CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT is dated as of September 9, 1993, and made
among ELK ASSOCIATES FUNDING CORPORATION, a New York corporation ("Borrower"),
and BANK LEUMI TRUST COMPANY OF NEW YORK, ISRAEL DISCOUNT BANK OF NEW YORK, BANK
HAPOALIM B.M. AND EXTEBANK (collectively, the "Banks"), and the U.S. SMALL
BUSINESS ADMINISTRATION ("SBA") (the Banks and the SBA, collectively, the
"Lenders"), and ISRAEL DISCOUNT BANK OF NEW YORK, as Custodian for the Banks and
SBA (in such capacity, the "Custodian").
RECITALS
WHEREAS, the Banks and SBA have entered into an Intercreditor Agreement
dated as of the date hereof with Borrower (as hereafter amended or otherwise
modified from time to time, the "Intercreditor Agreement");
WHEREAS, Borrower has granted a security interest in its assets to the
Banks and SBA, including but not limited to all notes, security agreements,
financing statements, assignments of financing statements, and other instruments
and securities from time to time hereafter delivered to or otherwise held by the
Custodian for or on behalf of the Banks and SBA (all such assets to be held by
the Custodian, collectively, the "Custodian Collateral"), as collateral security
for the prompt payment in full when due, whether at stated maturity, by
acceleration or otherwise, of certain obligations; and
WHEREAS, the parties hereto intend that Borrower deliver to the
Custodian the Custodian Collateral and the Custodian accept and hold the
Custodian Collateral in accordance with the terms of this Custodian Agreement;
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions and covenants contained herein, Borrower, the Custodian, SBA and each
of the Banks hereby agree as follows:
1. Definitions. The terms in this Custodian Agreement unless otherwise
specified shall have the same meaning as in the Intercreditor Agreement.
2. Appointment of Custodian. The Custodian is hereby appointed to act
as agent for the Banks and SBA hereunder and agrees to accept, hold and deliver
the Custodian Collateral in accordance with the terms hereof. Each Lender hereby
designates and appoints Custodian to act as agent and (and each Bank hereby
designates and appoints the Custodian to act as attorney-in-fact) for and on
behalf of each of the Lenders to take such action on behalf of the Lenders under
those provisions of the Loan
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Agreements and the SBA Security Agreement, as the case may be, which relate
solely to the Custodian Collateral, and to exercise such powers and to perform
such duties, with respect to the management, supervision, servicing,
administration and disbursement of the Custodian Collateral (including, without
limitation, perfecting such Lender's security interest in the Custodian
Collateral by filing financing statements, holding physical possession of
instruments or otherwise) and the payments or amounts realized or recovered from
the Custodian Collateral as are specifically delegated to or required of
Custodian by the terms of this Agreement, together with such other powers as are
incidental thereto, with, subject to approval by all Lenders, (1) full power of
substitution and (2) the power to select one or more sub-agents or designees to
carry out certain specific powers and obligations of Custodian pursuant hereto.
The power of attorney granted hereby being coupled with an interest is
irrevocable while this Agreement remains in effect.
3. Delivery of Custodian Collateral to Custodia. All notes, security
agreements, financing statements, assignments of financing statements,
participation agreements/interests and other instruments and securities
presently held or hereafter acquired by Borrower shall be assigned to the
Custodian, contain the endorsement set forth on Exhibit C attached hereto, and
be delivered to and held by the Custodian pursuant hereto. Custodian
acknowledges that each Lender has been granted a security interest in the
Custodian Collateral and agrees to hold any portion of the Custodian Collateral
in possession of the Custodian as bailee for the benefit of each Lender.
4. General Powers of Custodian. Lenders agree that Custodian shall have
the right to and shall exercise the following powers as long as this Agreement
remains in effect:
(a) maintain, in accordance with its customary business practices,
records reflecting the status of the Custodian Collateral;
(b) subject to the terms of the Loan Agreements and the SBA
Agreement, execute and/or file in its name as Custodian for the benefit of the
Lenders any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim for the Banks,
notices and other written agreements with respect to the Custodian Collateral
and hold and maintain physical possession of the instruments constituting
Custodian Collateral;
(c) upon notice to Borrower (unless the giving of such notice would
create a delay which would impair the Custodian Collateral), incur and pay such
reasonable expenses as Custodian may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to this
Agreement.
