business judgment made in good faith by a
shareholder or other professional employee of the
Custodian.
(ii) The Custodian shall not be liable with respect to
any action it takes or omits to take in good faith
in accordance with a direction received by it
pursuant to paragraph (b) of this Section.
(d) The Custodian may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any
loss, liability or expense.
(e) The Custodian shall not be liable for interest on any money
received by it except as otherwise provided for herein.
(f) Every provision of this Agreement that in any way relates to
the Custodian is subject to this paragraph 7.01((1).
2) MAINTENANCE OF SEPARATE BANK ACCOUNT.
With respect to funds received by the Custodian as a result of action
pursuant to Article 6 of this Agreement, the Custodian shall establish an
interest-bearing checking account in the name of the Corporation in a federally
insured, Florida state chartered bank or national bank with at least
$100,000,000 in deposits, in which the Custodian shall hold all cash of the
Corporation to be held by the Custodian hereunder (the "Trust Account") for the
benefit of the Note Holders as provided in Article 6. The Custodian shall be
the only person authorized to draw on such account.
3) DEALING WITH ELIGIBLE COLLATERAL.
The lien of this Agreement, as perfected, shall be released by the
Custodian and discharged with respect to any item of Eligible Collateral which
is
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(A) completely paid with respect to the principal and interest
obligation thereof; or
(B) sold in a transaction in which all interests therein become
vested in a person or entity other than the Corporation or
the Custodian.
With respect to items of Eligible Collateral which achieve the status
described in subparagraph (A) above, the Custodian shall deliver to such party
as the Corporation may specify all Loan Documents upon receipt of Written
Instructions from the Corporation. With respect to items of Eligible Collateral
which achieve the status described in paragraph (B) above, the Custodian shall
deliver to such party as the Corporation may specify all Loan Documents upon
the payment of the purchase price therefor, delivered to the Corporation. If
requested by the Corporation, the Custodian shall also deliver an instrument(s)
of release sufficient to completely discharge the items of Eligible Collateral
which are being delivered hereunder from the lien of this Agreement.
4) FIDELITY BOND.
Upon the request of the Corporation, the Custodian shall procure a
fidelity bond in favor of the Corporation and the Note Holders in an amount
equal to the outstanding balance due under the Notes, it being understood that
so long as any Note is outstanding, any proceeds from a claim under such bond
shall be covered by the lien of this Agreement as between the Corporation and
the Note Holders. The Corporation shall reimburse the Custodian for the actual
cost of such bond.
SECTION 7.02. RIGHTS OF CUSTODIAN.
1) RIGHT TO FURTHER ASSURANCES.
Before the Custodian acts or refrains from acting, it may require an
Officers' Certificate or opinion of counsel for the Corporation or an opinion
of counsel selected by the Custodian. The Custodian shall not be liable for an
action it takes or omits to take in good faith in reliance on the Certificate
or opinion.
2) USE OF AGENTS.
The Custodian may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
3) LIABILITY OF CUSTODIAN.
The Custodian shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
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SECTION 7.03. CUSTODIAN'S DISCLAIMER.
The Custodian makes no representation as to the validity or adequacy
of this Agreement or the Notes and it shall not be accountable for the
Corporation's use of the proceeds from the Notes, nor shall it be responsible
for any statement in the Notes or any Prospectus used in the sale of the Notes.
SECTION 7.04. NOTICE OF DEFAULT.
If an Event of Default occurs and is continuing and if it is known to
the Custodian, the Custodian shall mail and first publish as provided in
Section 10.02 notice of the Event of Default within ten (10) days after such
Default occurs. Except in the case of a Default in payment on any Note, the
Custodian may withhold the notice if and so long as it in good faith determines
that withholding the notice is in the interests of the Note Holders.
SECTION 7.05. COMPENSATION AND INDEMNITY.
The Corporation shall pay to the Custodian from time to time
reasonable compensation for its services. The Corporation shall reimburse the
Custodian upon request for all reasonable out-of- pocket expenses incurred by
it. Such expenses may include the reasonable compensation and expenses of the
Custodian's agents and attorneys as provided herein. The Corporation shall
indemnify the Custodian against any loss or liability incurred by it hereunder
and as a result of its service as Custodian. The Custodian shall notify the
Corporation promptly of any claim for which it may seek indemnity. The
Corporation shall defend the claims and the Custodian shall cooperate in the
defense. The Custodian may have separate counsel and the Corporation shall pay
the reasonable fees and expenses of such counsel. The Corporation need not pay
for any settlement made without its consent. The Corporation need not reimburse
any expense or indemnify against any loss or liability incurred by the
Custodian through negligence or bad faith.
SECTION 7.06. REPLACEMENT OF CUSTODIAN.
The Custodian may resign by so notifying the Corporation. The Holders
of a majority in principal amount of the Notes may remove the Custodian by so
notifying the removed Custodian and may appoint a successor Custodian by so
notifying the removed Custodian and may appoint a successor Custodian with the
Corporation's consent. The Corporation may remove the Custodian if:
(1) the Custodian is adjudged a bankrupt or an insolvent;
(2) a receiver or other public officer takes charge of the
Custodian or its property; or
(3) the Custodian otherwise becomes incapable of acting.
If the Custodian resigns or is removed or if a vacancy exists in the
office of the Custodian for any reason, the Corporation shall promptly appoint
a successor Custodian.
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A successor Custodian shall deliver a written acceptance of its
appointment to the retiring Custodian and to the Corporation. Immediately after
that, the retiring Custodian shall transfer all property, if any, held by it as
Custodian under this Agreement to the successor Custodian, the resignation or
removal of the retiring Custodian shall become effective, and the successor
Custodian shall have all of the rights, powers and duties of the Custodian
under this Agreement. A successor Custodian shall give notice of its succession
to each Note Holder as provided in Section 10.02.
If a successor Custodian does not take office within sixty (60) days
after the retiring Custodian resigns or is removed, the retiring Custodian, the
Corporation or the Holders of a majority in principal amount of the Notes may
petition any court of competent jurisdiction for the appointment of a successor
Custodian.
SECTION 7.07. SUCCESSOR CUSTODIAN BY MERGER, ETC.
If the Custodian consolidates with, merges or converts into, or
transfers all or substantially all of its corporate assets to another
professional association, the resulting, surviving or transferee professional
association, without any further act, shall be the successor Custodian.
SECTION 7.08. FAILURE TO DEPOSIT.
The Custodian assumes no duty, obligation or responsibility whatsoever
with respect to items of Eligible Collateral not deposited with the Custodian.
Eligible Collateral shall not be considered deposited with the Custodian until
physically received by, or registered in the name of, the Custodian in
accordance with the provisions of this Agreement.
SECTION 7.09. BOOKS AND RECORDS.
The Custodian acknowledges and agrees that all books and records
maintained for the Corporation in any capacity under this Agreement are the
property of the Corporation and may be inspected by the Corporation, or any
authorized regulatory agency, at any reasonable time, and that upon request,
they shall be surrendered promptly to the Corporation.
SECTION 7.10. INDEMNIFICATION.
The Custodian assumes only the usual duties and obligations normally
performed by Custodians under custodial agreements and as custodians of items
of collateral. It specifically assumes no responsibility for the management,
investment or reinvestment of the Cash, Cash Equivalents or other property from
time to time owned by the Corporation, whether or not on deposit hereunder, it
being understood that the responsibility for the proper and timely management,
investment and reinvestment responsibilities shall be those of the Corporation.
The Custodian shall not be liable for any taxes, assessments or
governmental charges which may be levied or assessed upon the Eligible
Collateral or other items of property held by it hereunder, or upon the income
therefrom or otherwise whatsoever. The Custodian may pay any such tax,
assessment or charge and reimburse itself out of the moneys of the Corporation
or out of
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the Cash held hereunder; provided, however, the Custodian shall advise the
officers of the Corporation before making any such payment.