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5. Release of Custodian Collateral to Borrower: Loan Information.
(a) Borrower shall be entitled to remove and the Custodian shall be
required to deliver to Borrower, or allow Borrower access to any of the
Custodian Collateral, in connection with any payment, refinancing, satisfaction
or amendment, provided that (i) Borrower provides the Custodian with a written
certification specifying for which type of event the removal is being requested,
and (ii) no Event of Default has been declared under the Intercreditor
Agreement, or if any Event of Default under the Intercreditor Agreement has been
declared, such Event of Default has been cured. In the event Borrower intends to
sell all or a portion of Borrower's interest in any note or other evidence of
indebtedness, including but not limited to any participation interest proposed
to be sold by Borrower, such sale may be made by Borrower in its sole discretion
and the Custodian shall deliver to Borrower, or allow Borrower access to the
related Custodian Collateral, so long as Borrower provides the Custodian with a
written certification that the net proceeds from such sale will be utilized
immediately to reduce Borrower's Senior Indebtedness and the proceeds are so
utilized; provided further, however, in the event Borrower does not intend to
utilize the proceeds to repay the Senior Indebtedness, it will notify the SBA,
the Banks and the Custodian in writing, which may be done by facsimile, of the
proposed sale (i) at least five (5) business days prior to the date of the
proposed transaction if the transaction involves proceeds of not more than
$500,000, which proceeds will be utilized for purposes other than reducing the
Senior Indebtedness and (ii) at least six (6) business days prior to the date of
the proposed transaction if the transaction involves proceeds of more than
$500,000, which proceeds will be utilized for purposes other than reducing the
Senior Indebtedness. If the SBA and the Banks do not object to the proposed
transaction within the applicable time period, the Borrower shall be entitled to
proceed with the transaction and the Custodian shall deliver to Borrower, or
allow Borrower access to the related Custodian Collateral. If the SBA or the
Banks object within the time period specified, the grounds of which objection
shall not be unreasonable, they shall do so in writing to the Borrower and the
Custodian, stating in reasonable detail the basis for such objections. Written
notice from the Borrower to the SBA, the Banks and the Custodian, as required
above shall set forth (i) the identity of the Borrower, (ii) the date the loan
was entered into, (iii) the current loan balance as carried on the Borrower's
books, (iv) the collateral securing the loan and the value thereof as estimated
by Borrower, (v) the consideration to be received by Borrower and (vi) the use
of the proceeds arising from the sale of the loan or interest in such loan.
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(b) Notwithstanding the foregoing, upon the occurrence of an Event
of Default as defined in the Intercreditor Agreement, the Borrower shall be
entitled to remove the Custodian Collateral only (i) upon substitution of
collateral of equal value, such valuation to be subject to the reasonable
confirmation by the SBA and the Banks, or (ii) by payment of cash in an amount
equal to the gross proceeds resulting from the sale of the collateral or from
routine loan repayments. Any such payment in cash shall either, at the election
of Borrower in its sole discretion, (A) be utilized to repay the Senior
Indebtedness or (B) be held by the Custodian as part of the Custodian
Collateral, provided that if the Borrower cures each Event of Default and no
Event of Default exists and is continuing, Borrower may remove such cash, but
only if it notifies SBA and the Banks in writing at least six (6) business days
prior to such proposed removal and SBA and the Banks do not reasonably object
within such time period.
(c) Prior to the occurrence of an Event of Default, Borrower shall
have the sole right to issue pay-off letters and/or to furnish any pay-off or
other information to third parties regarding the status of any loan which is
secured by any of the Custodian Collateral. Custodian shall direct to Borrower's
attention any inquiry from any person relating to pay-off information,
collection and/or payment or any other matter relating to any loan made by
Borrower. In connection therewith, Custodian shall issue in respect of any
such inquiry a letter substantially in the form of Exhibit A attached hereto. In
addition, upon written certification from Borrower that a loan has been repaid
in full, Custodian shall promptly deliver to Borrower an executed UCC-3
Termination Statement with respect to such loan.