The Custodian may rely upon the advice of counsel, who may be counsel
for the Corporation or for the Custodian and upon statements of accountants,
brokers or other persons reasonably believed by it in good faith to be expert
in the matters upon which they are consulted; and for any reasonable action
taken or suffered in good faith based upon such advice or statements the
Custodian shall not be liable to anyone. The Custodian shall not be liable for
any reasonable act or omission done in good faith in accordance with any
Written or Oral Instructions, request or advice of, or based upon information
furnished by, the Corporation or its officers. The Custodian is authorized to
accept a certificate of the President, Secretary or Assistant Secretary of the
Corporation to the effect that a resolution in the form submitted has been duly
adopted by its Board of Directors, as conclusive evidence that such resolution
has been duly adopted and is in full force and effect. The Custodian shall not
be liable for any reasonable action done in good faith and reasonably believed
to be within the powers conferred upon it by this Agreement.
No liability of any kind other than to the Corporation shall be
attached to the Custodian by reason of its custody of the Eligible Collateral
and other items of property on deposit with it from time to time under this
Agreement or otherwise by reason of its administration of its custodianship,
except such as shall result from its own gross negligence or willful misconduct
or that of its officers, agents or employees.
ARTICLE 8 - DISCHARGE OF AGREEMENT
The Notes which are the subject of this Agreement may not be prepaid
by the Corporation prior to maturity except with the express written consent of
the affected Note Holder. The obligations of the Corporation under this
Agreement and the obligations of the Custodian hereunder shall be fully
discharged when each and every Note which is the subject of this Agreement is
fully paid with respect to the principal obligation of such Notes and the
accrued interest thereon. At the time that the principal of and interest on the
Notes have been fully paid by the Corporation in accordance with the terms of
each such Note, the Corporation and the Custodian shall acknowledge in writing
the termination of their respective obligations under this Agreement, and the
Custodian shall transfer custody of all items of Eligible Collateral to the
Corporation, and shall execute any instruments or documents deemed reasonably
necessary or advisable by the Corporation to evidence such transfer and the
ownership of complete title of all items of Eligible Collateral by the
Corporation..
ARTICLE 9 - AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Corporation may amend or supplement this Agreement or the Notes
without notice to or consent of any Note Holder:
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(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to make any change that does not adversely affect the rights
of the Custodian or any Note Holder.
SECTION 9.02. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Corporation may require the Holder of the Note to deliver it to the
Corporation. The Corporation may place an appropriate notation on the Note
regarding the changed terms and return it to the Holder. Alternatively, if the
Corporation so determines, the Corporation, in exchange for the Note, shall
issue a new Note that reflects the changed terms.
SECTION 9.03. CUSTODIAN TO SIGN AMENDMENTS, ETC.
The Custodian shall sign any amendment, supplement or waiver
authorized pursuant to this Article 9 if the amendment, supplement or waiver
does not adversely affect the rights of the Custodian or any Note Holder. The
Corporation may not sign an amendment or supplement until the Board of
Directors of the Corporation approves it. The foregoing provisions of this
Section 9.03 notwithstanding, no amendment, supplement or waiver authorized
pursuant to this Article 9 shall have the affect of increasing the rights,
duties and responsibilities of the Custodian without the explicit written
consent of the Custodian.
ARTICLE 10 - MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT.
The Corporation and the Custodian acknowledge that this Agreement and
the Custodian with respect to its service as Custodian under this Agreement are
not subject to the provisions of the Trust Indenture Act of 1939 (the "TIA").
If this Agreement and the Custodian's service hereunder subsequently become
subject to the TIA, this Agreement shall be appropriately amended to accomplish
any necessary compliance.
SECTION 10.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail addressed as follows:
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If to the Corporation:
X X Lending, Inc.