6. Representations and Warranties. Borrower represents and warrants
that the following statements are true, correct and complete:
a) Borrower has full power and authority to enter in this Custodian
Agreement and Borrower shall be bound to its terms;
b) Borrower is the legal and beneficial owner of the Custodian
Collateral free and clear of any lien except for the liens and security
interests created by (i) the Security Agreement between Borrower and
SBA, (ii) the respective security agreements between Borrower and the
Banks and (iii) any security agreements between Borrower and Third
Party Participants (as defined in the Security Agreement) with respect
to any specific Custodian Collateral in which such participant is
assigned an interest; and
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c) the Custodian Collateral delivered to the Custodian pursuant to
this Custodian Agreement consists of all the notes, security
agreements, copies of financing statements, assignments of financing
statements, participation agreements/interests and other instruments
and securities presently owned or held by Borrower.
d) Each obligation owed to the Borrower evidenced by notes and
documents delivered to the Custodian is a valid, binding, and
unconditional obligation owed to the Borrower, payable in accordance
with the terms of each such note or document and to the best of
Borrower's knowledge, information and belief, there is no defense,
counterclaim or offset to the payment of such obligation.
7. Further Assurances. Borrower agrees that at any time and from time
to time, at its expense, it will promptly deliver to the Custodian any further
instruments and documents, and take any further actions, that may be necessary
or that SBA or the Custodian may reasonably request, in order to carry out the
intent of this Custodian Agreement or the Intercreditor Agreement.
8. Other Liens. In connection with the sale of a portion of Borrower's
interest as provided in Section 5 hereof, Borrower may create or permit to exist
any lien upon or with respect to any of the Custodian Collateral which does not
violate any agreement with any Bank or with the SBA and which does not require
the release of the Custodian Collateral. Nothing contained in this Section 8 or
elsewhere in this Agreement shall affect Borrower's right to substitute a new
secured party or add one or more additional secured parties at any time, or from
time to time, in its sole discretion, provided such substitute or additional
secured parties became parties to the Intercreditor Agreement and this Custodian
Agreement and such substitution or addition is in compliance with the Agreement
dated the date hereof between the Borrower and the SEA.
9. Standard of Care: No Responsibility for Certain Matters.
(a) In dealing with the Custodian Collateral in its possession,
Custodian shall exercise such care as a fiduciary exercises with respect to
property in its care. The Custodian shall have no right to exercise any of
Borrower's rights with respect to the Custodian Collateral, including but not
limited to collection of any proceeds from any of Borrower's underlying obligors
prior to the occurrence of an Event of Default.
(b) Neither Custodian nor any of its officers, directors, employees
or agents shall be liable to the Lenders or
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Borrower for any action taken or omitted to be taken under or in connection with
this Agreement, (whether or not such action taken or omitted is within or
without Custodian's responsibilities and duties expressly set forth in this
Agreement), except as a result of gross negligence or willful misconduct on the
part of Custodian or such other persons. Custodian does not assume any
responsibility for any failure or delay in performance or breach by Borrower or
any Lender of its obligations in this Agreement.
(c) Custodian shall be entitled to act, and shall be fully protected
in acting upon, any written communication believed by Custodian, in good faith,
to be genuine and correct and to have been signed by a proper person or persons
or entity. Custodian may consult counsel (other than any counsel affiliated with
the Borrower) and shall be entitled to act, and shall be fully protected in any
action taken in good faith in accordance with advice given by counsel. Custodian
may employ agents and attorneys-in-fact satisfactory to Lenders and reasonably
satisfactory to Elk and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by Custodian with reasonable care.
(d) The Banks and the SBA expressly acknowledge that neither the
Custodian nor any of its officers, directors, employees, or agents have made
any representations or warranties or assume any responsibility to the Banks and
the SBA with respect to the validity, authenticity, or accuracy of any documents
delivered to the Custodian by the Borrower in connection with the Custodian
Collateral or with respect to the perfection or enforceability of any security
interest in the Custodian Collateral. Upon reasonable request of any Bank or the
SBA, the Custodian will provide copies of any documents delivered into its
custody by the Borrower to such Bank or the SBA, as the case may be.
(e) Each Bank and the SBA represent that it has made and will
continue to make, independently and without reliance upon any act, omission,
statement, information or representation made or furnished by the Custodian, and
based on such documents and information as it has deemed appropriate, its own
appraisal of or an investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and will
continue to do so with regard to any extensions of credit to the Borrower.
10. Certain Rights of Custodian. If Custodian shall request
instructions from Lenders with respect to any act or action (including failure
to act) in connection with the Custodian Collateral, Custodian shall be entitled
to refrain from such act or taking such action unless and until Custodian shall
have received instructions from the Lenders and Custodian shall not incur
liability to any Lender by reason of so refraining. Custodian shall be entitled
to act or refrain from acting, and in
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all cases shall not be liable to any other Lender in acting or refraining from
acting under this Agreement, in accordance with any instructions from Lenders.
11. Remedies upon Default. If any Event of Default shall have occurred
and be continuing, the Custodian shall continue to hold the Custodian Collateral
subject to the rights of the parties. The Banks shall further have the right if
any Event of Default shall have occurred and be continuing to commence
foreclosure proceedings with respect to the Custodian Collateral and upon thirty
(30) days prior written notice to both the Borrower and the Custodian, the Banks
and the SBA shall have all rights accorded secured creditors as provided in
Article 9 of the New York Uniform Commercial Code, including the right to sell
the Custodian Collateral, subject to the terms of the Intercreditor Agreement.
Nothing contained in this paragraph shall be interpreted as restricting in any
way the SBA's ability to exercise the rights and remedies available to it under
the Act or applicable regulation.
12. Resignation and Removal; Appointment of Successor Custodian. The
Custodian shall at all times have the right to resign as Custodian without the
consent of the Lenders upon fifteen (15) business days prior written notice to
each of the Lenders. Upon the resignation of the Custodian and subject to the
approval of SBA and the Banks (which approval shall not be unreasonably
withheld), and provided no Event of Default exists and is continuing, Borrower
may appoint a successor Custodian provided such successor Custodian is a bank or
trust company licensed to operate in New York State. The Custodian may be
removed by Borrower, the Banks or SBA at any time upon thirty (30) days prior
written notice provided Borrower has appointed a successor Custodian approved by
SBA and the Banks (which approval shall not be unreasonably withheld) which has
agreed to serve in such capacity and such successor Custodian is a bank or
trust company licensed to operate in New York State. Upon its appointment, the
successor Custodian shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Custodian under this Custodian
Agreement, and the retiring Custodian under this Custodian Agreement shall
promptly deliver to such successor Custodian all Custodian Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Custodian as depository under this Custodian Agreement, whereupon such retiring
Custodian shall be discharged from its duties and obligations under this
Custodian Agreement.
13. Reports by Custodian. The Custodian shall deliver to the respective
parties to this Agreement at the addresses and in the manner set forth in the
Intercreditor Agreement within thirty (30) days of the end of each three month
period, commencing with the period ending December 31, 1993, a report in
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the form of Exhibit B, attached hereto itemizing the Custodian Collateral
maintained by the Custodian as of the last business day of such three month
period.
14. Custodian Fee. The fee charged by the Custodian for its services in
connection with the performance of its duties hereunder shall be payable by
Borrower. In the event of a resignation by the Custodian, any unearned and
prepaid fees shall be refunded to Borrower. Custodian may incur and pay
reasonable costs and expenses to the extent it deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers and
obligations pursuant to this Agreement including without limiting the generality
of the foregoing, court costs, attorneys' fees, and insurance premiums paid to
maintain the Custodian Collateral, whether or not Borrower is obligated to
reimburse Custodian or Lenders for such expenses pursuant to the Loan Agreements
or otherwise. Lenders shall be responsible for reimbursing Custodian for their
pro rata share of such costs and expenses.
15. No Waiver. No failure on the part of the Custodian to exercise, and
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof;. nor shall any
single or partial exercise by the Custodian of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are to the fullest
extent permitted by law cumulative and are not exclusive of any remedies
provided by law.