Attn: Xxxxxx Xxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, Xxxxxxx 00000
Copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxx
If to the Custodian:
_____________________, Esq.
Xxxxx, Tannenbaum, Wolff, Band, Gates & Xxxx, P.A.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
The Corporation or the Custodian by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to Note Holders shall be sufficiently
given if mailed by first class mail to each Note Holder at the address of each
such Note Holder as such appears on the lists or registration books of the
Corporation acting as Registrar. Any notice or communication mailed to a Note
Holder at his address as it appears on the lists or registration books of the
Corporation shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to give notice or communication to a Note Holder or any defect
in the notice given shall not affect its sufficiency with respect to other Note
Holders. If a notice or communication is mailed and, if required, published in
the manner provided above, it is duly given, whether or not the Note Holder
receives it or reads it.
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Note Holders may communicate with other Note Holders with respect to
their rights under this Agreement or the Notes.
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Corporation to the Custodian to
take any action under this Agreement, the Corporation shall furnish to the
Custodian:
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(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in
this Agreement relating to the proposed action have been
complied with; and
(2) an opinion of counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied
with.
Each opinion of counsel shall be in writing. The legal counsel who renders it
may be an employee of or counsel to the Corporation. The legal counsel shall be
acceptable to the Custodian.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 10.06. RULES BY CUSTODIAN.
The Custodian may make reasonable rules for the administration of this
Agreement. Such rules may cover matters relating to action by or a meeting of
Note Holders.
SECTION 10.07. DAYS OF SERVICE.
Nothing contained in this Agreement is intended to or shall require
the Custodian in any capacity hereunder to perform any functions or duties on
any holiday, day of special observance or any other day on which the Custodian
or Florida state chartered banks are closed. Functions or duties normally
scheduled to be performed on such days shall be performed on, and as of, the
next succeeding business day on which both Florida state chartered banks and
the Custodian are open.
SECTION 10.08. GOVERNING LAW.
This Agreement and the Notes shall be governed by the laws of the
State of Florida.
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SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Agreement may not be used to interpret another agreement, loan or
debt agreement of the Corporation. Any such agreement, loan or debt agreement
may not be used to interpret this Agreement.
SECTION 10.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the
Corporation shall not have any liability or any obligations of the Corporation
under the Notes or this Agreement or for any claim based on, in respect of or
by reason of such obligations or their creation.
SECTION 10.11. SUCCESSORS.
All agreements of the Corporation in this Agreement and the Notes
shall bind its successor. All agreements of the Custodian in this Agreement
shall bind its successor.
SECTION 10.12. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Agreement. Each
signed copy shall be an original, but all of them together represent the same
agreement.
IN WITNESS WHEREOF, the corporation and the Custodian have caused this
Agreement to be signed by their respective Presidents as of the day and year
first above written.
X X LENDING, INC.
By
-----------------------------------------
Xxxxxx Xxxxxxx, President
XXXXX, TANNENBAUM, WOLFF, BAND,
GATES & XXXX, P.A.
By
-----------------------------------------
President
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EXHIBIT A
FORM OF NOTE
$________________ NO. ______
X X LENDING, INC.
SECURED PROMISSORY NOTE - FIRST SERIES
OBLIGATION
X X LENDING, INC., a corporation organized and existing under the laws
of the State of Florida (the "Corporation"), for value received hereby promises
to pay to the registered holder of this Note the principal sum of
$______________, together with interest thereon at the annual rate of _____%
(the "Note Rate"). Payment of the principal of this Note in the amount of
$_________ shall occur on __________________, 20___. Interest on the unpaid
principal amount of this Note at the Note Rate shall accrue from the date of
acceptance by the Corporation of the Payee's subscription to the Note herein
and shall be paid in the manner specified in the Note Subscription Agreement by
the Payee as such Subscription Agreement is set forth in the Prospectus
relating to this Note and other Notes of like series, which Prospectus is dated
____________, 2002 (the "Note Prospectus").
The Corporation shall establish and maintain a Note register which
shall reflect the record holders of the Notes and any transfer of such Notes
which may occur. When permitted, title to this Note and all other Notes of this
Series may only be transferred by delivery of this Note or other Notes of the
same Series duly endorsed by the registered holder, and any transfer or
attempted transfer shall, in all events, be subject to the right of the
Corporation to request such assurances and appropriate documents from the
intended transferee to permit the Corporation to determine that any such
proposed transferee is a suitable holder of a Note of this Series. The right of
the Corporation to determine such suitability of any transferee of a Note shall
not apply to transferees who are members of the original Note Holder's
immediate family. The term "immediate family" shall include a spouse and/or an
adult child. The Corporation shall be entitled to rely upon the information
reflected in the Note register and to treat the registered holder of this Note
as reflected in such register as the owner of this Note for all purposes,
including, without limitation, the payment of obligations arising hereunder and
the carrying out of transfer instructions with respect thereto.
PREPAYMENT
The principal amount of this Note may not be prepaid in whole or in
part by the Corporation at any time except upon (i) the Holder or Holders of
this Note request prepayment, (ii) the Holder or Holders of this Note consent
to such prepayment, and/or (iii) the Eligible Collateral, as defined and dealt
with in the Custody Agreement, shall be constituted by Portfolio Loans having a
face amount as of the date of any calculation thereof constituting less than
75% of the aggregate amount
of Eligible Collateral and Cash or Cash Equivalents. Any prepayment made under
such circumstances shall be in an amount equal to the principal amount of the
Note being prepaid, together with accrued interest thereon to the date of such
prepayment. No prepayment penalty shall be assessed.
NOTE OBLIGATION SECURED
This Note has been issued under that certain Custody Agreement, dated
as of April 1, 2002 (the "Agreement"), which Agreement provides for the deposit
of certain assets of the Corporation with a custodian as collateral which
partially secures the repayment of the obligations of the Corporation
represented by the Secured Promissory Notes - First Series. All of the
covenants, conditions and agreements contained in such Agreement are hereby
made a part of this instrument. A copy of the Agreement may be obtained from
the Corporation at its principal business office at 0000 Xxxxxx Xxxxxx, Xxxxx
X, Xxxxxxxx, Xxxxxxx 00000 or from the Custodian, Xxxxx, Tannenbaum, Wolff,
Band, Gates & Xxxx, P.A., 0000 Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000.
DEFAULT - REMEDIES
The Corporation shall be deemed to be in Default with respect to its
obligations under this Note and all like Notes of this Series if:
(1) the Corporation defaults in the payment of interest on any
Note at the Note Rate when the same becomes due and payable
and the Default in the payment of such Note interest
continues for a period of thirty (30) consecutive days;
(2) the Corporation defaults in the payment of the principal of
any Note when the same becomes due and payable;
(3) the Corporation or its assets become subject to any voluntary
or involuntary proceeding under the Federal Bankruptcy Act or
any state statute which relates to credit relief and/or the
liquidation of the Corporation, which proceeding remains
undismissed for a period of sixty (60) of more days; and/or
(4) the Corporation fails to perform any of its covenants set
forth in Sections 4.04, 4.05, 4.06 or 4.07 of the Agreement,
and such failure continues for a period of ten consecutive
days.
In the event of the occurrence of any of the foregoing Events of Default which
are continuing, the Custodian under the Agreement may initiate, on behalf of
all of the registered holders of the Notes of this Series, such action at law
or in equity as may be appropriate to timely cure such Default.
In the event of Default in the payment of this Note, and if the same
is collected by an attorney-at-law, the undersigned hereby agrees to pay all
costs of collection, including a reasonable attorney's fee for collection,
trial or appellate services.
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Presentment for payment, notice of dishonor, notice of non-payment,
protest and notice of protest are hereby waived by the undersigned and any and
all others who may at any time become liable for payment of all or any part of
this obligation.
IN WITNESS WHEREOF, the Corporation has caused this Note to be signed
and imprinted with its corporate seal, and to be dated ____________________,
2002.
X X LENDING, INC.
ATTEST: By
--------------------------------
President
----------------------------------
Secretary
(CORPORATE SEAL)
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