16. Amendments Etc. No amendment, modification, termination or waiver
of any provision of this Custodian Agreement shall in any event be effective
without the written agreement of the parties. Any amendment, modification,
termination or waiver of any provisions of this Agreement or any other agreement
respecting only the Lenders' relationship among themselves shall not require the
concurrence of Borrower. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. Any
provision of this Section respecting Lenders' relationship among themselves are
solely for the benefit of Custodian and Lenders and neither the Borrower nor any
other person shall have any rights to rely on, inquire into, or enforce any of
such provisions. No course of dealing between Borrower (or other person at any
time liable on or in respect of the Obligations) and either Custodian or Lenders
nor any delay in exercising any rights hereunder or under the Loan Agreements or
the SBA Security Agreement shall operate as a waiver of any rights of Custodian
or Lenders.
17. Notices. Except as otherwise specifically provided herein, all
notices shall be given in accordance with the Intercreditor Agreement.
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18. Governing Law; Terms. This Custodian Agreement shall be governed
by, and shall be construed and enforced in accordance with, the laws of the
State of New York.
19. Term. This Agreement shall become effective upon the date hereof
and shall continue in full force and effect until the indefeasible payment and
satisfaction in full of all obligations of the Borrower to the Lenders and the
irrevocable termination of the Loan Agreements and the SBA Agreement, as the
case may be. Termination of this Agreement shall not affect the respective
rights or obligations hereunder incurred prior to the effective date of such
termination.
20. No Benefit to Third Parties. The terms and provisions of this
Agreement shall be for the sole benefit of the Banks, the SBA and the Custodian
and their permitted successors and assigns and no other person, firm, entity
or corporation, including, but not limited to, the Borrower, shall have any
right, benefit, priority or interest under, or because of the existence of this
Agreement.
21. Consent to Jurisdiction; Service of Process. Each of the parties
other than the SBA consent to the jurisdiction of the Supreme Court of the State
of New York and each of the parties consent to the jurisdiction of the United
States District Court for the Southern District of New York for all purposes in
connection with this Agreement. Each party further consents that any process or
notice of motion or other application to either of said courts or a Judge
thereof, or any notice in connection with any proceedings hereunder, may be
served inside or outside the State of New York or Southern District of New York
by registered or certified mail, return receipt requested, or by personal
service provided a reasonable time for appearance is allowed, or in such other
manner as may be permissible under the Rules of said Courts.
22. Further Assurances. Each party hereby agrees to execute and/or
deliver any and all further documents, instruments or agreements reasonably
requested by the other party in order to give effect to, and more fully carry
out the terms and provisions of this Agreement.
23. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS AGREEMENT, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO,
OR THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION HEREOF OR ANY OTHER
CLAIM OR DISPUTE HEREUNDER.
24. Counterparts. This Custodian Agreement may be executed by one or
more of the parties on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
agreement.
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IN WITNESS WHEREOF, Borrower, the Banks, SBA and the
Custodian have caused this Custodian Agreement to be duly executed and delivered
by their respective officers thereunto duly authorized as of the date first
above written.
ELK ASSOCIATES FUNDING CORPORATION
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President
BANK LEUMI TRUST COMPANY
OF NEW YORK
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------------
Name: Xxxxxx X. Plotzek
Title: S.P.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Assistant Vice-President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice-President
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice-President
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BANK HAPOALIM B.M.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice-President
By: /s/ Xxxxx Xxx Xxxxx
-------------------------------------------------
Name: Xxxxx Xxx Xxxxx
Title: Vice-President
EXTEBANK
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Assistant Vice-Pesident
U.S. SMALL BUSINESS ADMINISTRATION
By: /s/ Xxxxx X. Xxxxx
-------------------------------------------------
Name: Xxxxx X. Xxxxx
Title:
ISRAEL DISCOUNT BANK OF NEW YORK,
As Custodian
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice-President
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------------------
Name: Xxxx X. Xxxxxxx
Tit1e: Vice-President
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EXHIBITS OMITTED
